SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549

                                   FORM 20 - F

|_|      REGISTRATION STATEMENT PURSUANT TO SECTION 12(B) OR (G) OF THE
         SECURITIES EXCHANGE ACT OF 1934

                                       OR

|X|      ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
         EXCHANGE ACT OF 1934 FOR THE FISCAL YEAR ENDED MAY 31, 2001
                                                        -------------

                                       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: 1-15503


                                 WORKSTREAM INC.
--------------------------------------------------------------------------------
             (Exact name of Registrant as specified in its charter)


                                     CANADA
--------------------------------------------------------------------------------
                 (Jurisdiction of incorporation or organization)


               495 March Road, Suite 300, Ottawa, Ontario K2K 3G1
--------------------------------------------------------------------------------
                    (Address of principal executive offices)


Securities registered or to be registered pursuant to Section 12(b) of the Act:

            Title of Class Name of each Exchange on which registered

Common Shares, Without Par Value                 Nasdaq Small Cap Market
Common Shares, Without Par Value                 Boston Stock Exchange

Securities registered or to be registered pursuant to Section 12(g) of the Act:

                                      None
                                      ----
                                (Title of Class)


Securities for which there is a reporting obligation pursuant to Section 15(d)
of the Act:
                                      None
                                      ----
                                (Title of Class)


Indicate the number of outstanding shares of each of the Issuer's classes of
capital or common stock as of the close of the period covered by the annual
report.

                  7,712,262 Common Shares, Without Par Value
                  ------------------------------------------


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 which financial statement item the registrant has elected
to follow.

                              Item 17 [ ]  Item 18 [X]



NY2:\1098850\15\NJVM15!.DOC\42724.0004
<PAGE>
                                  INTRODUCTION

Unless otherwise indicated, as used in this annual report, the terms
"Workstream," "we," "us" and "our," mean Workstream Inc. and its consolidated
subsidiaries.

This annual report includes "forward-looking statements," within the meaning of
the Private Securities Litigation Reform Act of 1995, with respect to our
business, operating results and financial condition. Statements that use the
terms "believe," "anticipate," "expect," "plan," "intend," "estimate,"
"anticipate," "project" and similar expressions in the affirmative and the
negative are intended to identify forward-looking statements. These statements
reflect our current views with respect to future events and are based on current
assumptions, expectations, estimates and projections about our business and the
markets in which we operate and are subject to risks and uncertainties. Actual
events (including our results) could differ materially from those anticipated in
these forward-looking statements as a result of various factors, including the
risks discussed in "Item 3. Key Information--Risk Factors" and elsewhere in this
annual report. Except as required by applicable law, including the securities
laws of the United States, we do not undertake any obligation nor intend to
update or revise any forward-looking statements, whether as a result of new
information, future events or otherwise.

All references in this annual report to Cdn$ or $ are to Canadian dollars, and
all references to US$ are to United States dollars. The exchange rate of the
Canadian dollar to the U.S. dollar, based on the noon buying rate quoted by The
Federal Reserve Bank of New York for May 31, 2001 was $1.5457 per US $1.00.

For the purposes of this annual report, references to the years or fiscal years
1997, 1998, 1999, 2000 and 2001 mean our fiscal years ended on May 31 of the
relevant year.



<PAGE>
                                TABLE OF CONTENTS

<TABLE>
<CAPTION>
                                                                                                         PAGE
                                                                                                         ----
<S>                                                                                                      <C>
PART I.....................................................................................................1

            ITEM 1.     IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND ADVISERS..............................1

            ITEM 2.     OFFER STATISTICS AND EXPECTED TIMETABLE............................................1

            ITEM 3.     KEY INFORMATION....................................................................1

            ITEM 4.     INFORMATION ON THE COMPANY........................................................10

            ITEM 5.     OPERATING AND FINANCIAL REVIEW AND PROSPECTS......................................23

            ITEM 6.     DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES........................................33

            ITEM 7.     MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS.................................41

            ITEM 8.     FINANCIAL INFORMATION.............................................................43

            ITEM 9.     THE OFFER AND LISTING.............................................................44

            ITEM 10.    ADDITIONAL INFORMATION............................................................46

            ITEM 11.    QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK........................59

            ITEM 12.    DESCRIPTION OF SECURITIES OTHER THAN EQUITY SECURITIES............................60

PART II...................................................................................................60

            ITEM 13.    DEFAULTS, DIVIDEND ARREARAGES AND DELINQUENCIES...................................60

            ITEM 14.    MATERIAL MODIFICATIONS TO THE RIGHTS OF SECURITY HOLDERS AND USE OF PROCEEDS......60

            ITEM 15.    [RESERVED]........................................................................61

            ITEM 16.    [RESERVED]........................................................................61

PART III..................................................................................................62

            ITEM 17.    FINANCIAL STATEMENTS..............................................................62

            ITEM 18.    FINANCIAL STATEMENTS..............................................................62

            ITEM 19.    EXHIBITS..........................................................................62


</TABLE>

<PAGE>
                                     PART I

ITEM 1.    IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND ADVISERS

Not applicable.

ITEM 2.    OFFER STATISTICS AND EXPECTED TIMETABLE

Not applicable.

ITEM 3.    KEY INFORMATION

A.         SELECTED FINANCIAL DATA

           The summary financial information set forth below is presented in
Canadian dollars and is derived from our audited consolidated financial
statements. We prepared our financial statements for the fiscal years presented
in this annual report in accordance with Canadian generally accepted accounting
principles, known as Canadian GAAP, and report in Canadian dollars. These
principles conform in all material respects with U.S. generally accepted
accounting principles, known as U.S. GAAP, except as described in note 15 to our
audited consolidated financial statements, included elsewhere in this annual
report. The selected consolidated financial data set forth below should be read
together with and are qualified by reference to "Item 5. Operating and Financial
Review and Prospects" and our consolidated financial statements and related
notes, included elsewhere in this annual report.

           The following tables include a U.S. dollar convenience translation
using an exchange rate of $1.5457 per US $1.00, based on the noon buying rate
quoted by the Federal Reserve Bank of New York for May 31, 2001. These
translations are not necessarily representative of the amounts that would have
been reported if we had historically reported in U.S. dollars, and the rate used
is not necessarily indicative of the rates in effect at any other time.




                                       1
<PAGE>
<TABLE>
<CAPTION>
                                                                                                                          US $
CONSOLIDATED STATEMENTS OF LOSS DATA                                        CDN $                                      YEAR ENDED
                                                                     YEAR ENDED MAY 31,                                  MAY 31,
                                       -------------------------------------------------------------------------------------------
                                             1997          1998            1999           2000           2001          2001
                                             ----          ----            ----           ----           ----          ----
<S>                                    <C>             <C>             <C>             <C>           <C>           <C>
CANADIAN GAAP:

Revenue ..............................   $    85,524    $   870,003     $  1,399,557    $1,752,730    $ 3,078,989  $   1,991,971
Cost of revenue ......................        57,167        386,391         848,769      1,624,770      2,291,856      1,482,730
                                       -------------------------------------------------------------------------------------------
Gross profit .........................        28,357        483,612         550,788        127,960        787,133        509,241
                                       -------------------------------------------------------------------------------------------
Expense:
     Selling .........................       125,785        652,118         818,601      1,625,434      2,289,273      1,481,059
     Marketing........................       258,256        817,291         612,796      2,014,684      1,444,879        934,773
     General and administrative ......       242,560        349,161         619,265      1,401,991      2,043,930      1,322,333
     Research and development ........       258,257        510,974         606,088      2,460,600      3,344,965      2,164,045
                                       -------------------------------------------------------------------------------------------
           Total expense .............       884,858      2,329,544       2,656,750      7,502,709      9,123,047      5,902,210
Interest and other income                        617         18,543          16,311        767,499        764,558        494,635
Interest and other expense                   (1,361)       (19,396)       (122,759)      (691,153)       (65,565)         42,418
                                       -------------------------------------------------------------------------------------------
Net loss .............................   $ (857,245)    $(1,846,785)    $(2,212,410)    $(7,298,403)  $(7,636,921) $ (4,940,751)
                                       -------------------------------------------------------------------------------------------
Basic and diluted net loss per share..   $    (0.53)    $    (0.58)     $     (0.57)    $   (1.29)    $    (0.99)  $      (0.64)
Weighted average number of shares
 outstanding..........................     1,620,669      3,191,297      3, 854,579      5,649,783      7,710,284      7,710,284

U.S. GAAP:
Revenue                                  $    85,524    $   870,003     $  1,399,557    $1,752,730    $ 3,078,989  $   1,991,971
Net loss .............................   $ (857,245)    $(1,846,785)    $(4,864,735)    $(7,560,668)$ (7,888,997)  $ (5,103,835)
                                       ===========================================================================================
Net loss per share                       $    (0.53)    $    (0.58)     $     (1.26)    $   (1.34)    $    (1.02)  $      (0.66)

</TABLE>

<TABLE>
<CAPTION>
                                                                                                                          US $
CONSOLIDATED BALANCE SHEET DATA                                         CDN $                                         YEAR ENDED
                                                                 YEAR ENDED MAY 31,                                     MAY 31,
                                    ---------------------------------------------------------------------------------------------
                                          1997            1998             1999            2000            2001            2001
<S>                                 <C>            <C>              <C>               <C>             <C>            <C>
CANADIAN GAAP:

Working capital (deficit)...........$  201,386      $   (167,186)    $  (1,488,371)    $ 12,801,601   $  4,897,989   $  3,168,784
Total assets .......................   406,537            700,826         2,176,210      16,182,960      8,290,011      5,363,273
Total  liabilities..................   180,252            833,816         3,416,514       2,352,197      2,071,710      1,340,305
Capital stock....................... 1,083,530          2,571,040         3,541,040      26,045,606     26,070,065      1,340,305
Shareholders equity (deficit).......   226,285          (132,990)       (1,240,304)      13,830,763      6,218,301      4,022,968

U.S. GAAP:
Working capital (deficit)...........$  201,386      $   (167,186)    $  (1,956,924)    $ 12,801,601   $  4,897,989   $  3,168,784
Total assets........................   406,537            700,826         2,176,210      16,182,960      8,290,011      5,363,273
Total  liabilities..................   180,252            833,816         3,845,067       2,352,197      2,071,710      1,340,305
Capital stock....................... 1,083,530          2,571,040         3,541,040      28,131,567     28,156,026     18,215,712
Shareholders equity (deficit).......   226,285          (132,990)       (1,708,857)      13,830,763      6,218,301      4,022,968

</TABLE>

The differences between U.S. GAAP as compared to Canadian GAAP as they affect
our audited consolidated financial statements are explained in note 15 to the
notes to our audited consolidated financial statements included elsewhere in
this annual report. Differences between U.S. GAAP and Canadian GAAP do not
affect our consolidated financial statements for the years ended May 31, 1997
and 1998.


EXCHANGE RATES

The exchange rate of the Canadian dollar to the U.S. dollar, based on the noon
buying rate quoted by the Federal Reserve Bank of New York for November 20, 2001
was $1.5933 per US $1.00.

           The following table sets forth, for the months indicated below, the
high and low exchange rates of the Canadian dollar to the U.S. dollar based on
the highest and lowest noon buying rate quoted by the Federal Reserve Bank of


                                       2
<PAGE>
New York for each month during the previous six months. These exchange rates are
set forth as Canadian dollars per one U.S. dollar.



                  MONTH                              HIGH             LOW
                  -----                              ----             ---
May 2001....................................       $1.5541         $1.5300
June 2001...................................       $1.5437         $1.5142
July 2001...................................       $1.5450         $1.5102
August 2001.................................       $1.5490         $1.5275
September 2001..............................       $1.5797         $1.5535
October 2001................................       $1.5905         $1.5582


           The following table sets forth the average exchange rate of the
Canadian dollar to the U.S. dollar for the five most recent financial years. The
average exchange rate reflected in this table is the average of the exchange
rates as of the last day of each month during the applicable period.

<TABLE>
<CAPTION>
                                                                    FOR THE FINANCIAL YEAR ENDED MAY 31,
                                                    ---------------------------------------------------------------------
                                                      1997           1998            1999           2000            2001
                                                      ----           ----            ----           ----            ----
<S>                                                 <C>             <C>            <C>             <C>            <C>
      Average exchange rate during period........   $1.3671         $1.3902        $1.5122         $1.4725        $1.5099

</TABLE>

B.         CAPITALIZATION AND INDEBTEDNESS

           Not applicable.

C.         REASONS FOR THE OFFER AND USE OF PROCEEDS

           Not applicable.

D.         RISK FACTORS

           Our business, operating results and financial condition could be
seriously harmed due to any of the following risks. If we do not successfully
address any of the risks described below, we could experience a material adverse
effect on our business, operating results and financial condition and our share
price may decline. We cannot assure you that we will successfully address any of
these risks.

           We may not become profitable. Since our inception, we have incurred
losses which have been substantial in relation to our operations. As of May 31,
2001, the end of our most recent fiscal year, we had an accumulated deficit of
$19,851,764. Our losses are continuing, but decreasing. We have reported a net
loss of $734,590 for the three months ended August 31, 2001. Since our inception
we have generated relatively small amounts of revenue. In addition, we acquired
during the first six months of fiscal year 2002 all of the outstanding shares of
four companies, three of whom reported for their fiscal years ended December 31,
2000 aggregate net losses of approximately $3.2 million. If we continue to
acquire companies reporting losses, if revenue grows slower than we anticipate


                                       3
<PAGE>
or if operating expenses exceed our expectations, we may not become profitable.
Even if we do achieve profitability, we may not sustain or increase
profitability on a quarterly or annual basis. Failure to achieve or maintain
profitability may materially adversely affect the market price of our common
shares. We expect our operating expenses to continue to grow as we expand our
operations.

           We may encounter difficulties with acquisitions, which could harm our
business. During the first six months of fiscal year 2002, we made several
investments in, and acquisitions of, other companies and businesses, as part of
efforts to expand our operations and we may continue to make investments in, or
acquisitions of, complementary companies, products and businesses. If we acquire
a company, we may have difficulty integrating that company's personnel,
operations and products. We cannot assure you that we will successfully
integrate in a timely manner or at all these acquired companies into our
operations. These difficulties may increase our expenses, and our profitability
may be adversely affected.

           Resolutions may be influenced by a limited number of shareholders. We
are controlled by our three major shareholders, Paul Champagne, John Gerard
Stanton and Michael Mullarkey, which together, in the aggregate, beneficially
own approximately 43.11% of our outstanding common shares, not including 875,000
common shares currently held in escrow, to be released to Mr. Mullarkey upon the
achievement of certain profit and revenue targets specified in the acquisition
agreement of PAH. These major shareholders are also parties to a voting
agreement. The voting agreement governs the voting of our three major
shareholders on various issues including, the disposition of our corporate
assets, payment of dividends, issuance of additional shares, change in the
nature of our business, amendment to our articles of incorporation, change in
the number of directors and any amalgamation, reorganization, liquidation or any
other fundamental corporate change. Consequently, our three major shareholders
may influence the outcome of various actions that require shareholder approval,
including the election of our directors, delaying or preventing a transaction in
which shareholders might receive a premium over the prevailing market price for
their shares and preventing changes in control or management.

           The current economic downturn and future economic downturns may
adversely effect the demand for our services. Historically, the general level of
economic activity has significantly affected the demand for employment and
recruitment services. If the general level of economic activity slows, our
clients may not require additional personnel and may delay or cancel plans that
involve recruiting new personnel using our services and technology.
Consequently, our sales cycle could increase and the demand for our services
could decline, resulting in a loss of revenue harming our business, operating
results and financial condition.

           We may not be able to grow our client base and revenue because of the
number of competitors and the variety of sources of competition we face. Our
future success will depend to a large extent on our ability to rapidly grow and
maintain our client base and revenue. This requires that we offer services that
are superior to the services being offered by our competitors and that we price
our services competitively. We compete for a portion of employers' recruiting
budgets with many types of competitors, as employers typically utilize a variety
of sources for recruiting, including:


                                       4
<PAGE>
o          traditional offline recruiting firms;
o          traditional offline advertising, such as print media;
o          resume processing companies;
o          Web-based recruitment companies;
o          Internet job posting companies; and
o          client-server-based software services.

           In addition, many employers are developing or may develop their own
software to satisfy their recruitment needs. If we are unable to rapidly grow
our client base and revenue, our business, operating results and financial
condition could be materially adversely affected.

           The increasing competition in our markets could affect our ability to
expand. The market for human capital management, or HCM services is highly
fragmented and competitive. We compete nationally and internationally with
Internet recruitment services companies, outplacement service companies and
human resource, or HR service providers. We expect competition to increase and
intensify in the future, with increased price competition developing for our
services. A number of our current and potential competitors have longer
operating histories and consequently greater financial, technical and marketing
resources and name recognition than we do which could give them a competitive
advantage. Our competitors may develop products or services that are equal or
superior to ours or that achieve greater market acceptance than ours. It is also
possible that new competitors may emerge and rapidly acquire significant market
share. As a result, we may not be able to expand or maintain our market share
and our ability to penetrate new markets may be adversely affected.

           If we experience client attrition, our operating results will be
adversely affected. Since we generally enter into subscription agreements with
our E-Cruiter Enterprise clients for terms of one year or less, we have no
assurance that the client will maintain a long-term relationship with us. If we
lose clients after the expiration of their initial subscription, our business,
operating results and financial condition will be adversely affected. Since we
have only been offering our services for a limited period of time, we do not
know what rate of client attrition to expect. To the extent we experience
significant client attrition, we must attract additional clients to maintain
revenue.

           We may not be able to strengthen and maintain awareness of our brand
name. We believe that our success will depend to a large extent on our ability
to successfully develop, strengthen and maintain our brand recognition and
reputation. In order to strengthen and maintain our brand recognition and
reputation, we invest and will need to continue to invest substantial resources
in our marketing efforts and maintain high standards for actual and perceived
quality, usefulness, reliability, security and ease of use of our services. If
we fail to successfully promote and maintain our brand name, particularly after
incurring significant expenses in promoting our brand name, or encounter legal
obstacles which prevent our continued use of our brand name, our business,
operating results and financial condition could be materially adversely affected
and the market price of our common shares could decline. Moreover, even if we
continue to provide quality service to our clients, factors outside of our


                                       5
<PAGE>
control, including actions by organizations that are mistaken for us and factors
generally affecting our industry, could affect our brand and the perceived
quality of our services.

           Our success will depend on our ability to enter into strategic
relationships with job posting and other on-line recruitment services to offer
an attractive service to our clients and with a variety of third parties to
expand the distribution of our services. If we are unable to enter into
successful strategic relationships, our business will suffer. We must maintain
our existing relationships with job posting boards and other on-line recruitment
services and enter into additional similar relationships to continue to offer an
attractive service. We also must enter into arrangements with third parties,
such as value-added service providers, to expand the distribution of our
services. Because many of these third parties compete with each other, the
existence of a relationship with any particular third party may limit or
preclude us from entering into a relationship with that third party's
competitors. In addition, some of the third parties with which we seek to enter
into relationships may view us as a competitor and refuse to do business with
us. Any loss of an existing relationship or failure to establish new
relationships may adversely affect our ability to improve our services, offer an
attractive service in the new markets that we enter, or expand the distribution
of our services.

           We may not be able to expand our business successfully into new
geographic markets. Until the fourth quarter of fiscal year 2001, we have
marketed our services primarily in Canada. Consequently, substantially all of
our clients until that time were enterprises that are based in Canada or that
seek to fill job openings in Canada. During the Fourth quarter of fiscal year
2001 and subsequent to May 31, 2001, we completed several acquisition
transactions. Through these acquisition transactions we endeavored to enhance
our business by penetrating the United States market. Our success and ability to
grow our business will depend to a significant degree on our ability to market
our services successfully in new geographic markets, including the United
States. Penetrating new geographic markets involves the extension of substantial
resources, including retaining additional highly qualified personnel. Failure to
effectively penetrate new geographical markets may result in increasing losses
and the loss of our investment, in whole or in part. This could materially
adversely affect our business, operating results and financial condition.

           We may lose business if we are unable to successfully develop and
introduce new products, services and features. If we are unable to develop and
introduce new products, services, or enhancements to, or new features for,
existing services, in a timely and successful manner, we may lose sales
opportunities. The market for our services is characterized by rapid and
significant technological advancements, the introduction of new products and
services, changes in client demands and evolving industry standards. The
adoption of new technologies or new industry standards may render our products
obsolete and unmarketable. The process of developing new services or
technologies is complex and requires significant continuing efforts. We may
experience difficulties or funding shortages that could delay or prevent the
successful development, introduction and sale of enhancements or new products
and services. Moreover, new products, services or features which we introduce
may not adequately address the needs of the marketplace or achieve significant
market acceptance.


                                       6
<PAGE>
           Our business could suffer if financing is not available when required
or is not available on acceptable terms. Our future capital requirements depend
on a number of factors, including our ability to grow our revenue. We believe
that we have sufficient working capital and investments to fund our working
capital, anticipated operating cash flow deficit and capital expenditure
requirements for at least the end of the calendar year 2002. However, it is
possible that we may need to raise additional funds sooner than expected in
order to fund rapid expansion, develop new, and enhance existing, services or
acquire complementary businesses or technologies. Our business could suffer if
financing is not available when required or is not available on acceptable
terms.

           Future financing may be on terms adverse to your interests. If, in
the future, we issue equity or convertible debt securities to raise additional
funds, our shareholders may experience significant dilution of their ownership
interest and holders of those new securities may have rights senior to those of
the holders of our common shares.

           If we are characterized as a passive foreign investment company, our
U.S. shareholders may suffer adverse tax consequences. We believe that we were
not a passive foreign investment company for U.S. federal income tax purposes
for the fiscal year 2001, and we believe that we will not be a passive foreign
investment company for U.S. federal income tax purposes for the fiscal year
2002. Generally, we may be characterized as a passive foreign investment company
for U.S. federal income tax purposes if for any taxable year 75% of our gross
income is passive income, or at least 50% of our assets are held for the
production of, or produce, passive income. This characterization could result in
adverse U.S. tax consequences to our shareholders. These consequences may
include having gains realized on the sale of our common shares treated as
ordinary income, rather than capital gain income, and having potentially
punitive interest charges apply to the proceeds of share sales. U.S.
shareholders should consult with their own U.S. tax advisors with respect to the
U.S. tax consequences of investing in our common shares.

           Our business could be adversely affected if we are unable to protect
our proprietary technologies. Our success depends to a significant degree upon
the protection of our proprietary technologies and brand names. The unauthorized
reproduction or other misappropriation of our proprietary technologies could
provide third parties with access to our technologies without payment. If this
were to occur, our proprietary technologies would lose value and our business,
operating results and financial condition could be materially adversely
affected.

           We rely upon a combination of copyright, trade secret and trademark
laws and non-disclosure and other contractual arrangements to protect our
proprietary rights. The measures we have taken to protect our proprietary
rights, however, may not be adequate to deter misappropriation of proprietary
information or protect us if misappropriation occurs. Policing unauthorized use
of our technologies and other intellectual property is difficult, particularly
because of the global nature of the Internet. We may not be able to detect
unauthorized use of our proprietary information and take appropriate steps to
enforce our intellectual property rights. If we resort to legal proceedings to
enforce our intellectual property rights, the proceedings could be burdensome
and expensive and could involve a high degree of risk.


                                       7
<PAGE>
           Third parties could claim that we infringe upon their proprietary
technologies. Our products, services, content and brand names may be found to
infringe valid copyrights, trademarks or other intellectual property rights held
by third parties. In the event of a successful infringement claim against us and
our failure or inability to modify our technologies or services, develop
non-infringing technology or license the infringed or similar technology, we may
not be able to offer our services. Any claims of infringement, with or without
merit, could be time consuming to defend, result in costly litigation, divert
management attention, require us to enter into costly royalty or licensing
arrangements, modify our technologies or services or prevent us from using
important technologies or services, any of which could harm our business,
operating results and financial condition.

           We may become subject to burdensome government regulation which could
increase our costs of doing business, restrict our activities and/or subject us
to liability. Uncertainty and new regulations relating to the Internet could
increase our costs of doing business, prevent us from providing our services,
slow the growth of the Internet or subject us to liability, any of which could
adversely affect our business, operating results and prospects. In addition to
new laws and regulations being adopted, existing laws may be applied to the
Internet. There are currently few laws and regulations directly governing access
to, or commerce on, the Internet. However, due to the increasing popularity and
use of the Internet, the legal and regulatory environment that pertains to the
Internet is uncertain and continues to change. New and existing laws may cover
issues which include:

o          user privacy;
o          pricing controls;
o          consumer protection;
o          libel and defamation;
o          copyright and trademark protection;
o          characteristics and quality of services;
o          sales and other taxes; and
o          other claims based on the nature and control of Internet materials.

