<PAGE>
                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                                   FORM 10-KSB


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


                   For the fiscal year ended December 31, 2001

                                       Or

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


                        Commission file number: 333-89561


                            E-xact Transactions Ltd.
             ------------------------------------------------------
             (Exact name of Registrant as specified in its charter)

            Delaware                                        98-0212722
--------------------------------                   ----------------------------
(State or other jurisdiction of                    I.R.S. Employer I. D. Number
 incorporation or organization)

2410-555 West Hastings Street, Vancouver, B.C., Canada      V6B 4N6
------------------------------------------------------     ---------
(Address of principal executive offices)                   (zip code)

Registrant's telephone number, including area code:  (604) 691-1670
                                                     --------------

Securities registered pursuant to Section 12(b) of the Act: None.

Securities registered pursuant to Section 12(g) of the Act: Common Stock, $.001
                                                            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 if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein and will not be included
herein, to the best of Registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of the Form 10-KSB
or any amendment to this Form 10-KSB: [X].

       State issuer's revenues for its most recent fiscal year:  $392,519
                                                                 --------

       Shares of common stock, $.001 par value, outstanding as of March 20,
2002: 10,502,000 shares. Aggregate market value of voting stock held by
non-affiliates of the registrant on March 19, 2002: $1,047,824.

       Documents incorporated by reference: None.

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



<PAGE>


                            E-xact Transactions Ltd.
                                   FORM 10-KSB
                                TABLE OF CONTENTS

<Table>
<Caption>
                                                                                                               Page
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<S>                                                                                                            <C>
Part I

         Item 1.    Description of Business ..................................................................   1

         Item 2.    Description of Property ..................................................................  10

         Item 3.    Legal Proceedings ........................................................................  10

         Item 4.    Submission of Matters to a Vote of Security Holders ......................................  10


Part II

         Item 5.    Market for Common Equity and Related Stockholder Matters .................................  10

         Item 6.    Management's Discussion and Analysis or Plan of Operation ................................  12

         Item 7.    Financial Statements .....................................................................  17

         Item 8.    Changes in and Disagreements with Accountants on Accounting and Financial Disclosure .....  18


Part III

         Item 9.    Directors and Executive Officers; Compliance with Section 16(a) of the Exchange Act ......  18


         Item 10.   Executive Compensation ...................................................................  21

         Item 11.   Security Ownership of Certain Beneficial Owners and Management ...........................  23

         Item 12.   Certain Relationships and Related Transactions ...........................................  25

Part IV

         Item 13.   Exhibits and Reports on Form 8-K .........................................................  27
</Table>


<PAGE>


                            E-xact Transactions Ltd.
                                   FORM 10-KSB
                           FORWARD-LOOKING STATEMENTS

Statements made in this Form 10-KSB that are not historical or current facts are
"forward-looking statements" made pursuant to the safe harbor provisions of
Section 27A of the, Securities Act of 1993 ("The Act") and Section 21E of the
Securities Exchange Act of 1934. These statements often can be identified by the
use of terms such as "may," "will," "expect," "believes," "anticipate,"
"estimate," or "continue," or the negative thereof. The Company intends that
such forward-looking statements be subject to the safe harbors for such
statements. The Company wishes to caution readers not to place undue reliance on
any such forward-looking statements, which speak only as of the date made. Any
forward-looking statements represent management's best judgment as to what may
occur in the future. However, forward-looking statements are subject to risks,
uncertainties and important factors beyond the control of the Company that could
cause actual results and events to differ materially from historical results of
operations and events and those presently anticipated or projected. These
factors include adverse economic conditions, entry of new and stronger
competitors, inadequate capital, unexpected costs, failure to gain product
approval in United States or foreign countries and failure to capitalize upon
access to new markets. Additional risks and uncertainties that may affect
forward-looking statements about the Company's business and prospects include
the possibility that a competitor will develop a more comprehensive solution,
delays in market awareness of its products, possible delays in marketing
strategy, which could have an immediate and material adverse effect by placing
the Company behind its competitors. The Company disclaims any obligation
subsequently to revise any forward-looking statements to reflect events or
circumstances after the date of such statement or to reflect the occurrence of
anticipated or unanticipated events.

                                     PART I

ITEM 1. DESCRIPTION OF BUSINESS

CORPORATE HISTORY

E-xact Transactions Ltd. (the "Company") was incorporated under the laws of the
Province of British Columbia on August 13, 1998. On July 29, 1999 the Company
filed a certificate of domestication and certificate of incorporation with the
secretary of state of the State of Delaware, thereby "domesticating" or
transitioning from a Canadian company to one organized under the laws of the
State of Delaware.

The Company's principal office is located at 2410 - 555 West Hastings Street,
Vancouver, British Columbia, V6H 4N6 Canada. The Company's registered agent in
the U.S. is located at 1209 Orange Street, Wilmington, Delaware 19801 USA. The
Company has one subsidiary which operates in Canada.