           Computer viruses or software errors may disrupt our operations,
subject us to a risk of loss and/or expose us to liability. Computer viruses may
cause our systems to incur delays or other service interruptions. In addition,
the inadvertent transmission of computer viruses or software errors in new
services or products not detected until after their release could expose us to a
material risk of loss or litigation and possible liability. Moreover, if a
computer virus affecting our system is highly publicized or if errors are
detected in our software after it is released, our reputation and brand name
could be materially damaged and we could lose clients.

           We may experience reduced revenue, loss of clients and harm to our
reputation and brand name in the event of system failures. We may experience
reduced revenue, loss of clients and harm to our reputation and brand name in
the event of unexpected network interruptions caused by system failures. Our
servers and software must be able to accommodate a high volume of traffic. We
have experienced minor system interruptions in the past, and we believe that
system interruptions will continue to occur from time to time in the future. If
we are unable to add additional software and hardware to accommodate increased


                                       8
<PAGE>
demand, we could experience unanticipated system disruptions and slower response
times. Any catastrophic failure at our network operations center could prevent
us from serving our clients for a number of days, or possibly weeks, and any
failure of our Internet service provider may adversely affect our network's
performance. Our clients may become dissatisfied by any system failure that
interrupts our ability to provide our services to them or results in slower
response times. Our business interruption insurance may not adequately
compensate us for any losses that may occur due to any failures in our system or
interruptions in our services.

           Breaches of our network security could be costly. If unauthorized
persons penetrate our network security, they could misappropriate proprietary
information or cause interruptions in our services. We may be required to spend
capital and resources to protect against or to alleviate these problems. In
addition, because we host data for our clients, we may be liable to any of those
clients that experience losses due to our security failures. As a result,
security breaches could have a material adverse effect on our business and the
market price of our common shares may decline.

           Our business depends on Internet service providers to provide
satisfactory service to our clients to enable them to use our services and
access job seeker candidates on-line. Failure of Internet service providers or
on-line service providers to provide access to the Internet to our clients and
job seekers would prevent them from accessing our Web board, which would cause
our business to suffer. Many of the Internet service providers, on-line service
providers and other Web site operators on which we depend have experienced
significant service slowdowns, malfunctions, outages and capacity limitations.
If users experience difficulties using our services due to the fault of third
parties, our reputation and brand name could be harmed.

           Our business depends on the development and maintenance of the
Internet infrastructure. We cannot assure you that the Internet infrastructure
will continue to effectively support the demands placed on it as the Internet
continues to experience increased numbers of users, greater frequency of use or
increased bandwidth requirements of users. In the past, the Internet has
experienced a variety of outages and other delays. Any future outages or delays
could affect the willingness of employers to use our on-line recruitment
offerings and of job seekers to post their resumes on the Internet. If any of
these events occur, our business, operating results and financial condition
could be materially adversely affected.

           The existence of registration rights could depress the market for our
common shares. We have granted "piggy-back" registration rights to holders of
approximately 2,620,655 common shares in connection with our recent
acquisitions. This means that any registration statement that we file within the
five-year period beginning January 1, 2002 may trigger the registration of these
shares, subject to certain restrictions. In connection with our initial public
offering in fiscal year 2000 and financial consulting services rendered to us in
fiscal year 2001, we issued the underwriters warrants to purchase an aggregate
of 490,000 common shares. We also granted registration rights to the underwriter
with respect to the common shares issuable upon exercise of the underwriter's
warrants. These registration rights are described in the "Underwriting" section
of our prospectus pertaining to our initial public offering. We cannot predict


                                       9
<PAGE>
the effect, if any, that sales of these additional securities or the
availability of these additional securities for sale will have on the market
prices of our common shares prevailing from time to time.

ITEM 4.    INFORMATION ON THE COMPANY

A.         HISTORY AND DEVELOPMENT OF THE COMPANY

We were incorporated on May 24, 1996 under the Canada Business Corporation Act
under the name CareerBridge Corporation. In February 1999, we changed our name
to E-Cruiter.com Inc. and in November 2001 we changed our name to Workstream
Inc. In 1997, we began operating an online regional job board, on which
applicants post their resumes and employers post available positions, focused on
the high-technology industry. In February 1999, we changed our business focus
from the job board business to providing on-line recruitment services. In fiscal
year 2001, we broadened our focus and we are now servicing as a provider of
web-enabled tools and professional services for numerous capital management,
offering a diversified suit of high-tech and face to face, or high-touch
services to address the full lifecycle of the employer/employee relationship.

Our principal executive offices are located at 495 March Road, Suite 300,
Ottawa, Ontario K2K 3GI and our telephone number is (613) 236-2263. Our agent
for service of process in the United States is CT Corporation, whose address is
at 111 Eighth Avenue, New York, New York 10011.

In April 2001, we completed the acquisition of Paula Allen Holdings, Inc., or
PAH, and in connection with the acquisition, we appointed Michael Mullarkey,
formerly the president and chief executive officer of PAH, as our president and
chief executive officer.

CAPITAL EXPENDITURES

Our capital expenditures have primarily been made to expand our network
operations center and the move to our new office location at 495 March Road in
Ottawa, Canada.

In fiscal year 2001, we invested a aggregate of $1,461,119 in capital assets. Of
this aggregate amount, $968,835 related to the cost of leasehold improvements
and a new telephone system for the new office space. An additional $339,732 was
spent on computer software and hardware for our network operations center and
research and development team. The remainder was expended on equipment for our
other functional areas. In fiscal year 2000, we purchased $927,035 in capital
assets with the largest portion of the investment relating to the purchase of
servers and software for our network operations center. In fiscal year 1999 we
invested $105,588 in capital assets.

For additional information pertaining to our capital expenditures, please see
note 4 to our audited consolidated financial statement included elsewhere in
this annual report.

ACQUISITIONS

We constantly endeavor to increase our share of, and strengthen our position in,
the HCM market. A key component of our business strategy is to continue to
acquire companies offering services similar or complementary to ours. The HCM


                                       10
<PAGE>
market has experienced significant consolidation in the last several months as
companies attempt to expand their service offerings and broaden their revenue
bases to achieve rapid growth and profitability. Implementing our business
strategy and identifying the consolidation trend in relatively early stages, we
have actively pursued acquisition opportunities and completed acquisitions of
several attractive companies.

In April 2001, we entered into a definitive agreement to acquire 100% of the
outstanding shares of PAH and its subsidiaries, doing business as Allen And
Associates. As initial consideration for the sale, we issued to the shareholders
of PAH 4,000,000 of our common shares valued at approximately $8.5 million. In
addition to the initial consideration, 1,000,000 common shares are being held in
escrow, to be released upon the achievement of certain profit and revenue
targets of the combined companies. The escrow agreement expires on December 31,
2002, at which time any shares remaining in escrow will be cancelled. The
acquisition of PAH was completed in July 2001. PAH had 11 offices across the
U.S. at the time of execution of the agreement, and established 9 additional
offices by September 2001. Headquartered in Orlando, Florida, PAH is focused on
career transition, job placing services and recruiting within the information
technology, engineering, finance and marketing areas. PAH's online candidate
recruitment and placement technology enables employers to search for candidates
for employment in real time, reducing time to hire. PAH is also engaged in
management consulting PAH's management consulting practice focuses on emerging
technologies and extending HCM strategy. Leveraging the Internet and advanced
technology, PAH's service integrates platforms, systems and software, including
human resources management systems delivering innovative business processes that
encourage corporate growth. For the year ended December 31, 2000, PAH had
revenues of approximately $10.7 million and net losses of approximately
$334,000.

In May 2001, we entered into a definitive agreement to acquire 100% of the
shares of OMNIpartners, Inc. and its affiliates. As initial consideration for
the sale, we issued to the shareholders of OMNIpartners 500,000 common shares
valued at approximately $1.5 million. In addition to the initial consideration,
1,000,000 common shares are being held in escrow, to be released upon the
achievement of certain profit and revenue targets of the acquired company. The
escrow agreement expires on June 30, 2002, at which time any shares remaining in
escrow will be cancelled. The acquisition of OMNIpartners was completed in July
2001. OMNIpartners was founded in 1990 and developed the concept of recruitment
research at an hourly rate, as a lower-cost recruitment alternative.
OMNIpartners offers a range of executive and professional recruitment research
services to a wide array of industries including, retail, hotel, restaurant,
gaming, food service, telecommunications, insurance, distribution,
manufacturing, financial services and information technology. For its fiscal
year ended December 31, 2000, OMNIpartners had revenues of approximately $12.1
million and net income of approximately $187,030.

In June 2001, we entered into a definitive agreement to acquire 100% of the
shares of RezLogic, Inc., referred to as RezLogic, a company based in Colorado
Springs, Colorado. As initial consideration for the sale, we issued to the
shareholders of RezLogic 445,544 common shares valued at approximately $2.8
million. In addition to the initial consideration, 297,030 common shares are
being held in escrow, to be released upon the achievement of certain profit and


                                       11
<PAGE>
revenue targets of the acquired company. The escrow agreement expires on June
30, 2002, at which time any shares remaining in escrow will be cancelled. The
acquisition of RezLogic was completed in August 2001. RezLogic is a leader in
recruiting process automation offering Web-based recruiting process automation
solutions for employers, staffing agencies, executive recruiters, contract
placement firms and independent recruiters. We expect that the acquisition of
RezLogic will provide us with an established U.S. sales channel for the
applicant tracking systems, or ATS platform, and enable us to integrate
additional functionality into existing platforms, such as equal employment
opportunity, or EEO tracking. For the year ended December 31, 2000, RezLogic had
revenues of approximately $1.1 million and net loss of approximately $377,000.
We believe that this reporting capability is essential to achieve a significant
penetration of the U.S. market.

In July 2001, we entered into a definitive agreement to acquire the technology
and assets of Gonyea Career Marketing Inc., known as ResumeXpress. As
consideration for the sale, we paid ResumeXpress a cash amount of approximately
$260,000. The acquisition was completed in August 2001. ResumeXpress enables job
seekers to distribute their resumes to thousands of employers, recruiters and
online resume database services across the U.S. and Canada. Resumes are
distributed to those parties whose keywords are matched to the keywords found in
each job seeker's resume. Using the ResumeXpress Web site, job seekers can post
their resumes in a matter of minutes, and their resumes are posted for a
six-month period on a personal resume Web page with a unique uniform resource
locator, or URL.

In September 2001, we entered into a definitive agreement to acquire 100% of the
shares of 6FigureJobs.com, Inc. As initial consideration for the sale, we issued
to the shareholders of 6FigureJobs 1,294,498 common shares valued at
approximately $6.2 million. In addition to the initial consideration, 323,625
common shares are being held in escrow, to be released upon the achievement of
certain profit and revenue targets of the acquired company. The escrow agreement
expires on September 30, 2002, at which time any shares remaining in escrow will
be cancelled. The acquisition was completed in October 2001. 6FigureJobs.com is
a leader in executive search and recruitment services. 6FigureJobs.com provides
career management, recruitment advertising, resume database and targeted
research services for senior-level executives, employers and executive
recruiters. We believe that this acquisition expands and enhances our existing
executive career transition services which became available to us to offer as a
result of our previous acquisitions, and provides applicant tracking clients
with a premier advertising destination. For the year ended December 31, 2000
6FigureJobs.com had revenues of approximately $2.7 million and net losses of
approximately $2.5 million.

We believe that these acquisitions are important to our evolution from a
recruitment application service provider into an HCM business process
aggregator. These additions have broadened our revenue base, diversified our
product offering, and added over 200 employees to our work force and 20 revenue
generating locations across North America.


                                       12
<PAGE>
B.         BUSINESS OVERVIEW

GENERAL

We are a leading provider of Web-enabled tools and professional services for
HCM. Offering a diversified suite of high-tech and high-touch services to
address the full lifecycle of the employer/employee relationship, we ensure more
effective management of corporate assets via automation and outsourcing. Our HCM
technology backbone enables companies to streamline the management of enterprise
human capital processes including recruitment, assessment, deployment,
development and career transitions. We offer a full-range of HCM products and
services through our locations and dedicated human resource professionals.

PRINCIPAL SERVICES - ONLINE RECRUITING AUTOMATION

Through the use of our E-Cruiter Express services, our corporate clients are
able to write one job advertisement that is reformatted by our proprietary
software and posted in multiple job boards, thereby eliminating the need to
reformat job postings for each board. For clients that require more
comprehensive recruiting management services, we provide our E-Cruiter
Enterprise service, which includes the posting features of E-Cruiter Express, as
well as the following features:

         o        a corporate career site, which is a job site hosted on our
                  servers, and linked to a client's corporate Web site. This
                  recruiting portal is linked to job posting and management
                  services within E-Cruiter Enterprise;

         o        resume processing tools which enable clients to rate, score,
                  screen, search, organize and manage resumes submitted by job
                  seekers;

         o        applicant communication tools, including our proprietary
                  e-mail system which automatically keeps records of the
                  electronic communication associated with each job opening and
                  generates automatic messages to job seekers; and

         o        a suite of multi-user workflow features which allows for
                  collaborative hiring between human resources personnel and
                  hiring managers within the same organization.

Our services enable our corporate clients to take advantage of the Internet for
recruiting, communicating with job seekers and managing the recruiting process
in a cost-effective manner. We believe that, by using our services, our
corporate clients:

         o        reduce their time to hire;

         o        reduce their direct costs to hire;

         o        reduce their opportunity costs of having open unfilled
                  positions; and

         o        improve their quality of hire.

We generate our revenue from companies who use our recruitment services.
Approximately 75% of our revenue is generated by our E-Cruiter Enterprise
services with the balance being generated by our E-Cruiter Express service
offering.


                                       13
<PAGE>
Our business is a Web-outsourced application service. The cost benefit to
organizations of Web-outsourcing is that all software and hardware
infrastructure is physically located at the service provider's location, with
clients only requiring standard Web browsers on their employees' workstations.
Therefore, because our clients are not required to make a significant initial
investment, our services are easy to buy and implement. Compared to traditional
client-server computing our services provide the following advantages to our
clients:

         o        reduced total cost of ownership for technology;

         o        greater flexibility for accommodating future business needs
                  while maintaining state of the art technology deployment; and

         o        significantly quicker service deployment, reducing the
                  time-to-benefit cycle and the cost of adoption.

We believe our key competitive advantage is our experience in the recruiting
industry and our effective use of information technology. We understand the
human resource problems arising from poor use of technology and from ineffective
recruiting strategies. In February 2000, the Branham Group, a Canadian
consulting company, listed us as one of Canada's top 250 software and
information technology services companies in its 7th annual survey. We were
listed among the top 50 Web development and services companies in Canada.

Since the appointment of our new president and chief executive officer, Michael
Mullarkey, in April 2001, we have sought to expand our revenues by adding
services that are complementary to our online recruiting enterprise systems. Our
acquisitions of outplacement, recruitment research and executive job board
services give us more human capital products to offer to our principal buyer -
the human resource professional. For additional information see "-Our Solution."

INDUSTRY BACKGROUND

Our market includes any organization needing to hire employees, especially, but
not exclusively companies seeking information technology skills and expertise.
We believe that several factors require companies to hire additional personnel
and increase demand for our services:

         o        strong economies in both Canada and the United States;

         o        increased employee turnover; and

         o        the acute shortage of knowledge workers in North America.

Consequently, we believe many organizations are looking to the Internet to
increase the effectiveness of their recruiting processes and attract the quality
candidates that are strategic to their businesses.

The Internet provides for speed of communication as well as a medium for the
development of tools to facilitate a more efficient recruitment process. We
believe there will be considerable growth in the demand for software tools, such
as on-line screening and text searching, to take advantage of on-line


                                       14
<PAGE>
recruiting. A recent survey by Recruiter's Network.com of 1,000 companies
indicated that 10% of the companies surveyed allocated 50% of their recruiting
budget to recruiting on the Internet. Many organizations are beginning to
completely overhaul their human resources information systems to take advantage
of both new technologies and new recruiting concepts and we anticipate that
recruitment spending will shift away from the client-server human resources
services to Web-based media hiring processes because of their lower cost and
ease of implementation. Moreover, we believe that most of the advantages offered
by Internet technology have not been implemented to date in the recruiting
market.

A 1999 study by Forrester Research, a technology based industry analyst,
indicates that the on-line recruitment market is expected to grow by almost 60%
annually for the next four years. This compares with about 12% for the
traditional staffing industry in the United States. Forrester Research,
estimated this market to be US $0.6 billion in 1999 and expects it to reach more
than US $7.0 billion by 2005. Other forecasts estimate the market for such
services to be even larger. For example, The Electronic Recruiting Index
estimates the on-line recruitment market to be US $40 billion by 2005.

We believe that E-Cruiter Enterprise, our primary recruitment service, directly
addresses the major challenges facing employers, mainly, time-to-hire,
quality-of-hire and cost-of-hire. The July 1999 Internet Recruiting Intelligence
Report, Lessons from Global 500, found that on average, on-line recruiting
reduced the recruiting cycle by 20 days. Furthermore, the report notes that the
cost associated with Internet recruiting is well below that of all other
recruiting channels.

COMPETITION

The market for HCM services is highly fragmented and competitive. We compete
nationally and internationally with Internet recruitment services companies,
outplacement services companies and HR service providers. We believe that our
principal competitive advantages include:

         o        our unique combination of high-tech and high-touch services;

         o        our leading position in the applicant tracking, outplacement
                  and recruitment research markets;

         o        our award-winning technology;

         o        our network of offices and personnel throughout North America;

         o        our performance and reliability as an application service
                  provider;

         o        our service reputation; and

         o        our strong staff of HR professionals.


                                       15
<PAGE>
STRATEGY

Our objective is to become the leading supplier of comprehensive adaptive
workforce solutions in North America. Our services can be used by any size
organization and therefore we believe that our products can address the needs of
the entire human capital market. We have clients who have less than 50 employees
using the E-Cruiter Express job posting services. We also have clients who
employ more than 10,000 employees using our E-Cruiter Enterprise solution. Our
newly added corporate outplacement and recruitment research services are able to
provide services to companies of any size. We believe that our solutions provide
a comprehensive service for corporate HR in managing workforce churn. Our
services include:

         o        talent acquisition services ranging from job posting outreach
                  to job boards;

         o        hosting a corporate career site;

         o        automating and monitoring the recruitment process and the
                  provision of links to external service providers such as
                  companies that specialize in skill testing or personality
                  profiling;

         o        talent mobility services with job posting to internal company
                  intranets; and

         o        talent separation services that encompass pre-termination
                  planning, individual coaching and credential building,
                  opportunity research and job marketing campaign development.

We have developed a strategy that is focused on balanced revenue growth in any
economic conditions, as we endeavor to achieve profitability through a
combination of organic revenue growth, cost management and strategic
acquisitions. Key elements of our strategy for business development are as
follows:

         o        Enhancing and widening our service portfolio. We will
                  integrate our new recruitment research and corporate
                  outplacement services within our technology platform and sales
                  and service operations, and continue to expand the services we
                  provide to manage workforce churn through further product
                  development and strategic acquisitions. This will give us the
                  ability to grow revenues with each client, acquire new clients
                  with different requirements, and further develop revenue
                  stability regardless of market conditions.

         o        Pursuing strategic acquisitions. From time-to-time we will
                  evaluate acquisition and investment opportunities in
                  complementary businesses, products and/or technologies. Our
                  objective is to accelerate our growth, add new services or new
                  technologies for our existing client base and penetrate new
                  markets.

         o        Expanding into the U.S. market. We plan to further expand our
                  business outside of Canada by further penetrating the U.S.
                  market. We intend to continue to penetrate the U.S. market by
                  pursuing acquisitions of additional U.S.-based companies with


                                       16
<PAGE>
                  complementary services, and strengthening our indirect and
                  direct sales operations.

         o        Building a wider indirect sales channel for distribution of
                  our products and services. We plan to pursue reseller
                  agreements for all of our services with human capital solution
                  providers and recruiting companies.

         o        Expanding direct sales with vertical focus. We will continue
                  to emphasize our direct sales efforts into targeted vertical
                  industries, especially those with current good economic
                  outlooks including health care, pharmaceuticals and biotech,
                  food services, energy and some manufacturing sectors.

         o        Maintaining technological leadership. We plan to remain at the
                  forefront of Web-based human capital solutions by developing
                  or licensing the latest available technologies.

OUR SOLUTION

We designed our services to take advantage of the Internet and offer our clients
a comprehensive recruitment service. By linking organizations' recruiting
efforts with on-line sources of applicants such as job boards and news groups
and allowing clients to also download resumes from paper-based sources into
their applicant database, we believe our services allow organizations of every
size to significantly improve their recruiting and hiring cycles. Our services
can be accessed with any standard Web browser and require no additional software
or hardware deployment by clients.

We believe our clients use our services because our services significantly
reduce their time-to-hire, provide streamlined access to qualified candidates,
lower opportunity cost losses and result in significant cost savings. Based on
past experience, we believe that hiring cycles of organizations employing
traditional recruiting methods can extend beyond 25 to 50 days. However, the
best information technology candidates are often hired within five to ten
business days. Therefore, we believe that organizations who employ
Internet-based recruiting processes will be the only ones able to compete
effectively for good information technology candidates.

E-CRUITER ENTERPRISE

E-Cruiter Enterprise, a complete recruiting portal solution, allows companies of
all sizes to manage the entire hiring process on-line. Using E-Cruiter
Enterprise, clients have a central, multi-functional hiring platform for all
recruiting activities, including posting to their external career site, Intranet
career site, job boards, news groups and agency suppliers. It is sold to clients
with one or more concurrent user licenses. Each concurrent license enables
another user within the organization to access the service. One concurrent
license is sufficient for small organizations that have only a few individuals
actively recruiting. One or more concurrent licenses provide for additional
simultaneous users and permits clients to take full advantage of multi-user
functionality.


                                       17
<PAGE>
E-Cruiter Enterprise allows organizations to post jobs to multiple Internet
boards through a posting manager function. Clients write a job requisition only
once, and the job requisition is ready to be advertised on numerous Internet job
boards, newsgroups and the client's own corporate Web site. Our write-once,
post-to-many capability saves time in re-writing job requisitions for specific
boards and in making arrangements with numerous job boards. Through
PositionWatch Ltd., our job posting partner, we currently post job requisitions
to the following job boards: PositionWatch, CAREERSpan, Internet Job Locator,
Netjobs, Canjobs, Prohire, CareerMagazine and CareerExchange. We also separately
post to additional job boards including Workopolis.com, Headhunter.net,
CanadaJobs, Monster.ca, CanadianCareers, Business in Vancouver, Jobboom.com and
Campus WorkLink. We continue to add new job boards to our service so that our
clients can post job requisitions to national, regional and skill-specific
boards that assist them in targeting and attracting the right candidates for the
posted positions. We have signed agreements that will result in the following
additional job boards becoming available to our clients: Insuranceworks.com,
Canadian Professional Sales Association, Marketingjobs.com and Moretechjobs.com.

The E-Cruiter Enterprise recruiting portal solution allows clients to quickly
establish a high quality company career site. We believe that career sites
maximize the value of our recruiting portal solution, and are the most strategic
way to help clients attract quality candidates. In particular, our clients can
purchase career sites from us which include functionality, such as job seeker
agent, a capability that notifies registered candidates of employment
opportunities when they are posted to the career site, and search, a capability
that allows job seekers to search the jobs posted on the career site for
positions of interest to them. Our clients can track the effectiveness of their
career site by reviewing statistics on the volume and source of job seeker
traffic received.

E-Cruiter Enterprise provides for enhanced communication among candidates,
hiring managers and human resources personnel. Clients can use a set of generic
corporate messages to automatically respond to resumes or other applicant
communications using our auto-acknowledgement tool. For example, an e-mail
acknowledging receipt of a resume can be automatically sent to an applicant, an
administrative function which is now automated, making corporate recruiters' job
more efficient and cost effective. Our proprietary e-mail system also maintains
records of all electronic communication associated with each job opening, and
all applicants, including on-line interviews, as well as internal communications
between the hiring manager and the corporate recruiter. We have recently signed
an agreement with netPCS Networks to enhance communications between job seekers
and our clients' human resources personnel and hiring managers. When
implemented, corporate recruiters will have access to a service that empowers
them to make or receive multi-media calls, for example, through their cellular
phone or personal data assistant, with candidates the instant they enter our
career board.

We believe our E-Cruiter Enterprise selection capabilities, including automatic
screening and skills ranking, improve our clients' recruiting efforts and
increase the speed at which they gain access to top candidates. Applicants who
apply on-line are ranked after they have answered screening questions either
pulled by the corporate recruiter from our suggested list, or created for the
specific job by that corporate recruiter. These applicants are then matched
against the screening criteria determined by the corporate recruiter. Applicants
who do not meet the screening criteria are placed in a rejected folder, while


                                       18
<PAGE>
those that do are flagged for review by employers, and automatically become
qualified candidates. Clients also receive lists of the applicants in ranked
order, and this ranking is determined by the applicant's responses to the
screening questions, and the manner in which it matches against the set
criteria. This feature assists recruiters in determining quickly if an applicant
is qualified for a given position.

Through the applicant function, clients can manage their recruiting process
using familiar folder hierarchies. Job folders are logically organized by job
opening and can be tailored to the clients' recruiting process. For example,
clients typically set up the following job folders when using E-Cruiter
Enterprise: new applicant, active, rejected, set up interview, interview
schedule and hired. As applications are received, employers move the
applications through the folders as part of managing the recruiting process.
This provides ready access to recruiting status and allows our software to
generate standard reports measuring such things as time taken to hire and
recruiter productivity. Our software also generates standard reports on
advertising and job posting effectiveness. The multi-functionality of the
applicant process allows human resources personnel and hiring managers within
the same organization to share, circulate and electronically comment and
collaborate on resumes that have been received. In addition to permitting
various levels of access among hiring managers and employers, our hiring
management system allows users to optionally protect their own individual
assessments of candidates.

E-Cruiter Enterprise also allows clients to utilize the services of our
selection partners over the Internet, and have the results flow back into their
database on our servers. As part of our comprehensive hiring management system,
we resell skills and selection testing services of Brainbench Inc. and the
Self-Management Resources Corporation. Clients direct their applicants to a
specific Web site in which tests are completed by the applicant. The test
results are made available to our clients for use in their recruitment process.
We have recently entered into an agreement with a verification services company
that will allow our clients access to reference checking, educational
verification and other similar services.

The following is a summary of features offered within E-Cruiter Enterprise:

         o        Create, edit and search job requisitions. These features allow
                  our clients to quickly create, edit and search job
                  requisitions using a standard template that is compatible with
                  newsgroups, job boards, their career site and their intranet
                  site. Clients can either use the template or use job
                  requisitions from the posting archive.

         o        Posting Center. This feature allows clients to quickly post or
                  unpost job requisitions to multiple Internet boards. Jobs are
                  posted to regional or national job boards, newsgroups or the
                  client's corporate careersite.

         o        Create and manage career sites. This feature, together with
                  our assistance, allows clients to quickly set up and maintain
                  their own career site on a corporate Web site.


                                       19
<PAGE>
         o        Applicant communication. This feature allows clients to
                  automatically acknowledge receipt of applications, to conduct
                  on-line interviews and to decline applicants both in single or
                  multiple applicant mode.

         o        Applicant searching. This feature allows clients to search
                  their data for resumes using search criteria as defined by
                  users.

         o        Applicant review. This feature allows clients to review, rate
                  and comment on applications received. Clients can move
                  applications through job folders to reflect their status.

         o        Applicant management. This feature allows clients to share
                  applications among human resources personnel and hiring
                  managers within the same organization, to e-mail resumes to
                  remote users or to reject applicants. Applicants can be
                  deleted in single and multi-mode.

         o        Resume data loading. This feature allows clients to load
                  resumes from traditional paper based sources into their
                  applicant database integrating applicants from all sources
                  into their hiring management system to more effectively manage
                  their overall recruitment activities.

         o        Export. This feature allows clients to export their
                  applicants' resumes to alternative systems, including to their
                  human resource management systems.

         o        Send for testing. This feature allows our clients to direct
                  applicants to on-line testing and profiling partners.

         o        Send for verification. This feature allows our clients to
                  obtain verification services through the Internet.

         o        Administration/account management. This feature allows clients
                  to set up individual users, modify screen layouts, assign
                  posting or hiring privileges, assign default screen layouts
                  and modify passwords.

         o        Generate reports. This feature allows clients to generate
                  standard reports on advertising effectiveness, time-to-hire,
                  and recruiter productivity.

Our E-Cruiter Enterprise subscription contracts are typically for one-year terms
with automatic renewals, one or more simultaneous user licenses, user training
and set up and a menu of Internet posting services. Clients can terminate their
contracts at any time by providing 90 days written notice. Clients are charged a
monthly subscription fee for concurrent user access licenses, career site
hosting, on-line reporting and other services. We charge one-time fees for
initial career site development and other set up and product education. We also
provide professional consultation services on a time and materials basis. Job
site posting, skills testing, personality profiling and verification services
are provided on a pay-per-use basis.

We believe that the E-Cruiter Enterprise pricing formula provides clients with a
low-risk avenue to access the benefits of on-line recruiting at a reasonable


                                       20
<PAGE>
cost compared to client-server technology. Furthermore, since the required
technology infrastructure investments are nominal by comparison, clients
experience lower initial costs for full access to the comprehensive service that
E-Cruiter Enterprise provides. We believe that the subscription formula provides
us with the opportunity to earn annuity-based returns as subscriptions are
renewed. This pricing practice is consistent with similarly offered Web-based
services.

E-CRUITER EXPRESS

E-Cruiter Express is our job posting software for clients who wish to use the
Internet only to advertise their open positions. E-Cruiter Express is a quick,
easy and affordable way for clients to post jobs to multiple Internet sites and
introduce them to Internet recruiting and a more comprehensive hiring management
system for improved recruiting efficiency. Clients only have to write a job
description once, and it is ready to be advertised on numerous Internet job
boards and news groups concurrently. An advertisement can easily be placed with
just a click of a mouse on several job boards including PositionWatch,
CAREERSpan, Internet Job Locator, Netjobs, Canjobs, Prohire, CareerMagazine and
CareerExchange and Workopolis. We intend to continue to add job boards to our
service so that clients can post job requisitions to additional job sites. Our
write-once, post-to-many capability saves time in re-writing job requisitions
and saves administrative time in making arrangements with numerous job boards.

E-Cruiter Express clients can review their applications on-line and delete
unwanted applications. Clients can also electronically communicate with
applicants using our proprietary e-mail system.

E-Cruiter Express is priced on a per-job posting basis and can be paid for by
credit card by clients using our electronic commerce capabilities.

PAH - OUTPLACEMENT SERVICES

We currently provide outplacement services through our subsidiary, PAH. which we
acquired in July 2001. PAH, which carries on business under the name Allen And
Associates, is an outplacement and employment marketing firm. PAH provides
professional assistance to approximately 10,000 job seekers each year in the
areas of information technology, engineering, finance and marketing. The
services provided to the job seeker include construction of professional resume
and cover letter, industry employment research, as well as fulfillment,
administrative, and clerical services.

OMNIPARTNERS--RECRUITMENT RESEARCH SERVICES

We currently provide recruitment research services through our subsidiary
OMNIpartners, which we acquired in July 2001. OMNIpartners provides recruitment
research, which is the outsourcing of the sourcing and screening work associated
with recruiting, on a cost-per-hour basis. We believe this outsourcing formula
allows clients to lower costs and gain access to specialized expertise that
provides objectivity and ongoing value to the hiring process. OMNIpartners'
research employees look for potential employees, interview and qualify them, and
deliver all the information to the clients' HR departments. The OMNIresearch
Report, delivered after completion of the recruitment assignment, details


                                       21
<PAGE>
information about each individual uncovered during the search. OMNIresearch
Reports may include information about candidates' work histories, technical
abilities, educational backgrounds, people skills, decision-making abilities,
availability and salary expectations. The client can offer to hire any of the
individuals presented, at any time, for no additional charge.

REZLOGIC - EXPANSION OF HCM PLATFORM

We believe that our acquisition of RezLogic and its technology expands our HCM
platform and the client value of our service offerings. It also adds to our
continued expansion and consolidation efforts across North America.

Through RezLogic we provide an online recruiting suite of products and services
to corporations, staffing agencies, executive recruiters, contingent placement
firms and independent recruiters. We believe that RezLogic's products help
companies manage and optimize the acquisition cycle. RezLogic's technology is
designed to eliminate paperwork from the recruiting process with key
innovations, including automated e-mail input, streamlined resume capture,
document extraction and processing, and integrated graphical reports. In
addition, RezLogic's products provide requisition management, resume processing
capabilities, candidate tracking and efficiency reports, and EEO management, all
in a fully integrated software application. Clients can access all the
capabilities of the RezKeeper system using a standard Web browser.

6FIGUREJOBS.COM - ONLINE EXCHANGE

6FigureJobs.com (and its complementary service, 6FigureMBA.com), which we
acquired in October 2001 is an online exchange where job seeking candidates and
recruiting companies can interact. We believe that SixFigureJobs.com customizes
this experience to satisfy the needs of the upper-echelon management candidate
and the companies looking to hire them. The site provides content appropriate
for senior executives, directors and other managers, as well as containing job
postings that meet their qualifications. We employ screening to create this
exclusive community of job seekers. On the candidate side, each job seeker is
reviewed before his or her resume is allowed to reside in the site's candidate
database. On the recruiting side, all job openings must have a minimum aggregate
compensation of $100,000.

C.         ORGANIZATIONAL STRUCTURE

We have the following wholly owned subsidiaries:

         o        E-Cruiter.com USA Inc., incorporated under the laws of the
                  State of Delaware;

         o        3451615 Canada Inc., incorporated under the Canada Business
                  Corporations Act;

         o        Paula Allen Holdings Inc., incorporated under the laws of the
                  State of Florida, engaged in providing outplacement services;

         o        OMNIpartners Inc., incorporated under the laws of the State of
                  Florida, engaged in providing recruitment research services;


                                       22
<PAGE>
         o        RezLogic Inc., incorporated under the laws of the State of
                  Colorado, engaged in providing an online recruiting suite of
                  products and services to corporations; and

         o        6FigureJobs.com, Inc., incorporated under the laws of the
                  State of Delaware, engaged in providing online exchange
                  services.

D.         PROPERTY, PLANTS AND EQUIPMENT

Our head office is located in Ottawa, at suite 300, 495 March Road, Ottawa,
Ontario, Canada, where we occupy approximately 18,000 square feet and for which
we pay an annual rent of approximately $504,000, or approximately $42,000 per
month. Our lease for these premises expires in December 2010. These premises
facilitate all our Ottawa operations, which include research and development,
customer support, network operations and finance and administration.

We occupy additional premises of approximately 14,775 square feet located at
Suite 200, 861 SW 78th Avenue, in Fort Lauderdale, Florida, which serve as the
headquarters of OMNIpartners and for which we pay an annual rent of
approximately $348,000, or approximately $29,000 per month. Our lease for these
premises expires in January 2004.

In addition, we occupy premises of approximately 5,475 square feet located at
235-2600 Lake Lucien Drive, Maitland, Florida, which serve as the headquarters
of PAH and for which we pay an annual rent of approximately $156,900, or
approximately $13,075 per month. Our lease for these premises expires in October
2004.

We also occupy premises of approximately 7,300 square feet located at 397 Post
Road, Darien, Connecticut, which serves as the headquarters of 6FigureJobs.com,
for which we pay an annual rent of $268,000, or approximately $22,300 per month.
Our lease for these premises expires in April 2002.

We believe we currently have sufficient space to accommodate future growth
requirements.

ITEM 5.    OPERATING AND FINANCIAL REVIEW AND PROSPECTS

The following discussion and analysis should be read together with "Item 3. Key
Information--Selected Financial Data" and our consolidated financial statements
and related notes included elsewhere in this annual report. This discussion
contains forward-looking statements that involve risks and uncertainties. Our
actual results may differ materially from those anticipated in these
forward-looking statements as a result of certain factors, including, but not
limited to, those set forth in "Item 3. Key Information-Risk Factors."

OVERVIEW

We are a leading provider of HCM services. We offer a combination of high-tech
and high-touch services, giving clients the ability to manage their complete
recruiting and outplacement needs on a single E-Cruiter platform.


                                       23
<PAGE>
Fiscal year 2001 marked an important transition for us. In addition to
solidifying our leadership position in the Canadian applicant tracking market,
we took significant steps to expand and diversify our revenue base and penetrate
the U.S. market through several acquisitions. We also laid the basis for a new
Microsoft.NET technology platform that we believe will allow us to quickly offer
seamless aggregation of services across the full hire-to-retire HCM spectrum.

Revenue derived from our ATS, increased 99% to $2.7 million for fiscal year
2001, compared with $1.4 million in fiscal year 2000. Gross margins also
improved significantly, to $787,133, or 26% of revenues, from $127,960, or 7% of
revenues, in the prior year. Our client contract renewal rate exceeded 90%.

In the fourth quarter of fiscal year 2001, we entered into definitive agreements
to acquire 100% of the outstanding shares of PAH and its subsidiaries, doing
business as Allen And Associates, and 100% of the outstanding shares of
OMNIpartners. These acquisitions were approved by shareholders and completed in
July 2001. Subsequent to year-end, we entered into additional agreements
pursuant to which we acquired 100% of the outstanding shares of RezLogic and the
technology known as ResumeXPRESS, owned by Gonyea Career Marketing Inc.

We believe these acquisitions will significantly contribute to our success. For
the 12 months ended May 31, 2001, pro forma revenues would have been $24.9
million, with gross margins of $15.4 million and a pro forma net loss of $15.6
million.

Our expanded product and service offerings reach well beyond our traditional
area of applicant tracking, as we move forward with our strategy of offering
hire-to-retire services to the HR community and to individuals seeking to take
the next step in their careers. In addition to selling ATS to the corporate HR
market, we now offer recruitment research (retained hourly search), corporate
outplacement services, HR information system, or HRIS and enterprise resource
planning, or ERP system integration, and a host of professional services
providing consulting and business process outsourcing for HR. We also offer ATS
and recruitment support to the staffing industry, and provide career transition
counseling, resume writing and distribution, and targeted opportunity research
to individuals.

A.         OPERATING RESULTS

The following table sets forth certain statement of income data as a percentage
of revenue for the periods indicated:

<TABLE>
<CAPTION>
                                                           YEAR ENDED MAY 31,
                                                           ------------------
                                                1999              2000               2001
                                                ----              ----               ----
                                                 %                  %                 %
<S>                                           <C>               <C>                <C>
Revenue...................................     100.0             100.0              100.0
Cost of revenue...........................      60.6              92.7               74.4
Gross Profit..............................      39.4               7.3               25.6
Expense...................................
    Selling...............................      58.5              92.7               74.4
    Marketing.............................      43.8             114.9               46.9
    General and administration............      44.2              80.0               66.4
    Research and development..............      43.3             140.4              108.6
Other income                                     1.2              43.8               24.8
Other expense                                    8.8              39.4                2.1
Net loss                                       158.1             416.4              248.0

</TABLE>

                                       24
<PAGE>
Fiscal year ended May 31, 2001 compared to fiscal year ended May 31, 2000.

Revenue

Total revenue for the fiscal year 2001, increased 76% to $3,078,989, compared
with revenue of $1,752,730 for the year ended May 31, 2000. This growth in
revenue is primarily attributable to increased sales in the third and fourth
quarters, in which orders exceeded $1 million per quarter.

Revenue particularly increased due to an increase in ATS subscriptions, doubling
from the previous year to $2,712,377. Driven by the need to improve their time
to hire and quality of hire, clients are embracing the use of Web-based
technologies to improve the efficiency and effectiveness of the hiring process.
Inco Limited, Descartes Systems Group Inc., Nova Scotia Power Corporation and
Sympatico-Lycos Inc. all adopted the E-Cruiter platform to streamline their
recruiting processes. In fiscal year 2001, we entered into 73 contracts for ATS
subscriptions, with an average contract value of $31,746, compared with 68
contracts with an average value of $34,985 for fiscal year 2000. We also entered
into a total of 179 contracts for additional services, with an aggregate value
of $599,473 compared with contracts for an aggregate of $88,032 in fiscal year
2000. These additional service contracts include any job postings or
professional services that were above the scope of the initial contract. The
significant increase in the provision of these services reflects the high level
of satisfaction of our client with our product and service offering.

Revenues from E-Cruiter Express services decreased 6% to $366,612 in fiscal year
2001, compared with $388,912 in fiscal year 2000, as we redirected resources
away from the lower-margin Express product and focused more on the higher-margin
Enterprise solution. Active sales efforts of the Express product were terminated
in December 2000.

In the coming fiscal year, we expect to concentrate our sales efforts on
expansion into the U.S. market, through our network of subsidiary offices and
more than 26 direct sales personnel.

Cost of Revenue

Cost of revenue includes costs of network operations, client support and charges
relating to third-party services. Cost of revenue in fiscal year 2001 increased
41% to $2,291,856, compared with $1,624,770 in fiscal year 2000.

Costs relating to our network operations increased 24% to $938,227 in fiscal
year 2001, compared with $758,458 in fiscal year 2000. This increase is
primarily attributable to an increase in depreciation costs relating to our
investment in network infrastructure and capacity. Our live site is now hosted
in a state-of-the-art facility with full environmental controls and
redundancies, and a complete Microsoft.NET underpinning infrastructure. The
higher costs also reflect increased salaries relating to an increase in
personnel in our network center.


                                       25
<PAGE>
Client support costs increased 43% to $779,242 for fiscal year 2001, compared
with $543,824 for fiscal year 2000. This increase is primarily attributable to
the increase in our support staff as we added more resources in anticipation of
increased business volume in the latter half of fiscal year 2001, resulting from
a distribution agreement with ADP Canada. However, this agreement did not
generate the level of revenue that we originally anticipated, and the support
staff was accordingly reduced toward year-end.

Charges by third-party service partners, whose products are made available to
clients via the E-Cruiter software, increased 78% to $574,387 for fiscal year
2001, compared with $322,488 in fiscal year 2000. These third-party products
include postings to Internet job boards, reference and background checks, and
candidate assessment tools.

Overall, the improvement of our gross margins reflects the investments we made
in the past to develop a highly scalable infrastructure able to support a
significant increase in volume. As a result, the increase in revenue has not
incurred a proportional increase in cost of revenues. Management expects this
trend to continue in the future.

Expenses

To maintain the level of growth that we have experienced to date, and to
position ourselves for future growth, expenses were maintained at prior-year
levels for much of fiscal year 2001. Total expenses increased 22% to $9,123,047
for fiscal year 2001, compared with $7,502,709 for fiscal year 2000. Expenses
were divided into selling, marketing, research and development, and general and
administrative.

In January 2001, we relocated to a new facility in Ottawa (formerly Kanata),
Ontario. This relocation enabled us to bring our entire team in one location,
and provided us with the capacity for future growth. In addition, relocation
provided us with presence in the heart of the local high-technology area,
increasing our profile within a significant target market. The new facility
resulted in an increase of $117,624 in depreciation expense, as leasehold
improvements from the legacy locations were written off and leaseholds relating
to the new location were amortized. These costs were allocated across all
functional areas based on relative head count.

The other changes in total expenses from fiscal year 2000 to fiscal year 2001
are as follows:

         o        Selling expenses increased 41% to $2,289,273 in fiscal year
                  2001, compared with $1,625,434 in fiscal year 2000. The
                  increase was attributable primarily to increased salaries as
                  we expanded our direct sales force. The increase in the number
                  of contracts also resulted in a higher commission expense. In
                  addition, expansion into the Calgary, Vancouver and Montreal
                  markets resulted in a significant increase in
                  facilities-related costs for our sales force.

         o        Marketing expenses decreased 28% to $1,444,879 in fiscal year
                  2001, compared with $2,014,684 in fiscal year 2000. Following
                  our initial public offering in December 1999, significant
                  efforts were made to develop brand-name recognition in the
                  Canadian marketplace. These efforts were reduced to more of a


                                       26
<PAGE>
                  maintenance mode throughout fiscal year 2001, as we believed
                  that we were now well recognized as the leading supplier of
                  Web-based recruiting solutions in Canada.

         o        General and administrative expenses increased 46% to
                  $2,043,930 for fiscal year 2001, compared with $1,401,901 for
                  fiscal year 2000. This increase is primarily attributable to
                  an increase in expenses relating to us being a public company
                  including significant increases in audit fees, legal fees,
                  investor relations and directors and officers liability
                  insurance.

         o        Research and development expenses increased 36% to $3,344,965
                  for fiscal year 2001, compared with $2,460,600 in fiscal year
                  2000. This increase is primarily attributable to the continued
                  expansion of our research and development capability, hiring
                  additional personnel according to needs and engaging outside
                  consultants for specific projects. The increase in research
                  and development expenses also reflects depreciation costs
                  resulting from our investment in additional capital resources
                  for the research and development group. We also invested in
                  implementing a new Rapid Application Development, or RAD
                  process after the release of E-Cruiter 3.0 in November 2000.
                  The new RAD process takes client-server software industry best
                  practices and gears them to regular, quick releases of
                  Web-based software. The process resulted in a marked
                  improvement in speed and quality to market, demonstrated
                  through the releases of E-Cruiter 3.1 in March 2001, E-Cruiter
                  3.2 in June 2001 and E-Cruiter 3.3 in September 2001.

Other Income and Expenses

Other income and interest income includes $560,980 of interest income earned on
excess cash held during the fiscal year, foreign exchange gains on U.S. cash
holdings of $45,010 and a gain on disposal of fixed assets of $158,557. In
fiscal year 2000, we sold CareerBridge.com, our regional job board, to Thomson
Canada Limited. We continue to receive specific non-monetary benefits over a
three-year period.

Other expenses include $27,313 in interest charges relating to various capital
leases and the term loan with the Royal Bank of Canada, and $38,251 in
provincial capital taxes.

Net Loss

Our net loss increased 5% to $7,636,921, or $0.99 per share for fiscal year
2001, compared with a net loss of $7,298,403, or $1.29 per share for fiscal year
2000. To maintain the level of growth that we experienced to date, and to
position ourselves for future growth, we continued to invest in additional
selling efforts and research and development initiatives. To remain competitive
in the markets in which we operate, we believe it is necessary for us to
continue investing in our technological advantage and our sales efforts.


                                       27
<PAGE>
Fiscal year ended May 31, 2000 compared to fiscal year ended May 31, 1999.

Revenue

Revenue increased 25% to $1,752,730 for fiscal year 2000, compared with revenue
of $1,399,557 for fiscal year 1999. Sales were particularly strong in the third
and fourth quarters of fiscal year 2000. During this period we received in
excess of $2,003,000 in orders, compared with $775,000 received in the first
half of fiscal year 2000. This increase in revenue reflects our successful
increased sales and marketing efforts following our initial public offering.

Revenue from E-Cruiter Enterprise services increased 25% to $1,363,818 in fiscal
year 2000 compared with $1,094,632 in fiscal year 1999. During fiscal year 2000,
we focused our sales efforts on mid-and large-sized companies. We competed for
and won several significant new accounts during the year including Home Depot
Canada, Zurich Canada, KPMG Canada, Sony Music Canada, Watson Wyatt World Wide
and Ballard Power Systems Inc. We entered into 68 contracts for an aggregate
value of $2,379,000 and average value of $34,985 in fiscal year 2000 compared
with 49 contracts valued at an aggregate value of $1,184,000 and average value
of $24,163 in fiscal year 1999.

Revenue from the sale of E-Cruiter Express services increased from $305,013 in
fiscal year 1999 to $388,912 in fiscal year 2000, an increase of 28%. This
reflects our increased telesales effort during the year.

Sales of our E-Cruiter Express job posting service through the Worklife
Solutions Inc. and the AltaVista Live! Careers channel were not as high as
expected. The content-partner arrangement with Worklife Solutions Inc. for
access to AltaVista Live! Careers channel was terminated subsequent to year-end.

Cost of Revenue

The cost of revenue in fiscal year 2000 increased 91% to $1,624,770, compared
with $848,769 in fiscal year 1999. These costs include network operations,
client support and charges for posting to third-party job boards. The change in
each of these expenses from fiscal year 1999 to fiscal year 2000 is explained as
follows:

         o        The cost of supporting our network operations center increased
                  73% to $758,458 in fiscal year 2000, compared with $438,744 in
                  fiscal year 1999. This largely reflects an increase in
                  personnel. The higher costs also reflect higher depreciation
                  charges related to our investment in network infrastructure to
                  achieve scalability and better-than-average data redundancy
                  and reliability. We made these investments in anticipation of
                  increased business volume in fiscal year 2001 and beyond.

         o        Client support expenses increased 63% to $543,824 in fiscal
                  year 2000, compared with $333,093 in fiscal year 1999. This
                  reflects the addition of several new client support personnel
                  including individuals for our career site design team. We
                  increased career site design staff in response to strong


                                       28
<PAGE>
                  client demand for our leading-edge recruiting portals. We
                  continue to maintain a "relationships first" approach with our
                  clients in order to achieve high average client satisfaction.
                  The annual renewal rate approached 80% in fiscal year 2000.

         o        Charges by third-party posting companies increased 319% to
                  $322,500 in fiscal year 2000, compared with $76,932 in fiscal
                  year 1999. This reflects the introduction of new posting
                  services for our Enterprise and Express customers.

Expenses

To achieve our growth in fiscal year 2000, and to position ourselves for future
growth, our expenses increased substantially compared with fiscal year 1999.
Total expenses increased 182% to $7,502,709 in fiscal year 2000, compared with
$2,656,750 in fiscal year 1999. Expenses are divided into the following
categories: selling, marketing, research and development, and general and
administrative. The change in total expenses from fiscal year 1999 to fiscal
year 2000 is explained as follows:

         o        Selling expenses increased 99% to $1,625,434 for fiscal year
                  2000, compared with $818,601 for fiscal year 1999. This
                  increase was attributable to an increase in our direct sales
                  force both for the E-Cruiter Enterprise and E-Cruiter Express
                  product lines.

         o        Marketing expenses increased 229% to $2,014,684 for fiscal
                  year 2000, compared with $612,796 for fiscal year 1999,
                  primarily as a result of advertising promotion in the Canadian
                  marketplace. We believe that as a result of our marketing
                  efforts during fiscal year 2000 we are now recognized as a
                  leading supplier of Internet recruiting solutions in Canada.
                  During the fiscal year 2000 we spent $1,040,000 on
                  advertising, compared with $112,421 in 1999.

         o        An increase in general and administrative expenses also
                  contributed to the overall increase in expenses for fiscal
                  year 2000. General and administrative expenses increased 126%
                  to $1,401,991 in fiscal year 2000, compared with $619,265 in
                  fiscal year 1999. A portion of the increase relates to
                  additional recruiting efforts to bring our staffing complement
                  from 36 employees to a total of 79 by the end of the year. The
                  higher costs also partially reflect the costs of being a
                  public company, which include higher accounting and legal
                  costs and higher costs for directors and officers liability
                  insurance. During the year we also entered into a consulting
                  services arrangement with SC Stormont Corporation for
                  financial and business advisory services and incurred costs of
                  $78,333 in connection with these services.

         o        Research and development expenses increased 306% to $2,460,600
                  in fiscal year 2000, compared with $606,088 in fiscal year
                  1999. We significantly increased our research and development
                  capabilities during the year by adding 14 personnel and hiring
                  specific consultants where required. A more rigorous product


                                       29
<PAGE>
                  management and development process was implemented during the
                  year and we also completed two significant product upgrades.

Other Income and Expenses

Other income and interest income includes interest earned on excess cash held
during the year and a gain of $311,563 on the sale of CareerBridge.com, our
regional job board, to Thomson Canada Limited during fiscal year 2000. As
consideration for the sale, we have received and will receive specific
non-monetary benefits over a three-year period.

Other expense includes interest and amortization charges related to convertible
promissory notes that were outstanding for the first six months of fiscal year
2000. Upon completion of our initial public offering, these notes were converted
into common shares and, as a result, there was no such expense in the latter
half of the year. Interest expense also includes charges on a term loan with the
Royal Bank of Canada and interest on various capital leases.

Net Loss

Our net loss for fiscal year 2000 was $7,298,403, or $1.29 per share, compared
with a net loss of $2,212,410, or $0.57 per share, in fiscal year 1999. This
largely reflects a higher level costs in sales and marketing, infrastructure and
research and development.

IMPACT OF FOREIGN CURRENCY FLUCTUATIONS

For information pertaining to the impact that foreign currency fluctuations may
have on us please see "Item 11. Quantitative and Qualitative Disclosures About
Market Risk."

B.  LIQUIDITY AND CAPITAL RESOURCES

Our capital requirements have exceeded cash flows from operations for the fiscal
year primarily as a result of significant investments in our business. However,
we still have approximately $5.5 million available. Based on current operational
requirements, management believes that cash amounts currently available to us
are sufficient to satisfy working capital needs over the course of the next
fiscal year. However, as we continue our efforts to achieve growth and by
implementing our acquisition strategy and otherwise, additional working capital
may be required. To that end, we are actively pursuing several alternatives to
raise additional funds.

As part of our growth and expansion strategy, we have reduced our expenditures
to align with revenues and cash flows. It is anticipated that we will achieve
cash-flow break even early in fiscal year 2002 and achieve operational break
even by the end of the fiscal year 2002.

Cash used for operating activities in the year was $7,285,095. Our net loss of
$7,636,921 was partially offset by non-cash charges for depreciation and
amortization. However, an increase in working capital needs resulted from
changes in our method of invoicing our clients. In previous fiscal years,
clients were invoiced the full cost of their contracts upon signature, which
resulted in high deferred revenues. In fiscal year 2001, we changed our billing


                                       30
<PAGE>
policy to monthly invoicing as a result of market pressures, which resulted in a
significant decrease in deferred revenues and accounts receivable.

Capital asset purchases for fiscal year 2001 were significant, amounting to
$1,165,432. These investments related primarily to furniture, fixtures and
leasehold improvements for our new facility. Management expects that the level
of capital expenditures will decrease significantly in the coming fiscal year,
although limited additional investment in capital assets will be required to
maintain the same service levels on our application network infrastructure.

These cash shortfalls were financed primarily through the disposal of short term
investments. Excess cash is invested in an investment trust established by a
Canadian chartered bank, which holds various short term, low-risk instruments
that accrue interest daily. We can withdraw funds held in trust without penalty
at any time.

C.  RESEARCH AND DEVELOPMENT, PATENTS AND LICENSES

We continue to invest significant capital in product development and refinement.
For the fiscal years ending May 31, 1999, 2000, and 2001, we spent $606,088,
$2,460,600 and $3,344,965, respectively, on research and development efforts. It
is our policy to expense all research costs as incurred. Development costs are
expensed in the year incurred unless a development project meets the criteria
under Canadian GAAP for deferral and amortization. No amounts have been
capitalized to date.

D.  TREND INFORMATION

Human capital management - defined as the full array of services, technologies
and processes used by an organization to manage its human resources from the
time it first identifies a requirement for an employee to an eventual retirement
or layoff, is a large and rapidly growing market presenting opportunities for
companies that provide both employers and employees with the right mix of
technologies and services.

The labor market in both the U.S. and Canada is one of the country's largest
marketplaces. However, it is largely inefficient and has been slow in adapting
new technologies and processes that have galvanized most other markets. We
believe that at the same time, despite economic slowdown and current market
conditions, the labor market's supply-and-demand equation is becoming
increasingly unbalanced, with an increasing demand for talent, highly skilled
qualified personnel. Demographics in North America and Europe indicate that this
imbalance will not be corrected in the near future.

The labor market is also becoming increasingly dynamic. Highly talented
personnel is able to freely move from one company to another, from one region to
another and even from one country to another. Human capital is expected to drift
inexorably to where it commands the best return. This is driving down average
tenure rates, the length of time an employee spends at any one company before
moving on to the next opportunity. This increased mobility forces companies to
deal with more churn in their workforces and recruit additional new talents to
keep pace.


                                       31
<PAGE>
The current economic slowdown, especially in the technology sector, has somewhat
slowed the recruiting scene, while increasing demand for outplacement services.
We believe that the inevitable economic recovery, however, will bring with it an
escalation in the corporate competition for talent. Companies will continue to
place an acute premium on identifying, recruiting, retaining and rewarding the
human capital they need to succeed.

At the same time as these twin forces of human talent scarcity and mobility are
making it more challenging for employers to attract and retain the skilled
personnel they require, the burden and cost of administering those employees are
increasing. New administrative requirements are proliferating. In all western
jurisdictions and especially the U.S., employers must now comply with a
bewildering array of regulatory issues, ranging from discrimination and
harassment to health and safety to equitable policies on the whole spectrum of
compensation and employment conditions. Consequently, costs incurred by
corporations associated with satisfaction of their HR requirements are rapidly
outgrowing most other costs. One of the largest components of the HR costs in
the U.S. is health care benefits, and the cost of providing them to employees is
rising several times faster than the cost of living.

Organizations constantly endeavor to reduce their HR costs. While companies may
be doing little so far to react to external factors, they are succeeding at
decreasing the size and lowering the cost of the HR function itself. This
cost-containment pressure mandates HR professionals to increase their
efficiency, do more with less, and improve the return they deliver on a
shrinking budget. At the same time, acknowledging that the most successful
corporations are those with the best HCM processes, HR professionals are also
being driven to be more strategic and to develop and manage processes that
improve corporate performance rather than just keep track of employees.

As with most other markets facing new dynamics and challenges, the HCM market is
turning to new technologies and processes to improve efficiencies and allow HR
managers to concentrate on core competencies and strategic planning.

The Internet has already revolutionized one key element of the hire-to-retire
HCM. Over the past five years, companies have harnessed their own Web sites and
external services to the critical task of recruiting new talent. We believe that
hiring management portals, such as ours, and job posting boards were key tools
in the intense corporate competition for talent through the late 1990s, allowing
companies to quickly post their job openings and screen new candidates as soon
as they became available. We also believe that these tools have continued to be
useful even as economic tides have turned, as companies manage employee churn,
continue recruiting for some positions, and strive to maintain their employment
brand images in the market.

We believe that the penetration of new technologies, particularly the Internet,
into the HCM market has only just begun. A proliferation of point solutions,
custom internal databases and stand-alone external offerings is beginning to
give way to consolidated platforms that integrate all the technology
requirements of the complete hire-to-retire spectrum. We believe that the demand
for technology-enabled services that facilitate the consolidation of
employment-related business processes will increase as companies seek to
outsource the management of solutions in favor of focusing on core strategic
tasks.


                                       32
<PAGE>
We are in the process of transforming ourselves from a point solution that
helped companies hire new employees into a business process aggregator, offering
seamless management of employment processes from hire to retire with a
combination of high-tech and high-touch platforms and services.

That process gained considerable traction in this past fiscal year as we added
to our capabilities at the hiring end of the spectrum with the acquisition of
RezLogic and OMNIpartners. We also added capabilities at the other end of the
spectrum, employee separation, with the acquisition of the outplacement group of
companies PAH and its subsidiaries, which carry on business as Allen And
Associates. These acquisitions also gave us professional staff and offices in 20
locations in North America, bringing expanded service capability to our existing
technology solutions.

The human capital value chain consists of four parts, the acquisition,
integration, optimization and separation of human capital. Acquisition includes
functions such as planning, sourcing, assessment and hiring. Integration covers
administrative tasks such as benefits, payroll and compensation. Optimization
focuses on the deployment, professional development and retention of employees,
while separation involves the outplacement of employees through retirement or
layoff. With effective capabilities in the first and last of these four areas,
we believe that we will focus this coming fiscal year on expanding our
capabilities in the middle two areas through further acquisitions and
partnerships with established suppliers.

ITEM 6.    DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES

A.  DIRECTORS AND SENIOR MANAGEMENT

The following table lists the name, age and position held by each of our
executive officers and directors as of November 30, 2001:

Name                          Age          Position
----                          ---          --------
John Gerard Stanton           53           Director
Michael Mullarkey             33           Chairman of the Board of Directors,
                                           Chief Executive Officer
Robert Richards               43           Executive Vice President, Strategy
Paul Haggard                  49           Chief Financial Officer
Andrew Hinchliff              36           Vice President Sales
David Padgett                 59           Senior Vice President, Recruiting
                                           and Career Services
Arthur Halloran               55           President, Chief Operating Officer
                                           and Director
Matthew Ebbs                  36           Director
Michael A. Gerrior            51           Director
Tom Danis                     54           Director
Cholo Manso                   38           Director

John Gerard Stanton co-founded us in May 1996, and he had been our President,
Chairman of the Board of Directors and Chief Executive Officer since our
inception. In April 2001, Mr. Stanton resigned as President and Chief Executive
Officer but remained as Chairman. In November 2001, Mr. Stanton ceased to serve
as our Chairman of the Board of Directors and currently serves as one of our


                                       33
<PAGE>
Directors. In 1986, Mr. Stanton founded an out-placement services business,
Drake Beam Morin (Ottawa) Inc., which he operated until March 1998. From 1985 to
1989, Mr. Stanton operated Stanton and Associates, a regional executive search
firm that specialized in high technology searches. From 1978 to 1984, Mr.
Stanton was Vice President of Human Resources for Mitel Corporation, a company
that designs and sells telecommunications equipment and semiconductor devices.
Mr. Stanton received his Bachelor of Arts from Carleton University in 1972.

Michael Mullarkey has been our Chairman of the Board of Directors since November
2001 and Chief Executive Officer since April 2001. From April 2001 to November
2001 Mr. Mullarkey served as our President. From 2000 to April 2001, Mr.
Mullarkey was the President and Chief Executive Officer of PAH a full service
outplacement firm in the United States, which we acquired in April 2000. From
1998 to 1999 Mr. Mullarkey was the co-founder and managing director of
information technology Mergers & Acquisitions, LLC, an investment capital group
managing private equity funding and investing in emerging technology markets and
organizations. From 1997 to 1998, he was the senior vice president of sales and
marketing for Allin Communications Corp., a publicly traded enterprise solution
provider. From 1989 to 1997, Mr. Mullarkey was vice-president and general
manager at Sony Corporation of America, the US subsidiary of Sony Corporation.

Robert Richards has been our Executive Vice President of Strategy since November
2001. From August 2000 to November 2001 Mr. Richards served as our Chief
Operating Officer. Prior to this, he was our Director of Strategic Alliances
since February 1999. Mr. Richards joined us in June 1997 and has been
responsible for sales, marketing and product management over the course of his
employment with us. From September 1996 to June 1997, Mr. Richards was the Vice
President of Technical Marketing for Noram Corporation, a design and
manufacturing company, where he was the principal corporate representative in
implementing a strategic joint venture between a Canadian high technology
start-up and the Polish division of Daimler-Benz. From December 1994 to August
1996, Mr. Richards was the President and owner of a brand marketing company,
Sursun International Inc. From January 1991 to November 1994, Mr. Richards
provided consulting services to Northern Telecom, Consumers Distributions,
Statistics Canada, Canada Customs and Revenue Agency, Canada Post and Scouts
Canada. Mr. Richards received his Bachelor of Science in Co-op Applied Physics
from the University of Waterloo in 1983.

Paul Haggard has been our Chief Financial Officer since November, 2001. He is in
charge of our financial and administrative affairs. From May 2000 to May 2001,
Mr. Haggard was the Chief Financial Officer for Applied Programming Solutions
Inc. and was responsible for accounting, finance, legal, facilities,
administration and human resources. From September 1997 to March 2000 Mr.
Haggard served as the Chief Financial Officer of Interim HealthCare Inc. At
Interim HealthCare Inc. he was responsible for all corporate finance functions
including accounting, reimbursement, tax, risk management, treasury, business
development and facilities. Mr. Haggard holds a Bachelor Business Administration
from the University of Miami.

Andrew Hinchliff joined us in November 2000, as our Vice President, North
American Sales. He was previously employed by Dell Computer Corporation from
September, 1997 to November 2000 where he recently held the position of Manager


                                       34
<PAGE>
for Canada, Preferred Accounts, Dell Canada. From March 1997 to July 1997, Mr.
Hinchliff worked for Minacs doing call center consulting. From March to December
1996, he was the national account manager at Sprint Canada and from 1993 to 1995
he was the Director of Sales for Telroute Communications Inc. Mr. Hinchliff
received his Honors Bachelor of Arts degree in Economics from the University of
Toronto in 1988.

David Padgett has been our Senior Vice President, Recruiting and Career Services
since November, 2001. From 1996 to 2001 Mr. Padgett was the General Manager of
PAH, one of the companies that we recently acquired. He is responsible for the
sales of our career transition services under the Allen And Associates brand.
From 1991 to 1996 he was employed by Data Switch Corporation as the Area Sales
Vice President of the Southeast and Southwest territories. Mr. Padgett holds a
Bachelor of Arts degree from the University of North Carolina.

Arthur Halloran has been our President and Chief Operating Officer since
November 2001 and a member of our Board of Directors since May 2001. From 1989
to present Mr. Halloran has been with Sony Electronics Inc. with his most recent
position being Senior Vice President, Specialty Sales and Marketing where he was
responsible for the retail operations and incentive marketing. From 1999 to
2000, Mr. Halloran was the President, Business Solutions responsible for
mobilizing all Sony Electronic business units. From 1990 to 1999, Mr. Halloran
was the Vice President, Diversified Markets responsible for the
non-retail/non-traditional markets of Sony Electronics. Mr. Halloran has a
Bachelor of Arts degree from Jersey City State College.

Matthew Ebbs has been a member of our Board of Directors since October 1999.
Presently, Mr. Ebbs is the Recovery Service Manager with Export Development
Corporation. Until October 2001, Mr. Ebbs was the Chairman, Chief Executive
Officer and a director of LuxurySquare.com Corporation, an electronic business
and online catalogue company. From January 1998 to April 2000, Mr. Ebbs had been
a member of Perley-Robertson, Hill & McDougall, our Canadian legal counsel. From
February 1993 to December 1997, Mr. Ebbs was a lawyer at the firm of Ebbs and
Ebbs. Mr. Ebbs received a Bachelor of Arts from Carleton University in 1987 and
his Bachelor of Laws from the University of Ottawa in 1990.

Michael A. Gerrior has been a member of our Board of Directors since April 2001.
From 1988 to present, Mr. Gerrior has been with Perley-Robertson, Hill &
McDougall LLP, a law firm of which he is a member. Mr. Gerrior assists his
clients with mergers and acquisitions, securities matters and corporate
governance. He has concluded private placements, venture capital transactions,
and public offerings on various exchanges, including NASDAQ, CDNX, TSE, and ME.
Mr. Gerrior is also a board member of the Ottawa Senators Hockey Club.

Tom Danis joined our Board of Directors and audit committee in July 2001. Mr.
Danis is an Executive with Aon Group Insurance. During 2001 Mr. Danis was the
Market Area Leader for Southern California, with Aon Risk Services responsible
for the offices in this area. From 1993 to 2000 Mr. Danis was the Managing
Director of the Mergers & Acquisitions Practice Global Head Senior Executive of
Sales in charge of the sales offices of the mid-River area of Aon Risk Services.
Mr. Danis serves on the Board of Directors of International Wire Group, Inc.,


                                       35
<PAGE>
which is a privately held company that manufactures wires for sale to computer
and date communications companies. Mr. Danis has a Bachelor of Arts degree from
St. Louis University.

Cholo Manso joined our Board of Directors and audit committee in July 2001. He
is the Chief Executive Officer of Zivex Technology Solutions Inc. an Information
Technology utility infrastructure provider. From March 2001 to October 2001, Mr.
Manso was the Chief Executive Officer of ThunderStore (North America) Inc. where
he was responsible for the software distribution channel for proprietary
ThunderStore content security in North America. From 1999 to 2001, Mr. Manso was
the President of Avemore International Inc. which is a consulting company that
focuses on advising angel investors. From 1996 to 1999, Mr. Manso was the Chief
Executive Officer and founder of Quarterdeck Consulting Inc., a company that
specialized in sales of security software, hardware, consulting and maintenance
services to the Canadian Federal Government and the private sector.

B.  COMPENSATION

During the fiscal year 2001 we compensated our officers as set forth in the
table below. Compensation includes salary, health care benefits and, where
applicable, bonuses, parking, car allowances and professional accounting and tax
services.

                                                   ANNUAL COMPENSATION
                                                          (CDN$)
                          FISCAL                     BONUS OR
NAME                      YEAR          SALARY       COMMISSION      OTHER
----                      ----          ------       ----------      -----

John Gerard Stanton       2001          $146,663            -        $9,720(1)
                                        45,000(5)                    $1,656(2)
                                                                     $3,235(3)
Michael Mullarkey (6)     2001               -              -               -
Robert Richards           2001          $108,917            -        $9,459(1)
                                                                     $1,839(3)
Andrew Hincliff           2001          $90,115         $48,077             -
Kimberly Layne (7)        2001          $104,000            -        $1,200(2)
                                                                     $3,069(3)
Jeff Potts (8)            2001          $79,250             -        $1,902(3)
                                                                     $1,200(2)
Natalie Prowse (8)        2001          $48,500         $75,000      $2,306(3)

(1) Car Allowance
(2) Paid Parking
(3) Employee Health Benefits
(4) None of the Named Executive Officers received restricted shares, long-term
incentive plan payments or other forms of long -term compensation during fiscal
year 2001
(5) Consulting Fees
(6) Shall be entitled to receive a salary upon the earlier of January 1, 2002 or
the time at which we cease to incur losses
(7) Employment discontinued subsequent to May 31, 2001
(8) Employment discontinued during fiscal year 2001


                                       36
<PAGE>
We do not provide cash compensation to our directors. Our directors who are not
employees, are eligible to be reimbursed for their reasonable expenses incurred
in attending meetings of the Board of Directors and its committees. During
fiscal year 2001, however, we did not pay any amounts to our directors for
expenses incurred in attending meetings.

Our officers and directors are eligible to receive stock options, pursuant to
our stock option plans, to purchase common shares. During the last fiscal year
we granted the following options to our directors and officers.

<TABLE>
<CAPTION>
                        Number of Options to                               Expiration Date
                             Purchase                                       of Options
                          Common Shares            Exercise Price         (month/day/year)
                          -------------            --------------         ----------------
<S>                      <C>                       <C>                    <C>
John Gerard Stanton            200,000                US $3.65                09/05/05
                               100,000                US $1.00                03/22/06
Michael Mullarkey                 -                       -                       -
Robert Richards                100,000                US $3.65                09/05/05
                                25,000                US $2.00                05/18/06
Jeff Potts(1)                   35,000                US $3.65                09/01/05
Andrew Hinchliff               100,000                US $2.71                11/06/05
                                 7,000                US $2.00                05/18/06
Natalie Prowse(1)               75,000                US $3.30                08/16/05
Kimberly Layne(4)               16,323                US $1.01                12/29/05
Roderick Bryden(2)                -                       -                       -
John McLennan(3)                  -                       -                       -
Michael A. Gerrior                -                       -                       -
Matthew Ebbs                   100,000                    1.00                22/03/06

</TABLE>

(1) Employment discontinued during fiscal year 2001
(2) Resigned as board member in April 2001
(3) Resigned as board member in March 2001
(4) Employment discontinued subsequent to May 31, 2001


Subsequent to May 31, 2001, we granted to

o        Paul Haggard options to purchase 50,000 common shares at an exercise
         price of US $2.20 per share expiring on October 2, 2006; and

o        each of Arthur Halloran and David Padgett options to purchase 100,000
         common shares at an exercise price of US $2.20 per share expiring on
         October 2, 2006.

C.  BOARD PRACTICES

The term of office of each director is for one year with nomination taking place
at the Annual General Meeting of Shareholders which is held in the fall. Our
Board of Directors has an Audit Committee comprised of independent directors.
During fiscal year 2001 the members of our audit committee were Matthew Ebbs,
Roderick Bryden and John McLennan. The Audit Committee recommends to the Board
of Directors the annual engagement of a firm of independent accountants and
reviews with the independent accountants the scope and results of audits,
internal accounting controls and audit practices and professional services
rendered to us by such independent accountants. The Audit Committee also makes
recommendations to the Board of Directors on the compensation of the President


                                       37
<PAGE>
and Chief Executive Officer and Chief Financial Officer and administers our
stock option plans. We do not have an Executive Committee, or a remuneration
committee.

We do not provide cash compensation to our directors. Our directors who are not
employees, are eligible to be reimbursed for their reasonable expenses incurred
in attending meetings of the Board of Directors and its committees. During
fiscal year 2001, however, we did not pay any amounts to our directors for
expenses incurred in attending meetings.

We do not have service contracts with any of our directors granting benefits to
these directors upon termination of office.

D.  EMPLOYEES

The following table sets forth the number of our employees at the end of each of
the last three financial years by main category and activity.

                                     2001             2000           1999
                                     ----             ----           ----

Sales                                   9              14             9
Marketing                               4               7             3
Research and development               20              30             10
Professional services                   7              11             4
Operations                              6               9             4
Finance and administration              5               8             6
--------------------------              -               -             -
Total number of employees              51              79            36


As of May 31, 2001 all of our employees were based in Canada. None of our
employees are represented by unions. We consider our relationship with our
employees to be good and in the past have experienced no strikes or work
stoppages.


                                       38
<PAGE>
E.  SHARE OWNERSHIP

The following table sets forth certain information regarding beneficial
ownership of our common shares by our directors and officers as of November 20,
2001. The voting rights of our officers and directors do not differ from the
voting rights of other holders of common shares.

<TABLE>
<CAPTION>
                                  NUMBER OF COMMON                     PERCENTAGE OF
NAME AND ADDRESS            SHARES BENEFICIALLY OWNED (1)    OUTSTANDING COMMON SHARES (2)(3)
----------------            -----------------------------    --------------------------------
<S>                         <C>                              <C>
John Gerard Stanton(4)                  1,256,404                            7.54%
Michael Mullarkey(5)                    3,500,000                           21.13%
Robert Richards                           *                                  *
Paul Haggard                              -                                  -
Jeff Potts                                -                                  -
Andrew Hinchliff                          -                                  -
Natalie Prowse                            -                                  -
Kimberly Layne                            -                                  -
Roderick Bryden                           -                                  -
John McLennan                             -                                  -
Arthur Halloran                           -                                  -
Matthew Ebbs                              -                                  -
Michael A. Gerrior                        -                                  -
Tom Danis                                 -                                  -
Cholo Manso                               *                                  *

</TABLE>

(1)      Except as otherwise noted and pursuant to applicable community property
         laws, each person named in the table has sole voting and investment
         power with respect to all common shares listed as owned by such person.
         Shares beneficially owned include shares that may be acquired pursuant
         to options that are exercisable within 60 days of November 20, 2001.

(2)      Common shares deemed beneficially owned by virtue of the right of any
         person or group to acquire such shares within 60 days of November 20,
         2001, are treated as outstanding only for the purposes of determining
         the percent owned by such person or group.

(3)      The percentages shown are based on 16,560,718 common shares issued and
         outstanding as of November 20, 2001. Includes an aggregate of 2,620,655
         common shares currently held in escrow pursuant to several acquisition
         agreement and which may be released upon the achievement of certain
         objectives specified in these agreements.

(4)      Includes 106,666 common shares issuable upon exercise of options
         exercisable within 60 days of November 20, 2001.

(5)      Does not include 875,000 common shares currently held in escrow, to be
         released to Mr. Mullarkey upon the achievement of certain profit and
         revenue targets specified in the acquisition agreement of PAH.

*        Beneficially owns less than 1% of outstanding common shares as of
         November 20, 2001.

OPTION PLANS

1997 Option Plan

In April 1997, we established an option plan for our directors and employees.
The intention of this plan was to develop interest in us and to provide an
incentive to eligible employees and directors to help us grow and develop.


                                       39
<PAGE>
Eligibility for participation in this plan is limited to our employees and
directors. The number of shares that may be optioned is determined from time to
time by our Board of Directors. The plan provides that the option price is to be
fixed by the directors from time to time, but may not be lower than the fair
market value of the underlying common shares on the date of grant. The options
will expire five years after their grant, and unless otherwise determined by the
directors, awards will vest one-third each year. In some cases, the directors
may deem it appropriate to accelerate the vesting period of the options. All
options under this plan are non-assignable and terminate 180 days after the
death, disability or retirement of a participant. In addition, all options under
this plan expire upon the termination of the employee's employment or services
other than for reason of death, disability or retirement, except that the
options which have vested may be exercised within 60 days following the date of
termination.

As of November 20, 2001, 263,482 options granted under the plan were outstanding
and the exercise price of the options ranges from US $2.30 to US $9.27. No
additional options have been granted under this plan since October 1999.

1999 Option Plan

In October 1999, we established a new option plan for our directors and
employees. The intention of this plan was to develop interest in us and to
provide an incentive to eligible employees and directors to help us grow and
develop.

Eligibility for participation in this plan was originally limited to our
employees and directors. For any United States directors and employees, the
common shares to be optioned will be designated, at the date of grant, as either
incentive stock option or non-qualified stock options. An incentive stock option
is an option granted under the plan, which is designated as such and meets the
definition of section 422 of the U.S. Internal Revenue Code of 1986. To meet the
definition of section 422, the individual, at the time the option is granted,
cannot own more than ten percent of all classes of our voting shares, unless the
exercise price of the option is equal to at least 110% of the fair market value
of the underlying common shares. A non-qualified stock option is an option
granted under the plan, which is designated as such and does not constitute an
incentive stock option within the meaning of section 422 of the U.S. Internal
Revenue Code.

Under the terms of this plan, options may be granted by our audit committee of
the Board of Directors. The plan provides that the terms of the option and the
option price shall be fixed by the audit committee, but in any event, the option
price shall not be lower than the fair market value of a common share on the
date of grant of the option. Options may be exercised as to 1/3 of the optioned
shares from the first anniversary from the grant of the option up to the fifth
anniversary grant of the option, an additional 1/3 of the optioned shares from
the second anniversary of the grant of the option up to the fifth anniversary of
the grant of the option and as to the remaining 1/3 of the optioned shares from
the third anniversary of the grant of the option up to the fifth anniversary of
the grant of the option. The exercise period for the options may be accelerated
from time to time, as determined by the audit committee. Unless otherwise
specified by the audit committee, and subject to accelerated termination as
provided for in the plan, options expire on the fifth anniversary of the grant
of the option, provided however, that no option may be exercised after the tenth
anniversary of the grant. Options issued under the plan are non-assignable and


                                       40
<PAGE>
non-transferable and terminate 180 days (or such other period as the audit
committee may specify) after the death, disability or retirement of a
participant. Unless otherwise determined by the audit committee, if a
participant's employment or services terminate for any reason other than death,
disability or retirement, any options held by that participant shall thereupon
terminate, except that each such option, to the extent then exercisable, may be
exercised for the lesser of 60 days or the balance of such participant's term of
employment.

At our shareholders meeting on October 4, 2000, we received approval to increase
the number common shares reserved for issuance under this plan from 250,000
shares to 1,150,000 shares.

At our shareholders meeting held on July 26, 2001, the maximum number of common
shares reserved for issuance under the plan was increased by 1,350,000 common
shares to an aggregate of 2,500,000 common shares, and the plan was amended to
allow us to grant stock options to employees and directors of our affiliates,
including PAH, to our consultants and to consultants of our affiliates. The
purpose of these amendments to the plan is to provide us with greater
flexibility to attract and retain qualified individuals as employees,
consultants, officers and directors and to grant options pursuant to the
acquisition agreement of PAH. Management views the granting of stock options as
a key component of employee compensation, retention and attraction. We also
changed the name of the plan to the 2001 Amended and Restated Stock Option Plan.

As of November 20, 2001, 2,056,246 options granted under this plan were
outstanding and the exercise price of the options ranges from US $1.00 to US
$7.45.

ITEM 7.    MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS

A.  MAJOR SHAREHOLDERS

Our authorized share capital consists of an unlimited number of common shares
without nominal or par value. The following table sets forth certain information
regarding ownership of our common shares as of November 20, 2001, for each
person known by us to own beneficially more that 5% of our outstanding common
shares. The voting rights of our major shareholders do not differ from the
voting rights of other holders of common shares.



                                       41
<PAGE>
                                      NUMBER OF                 PERCENT OF
                                       COMMON                 COMMON SHARES
 NAME                             SHARES OWNED (1)          OUTSTANDING (2)(3)
 ----                             ----------------          ------------------
 Paul Champagne                       2,392,921                   14.4%
 John Gerard Stanton(4)               1,256,404                   7.54%
 Michael Mullarkey(5)                 3,500,000                   21.13%

(1)      Except as otherwise noted and pursuant to applicable community property
         laws, each person named in the table has sole voting and investment
         power with respect to all common shares listed as owned by such person.
         Shares beneficially owned include shares that may be acquired pursuant
         to options that are exercisable within 60 days of November 20, 2001.

(2)      Common shares deemed beneficially owned by virtue of the right of any
         person or group to acquire such shares within 60 days of November 20,
         2001, are treated as outstanding only for the purposes of determining
         the percent owned by such person or group.

(3)      The percentages shown are based on 16,560,718 common shares issued and
         outstanding as of November 20, 2001. Includes an aggregate of 2,620,655
         common shares currently held in escrow pursuant to several acquisition
         agreements and which may be released upon the achievement of certain
         objectives specified in these agreements.

(4)      Includes 106,666 common shares issuable upon exercise of options
         exercisable within 60 days of November 20, 2001.

(5)      Does not include 875,000 common shares currently held in escrow, to be
         released upon the achievement of certain profit and revenue targets
         specified in the acquisition agreement of PAH.

We completed the acquisition of PAH in July 2001. In connection with the
acquisition of PAH we issued to Michael Mullarkey 3,500,000 common shares. An
additional 875,000 common shares were also issued and are currently held in
escrow, to be released to Mr. Mullarkey upon the achievement of certain profit
and revenue targets specified in the acquisition agreement.

As of November 20, 2001, we had approximately 94 shareholders of record with a
United States address. As of November 20, 2001, these United States record
holders held approximately 11,861,851 common shares, representing approximately
71% of our then outstanding share capital.

Following the completion of the acquisition of PAH, our major shareholders, Paul
Champagne, John Gerard Stanton and Michael Mullarkey, have entered into a voting
agreement pursuant to which each of them agreed to vote his shares as will be
determined by two of the other parties with respect to voting on various issues,
including capital expenditures exceeding $250,000, disposition of our corporate
assets, payment of dividends, issuance of additional shares, change in the
nature of our business, amendment to our articles of incorporation, change in
the number of directors and any amalgamation, reorganization, liquidation or any
other fundamental corporate change. This voting agreement will terminate on July
25, 2003 or earlier if any of the parties to that agreement will cease to hold
any of our shares.

Except as otherwise disclosed in this annual report, to the best of our
knowledge, we are not directly or indirectly owned or controlled by another


                                       42
<PAGE>
corporation or by any foreign government and currently there are no arrangements
that may, at a subsequent date, result in a change in our control.

B.  RELATED PARTY TRANSACTIONS

Prior to fiscal 2001, we leased certain office space and receive administrative
services from companies controlled by shareholders or senior management. We were
charged to pay $nil, $39,382 and $190,227, for the fiscal years 2001, 2000, and
1999, respectively, in connection with this office space and administrative
services.

We are also provided with research, development and other consulting services by
companies controlled by shareholders or senior management. We were charged
$51,648, $185,900 and $130,200 for the fiscal years 2001, 2000, and 1999,
respectively, in connection with these services.

We receive advertising and financial consulting services by companies controlled
by one of our directors. We were charged $50,200 in fiscal year 2000 and no
charges were incurred in fiscal year 2000 in connection with these advertising
services. We were also charged for the financial consulting services $167,416,
$78,333 for fiscal years 2001 and 2000, respectively, and incurred no charges in
fiscal year 1999. These transactions are in the ordinary course of business
operations and are measured at the exchange amount of consideration paid, which
management believes approximates fair market value. As of May 31, 2001 and 2000,
$nil and $52,133 respectively was payable to these related companies.

We are provided with legal consulting services in Canada by a law firm of which
one of our directors is a member. We were charged by that firm $100,828,
$274,383, and $45,211, for the fiscal years 2001, 2000 and 1999, respectively,
in connection with the legal services we received from that firm.

We receive management and consulting services by a member of our Board of
Directors regarding corporate strategic direction, mergers and acquisitions and
strategic product review for a term ending on December 31, 2003. We were charged
$48,150, $nil an $nil for the fiscal years 2001, 2000 and 1999, respectively, in
connection with these consulting services.

C.  INTERESTS OF EXPERTS AND COUNSEL

Not applicable.

ITEM 8.    FINANCIAL INFORMATION

A.  CONSOLIDATED STATEMENTS AND OTHER FINANCIAL INFORMATION

The financial statements required by this item are found at the end of this
annual report, beginning on page F-1.


                                       43
<PAGE>
LEGAL PROCEEDINGS

From time to time, we are subject to legal proceedings and claims in the
ordinary course of business, including claims of alleged breach of contract by
former employees, infringement of trademarks, copyrights and other intellectual
property rights. We are not currently aware of any legal proceedings or claims
that we believe will have, individually or in the aggregate, a material adverse
effect on our business, operating results or financial condition.

DIVIDEND POLICY

We have never declared or paid any cash dividend on our common shares. We do not
anticipate paying any cash dividend on our common shares in the foreseeable
future. We currently intend to retain all future earnings to finance operations
and expand our business.

B.  SIGNIFICANT CHANGES

Due to a change in the composition of our executive officers in November 2001,
we no longer meet the requirements of the definition of a "foreign private
issuer" under U.S. securities laws. Except as otherwise disclosed in this annual
report, no significant change has occurred since May 31, 2001.

ITEM 9.    THE OFFER AND LISTING

A.  OFFER AND LISTING DETAILS

The following table lists the high and low closing prices, in U.S. dollars, of
our common shares for the years indicated as reported by the NASDAQ Small Cap
Market for each year indicated below. Comparable information on trading of the
common shares on the Boston Stock Exchange is not publicly available.


                   YEAR              HIGH               LOW
                   ----              ----               ---

                   2000             US$9.12            US$3.00
                   2001             US$5.00            US$0.81

The following tables list the high and low closing prices, in U.S. dollars, of
our common shares as reported by the NASDAQ Small Cap Market for each full
financial quarter of the periods indicated below. Comparable information on
trading of the common shares on the Boston Stock Exchange is not publicly
available.


   FISCAL YEAR 2000                   HIGH                       LOW
   ----------------                   ----                       ---

   Third Quarter                     US$9.12                  US$6.75
   ended February 29, 2000
   Fourth Quarter                    US$8.75                  US$3.00
   ended May 31, 2000



                                       44
<PAGE>
   FISCAL YEAR 2001                   HIGH                       LOW
   ----------------                   ----                       ---

   First Quarter                      US$4.88                   US$2.50
   ended August 31, 2000
   Second Quarter                     US$5.00                   US$0.51
   ended November 30, 2000
   Third Quarter                      US$2.25                   US$0.81
   ended February 28, 2001
   Fourth Quarter                     US$3.50                   US$0.88
   ended May 31, 2001

   FISCAL YEAR 2001                   HIGH                       LOW
   ----------------                   ----                       ---

   First Quarter                      US$3.99                  US$2.00
   ended August, 31, 2001

The following table lists the high and low closing prices, in U.S. dollars, of
our common shares as reported by the NASDAQ Small Cap Market for the most recent
six months and November 2001 (through November 20, 2001). Comparable information
on trading of the common shares on the Boston Stock Exchange is not publicly
available.

 2000                                                HIGH             LOW
 ----                                                ----             ---

 May 2001                                          US$3.50          US$1.01
 June 2001                                         US$4.69          US$3.43
 July 2001                                         US$4.16          US$2.68
 August 2001                                       US$3.95          US$2.70
 September 2001                                    US$3.99          US$2.20
 October 2001                                      US$3.75          US$2.20
 November 2001 (through November 20, 2001)         US$3.70          US$2.45

B.  PLAN OF DISTRIBUTION

Not applicable.

C.  MARKETS

Our common shares are traded in the United States on the Nasdaq Small Cap Market
under the symbol "WSTM" and on the Boston Stock Exchange under the symbol "ERM."

D.  SELLING SHAREHOLDERS

Not applicable.

E.  DILUTION

Not applicable.



                                       45
<PAGE>
F.  EXPENSES OF THE ISSUE

Not applicable.

ITEM 10.   ADDITIONAL INFORMATION

A.  SHARE CAPITAL

Not applicable.

B.  MEMORANDUM AND ARTICLES OF ASSOCIATIONS

SECURITIES REGISTERS

The transfer agent for our common shares is American Stock Transfer and Trust
Company, 40 Wall Street, New York, New York 10005.

ORGANIZATIONAL DOCUMENTS

General

The following description of provisions of the Canada Business Corporations Act,
referred to as the Canada Business Corporations Act, our amended and restated
articles of incorporation and our by-laws does not purport to be complete and is
subject in all respects to the provisions of the Canada Business Corporations
Act, our amended and restated articles of incorporation and our by-laws.

We were incorporated on May 24, 1996 under the Canada Business Corporations Act.
Under the Canada Business Corporations Act, we have the capacity and the rights,
powers and privileges of a natural person.

Our authorized share capital consists of an unlimited number of common shares.
As of November 2001, 16,560,718 common shares were issued and outstanding of
which 2,620,655 were held in escrow pursuant to several acquisition agreements.

Board of Directors

Our articles of incorporation provide that the Board of Directors may (i) borrow
money on our credit, (ii) issue, re-issue, sell or pledge our debt obligations,
(iii) give a guarantee on our behalf to secure performance of an obligation of
any person and, (iv) mortgage, hypothecate, pledge or otherwise create a
security interest in any or all property of ours, owned or subsequently
acquired, to secure any obligation of ours.

The Canada Business Corporations Act provides that the Board of Directors may
vary these borrowing powers by passing a resolution to that effect and
subsequently submitting the amendment of our shareholders at the next meeting of
shareholders (at which point the shareholders may confirm, reject or amend the
amendment).


                                       46
<PAGE>
The Canada Business Corporations Act provides that a director who is materially
interested in a contract or transaction may not vote on any resolution to
approve the contract or transaction unless the contract or transaction (i)
relates primarily to the director's remuneration as our director, officer,
employee or agent or as a director, officer, employee or agent of an affiliate
of us, (ii) is for indemnity or directors' and officers' insurance as permitted
by the Canada Business Corporations Act, or (iii) is with an affiliate.

Description of Common Shares

Holders of our common shares are entitled to one vote for each share held on all
matters submitted to a vote of shareholders, including the election of
directors. Holders of our common shares do not have any cumulative voting
rights. Accordingly, holders of a majority of our common shares entitled to vote
in any election of directors may elect all of the directors standing for
election.

Holders of our common shares are entitled to receive dividends, if any, as may
be declared by the Board of Directors out of legally available funds. In the
case of our liquidation, dissolution or winding-up, the holders of our common
shares are entitled to receive ratably our net assets available after the
payment of all debts and liabilities and subject to the prior rights of any
outstanding preferred stock.

Holders of our common shares have no pre-emptive, subscription or conversion
rights. There are no redemption of sinking fund provisions applicable to our
common shares.

Subject to the Canada Business Corporations Act, in the event that we were to
issue a different class of our equity shares, the holders of our common shares
would be entitled to vote separately as a class and to dissent on a proposal to
amend our articles of incorporation to:

         o        change the maximum number of authorized common shares;

         o        increase the maximum number of authorized shares of any class
                  or series of a class having rights or privileges equal or
                  superior to our common shares;

         o        add, change or remove the rights, privileges, restrictions or
                  conditions attached to our common shares;

         o        increase the rights or privileges of any class of shares
                  having rights or privileges equal or superior to the common
                  shares;

         o        effect an exchange or create a right of exchange of all or
                  part of our common shares into another class of shares;

         o        constrain the issue, transfer or ownership of our common
                  shares or change or remove this constraint;

         o        effect an exchange, reclassification or cancellation of our
                  common shares; or


                                       47
<PAGE>
         o        create a new class or series of a class of shares equal or
                  superior to our common shares.

Rights of Shareholders under the Canada Business Corporations Act

In accordance with the provisions of the Canada Business Corporations Act, the
following amendments of rights of holders of our common shares requires the
approval of at least two-thirds of the votes cast by the holders of common
shares voting at a special meeting of the holders:

         o        an amendment to our articles of incorporation to add, change
                  or remove any provisions restricting or constraining the
                  issue, transfer or ownership of shares of that class;

         o        an amendment to our articles of incorporation to add, change
                  or remove any restriction on the business or businesses that
                  we may carry on;

         o        a reorganization of our share capital;

         o        an amalgamation;

         o        a transfer of all of our property to another corporation;

         o        an exchange of our securities for money, property or other
                  securities of that corporation or another corporation;

         o        our liquidation or dissolution;

         o        our continuation under the laws of another jurisdiction;

         o        our voluntary wind-up;

         o        the carrying out of a going-private transaction or squeeze-out
                  transaction;

         o        a sale, lease or exchange of all or substantially all of our
                  property other than in our ordinary course of business; and

         o        a reduction of our stated capital account, which records the
                  full amount of any consideration received by us for each class
                  and series of shares.

Meetings of Shareholders

Holders of our common shares are entitled to receive notice of and attend all
annual and special meetings of our shareholders, other than separate meetings of
holders of any class or series of shares, and to one vote for each common share
held at such meetings.

The Canada Business Corporations Act provides that the directors shall call an
annual shareholders' meeting not later than 15 months after the last preceding
annual shareholders' meeting and that the directors may call a special
shareholders' meeting at any time. The Canada Business Corporations Act provides


                                       48
<PAGE>
that, subject to the two exceptions below, a written resolution of all the
shareholders entitled to vote at a shareholders' meeting is as valid as a
resolution passed at a shareholders' meeting and a written resolution dealing
with all the matters required to be dealt with at a shareholders' meeting
satisfies the statutory requirement to hold such a meeting. A written resolution
of all the shareholders may not be used in lieu of a shareholders' meeting when
the shareholders will deal with the resignation, removal or replacement of a
director or the auditor, or a resolution not to appoint an auditor, and the
director or auditor submits a written statement to us on the matter.

We are required to give notice of the time and place of an annual or special
meeting of shareholders to:

         o        all shareholders who appear on our or our transfer agent's
                  register as of a fixed record date, which date cannot be more
                  than 50 or less than 21 days prior to the meeting, or if no
                  record date is fixed by the Board of Directors, the business
                  day immediately preceding the day on which notice for the
                  shareholders' meeting is given;

         o        all directors; and

         o        our auditor.

For a special shareholders' meetings, we are also required to provide a
description of the special business to be discussed at the meeting and a copy of
the special resolution to be passed. Notice of a shareholders' meeting can be
waived, or a shareholders' meeting can take place without prior notice if all
those entitled to receive such notice are present in person or represented by
proxy at such meeting.

In accordance with our by-laws, the quorum requirements for a meeting of the
holders of common shares are met if at least one-third of the common shares
entitled to vote at a meeting are represented either in person or by proxy.

Limitations Affecting Holders of Our Common Shares who are not Canadian
Residents

There is no law or government decree or regulation in Canada that restricts the
export or import of capital, or that affects the remittance of dividends,
interest or other payments to a non-resident holder of common shares, other than
withholding tax requirements. Our articles of incorporation and our by-laws do
not limit the right of a Canadian non-resident to hold or vote our common
shares, or to directly acquire control of us. The Investment Canada Act requires
Canadian government review of some acquisitions of control of Canadian
businesses by non-Canadians. A direct acquisition of control by a member of the
World Trade Organization, or a WTO investor of a Canadian business engaged in
activity similar to our activity is reviewable in situations where the gross
book value of the assets of the target Canadian business equals or exceeds
$209,000,000 in 2001, as indicated in the target company's most recent financial
statements. A WTO investor is defined in the Investment Canada Act as an
individual or other entity that is a national of, or has the right of permanent
residence in a WTO investor controlled entity, as defined in the Investment
Canada Act. Current members of the World Trade Organization include the European
Union, Germany, Japan Mexico, the United Kingdom and the United States.


                                       49
<PAGE>
Change of Control

Holders of our common shares will have the right under the Canada Business
Corporations Act to dissent and require that we pay them the fair value of their
common shares in the following circumstances:

         o        amend our articles of incorporation to change share rights or
                  to change our business;

         o        amalgamate with another company;

         o        continue under the laws of another jurisdiction;

         o        carry out a going-private transaction or squeeze-out
                  transaction; or

         o        sell, lease or exchange all or substantially all of our
                  property other than in the ordinary course of our business.

C.  MATERIAL CONTRACTS

Except as otherwise disclosed in this annual report and our financial statements
and related notes, included elsewhere in this annual report, we have no other
material contracts.

D.  EXCHANGE CONTROLS

There is no law or government decree or regulation in Canada that restricts the
export or import of capital, or that affects the remittance of dividends,
interest or other payments to a non-resident holder of common shares, other than
withholding tax requirements. See "- E. Taxation."

There is no limitation imposed by Canadian law or by our articles or other
charter documents on the right of a non-resident to hold or vote our common
shares, other than as provided in the Investment Canada Act, as amended,
referred to as the Investment Act.

The Investment Act generally prohibits implementation of a reviewable investment
by an individual, government or agency thereof, corporation, partnership, trust
or joint venture that is not a "Canadian" as defined in the Investment Act,
referred to as a non-Canadian, unless, after review, the minister responsible
for the Investment Act is satisfied that the investment is likely to be of net
benefit to Canada. If an investment by a non-Canadian is not a reviewable
investment, it nevertheless requires the filing of a short notice which may be
given at any time up to 30 days after the implementation of the investment.

An investment in our common shares by a non-Canadian that is a WTO investor
would be reviewable under the Investment Act if it were an investment to acquire
direct control, through a purchase of our assets or voting interests, and the
gross book value of our assets equaled or exceeded $209 million, the threshold
established for 2001, as indicated in our financial statements for our fiscal


                                       50
<PAGE>
year immediately preceding the implementation of the investment. In subsequent
years, such threshold amount may be increased or decreased in accordance with
the provisions of the Investment Act. A WTO investor is an investment by an
individual or other entity that is a national of, or has the right of permanent
residence in, a member of the World Trade Organization, current members of which
include the European Community, Germany, Japan, Mexico, the United Kingdom and
the United States, or a WTO investor-controlled entity, as defined in the
Investment Act.

An investment in our common shares by a non-Canadian, other than a WTO investor,
would be subject to review under the Investment Act if it were an investment to
acquire our direct control and the value of the assets were $5.0 million or
more, as indicated on our financial statements for its fiscal year immediately
preceding the implementation of the investment.

A non-Canadian, whether a WTO investor or otherwise, would acquire control in us
for the purposes of the Investment Act if he, she or it acquired a majority of
our common shares or acquired all or substantially all of the assets used in
conjunction with our business. The acquisition of less than a majority, but
one-third or more of our common shares would be presumed to be an acquisition of
control in us unless it could be established that we were not controlled in fact
by the acquirer through the ownership of common shares.

The Investment Act would not apply to certain transactions in relation to our
common shares including:

           (a)    an acquisition of our common shares by any person if the
                  acquisition were made in the ordinary course of that person's
                  business as a trader or dealer in securities;

           (b)    an acquisition of control in us in connection with the
                  realization of security granted for a loan or other financial
                  assistance and not for any purpose related to the provisions
                  of the Investment Act; and

           (c)    an acquisition of control in us by reason of an amalgamation,
                  merger, consolidation or corporate reorganization following
                  which the ultimate direct or indirect control in fact in us
                  through the ownership of voting interests, remains unchanged.

E.  TAXATION

MATERIAL CANADIAN FEDERAL INCOME TAX CONSIDERATIONS

The following is a summary of the material Canadian federal income tax
considerations generally applicable to a person who acquires our common shares
and who, for purposes of the Income Tax Act (Canada) and the Canada-United
States Income Tax Convention, 1980, as applicable, and at all relevant times, is
a U.S. holder. Readers are cautioned that this is not a complete technical
analysis or listing of all potential tax effects that may be relevant to holders
of our common shares. In particular, this discussion does not deal with the tax
consequences applicable to all categories of investors, some of which may be
subject to special rules, and does not address the tax consequences under
Canadian provincial or territorial tax laws, or tax laws of jurisdictions


                                       51
<PAGE>
outside of Canada. Accordingly, you should consult your own advisor regarding
the particular tax consequences to you of an investment in our common shares.
This summary is based on the advice of our Canadian counsel, Perley-Robertson,
Hill & McDougall.

For purposes of the Income Tax Act (Canada) and the Canada-United States Income
Tax Convention, 1980, a U.S. holder is a person that:

         o        throughout the period during which the person owns our common
                  shares is not resident in Canada and is a resident of the
                  United States;

         o        holds our common shares as capital assets, that is, generally
                  as investments;

         o        deals at arm's length with us within the meaning of the Income
                  Tax Act (Canada);

         o        does not have a permanent establishment or fixed base in
                  Canada, as defined by the Canada-United States Income Tax
                  Convention, 1980; and

         o        does not own and is not treated as owning, 10% or more of our
                  outstanding voting shares.

Special rules, we do not address in this discussion, may apply to a U.S. holder
that is (a) an insurer that carries on an insurance business in Canada and
elsewhere, or (b) a financial institution subject to special provisions of the
Income Tax Act (Canada) applicable to income gain or loss arising from
mark-to-market property.

This discussion is based on the current provisions of the Canada-United States
Income Tax Convention, 1980, the Income Tax Act (Canada) and their regulations,
all specific proposals to amend the Income Tax Act (Canada) and regulations
announced by the Minister of Finance (Canada) before the date of this annual
report and counsel's understanding of the current published administrative
practices of Canada Customs and Revenue Agency. This discussion is not
exhaustive of all potential Canadian tax consequences to a U.S. holder and does
not take into account or anticipate any other changes in law, whether by
judicial, governmental or legislative decision or action, nor does it take into
account the tax legislation or considerations of any province, territory or
foreign jurisdiction.

TAXATION OF DIVIDENDS

Dividends paid or credited or deemed to be paid or credited on common shares
owned by a U.S. holder will be subject to Canadian withholding tax under the
Income Tax Act (Canada) at a rate of 25% on the gross amount of the dividends.
The rate of withholding tax generally is reduced under the Canada-United States
Income Tax Convention, 1980 to 15% where the U.S. holder is the beneficial owner
of the dividends. Under the Canada-United States Income Tax Convention, 1980,
dividends paid to religious, scientific, charitable and similar tax exempt
organizations and pension organizations that are resident and exempt from tax in
the United States and that have complied with the administrative procedures
specified in the Tax Convention are exempt from this Canadian withholding tax.


                                       52
<PAGE>
TAXATION OF CAPITAL GAINS

A gain realized by a U.S. holder on a sale, disposition or deemed disposition of
our common shares generally will not be subject to tax under the Income Tax Act
(Canada) unless the common shares constitute taxable Canadian property within
the meaning of the Income Tax Act (Canada) at the time of the sale, disposition
or deemed disposition. Our common shares generally will not be taxable Canadian
property provided that: (a) they are listed on a prescribed stock exchange, and
(b) at no time during the five-year period immediately preceding the sale,
disposition or deemed disposition, did the U.S. holder, persons with whom the
U.S. holder did not deal at arm's length, or the U.S. holder acting together
with those persons, own or have an interest in or a right to acquire 25% or more
of the issued shares of any class or series of our shares. A deemed disposition
of common shares will occur on the death of a U.S. holder.

  If our common shares are taxable Canadian property to a U.S. holder, any
capital gain realized on a disposition or deemed disposition of those shares
will generally be exempt from tax under the Income Tax Act (Canada) by the
Canada-United States Income Tax Convention, 1980, so long as the value of our
common shares at the time of the sale, disposition or deemed disposition is not
derived principally from real property situated in Canada, as defined by the
Canada-United States Income Tax Convention, 1980. We have been advised that
currently our common shares do not derive their value principally from real
property situated in Canada; however, the determination as to whether Canadian
tax would be applicable on a sale, disposition or deemed disposition of common
shares must be made at the time of that sale, disposition or deemed disposition.

UNITED STATES FEDERAL INCOME TAX CONSIDERATIONS

GENERAL

Subject to the limitations described below, the following discussion describes
the material United States federal income tax consequences to a U.S. Holder (as
defined below) that is a beneficial owner of the common shares of Workstream
Inc. and that holds them as capital assets. For purposes of this summary, a
"U.S. Holder" is a beneficial owner of common shares who or that is for United
States federal income tax purposes (i) a citizen or resident of the United
States, (ii) a corporation (or other entity treated as a corporation for United
States federal tax purposes) created or organized in the United States or under
the laws of the United States or of any state or the District of Columbia, (iii)
an estate, the income of which is includible in gross income for United States
federal income tax purposes regardless of its source, or (iv) a trust, if a
court within the United States is able to exercise primary supervision over the
administration of the trust and one or more U.S. persons have the authority to
control all substantial decisions of the trust.

This summary is for general information purposes only. It does not purport to be
a comprehensive description of all of the tax considerations that may be
relevant to owning the common shares. AS THIS IS A GENERAL SUMMARY, OWNERS OF
COMMON SHARES ARE ADVISED TO CONSULT THEIR OWN TAX ADVISERS WITH RESPECT TO THE
U.S. FEDERAL, STATE AND LOCAL TAX CONSEQUENCES, AS WELL AS TO NON-U.S. TAX
CONSEQUENCES, OF THE ACQUISITION, OWNERSHIP AND DISPOSITION OF COMMON SHARES
APPLICABLE TO THEIR PARTICULAR TAX SITUATIONS.


                                       53
<PAGE>
This discussion is based on current provisions of the U.S. Internal Revenue Code
of 1986, as amended, current and proposed U.S. Treasury regulations promulgated
thereunder, and administrative and judicial decisions, as of the date hereof,
all of which are subject to change, possibly on a retroactive basis. This
discussion does not address all aspects of United States federal income taxation
that may be relevant to any particular holder based on such holder's individual
circumstances. In particular, this discussion does not address the potential
application of the alternative minimum tax or the United States federal income
tax consequences to holders that are subject to special treatment, including:

         o        broker-dealers, including dealers in securities or currencies;

         o        insurance companies, regulated investment companies or real
                  estate investment trusts;

         o        taxpayers that have elected mark-to-market accounting;

         o        tax-exempt organizations;

         o        financial institutions or "financial services entities";

         o        taxpayers who hold common shares as part of a straddle,
                  "hedge" or "conversion transaction" with other investments;

         o        holders owning directly, indirectly or by attribution at least
                  10% of our voting power;

         o        non-resident aliens of the United States;

         o        taxpayers whose functional currency is not the U.S. dollar;
                  and

         o        taxpayers who acquire common shares as compensation.

This discussion does not address any aspect of United States federal gift or
estate tax, or state, local or non-United States tax laws. Additionally, the
discussion does not consider the tax treatment of partnerships or persons who
hold common shares through a partnership or other pass-through entity. Certain
material aspects of United States federal income tax relevant to a beneficial
owner other than a U.S. Holder (a "Non-U.S. Holder") also are discussed below.

EACH HOLDER OF COMMON SHARES IS ADVISED TO CONSULT SUCH PERSON'S OWN TAX ADVISOR
WITH RESPECT TO THE SPECIFIC TAX CONSEQUENCES TO SUCH PERSON OF PURCHASING,
HOLDING OR DISPOSING OF COMMON SHARES.

TAXATION OF DIVIDENDS PAID ON COMMON SHARES

We have never paid cash dividends, and we currently do not intend to pay cash
dividends in the foreseeable future. In the event that we do pay a dividend, and
subject to the discussion of the passive foreign investment company, or PFIC,


                                       54
<PAGE>
rules below, a U.S. Holder will be required to include in gross income as
ordinary income the amount of any distribution paid on our common shares,
including any Canadian taxes withheld from the amount paid, on the date the
distribution is received to the extent the distribution is paid out of our
current or accumulated earnings and profits, as determined for United States
federal income tax purposes. Distributions in excess of such earnings and
profits will be applied against and will reduce the U.S. Holder's basis in the
common shares and, to the extent in excess of such basis, will be treated as a
gain from the sale or exchange of the common shares.

Distributions of current or accumulated earnings and profits paid in a currency
other than the U.S. dollar to a U.S. Holder will be includible in the income of
a U.S. Holder in a U.S. dollar amount calculated by reference to the exchange
rate on the date the distribution is received. A U.S. Holder that receives a
distribution in a currency other than the U.S. dollar and converts the non-U.S.
currency into U.S. dollars subsequent to its receipt will have foreign exchange
gain or loss based on any appreciation or depreciation in the value of the
non-U.S. currency against the U.S. dollar, which will generally be U.S. source
ordinary income or loss.

U.S. Holders will have the option of claiming the amount of any Canadian income
taxes withheld at source either as a deduction from gross income or as a
dollar-for-dollar credit against their United States federal income tax
liability. Individuals who do not claim itemized deductions, but instead utilize
the standard deduction, may not claim a deduction for the amount of any Canadian
income taxes withheld, but such individuals may still claim a credit against
their United States federal income tax liability. The amount of foreign income
taxes which may be claimed as a credit in any year is subject to complex
limitations and restrictions, which must be determined on an individual basis by
each shareholder. The total amount of allowable foreign tax credits in any year
cannot exceed the pre-credit U.S. tax liability for the year attributable to
foreign source taxable income.

A U.S. Holder will be denied a foreign tax credit with respect to Canadian
income tax withheld from dividends received on our common shares:

         o        if such U.S. Holder has not held the common shares for at
                  least 16 days of the 30-day period beginning on the date which
                  is 15 days before the ex-dividend date; or

         o        to the extent such U.S. Holder is under an obligation to make
                  related payments on substantially similar or related property.

Any days during which a U.S. Holder has substantially diminished its risk of
loss on the common shares are not counted toward meeting the 16 day holding
period required by the statute. In addition, distributions of current or
accumulated earnings and profits will be foreign source passive income for
United States foreign tax credit purposes and will not qualify for the dividends
received deduction otherwise available to corporations.


                                       55
<PAGE>
TAXATION OF THE DISPOSITION OF COMMON SHARES

Subject to the discussion of the PFIC rules below, upon the sale, exchange or
other disposition of our common shares, a U.S. Holder will recognize capital
gain or loss in an amount equal to the difference between such U.S. Holder's
basis in the common shares, which is usually the U.S. dollar cost of such common
shares, and the amount realized on the disposition. If the common shares are
publicly traded, a disposition of common shares will be considered to occur on
the "trade date," regardless of the U.S. Holder's method of accounting. A U.S.
Holder that uses the cash method of accounting calculates the U.S. dollar value
of the proceeds received on the sale as of the date that the sale settles.
However, a U.S. Holder that uses the accrual method of accounting is required to
calculate the value of the proceeds of the sale as of the "trade date" and may
therefore realize foreign currency gain or loss, unless such U.S. Holder has
elected to use the settlement date to determine its proceeds of sale for
purposes of calculating such foreign currency gain or loss. Capital gain from
the sale, exchange or other disposition of the common shares held more than one
year is long-term capital gain. Gain or loss recognized by a U.S. Holder on a
sale, exchange or other disposition of common shares generally will be treated
as United States source income or loss for United States foreign tax credit
purposes. The deductibility of a capital loss recognized on the sale, exchange
or other disposition of common shares is subject to limitations. In addition, a
U.S. Holder that receives non-U.S. currency upon disposition of our common
shares and converts the non-U.S. currency into U.S. dollars subsequent to its
receipt will have foreign exchange gain or loss based on any appreciation or
depreciation in the value of the non-U.S. currency against the U.S. dollar,
which will generally be United States source ordinary income or loss.

PASSIVE FOREIGN INVESTMENT COMPANY CONSIDERATIONS

We will be a passive foreign investment company, or PFIC, for United States
federal income tax purposes, if 75% or more of our gross income in a taxable
year, including the pro-rata share of the gross income of any company, U.S. or
foreign, in which we are considered to own 25% or more of the shares by value,
is passive income. Alternatively, we will be considered to be a PFIC if 50% or
more of our assets in a taxable year, averaged over the year and ordinarily
determined based on fair market value and including the pro-rata share of the
assets of any company in which we are considered to own 25% or more of the
shares by value, are held for the production of, or produce, passive income.
Passive income includes amounts derived by reason of the temporary investment of
funds raised in our public offerings.

If we were a PFIC, and a U.S. Holder did not make a qualifying election either
to (i) treat us as a "qualified electing fund" (a "QEF") (as described below),
or (ii) mark our common shares to market (as discussed below), excess
distributions by us to a U.S. Holder would be taxed in a special way. "Excess
distributions" are amounts received by a U.S. Holder with respect to shares in a
PFIC in any taxable year that exceed 125% of the average distributions received
by such U.S. Holder from the PFIC in the shorter of either the three previous
years or such U.S. Holder's holding period for such shares before the present
taxable year. Excess distributions must be allocated ratably to each day that a
U.S. Holder has held shares in a PFIC. A U.S. Holder must include amounts
allocated to the current taxable year in its gross income as ordinary income for
that year. Further, a U.S. Holder must pay tax on amounts allocated to each


                                       56
<PAGE>
prior taxable year at the highest rate in effect for that year on ordinary
income and the tax is subject to an interest charge at the rate applicable to
deficiencies for income tax. The entire amount of gain that is realized by a
U.S. Holder upon the sale or other disposition of our common shares will also be
treated as an excess distribution and will be subject to tax as described above.
A U.S. Holder's tax basis in our common shares that were acquired from a
decedent who was a U.S. Holder would not receive a step-up to fair market value
as of the date of the decedent's death but would instead be equal to the
decedent's basis, if lower. If we were a PFIC, a U.S. Holder of our common
shares will be subject to the PFIC rules as if such holder owned its pro-rata
share of any of our direct or indirect subsidiaries which are themselves PFICs.
Accordingly, a U.S. Holder of our common shares will be subject to tax under the
PFIC rules with respect to distributions to us by, and dispositions by us of
stock of, any direct or indirect PFIC stock held by us, as if such holder
received directly its pro-rata share of either the distribution or proceeds from
such disposition.

The special PFIC rules described above will not apply to a U.S. Holder if the
U.S. Holder makes an election to treat us as a "qualified electing fund" in the
first taxable year in which the U.S. Holder owns common shares and if we comply
with certain reporting requirements. Instead, a shareholder of a qualified
electing fund is required for each taxable year to include in income a pro-rata
share of the ordinary earnings of the qualified electing fund as ordinary income
and a pro-rata share of the net capital gain of the qualified electing fund as
long-term capital gain, subject to a separate election to defer payment of
taxes, which deferral is subject to an interest charge. The QEF election is made
on a shareholder-by-shareholder basis and can be revoked only with the consent
of the U.S. Internal Revenue Service, or IRS. A shareholder makes a QEF election
by attaching a completed IRS Form 8621, including the PFIC annual information
statement, to a timely filed United States federal income tax return and by
filing such form with the IRS Service Center in Philadelphia, Pennsylvania. Even
if a QEF election is not made, a shareholder in a PFIC who is a U.S. person must
file a completed IRS Form 8621 every year. We have agreed to supply U.S. Holders
with the information needed to report income and gain pursuant to a QEF election
in the event we are classified as a PFIC.

A U.S. Holder of PFIC stock which is publicly traded could elect to mark the
stock to market annually, recognizing as ordinary income or loss each year an
amount equal to the difference as of the close of the taxable year between the
fair market value of the PFIC stock and the U.S. Holder's adjusted tax basis in
the PFIC stock. Losses would be allowed only to the extent of net mark-to-market
gain previously included by the U.S. Holder under the election for prior taxable
years. If the mark-to-market election were made, then the rules set forth above
would not apply for periods covered by the election.

We believe that we were not a PFIC for the fiscal year ending May 2001 and we
believe that we will not be a PFIC for the fiscal year ending May 2002. The
tests for determining PFIC status, however, are applied annually, and it is
difficult to make accurate predictions of future income and assets, which are
relevant to this determination. Accordingly, there can be no assurance that we
will not become a PFIC. U.S. Holders who hold common shares during a period when
we are a PFIC will be subject to the foregoing rules, even if we cease to be a
PFIC, subject to certain exceptions for U.S. Holders who made a QEF election.
U.S. Holders are strongly urged to consult their tax advisors about the PFIC


                                       57
<PAGE>
rules, including the consequences to them of making a mark-to-market or QEF
election with respect to common shares in the event that we qualify as a PFIC.

TAX CONSEQUENCES FOR NON-U.S. HOLDERS OF COMMON SHARES

Except as described in "U.S. Information Reporting and Backup Withholding"
below, a Non-U.S. Holder who is a beneficial owner of our common shares will not
be subject to United States federal income or withholding tax on the payment of
dividends on, and the proceeds from the disposition of, our common shares,
unless:

         o        such item is effectively connected with the conduct by the
                  Non-U.S. Holder of a trade or business in the United States
                  and, in the case of a resident of a country which has a treaty
                  with the United States, such item is attributable to a
                  permanent establishment or, in the case of an individual, a
                  fixed place of business, in the United States;

         o        the Non-U.S. Holder is an individual who holds the common
                  shares as capital assets and is present in the United States
                  for 183 days or more in the taxable year of the disposition
                  and does not qualify for an exemption; or

         o        the Non-U.S. Holder is subject to tax pursuant to the
                  provisions of United States tax law applicable to U.S.
                  expatriates.

U.S. INFORMATION REPORTING AND BACKUP WITHHOLDING

U.S. Holders generally are subject to information reporting requirements with
respect to dividends paid in the United States on common shares. In addition,
U.S. Holders are subject to U.S. backup withholding at a rate of up to 30.5% on
dividends paid in the United States on common shares unless the U.S. Holder
provides an IRS Form W-9 or otherwise establishes an exemption. U.S. Holders are
subject to information reporting and backup withholding at a rate of up to 30.5%
on proceeds paid from the sale, exchange, redemption or other disposition of
common shares unless the U.S. Holder provides an IRS Form W-9 or otherwise
establishes an exemption.

Non-U.S. Holders generally are not subject to information reporting or backup
withholding with respect to dividends paid on, or proceeds upon the sale,
exchange, redemption or other disposition of, common shares, provided that such
Non-U.S. Holder provides a taxpayer identification number, certifies to its
foreign status, or otherwise establishes an exemption.

The amount of any backup withholding will be allowed as a credit against such
U.S. Holder's or Non-U.S. Holder's United States federal income tax liability
and may entitle such holder to a refund, provided that the required information
is furnished to the U.S. Internal Revenue Service.

F.  DIVIDENDS AND PAYING AGENTS

Not applicable.


                                       58
<PAGE>
G.  STATEMENT BY EXPERTS

Not applicable.

H.  DOCUMENTS ON DISPLAY

Any statement in this annual report about any of our contracts or other
documents is not necessarily complete. If the contract or document is filed as
an exhibit to this annual report, the contract or other document is deemed to
modify the description contained in this annual report. The exhibits themselves
must be reviewed for a complete description of the contract or document.

You may examine and copy this annual report and any other document we file with
the Commission at the Commission's public reference room at 450 Fifth Street,
N.W., Washington, D.C. 20549. You may also obtain copies of the documents at
prescribed rates by writing to the Public Reference Section of the Commission at
450 Fifth Street, N.W., Washington, D.C. 20549. You may call the Commission at
1-800-SEC-0330 for further information on the operation of the public reference
facilities. In addition, the Commission maintains an Internet site at
http://www.sec.gov, from which you can electronically access this annual report,
including the exhibits and schedules to this annual report.

The documents concerning us which are referred to in this annual report may also
be examined at our offices located at 495 March Road, Suite 300, Ottawa, Ontario
K2K 3G1.

I.  SUBSIDIARY INFORMATION

Not applicable.

ITEM 11.   QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

We are primarily exposed to market risks associated with fluctuations in
interest rates and foreign currency exchange rates.

INTEREST RATE RISKS

Our exposure to interest rate fluctuations relates primarily to our short-term
investment portfolio and our bank credit. We invest our surplus cash in an
investment trust established by a Canadian chartered bank. The investment
consists of various short-term, low-risk instruments, and can be withdrawn
without penalty at any time. The interest income from these investments is
subject to interest rate fluctuations which our management believes will not
have a material impact on our financial position.

We have loans outstanding from a Canadian chartered bank. The remaining balance
at May 31, 2001 was $7,917, and the loan bears interest at a rate of prime plus
3%. We also have a revolving line of credit, which bears interest at a rate of
prime plus 3%, and is available to us in the amount of $300,000. As of May 31,
2001, no amounts had been drawn on the line of credit.


                                       59
<PAGE>
The impact on net interest income of a 100 basis point adverse change in
interest rates for the fiscal year ended May 31, 2001 would have been less than
$1,000.

FOREIGN CURRENCY RISK

We have net monetary asset and liability balances denominated in U.S. Dollars,
including $580,588 of short-term investments. Our cash and cash equivalents are
held in Canadian and U.S. dollars. As a result, fluctuations in the exchange
rate of the U.S. dollar will impact our reported cash position. Since a
significant portion of our short-term investments are denominated in U.S.
dollars, a 10% adverse change in foreign exchange rates would result in a
decrease in our reported cash and short-term investments balance of
approximately $65,000.

ITEM 12.   DESCRIPTION OF SECURITIES OTHER THAN EQUITY SECURITIES

Not applicable.

PART II

ITEM 13.   DEFAULTS, DIVIDEND ARREARAGES AND DELINQUENCIES

Not applicable.

ITEM 14.   MATERIAL MODIFICATIONS TO THE RIGHTS OF SECURITY HOLDERS AND USE
           OF PROCEEDS

A.     For information pertaining to amendments to our articles and certain
       securities, see note 9(a) to our audited consolidated financial
       statements included elsewhere in this annual report.

B-D.  Not applicable.

E.  USE OF PROCEEDS

The effective date of the Securities Act registration statement for which the
use of proceeds information is being disclosed in this Item 16 is December 6,
1999 and the Commission file number assigned to the registration statement is
333-87537.

The offering was commenced after filing of the registration statement with the
Commission on September 22, 1999.

The offering has terminated and all securities offered pursuant to the offering
were sold. The name of the managing underwriter for the offering is Whale
Securities Co., L.P. The title of the securities registered is common shares,
without par value. The aggregate number of common shares registered was
2,817,500, including 367,500 shares which the underwriter had the option to
purchase to cover over-allotments and of which it actually purchased 301,157
shares; the initial public offering price was US$6.00 per share; the aggregate
price of the offering amount registered was US$16,905,000; the aggregate amount
sold for our account was US$15,715,914 and the aggregate amount sold for the
account of selling shareholders was US$791,028.


                                       60
<PAGE>
The actual expenses we incurred in connection with the issuance of the
securities registered were as follows:

       Underwriting discounts and commissions                US$   1,388,239
       Expenses paid to/for underwriters                     US$     471,477
       Professional fees                                     US$     431,111
       Other expenses                                        US$     194,627

The net offering proceeds to us after deducting the total expenses described
above were $19,498,569 (US$13,230,460).

The amount of net offering proceeds used from December 6, 1999 to May 31, 2000
is as follows (figures are in approximate amounts):

<TABLE>
<S>                                                                                  <C>
     o    Purchase and installation of computer equipment and software                US$   784,111
     o    Purchase and installation of office equipment and leasehold
          improvements                                                                US$   646,957
     o    Repayment of indebtedness to principal stockholder, Paul Champagne          US$   846,914
     o    Working capital                                                             US$   458,217
     o    Marketing and advertising                                                   US$ 1,054,538
     o    Research and development                                                    US$   944,556
     o    Purchase of temporary investments                                           US$ 3,502,343
     o    Cash consumed in other operating activities                                 US$ 4,262,490

</TABLE>

Except as disclosed above, none of these payments was made, directly or
indirectly, to any of our directors or officers, or their associates, any
persons owning 10% or more of any class of our equity securities, or any of our
affiliates.

ITEM 15.   [RESERVED]

ITEM 16.   [RESERVED]









                                       61
<PAGE>
                                    PART III

ITEM 17.   FINANCIAL STATEMENTS

We have responded to Item 18 in lieu of this item.

ITEM 18.   FINANCIAL STATEMENTS

The financial statements required by this item are found at the end of this
annual report, beginning on page F-1.

ITEM 19.   EXHIBITS

       EXHIBIT NO.                           DESCRIPTION
       -----------                           -----------

           1.1        Articles of Incorporation, as amended (incorporated by
                      reference to Exhibit 3.1 to the Registration Statement on
                      Form F-1 (File No. 333-87537)).

           1.2*       Articles of Amendment, dated July 26, 2001.

           1.3*       Articles of Amendment, dated November 6, 2001.

           1.4        By-law No. 1 and No. 2 (incorporated by reference to
                      Exhibit 3.2 to the Registration Statement on Form F-1
                      (File No. 333-87537)).

           1.5*       By-law No. 3.

           2.1        Form of common share certificate (incorporated by
                      reference to Exhibit 4.1 to the Registration Statement on
                      Form F-1 (File No. 333-87537)).

           2.2        Registration Rights Agreement among the Registrant, Paul
                      Champagne, John Gerard Stanton and Les Kirkland, dated
                      September 21, 1999 (incorporated by reference to Exhibit
                      10.1 to the Registration Statement on Form F-1 (File No.
                      333-87537)).

           3.1*       Voting Agreement, dated July 24, 2001, between Michael
                      Mullarkey, John Gerard Stanton and Paul Champagne.


                                       62
<PAGE>
           4.1        Plan of Reorganization and Stock Acquisition Agreement,
                      dated April 3, 2001, by and among Michael Mullarkey and
                      Karen Paula Allen, as trustee of the Karen Paula Allen
                      Revocable Trust, as Sellers, Paul Allen Holdings, Inc. and
                      its Subsidiaries, as subject companies, and Registrant, as
                      Purchaser (incorporated by reference to Exhibit 3 to the
                      report on Form 6-K for the month of April 2001).

           4.2        Share Purchase Agreement, dated May 18, 2001, by and among
                      Marvin A. Cohen, Meredith A. Cohen, as Vendors, The Omni
                      Partners Inc., a Florida corporation, Omni Partners
                      Mid-Atlantic, Inc., a Pennsylvania corporation, and Omni
                      Partners West, Inc., a Nevada corporation, as subject
                      companies, and Registrant, as Purchaser (incorporated by
                      reference to Exhibit 2 to the report on Form 6-K for the
                      month of May 2001).

           4.3*       Asset Purchase Agreement, dated July 2, 2001, between the
                      Registrant and Gonyea Career Marketing Inc.

           4.4        Merger Agreement between Rezlogic, Inc., the Registrant
                      and E-Cruiter Acquisition I, Inc., dated June 29, 2001
                      (incorporated by reference to Exhibit 3 to the report on
                      Form 6-K for the month of July 2001).

           4.5        Merger Agreement dated September 14, 2001 between
                      6FigureJobs.com, Inc., the Registrant and E-Cruiter
                      Acquisition II, Inc. (incorporated by reference to Exhibit
                      5 to the report on Form 6-K for the month of September
                      2001).

           4.6*       Asset Purchase Agreement, dated September 21, 2001,
                      between Paula Allen Holdings, Inc. and Tech Engine, Inc.

           4.7        E-Cruiter.com Inc. 1997 Key Employee Stock Option Plan
                      (incorporated by reference to Exhibit 10.7 to the
                      Registration Statement on Form F-1 (File No. 333-87537)).

           4.8*       E-Cruiter.com Inc. 2001 Amended and Restated Stock Option
                      Plan, as amended as of July 26, 2001.

           4.9        Stock Option Agreement between Sandy Bryden and the
                      Registrant, dated June 24, 1999 (incorporated by reference
                      to Exhibit 10.3 to the Registration Statement on Form F-1
                      (File No. 333-87537)).


                                       63
<PAGE>
           4.10       Option Agreement between WorkLife Solutions, Inc. and the
                      Registrant, dated October 13, 1999 (incorporated by
                      reference to Exhibit 10.10 to the Registration Statement
                      on Form F-1 (File No. 333-87537)).

           4.11*      Warrant Agreement dated as of March 22, 2001 between the
                      Registrant and BlueStone Capital Corp.

           4.12*      Consulting Agreement, dated as of January 1, 2002, between
                      J. Gerry Stanton Executive Services Ltd. and the
                      Registrant.

           4.13       Lease Agreement between Drake Beam Morin (Ottawa) Inc. and
                      Omers Realty Corporation, dated November 16, 1993
                      (incorporated by reference to Exhibit 10.4 to the
                      Registration Statement on Form F-1 (File No. 333-87537)).

           4.14       Head Lease Agreement between 871484 Ontario Inc. and the
                      Registrant, dated August 1, 1999 (incorporated by
                      reference to Exhibit 10.5 to the Registration Statement on
                      Form F-1 (File No. 333-87537)).

           4.15       Lease Agreement between Registrant and RT Twenty-Second
                      Pension Properties Limited, dated March 21, 2000
                      (incorporated by reference to Exhibit 2.1 to the annual
                      report on Form 20-F for the period ended May 31, 2000).

           4.16       Agreement between Registrant and SC Stormont Corporation
                      for the provision of financial and business advisory
                      services to Registrant (incorporated by reference to
                      Exhibit 2.2 to the annual report on Form 20-F for the
                      period ended May 31, 2000).

           4.17       Service Agreement between Positionwatch Limited and the
                      Registrant, dated February 23, 1999 (incorporated by
                      reference to Exhibit 10.6 to the Registration Statement on
                      Form F-1 (File No. 333-87537)).

           4.18       Sales and Marketing Agreement between WorkLife Solutions,
                      Inc. and the Registrant, dated October 13, 1999
                      (incorporated by reference to Exhibit 10.9 to the
                      Registration Statement on Form F-1 (File No. 333-87537)).

           8.1*       List of Subsidiaries.

           10*        Consent of PricewaterhouseCoopers LLP


---------------------------
*   Filed herewith.


                                       64
<PAGE>
                                   SIGNATURES

The registrant hereby certifies that it meets all of the requirements for filing
on Form 20-F and it has duly caused and authorized the undersigned to sign this
annual report on its behalf.




BY: /s/ Michael Mullarkey
    ---------------------------------------
    Name: Michael Mullarkey
    Title: Chief Executive Officer and
           Chairman

Dated: November 30, 2001




















                                       65
<PAGE>
                                Auditors' Report
                    To the Shareholders of E-Cruiter.com Inc.

         July 6, 2001, except for note 13, which is at August 1, 2001

         We have audited the consolidated balance sheets of E-Cruiter.com Inc.
as at May 31, 2001 and 2000, and the consolidated statements of loss,
shareholders' equity and cash flows for the three-year period ending May 31,
2001. These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements based on our audits.

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

         In our opinion, these consolidated financial statements present fairly,
in all material respects, the financial position of the Company as at May 31,
2001 and 2000, and the results of its operations and its cash flows for the
three-year period ending May 31, 2001, in accordance with Canadian generally
accepted accounting principles.



/s/ Pricewaterhouse Coopers LLP
-------------------------------
Chartered Accountants
Ottawa, Canada




                                       F-1


<PAGE>

CONSOLIDATED BALANCE SHEETS AS AT MAY 31
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
                                                                                                 2001                 2000
(Canadian dollars)                                                                                  $                    $
<S>                                                                                         <C>                   <C>
Assets
Current assets
Cash and cash equivalents  (note 3)                                                            100,739               246,998
Short-term investments (note 3)                                                              5,413,571            13,597,509
Accounts receivable, net of allowance for doubtful accounts of $20,381 (2000 -
      $50,000)                                                                                 491,373               718,862
Prepaid expenses                                                                               413,397               482,957
Other receivables                                                                              248,482                65,253
                                                                                      -----------------------------------------

                                                                                             6,667,562            15,111,579
Deferred costs                                                                                  27,680                83,040
Capital assets (note 4)                                                                      1,594,769               988,341
                                                                                      -----------------------------------------

                                                                                             8,290,011            16,182,960
                                                                                      -----------------------------------------

Liabilities and Shareholders' Equity
Current liabilities
Trade accounts payable                                                                         490,579               166,428
Accrued liabilities                                                                            539,328               640,917
Accrued compensation                                                                           313,909               223,609
Deferred revenue                                                                               345,049             1,133,840
Current portion of long-term obligations (note 5)                                               80,708               145,184
                                                                                      -----------------------------------------

                                                                                             1,769,573             2,309,978
Long-term obligations (note 5)                                                                 302,137                42,219
                                                                                      -----------------------------------------

                                                                                             2,071,710             2,352,197
                                                                                      -----------------------------------------

Commitments (note 5)

Shareholders' equity
Common shares  - issued and outstanding - 7,712,262 (2000 - 7,701,628)                      26,070,065            26,045,606
Deficit                                                                                    (19,851,764)          (12,214,843)
                                                                                      -----------------------------------------

                                                                                             6,218,301            13,830,763
                                                                                      -----------------------------------------

                                                                                             8,290,011            16,182,960
                                                                                      -----------------------------------------
</TABLE>


Signed on behalf of the Board,


/s/ John Gerard Stanton                                       /s/ Matthew Ebbs
-----------------------                                       ----------------
John Gerard Stanton                                           Matthew Ebbs
Chairman                                                      Director

   The accompanying notes are an integral part of these financial statements.

                                       F-2
<PAGE>
<TABLE>
<CAPTION>
CONSOLIDATED STATEMENT OF LOSS FOR THE YEARS ENDED MAY 31
--------------------------------------------------------------------------------
                                                                            2001                 2000                   1999
(Canadian dollars)                                                             $                    $                      $
<S>                                                                   <C>                   <C>                   <C>
 Revenue                                                              3,078,989             1,752,730             1,399,557

 Cost of revenue                                                      2,291,856             1,624,770               848,769
                                                               ----------------------------------------------------------------

 Gross profit                                                           787,133               127,960               550,788
                                                               ----------------------------------------------------------------

 Expense
 Selling                                                              2,289,273             1,625,434               818,601
 Marketing                                                            1,444,879             2,014,684               612,796
 General and administrative                                           2,043,930             1,401,991               619,265
 Research and development                                             3,344,965             2,460,600               606,088
                                                               ----------------------------------------------------------------

                                                                      9,123,047             7,502,709             2,656,750

 Operating loss                                                      (8,335,914)           (7,374,749)           (2,105,962)


 Interest and other income                                              764,558               767,499                16,311
 Interest and other expense                                             (65,565)             (691,153)             (122,759)
                                                               ----------------------------------------------------------------

 Net loss for the year                                               (7,636,921)           (7,298,403)           (2,212,410)
                                                               ----------------------------------------------------------------

 Basic and fully diluted loss per common share                            (0.99)               (1.29)                 (0.57)
                                                               ----------------------------------------------------------------

 Weighted average number of common shares outstanding
       during the year                                                7,710,284             5,649,783             3,854,579
                                                               ----------------------------------------------------------------

</TABLE>

   The accompanying notes are an integral part of these financial statements.


                                       F-3

<PAGE>
<TABLE>
<CAPTION>
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY FOR THE
YEARS ENDED MAY 31
--------------------------------------------------------------------------------
                                                                                                                           Total
                                          Number of                                                                Shareholders'
                                             Common                            Convertible        Accumulated             Equity
                                             Shares      Common Shares    Promissory Notes            Deficit          (Deficit)
(Canadian dollars)                                                   $                   $                  $                  $
<S>                                       <C>                 <C>                  <C>             <C>                   <C>
Balance as at May 31, 1998                3,436,632           2,571,040                  -         (2,704,030)           (132,990)
 Issuance of shares                         433,863           1,000,000                  -                  -           1,000,000
 Redemption of shares                       (13,016)            (30,000)                 -                  -             (30,000)
 Issuance of convertible promissory
    notes -equity component                       -                   -            135,096                  -             135,096
 Net loss for the year                            -                   -                  -         (2,212,410)         (2,212,410)
                                      ---------------------------------------------------------------------------------------------

 Balance as at May 31, 1999               3,857,479           3,541,040            135,096         (4,916,440)         (1,240,304)
 Issuance of shares                       2,625,828          19,556,067                  -                  -          19,556,067
 Issuance of shares through exercise
    of options                                6,508              15,005                  -                  -              15,005
 Conversion of convertible
    promissory notes                      1,211,813           2,933,494           (135,096)                 -           2,798,398
 Net loss for the year                            -                   -                  -         (7,298,403)         (7,298,403)
                                      ---------------------------------------------------------------------------------------------

 Balance as at May 31, 2000               7,701,628          26,045,606                  -        (12,214,843)         13,830,763
  Issuance of shares through
    exercise of options                      10,634              24,459                  -                  -              24,459
 Net loss for the year                            -                   -                  -         (7,636,921)         (7,636,921)
                                      ---------------------------------------------------------------------------------------------

 Balance as at May 31, 2001               7,712,262          26,070,065                  -        (19,851,764)          6,218,301
                                      ---------------------------------------------------------------------------------------------

</TABLE>

   The accompanying notes are an integral part of these financial statements.


                                       F-4

<PAGE>

<TABLE>
<CAPTION>
CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE YEARS ENDED MAY 31
--------------------------------------------------------------------------------
<S>                                                                  <C>                    <C>                    <C>
                                                                          2001                   2000                   1999
(Canadian dollars)                                                           $                      $                      $
Cash flows from (used in)
 Operating activities
 Net loss for the year                                               (7,636,921)            (7,298,403)            (2,212,410)
 Amortization of capital assets                                         721,049                368,937                117,150
 Amortization of lease inducement                                        (6,281)                     -                      -
 Amortization of other long term assets                                  55,360                      -                      -
 Non-cash interest on convertible promissory notes                            -                581,335                104,238
 Net change in operating components of working capital (note 10)       (418,302)               451,440                 20,835
                                                               ----------------------------------------------------------------

                                                                     (7,285,095)            (5,896,691)            (1,970,187)
                                                               ----------------------------------------------------------------

 Investing activities
 Purchase of capital assets                                          (1,165,432)              (927,035)              (105,588)
 Purchase of short-term investments                                           -            (19,756,000)                     -
 Sale of short-term investments                                       8,183,938              6,158,491                      -
 Purchase of other long-term assets                                           -                (83,040)                     -
                                                               ----------------------------------------------------------------

                                                                      7,018,506            (14,607,584)              (105,588)
                                                               ----------------------------------------------------------------

 Financing activities
 Proceeds from share issuance                                                 -             23,164,437              1,000,000
 Costs relating to share issuance                                             -             (3,665,868)                     -
 Proceeds from exercise of options                                       24,459                 15,005                      -
 Redemption of shares                                                         -                      -                (30,000)
 Proceeds from issuance of convertible promissory notes                       -                      -              2,600,000
 Costs relating to issuance of convertible promissory notes                   -               (275,000)               (77,079)
 Proceeds from shareholder loan                                               -              1,300,000                      -
 Repayment of shareholder loan                                                -             (1,300,000)                     -
 Proceeds from lease inducement                                         251,230                      -                      -
 Proceeds from bank financing                                           160,000                190,000                      -
 Repayment of bank financing                                           (255,000)              (137,083)               (50,000)
 Capital lease payments                                                 (60,359)               (46,000)               (55,603)
                                                               ----------------------------------------------------------------

                                                                        120,330             19,245,491              3,387,318
                                                               ----------------------------------------------------------------

 Increase (decrease) in cash and cash equivalents                      (146,259)            (1,258,784)             1,311,543
 Cash and cash equivalents - Beginning of year                          246,998              1,505,782                194,239
 Cash and cash equivalents - End of year                                100,739                246,998              1,505,782
                                                               ----------------------------------------------------------------

 Supplementary cash flow information:
 Purchase of capital assets under capital lease                        (105,852)               (56,313)               (63,149)
 Proceeds from capital leases                                           105,852                 56,313                 63,149
 Interest paid                                                          (23,865)               (64,871)               (20,313)
 Non-cash expenses                                                      220,743                162,551                      -
 Non-cash revenues                                                       (9,303)                     -                      -

</TABLE>

   The accompanying notes are an integral part of these financial statements.


                                       F-5
<PAGE>
                         Notes to Financial Statements

1. Nature of operations

         E-Cruiter.com Inc. (the "Company") provides Internet-based recruiting
services to companies of all sizes. The Company began business in the Ottawa,
Ontario, market in May 1996 and introduced the first commercial version of our
services in August 1997. The Company operates primarily in the Canadian market,
serving a wide range of industries ranging from high-technology to
not-for-profit organizations. The majority of the Company's customers are based
in Ontario.

2. Significant accounting policies

         a) Basis of presentation

         These financial statements have been prepared by management in
accordance with Canadian generally accepted accounting principles ("Canadian
GAAP") and include the accounts of E-Cruiter.com Inc. and its wholly owned
subsidiaries. These principles also conform in all material respects with
accounting principles generally accepted in the United States ("U.S. GAAP"),
except as described in note 15.

         b) Use of estimates

         The preparation of financial statements in conformity with GAAP
requires management to make estimates and assumptions that affect the reported
amounts of assets and liabilities and disclosure of contingent assets and
liabilities at the dates of the financial statements and the reported amounts of
revenues and expenses during the reporting periods. Actual results could differ
from these estimates.

         c) Cash equivalents and short-term investments

         Cash equivalents and short-term investments are stated at cost plus
accrued interest, which approximates fair value. Cash equivalents are defined as
highly liquid investments with terms to maturity at acquisition of three months
or less. Short-term investments are defined as highly liquid investments with
terms to maturity of one year or less. All cash equivalents and short-term
investments are classified as available for sale.

         d) Investment tax credits

         Investment tax credits, which are earned as a result of qualifying
research and development expenditures, are recognized when the expenditures are
made and their realization is reasonably assured and are applied to reduce the
related research and development capital costs and expenses in the year.



                                       F-6
<PAGE>
         e) Capital assets

         Capital assets are recorded at cost. Amortization is based on the
estimated useful life of the asset and is recorded as follows:

         Furniture, equipment and leaseholds         20% declining balance
         Office equipment                            33% declining balance
         Computers and software                      60% declining balance

         f) Lease inducements

         Lease inducements are recorded as long-term obligations and amortized
over the term of the lease as a reduction of rent expense.

         g) Income taxes

         The Company uses the asset and liability method of accounting for the
tax effect of temporary differences between the carrying amount and the tax
basis of the Company's assets and liabilities. Temporary differences arise when
the realization of an asset or the settlement of a liability would give rise to
either an increase or a decrease in the Company's income taxes payable for the
year or a later period.

         Future income taxes are recorded at the income tax rates that are
expected to apply that when the future tax liability is settled or the future
tax asset is realized. Valuation allowances are established when necessary to
reduce future income tax assets to the amount more likely than not to be
realized. Income tax expense consists of the income taxes payable for the period
and the change during the period in future income tax assets and liabilities.

         h) Financing issue costs

         Issue costs of convertible debt instruments are allocated between the
debt and equity components of the instruments in the same ratio as the gross
proceeds. These costs are netted against the proceeds and the portion allocated
to the debt component is amortized against earnings over the term of the
instruments.

         i) Capital stock

         Capital stock is recorded as the net proceeds received on issuance
after deducting all share issue costs.



                                       F-7
<PAGE>
         j) Stock-based compensation

         The Company has two stock-based compensation plans as described in note
9. No compensation expense is recognized when shares or stock options are issued
to employees. The consideration paid by employees on the exercise of stock
options or purchase of shares is credited to share capital. If share or stock
options are repurchased from employees, the excess of the consideration paid
over the carrying amount of the shares or stock options canceled is charged to
retained earnings.

         k) Revenue recognition

         Revenue is recognized when persuasive evidence of an arrangement
exists, services have been rendered, the price is fixed and determinable, and
collectibility is reasonably assured. Application of this policy means that
revenue is generally recognized ratably over the term of subscription contracts
and job posting arrangements.

         l) Research and development costs

         The Company expenses all research costs as incurred. Development costs
are expensed in the year incurred unless a development project meets the
criteria under Canadian GAAP for deferral and amortization. No amounts have been
capitalized to date.

3. Cash equivalents and short-term investments

         The Company's short-term investments of $13,597,509 as at May 31, 2000,
which include $3,386,711 denominated in United States dollars, consist of units
in an investment trust established by a Canadian chartered bank. The Company's
short-term investments of $5,413,571 as at May 31, 2001, include $580,588
denominated in United States dollars. Excess funds are used to purchase units of
an investment trust established by a Canadian chartered bank, as well as bonds
issued by Canadian corporations. The investment trust holds various short-term,
low-risk instruments that accrue interest daily, and monies held in trust can be
withdrawn without penalty at any time. The bonds mature in December 2001. These
cash equivalents and short- term investments represent the Company's only
significant concentration of credit risk. The nature of these instruments is
such that the stated value equals the market value at May 31, 2001.

4.Capital assets
<TABLE>
<CAPTION>
                                                        2001                                          2000
                                   ---------------------------------------           -----------------------------------

                                              Cost                  Net                         Cost               Net
                                                 $                    $                           $                 $
<S>                                         <C>                   <C>                          <C>               <C>
Furniture, equipment and leaseholds         908,835               781,202                      17,361            10,215
Office equipment                            211,417               124,528                     102,882            47,372
Computers and software                    1,845,868               689,039                   1,518,401           930,754
                                   -------------------------------------------------------------------------------------
                                          2,966,120             1,594,769                   1,638,644           988,341
                                   -------------------------------------------------------------------------------------
</TABLE>


                                       F-8
<PAGE>
         As at May 31, 2000, accumulated amortization was $650,303. As at May
31, 2001, capital assets include net assets under capital lease of $113,741
(2000 - $76,505) net of accumulated amortization of $115,590 (2000 - $144,503).

5. Long-term obligations and other commitments

                                             2001                    2000
Small business loan                           7,917                  102,917
Capital lease obligations                   129,979                   84,486
Lease inducement                            244,949                        -
                                        -------------------------------------
                                            382,845                  187,403
Less current portion                         80,708                  145,184
                                        -------------------------------------
                                            302,137                   42,219
                                        -------------------------------------


         During 1998 and 2000, the Company obtained $100,000 and $190,000
respectively in small business loans from a Canadian chartered bank. Principal
on these loans, which bear interest at the bank prime rate plus 3%, is repayable
over a 24-month period and the assets financed by the loans are pledged as
collateral.

         Capital lease obligations relate to office equipment, computers and
software and bear interest at rates that range from 7.5% to 27.0% per annum.
These leases mature at various times through December 2004.

         As at May 31, 2001, the Company has a letter of credit outstanding in
the amount of $300,000 relating to an office lease that commenced in December
2000.

         The Company has also committed to operating leases for its office
facilities and vehicles. Future minimum payments for both operating and capital
leases are as follows:

                         2002       2003         2004        2005       2006
                            $          $            $           $          $

Operating leases      713,849    563,015      527,269     488,316    488,316
Capital leases
      Principal        47,668    35,804        29,466      17,041          -
      Interest          9,622     5,175         2,584         462          -
                   ------------------------------------------------------------

Total payments        771,139   603,994       559,319     505,819    488,316
                   ------------------------------------------------------------



Rent expense for the year ended May 31, 2001, was $674,057 (2000 - $364,277;
1999 - $207,085).


                                       F-9
<PAGE>
6. Convertible promissory notes

         In fiscal 1999, the Company issued 12% convertible promissory notes
(the "Notes") with an original maturity date of January 22, 2000, that were
convertible at any time at the Note holders' option into 0.434 common shares for
every dollar of the face value plus accrued interest to the date of conversion
without payment of additional consideration, the equivalent of $2.30 per share.
The Company executed a general security agreement against all its assets as
collateral for the Notes. The Notes were accounted for in accordance with their
substance and were presented in the financial statements in their component
parts, measured at their respective fair values at the time of issue. The debt
component was calculated as the present value of the required interest payments
discounted at 25%, approximating the interest rate that would have been
applicable to nonconvertible debt at the time the Notes were issued. Interest
expense was determined on the debt component as the amount necessary to increase
the debt component to its face amount at maturity. The difference between the
debt component and the face value of the Notes was classified as equity.

         In December 1999, the Company converted all of the convertible
promissory notes outstanding into 1,211,813 common shares, resulting in an
increase in share capital of $2,933,494, consisting of the debt and equity
components of the convertible promissory notes plus accrued interest and
amortization on the debt component.

7. Related party transactions

         The Company was charged $nil for office space and administrative
services (2000 - $39,382; 1999 - $190,227) and $51,648 for research, development
and other consulting services (2000 - $189,900; 1999 - $130,200) by companies
controlled by shareholders and/or senior managers of the Company. The Company
was charged $nil (2000 - $nil; 1999 - $50,200) for advertising and $167,416
(2000 - $78,333; 1999 - $nil) for financial consulting services by companies
controlled by a director of the Company. These transactions are in the normal
course of operations and are measured at the exchange amount of consideration
paid, which management believes approximates fair market value. As at May 31,
2001 and 2000, $nil and $52,133 respectively was payable to these related
companies.


                                       F-10
<PAGE>
<TABLE>
<CAPTION>
8. Income taxes

                                                                     2001                   2000                   1999
<S>                                                                 <C>                    <C>                    <C>
Combined Canadian federal and provincial income tax rate            42.3%                  44.5%                  44.6%

Income tax recovery based on combined Canadian
federal and provincial rate                                     3,230,000              3,250,000                948,000
Deductible amounts charged to equity                              410,000                381,000                      -
Change in tax rates                                              (254,000)                     -                      -
Non-deductible amounts                                             (6,000)                (8,000)                (5,000)
Valuation allowance                                            (3,380,000)            (3,623,000)              (943,000)
                                                         -----------------------------------------------------------------

Provision for income taxes                                              -                      -                      -
                                                         -----------------------------------------------------------------


                                                                     2001                   2000                   1999

Scientific research & experimental development
      expenses ("SR&ED")                                          310,000                162,000                 95,000
Loss carry forwards                                             8,221,000              5,374,000              2,021,000
Other                                                             435,000                 50,000                      -
                                                         -----------------------------------------------------------------
                                                                8,966,000              5,586,000              2,116,000
Valuation allowance                                            (8,966,000)            (5,586,000)            (2,116,000)
                                                         -----------------------------------------------------------------

Net future income taxes                                                 -                      -                      -
                                                         =================================================================
</TABLE>


         The SR&ED expenditures can be carried forward indefinitely and applied
to reduce income taxes otherwise payable in future years. The income tax loss
carry forwards will begin to expire in the year 2004.


                                       F-11
<PAGE>
9. Share capital

         a) Share reorganization

         In October 1999, the Company filed Articles of Amendment to (i) create
an unlimited number of a single class of common shares; (ii) convert the
outstanding Class A common and Class D special shares into common shares on the
basis of one Class A common share and one Class D special share into 0.216932 of
a common share; (iii) cancel all authorized Class A, B and C common shares and
Class A, B, C and D special shares; and (iv) convert all of the options to
purchase Class D special shares into options to purchase the converted number of
common shares at converted exercise prices. The holders of the common shares are
entitled to one vote at meetings of shareholders for each common share held and
to receive dividends as and when declared by the Board of Directors.

         All per share amounts and number of common shares in these consolidated
financial statements have been restated to give retroactive effect to the filing
of these Articles of Amendment.

         b) Employee stock option plans

         The Company has an employee and directors stock option plan (the "1997
Plan"). Under the terms of the 1997 Plan, the options to purchase common shares
generally vest ratably over a period of three years and expire five years from
the date of grant. The 1997 Plan provides that the number of options and the
option exercise price are to be fixed by the Board of Directors, but the
exercise price may not be lower than the fair value of the underlying common
shares on the date of grant. The Board of Directors has the right to accelerate
the vesting date for any options granted. In the event of a third-party offer to
acquire control of the Company that is accepted by a majority of the
shareholders, any options that are not exercisable at that time become fully
exercisable.

         On October 29, 1999, the shareholders approved the 1999 Employees Stock
Option Plan (the "1999 Plan") to replace the 1997 Plan. The 1999 Plan is similar
to the 1997 Plan but includes provisions for directors and employees who reside
in the United States.


                                       F-12
<PAGE>
         Options granted under the 1997 Plan will remain outstanding. No new
options will be granted under that plan.
                                                                Weighted
                                                                 Average
                                                Number of       Exercise
                                                  Options          Price


Balance outstanding - May 31, 1998                172,027          $2.30
Granted                                           351,972          $3.07
Forfeited                                         (71,805)         $2.30
                                         ------------------

Balance outstanding - May 31, 1999                452,194          $2.77
Granted                                           232,522          $9.63
Exercised                                         (13,017)         $2.30
Forfeited                                        (100,399)         $6.09
                                         ------------------

Balance outstanding - May 31, 2000                571,300          $5.05
Granted                                         1,074,569          $3.94
Exercised                                         (10,634)         $2.30
Forfeited                                        (308,199)         $4.07
                                         ------------------

Balance outstanding - May 31, 2001              1,327,036          $4.30
                                         ------------------


Stock options outstanding as at May 31, 2001 are set out below:
<TABLE>
<CAPTION>
                                                                          Options Currently Exercisable
                                                                          -----------------------------
Range of Exercise        Number          Weighted       Weighted      Number Exercisable   Weighted Average
      Prices          Outstanding        Average         Average                            Exercise Price
                                        Remaining    Exercise Price
                                          Life
------------------------------------------------------------------------------------------------------------
<S>                          <C>               <C>              <C>              <C>                   <C>
$1.00 - 1.99                 248,069           4.76             1.54                   -                 n/a
$2.00 - 2.99                 211,324           2.36             2.33             160,530                2.30
$3.00 - 3.99                 186,000           4.96             3.08                   -                 n/a
$4.00 - 4.99                 141,000           4.36             4.39                   -                 n/a
$5.00 - 5.99                 390,000           4.24             5.49                   -                 n/a
$6.00 and over               150,643           3.33             9.82              49,672               10.02
------------------------------------------------------------------------------------------------------------
                           1,327,036           4.05             4.30             210,202                4.12
</TABLE>
         As at May 31, 2001, 1,428,667 common shares have been reserved for
employee stock options, of which 101,631 remain unissued.

         During the year ended May 31, 2000, 21,693 options were granted outside
the 1999 Plan to the spouse of a director of the Company. These non-plan
options, which have an exercise price of $2.30 per share, vest immediately and
expire four years from the date of grant.



                                       F-13
<PAGE>
         c) Earnings per share

         For all of the years presented, fully diluted loss per share equals
basic loss per share due to the antidilutive effect of employee stock options
and convertible promissory notes. The following outstanding instruments could
potentially dilute basic earnings per share in the future.
<TABLE>
<CAPTION>
                                                               2001                    2000                   1999
<S>                                                        <C>                      <C>                    <C>
Stock options                                              1,327,036                571,300                452,194
Underwriter warrants                                         458,184                213,184                      -
Convertible promissory notes                                       -                      -              1,141,328
                                                    ----------------------------------------------------------------

Potential increase in number of shares from
   dilutive instruments                                    1,785,220                784,484              1,593,522
                                                    ----------------------------------------------------------------

The weighted average exercise price of the options exercisable at May 31, 2001,
was $4.12 (2000 - $2.52: 1999 - $2.30)


10. Net change in operating components of working capital

                                                                        2001                   2000                 1999
                                                                           $                      $                    $

Accounts receivable                                                   227,488              (507,105)              158,869
Prepaid expenses                                                       69,560              (381,257)              (86,391)
Other receivables                                                    (183,229)                3,651               (48,904)
Trade accounts payable and accrued liabilities                        222,562               396,186               141,550
Accrued compensation                                                   90,300               157,959                30,009
Deferred revenue                                                     (788,791)              810,371               (38,469)
                                                             --------------------------------------------------------------

                                                                     (362,110)              479,805               156,664
Amounts included in accounts payable at year end related
to fixed asset purchases                                              (56,192)              (85,861)             (135,829)

Accounts payable settled through the issuance of shares                     -                57,496                     -
                                                             --------------------------------------------------------------

                                                                     (418,302)              451,440                20,835
                                                             --------------------------------------------------------------

</TABLE>

   The accompanying notes are an integral part of these financial statements.


                                       F-14
<PAGE>
11. Financial instruments

         The Company's financial instruments consist of cash and cash
equivalents, short- term investments, accounts receivable, accounts payable and
accrued liabilities. It is management's opinion that the Company is not exposed
to significant interest, currency or concentrations of credit risks arising from
these financial instruments other than as disclosed in note 3. The fair values
of these financial instruments approximate their carrying values, unless
otherwise noted.

12. Segmented information

         In the opinion of management, the Company operates solely in the
software industry and all of its sales consist of Web-centric recruiting
products and related services. Accordingly, management has determined that it
does not have any separately reportable business segments. To date, the
Company's operations, assets and substantially all of its sales have been in
Canada.

13. Subsequent events

         On April 3, 2001, the Company signed a definitive agreement to acquire
100% of the outstanding shares of Paula Allen Holdings, Inc. ("PAH"), a
Florida-based company specializing in career transition and outplacement
services. As consideration, the Company issued 5,000,000 common shares of the
Company, valued at US$6,875,000. For the year ended December 31, 2000, PAH had
revenues of US$6,900,000 and net losses of US$216,000. Of the total
consideration, 1,000,000 shares are being held in escrow, to be released upon
the achievement of certain profit and revenue targets of the combined companies.
The acquisition was approved by shareholders on July 26, 2001.

         On May 18, 2001, the Company signed a definitive agreement to acquire
100% of the outstanding shares of OMNIpartners, Inc. and its affiliates
("OMNIpartners") for US$3,000,000 in common shares. OMNIpartners is a
Florida-based recruitment research firm delivering executive and professional
search services to Fortune 2000 companies. Revenues for the year ended December
31, 2000, were US$7,800,000, with net income of US$121,000 (unaudited). As
consideration for the sale, the Company issued 1,500,000 shares, of which
1,000,000 shares are being held in escrow to be released upon the achievement of
certain profit and revenue targets of the business line. Shareholders approved
the transaction on July 26, 2001.

         A definitive agreement to acquire 100% of the shares of RezLogic, Inc.
was signed on June 29, 2001. As consideration for the purchase, the Company
issued US$3,000,000 worth of common shares, of which US$1,200,000 worth of
common shares are being held in escrow to be released upon the achievement of
certain profit and revenue targets of the business line. For the year ended
December 31, 2000, RezLogic had revenues of US$734,000, with net losses of
US$244,000 (unaudited). The Board of Directors approved the acquisition on June
28, 2001.

         On July 2, 2001, the Company purchased the assets of ResumeXPRESS, a
Web-based resume distribution service, for US$168,000 in cash.



                                       F-15
<PAGE>
14. Sale of CareerBridge

         On December 1, 1999, the Company sold its CareerBridge.com regional job
board. As consideration for the sale, the Company receives specific nonmonetary
benefits for a period of three years. These benefits include no-charge online
advertising, preferential reseller terms, discounts on job postings, and
no-charge access to the services provided by the Workopolis Web site operated by
Thomson Canada Limited.

         Included in other income for the year ended May 31, 2001, is a gain on
sale of $164,545, reflecting the fair value of no-charge and preferential
services received. The fair value of the job posting discounts will be
recognized in earnings in the quarter the postings are made.

15. United States accounting principles

         The financial statements have been prepared in accordance with Canadian
GAAP. These principles differ, as they affect the Company, in the following
material respects from U.S. GAAP:

         a) Statements of loss
<TABLE>
<CAPTION>
                                                                 Year ended May     Year ended May     Year ended May
                                                                     31, 2001          31, 2000            31, 1999
<S>                                                                 <C>                <C>               <C>
Net loss in accordance with Canadian GAAP                           (7,636,921)        (7,298,403)       (2,212,410)
Compensation expense adjustment for options  issued below
      fair value (1)                                                  (252,076)          (702,682)         (125,947)
Expense adjustment for convertible promissory notes with
      conversion price below the fair value of the shares (2)                -            440,417        (2,526,378)
                                                              --------------------------------------------------------

Net loss in accordance with U.S. GAAP                               (7,888,997)        (7,560,668)       (4,864,735)
                                                              --------------------------------------------------------

Basic and diluted loss per common share - U.S. GAAP                      (1.02)             (1.34)            (1.26)
                                                              --------------------------------------------------------

Weighted average number of common shares outstanding during
      the year                                                       7,710,284          5,649,783         3,854,579
                                                              --------------------------------------------------------
</TABLE>


                                       F-16
<PAGE>
      b) Balance sheets

                                              May 31, 2001        May 31, 2000

Total assets                                  8,290,011            16,182,960
                                       ========================================

Total liabilities                             2,071,710             2,352,197
                                       ----------------------------------------

Capital stock                                28,156,026            28,131,567
Additional paid-in-capital (1) (2)            1,080,705               828,629
Deficit (1) (2)                             (23,018,430)          (15,129,433)
                                       ----------------------------------------

Shareholders' equity (deficit)                6,218,301            13,830,763
                                       ----------------------------------------

Liabilities and shareholders' equity          8,290,011            16,182,960
                                       ========================================


           (1)    Under U.S. GAAP, the difference between the exercise price of
                  options and the fair value of the underlying shares, which is
                  assumed for US GAAP purposes to be the public offering price
                  of US$6.00 per share, is accounted for as compensation and is
                  charged against earnings over the vesting period of the
                  options with a corresponding and equal amount recorded as
                  paid-in-capital.

           (2)    Under U.S. GAAP, the proceeds from convertible debt
                  instruments that have non-detachable conversion features where
                  the fair value of the underlying common shares exceeds the
                  conversion price of the debt instrument ("beneficial
                  conversion features") are allocated between the debt and the
                  equity components of the instruments. The value of the
                  beneficial conversion feature is measured by the excess of the
                  fair value of the underlying shares over the conversion price
                  up to, but not exceeding, the net proceeds received upon
                  issuance of the convertible debt instruments. The value
                  ascribed to the beneficial conversion feature is recorded as
                  paid-in-capital. The discount resulting from the allocation of
                  the proceeds is recognized as interest expense over the
                  minimum period from the date of issuance to the date at which
                  the debt holder can realize that return.

                  The Company has allocated all of the proceeds of the
                  convertible promissory notes to paid-in-capital. The discount
                  resulting from the allocation was expensed for US GAAP
                  purposes upon issuance of the convertible promissory notes as
                  they are immediately convertible at the Note holders' option.



                                       F-17
<PAGE>
         c) Share-based compensation

         The Company has adopted the disclosure-only provision of Statement of
Financial Accounting Standards No. 123, "Accounting for Stock Based
Compensation" ("SFAS 123"). Had compensation cost for options been determined
based on the Black-Scholes option pricing model at the grant date as prescribed
by SFAS 123, the Company would have reported a greater compensation expense
related to these options than recorded under
<TABLE>
<CAPTION>
                                                          Year ended             Year ended         Year ended May
                                                        May 31, 2001           May 31, 2000           May 31, 1999
                                                                   $                      $                      $
<S>                                                       <C>                    <C>                    <C>
Net loss under U.S. GAAP                                  (7,888,997)            (7,560,668)            (4,864,735)
Estimated incremental share based compensation
      expense                                               (982,589)              (712,322)              (160,246)
                                                    ----------------------------------------------------------------

Pro forma net loss                                        (8,871,586)            (8,272,990)            (5,024,981)
                                                    ----------------------------------------------------------------

Pro forma basic loss per share                                 (1.15)                 (1.46)                 (1.30)
                                                    ----------------------------------------------------------------
</TABLE>

         The weighted average fair value of the options issued during the year
ended May 31, 2001, as calculated using the Black-Scholes option pricing model,
was $3.60 (2000 - $6.72; 1999 - $5.35). Of the options issued during the year
ended May 31, 1999, a total of 280,927 were issued with exercise prices below
the fair value at the date of grant. The weighted average fair value of these
options was $6.50 and the weighted average exercise price was $2.93. The
remaining 71,045 options issued during the year ended May 31, 1999, were issued
with exercise prices equal to fair value. The weighted average fair value of
these options was $0.78 and the weighted average exercise price was $3.65.

         The fair value of each option granted during 1999 is estimated on the
date of the grant using the minimum value method while options issued during the
years ended May 31, 2000, and May 31, 2001, were valued using the Black-Scholes
option pricing model at the date of grant. The following weighted average
assumptions were used to determine the fair values:



                                         1999          2000            2001
                                         -----------------------------------
Expected option life, in years           4.5            3.5             3.5
Risk free interest rate                  5.0%           6.4%            4.5%
Dividend yield                           nil            nil             nil
Volatility rate                          nil            100%            196%
                                         -----------------------------------



                                       F-18
<PAGE>
         d) Recent United States accounting pronouncements

         During the year ended May 31, 2001, the Company adopted SEC Staff
Accounting Bulleting ("SAB") No. 101, "Revenue Recognition in Financial
Statements," as amended in March 2000 by SAB 101A. The SAB summarizes certain of
the SEC staff views in applying generally accepted accounting principles to
revenue recognition in financial statements. Adoption of this SAB did not have a
material impact on its results of operations or financial position.

         In July 2001, the FASB issued SFAS Nos. 141 and 142, "Business
Combinations" and "Goodwill and Other Intangible Assets." These standards
significantly revise current accounting practices with respect to recognition
and amortization of goodwill and other intangible assets arising from a business
combination. SFAS 141 and 142 are effective for acquisitions after July 1, 2001,
and will be adopted by the Company in fiscal 2002. The Company expects the
adoption of SFAS 141 and 142 to have a material impact on the results of
operations reported following consummation of the transactions described in note
13.












                                       F-19

<PAGE>
                                 WORKSTREAM INC.

                                INDEX TO EXHIBITS


         EXHIBIT NO.                         DESCRIPTION
         -----------                         -----------

            1.1         Articles of Incorporation, as amended (incorporated by
                        reference to Exhibit 3.1 to the Registration Statement
                        on Form F-1 (File No. 333-87537)).

            1.2*        Articles of Amendment, dated July 26, 2001.

            1.3*        Articles of Amendment, dated November 6, 2001.

            1.4         By-law No. 1 and No. 2 (incorporated by reference to
                        Exhibit 3.2 to the Registration Statement on Form F-1
                        (File No. 333-87537)).

            1.5*        By-law No. 3.

            2.1         Form of common share certificate (incorporated by
                        reference to Exhibit 4.1 to the Registration Statement
                        on Form F-1 (File No. 333-87537)).

            2.2         Registration Rights Agreement among the Registrant, Paul
                        Champagne, John Gerard Stanton and Les Kirkland, dated
                        September 21, 1999 (incorporated by reference to Exhibit
                        10.1 to the Registration Statement on Form F-1 (File No.
                        333-87537)).

            3.1*        Voting Agreement, dated July 24, 2001, between Michael
                        Mullarkey, John Gerard Stanton and Paul Champagne.

            4.1         Plan of Reorganization and Stock Acquisition Agreement,
                        dated April 3, 2001, by and among Michael Mullarkey and
                        Karen Paula Allen, as trustee of the Karen Paula Allen
                        Revocable Trust, as Sellers, Paul Allen Holdings, Inc.
                        and its Subsidiaries, as subject companies, and
                        Registrant, as Purchaser (incorporated by reference to
                        Exhibit 3 to the report on Form 6-K for the month of
                        April 2001).

            4.2         Share Purchase Agreement, dated May 18, 2001, by and
                        among Marvin A. Cohen, Meredith A. Cohen, as Vendors,
                        The Omni Partners Inc., a Florida corporation, Omni
                        Partners Mid-Atlantic, Inc., a Pennsylvania corporation,
                        and Omni Partners West, Inc., a Nevada corporation, as
                        subject companies, and Registrant, as Purchaser
                        (incorporated by reference to Exhibit 2 to the report on
                        Form 6-K for the month of May 2001).

<PAGE>
            4.3*        Asset Purchase Agreement, dated July 2, 2001, between
                        the Registrant and Gonyea Career Marketing Inc.

            4.4         Merger Agreement between Rezlogic, Inc., the Registrant
                        and E-Cruiter Acquisition I, Inc., dated June 29, 2001
                        (incorporated by reference to Exhibit 3 to the report on
                        Form 6-K for the month of July 2001).

            4.5         Merger Agreement dated September 14, 2001 between
                        6FigureJobs.com, Inc., the Registrant and E-Cruiter
                        Acquisition II, Inc. (incorporated by reference to
                        Exhibit 5 to the report on Form 6-K for the month of
                        September 2001).

            4.6*        Asset Purchase Agreement, dated September 21, 2001,
                        between Paula Allen Holdings, Inc. and Tech Engine, Inc.

            4.7         E-Cruiter.com Inc. 1997 Key Employee Stock Option Plan
                        (incorporated by reference to Exhibit 10.7 to the
                        Registration Statement on Form F-1 (File No.
                        333-87537)).

            4.8*        E-Cruiter.com Inc. 2001 Amended and Restated Stock
                        Option Plan, as amended as of July 26, 2001.

            4.9         Stock Option Agreement between Sandy Bryden and the
                        Registrant, dated June 24, 1999 (incorporated by
                        reference to Exhibit 10.3 to the Registration Statement
                        on Form F-1 (File No. 333-87537)).

            4.10        Option Agreement between WorkLife Solutions, Inc. and
                        the Registrant, dated October 13, 1999 (incorporated by
                        reference to Exhibit 10.10 to the Registration Statement
                        on Form F-1 (File No. 333-87537)).

            4.11*       Warrant Agreement, dated as of March 22, 2001, between
                        the Registrant and BlueStone Capital Corp.

            4.12*       Consulting Agreement, dated as of January 1, 2002,
                        between J. Gerry Stanton Executive Services Ltd. and the
                        Registrant.

            4.13        Lease Agreement between Drake Beam Morin (Ottawa) Inc.
                        and Omers Realty Corporation, dated November 16, 1993
                        (incorporated by reference to Exhibit 10.4 to the
                        Registration Statement on Form F-1 (File No.
                        333-87537)).


                                       2
<PAGE>
            4.14        Head Lease Agreement between 871484 Ontario Inc. and the
                        Registrant, dated August 1, 1999 (incorporated by
                        reference to Exhibit 10.5 to the Registration Statement
                        on Form F-1 (File No. 333-87537)).

            4.15        Lease Agreement between Registrant and RT Twenty-Second
                        Pension Properties Limited, dated March 21, 2000
                        (incorporated by reference to Exhibit 2.1 to the annual
                        report on Form 20-F for the period ended May 31, 2000).

            4.16        Agreement between Registrant and SC Stormont Corporation
                        for the provision of financial and business advisory
                        services to Registrant (incorporated by reference to
                        Exhibit 2.2 to the annual report on Form 20-F for the
                        period ended May 31, 2000).

            4.17        Service Agreement between Positionwatch Limited and the
                        Registrant, dated February 23, 1999 (incorporated by
                        reference to Exhibit 10.6 to the Registration Statement
                        on Form F-1 (File No. 333-87537)).

            4.18        Sales and Marketing Agreement between WorkLife
                        Solutions, Inc. and the Registrant, dated October 13,
                        1999 (incorporated by reference to Exhibit 10.9 to the
                        Registration Statement on Form F-1 (File No.
                        333-87537)).

            8.1*        List of Subsidiaries.

            10*         Consent of PricewaterhouseCoopers LLP


---------------------------
*    Filed herewith.






                                       3