The Company offers an electronic commerce, known as "e-commerce," software
solution for real-time transaction processing which allows PC based cash
registers, PCs, point-of-sale terminals, computer systems and proprietary
product platforms to accept credit card payments and submit those payments to
various payment processing companies for authorization and settlement/deposit.

The Company has acquired and developed software and a network system to act as a
third party payment processor to conduct transaction processing with major banks
in North America. The Company is currently approved to conduct transaction
processing with major banks and credit unions in Canada and has a gateway with
Vital Processing Services, a U.S.-based credit card


                                      -1-
<PAGE>

processing network, allowing the Company to process financial transactions with
many of the major banks in the U.S.

The Company was founded in 1998, by the Sutton Group Financial Services Ltd.
("Sutton Group") and DataDirect Holdings Inc. ("DataDirect"). On September 1,
1998, each of Sutton Group and DataDirect transferred to the Company their
respective interests in certain computer software designed by DataDirect, known
as the Transaction Software and Processing System, in exchange for ninety-nine
shares each of common stock of the Company. The software system offered has real
time credit card transaction processing capabilities for other e-commerce
providers.

Version 2.0 provided the ability to move transactional data between the
Company's system and the Royal Bank of Canada, the largest bank in Canada in
terms of assets and the only financial institution with which it was certified
to process financial transactions at the time. Throughout the autumn of 1998,
the Company focused on further testing of its system and enhancing its
scalability. Testing was undertaken with six clients, each focused on a
different type of application, including an Internet based storefront, a
physical point-of-sale location, a telephone based voice response system and a
billing system. In January 1999, the Company received certification from Shared
Network Systems, a firm that processes financial transactions for most other
banks and credit unions in Canada.

Version 3.0 of the Company's transaction processing component was released in
January 1999. The software allowed other computers to speak to the Company's
computers. Following this release, the Company introduced versions for various
computer operating systems including LINUX, UNIX and JAVA. In June 1999, the
Company released version 4.0 of its software system and it also established its
Internet web site. Version 4.0 focused on providing transaction processing,
reporting and support services for e-commerce merchants. In November 1999 the
Company recruited a CEO to build a management team in the US marketplace. During
2000, US management recruited additional staff to design and build specific
technologies to create additional sales opportunities in the North American
transaction processing arena. In the fourth quarter of 2000, the Company
reassessed its position in the US. It felt that the then existing US management
team was unable to achieve US market penetration and as a result, the Company
elected to change management and consolidate its operations in Vancouver, B.C.
The Company continues to operate out of its Vancouver, B.C. headquarters.

NARRATIVE DESCRIPTION OF BUSINESS

The Company managed to maintain steady growth throughout 2001 despite a slowdown
in the economy. In addition to processing web based transactions in U.S. and
Canadian dollars through credit card merchant accounts for Visa, MasterCard,
American Express, Discover, Diners Club, and JCB, the Company also offers
transaction processing via other applications. The Company's software has been
successfully integrated into solutions for call centers, billing systems and
other enterprise programs as well as successful trials in the hospitality
segment enabling "card present" or "swipe" processing capabilities.

The software does not require a lengthy installation or integration process;
users need only enable the software within their computer operating environment.
The software comes in various versions to support the most popular operating
environments. Once activated, merchants are ready to start accepting customer
credit cards, provided they have established a merchant account with a bank for
funds settlement.

The Company also provides merchants a variety of reports with the transaction
processing system, such as a full suite of accounting tools that help customers
manage their e-commerce activities such as detailed billing statements,
transaction search engine, web point-of-sale terminals and reporting services.


                                      -2-
<PAGE>


In order to leverage its marketing efforts, the Company offers its e-commerce
transaction processing solution to merchants directly as well as to partners,
which can offer it in turn to their clients. The Company's partners may receive
a percentage of every transaction fee processed by the partner's clients and may
use the Company's comprehensive web tools and services for the benefit of such
partner's clients or e-merchants.

A key advantage of the Company's transaction processing software is that it can
be easily integrated with most existing systems and is able to communicate with
most banks in North America. Additionally, the Company provides a flexible
interface to match a customer's existing operations rather than requiring them
to meet and design their systems to the Company's pre-defined protocols.

PRODUCTS AND SERVICES

The Company's product/service is a combination of an online service and a suite
of software that act as a real-time payment mechanism for e-commerce, either
over the Internet or via a wide range of other electronic networks.

         How the system works utilizing the Internet:

         When a customer makes a purchase using a credit card on the web site of
         a merchant whose e-commerce system incorporates the Company's
         transaction component, the payment information is first sent securely
         in encrypted format to a secure computer called a transaction server. A
         firewall exists between the Internet and web servers/transaction
         servers to safeguard against any unauthorized intruders.

         The encrypted payment information is then sent through another, much
         more extensive firewall to the Company's Gateway Server, from which it
         is sent onward to the banking network to be approved or declined. Once
         approved or declined, the information is returned back securely to the
         transaction component on the merchant's web site where only the
         customer can see the results. The information regarding each
         transaction is also forwarded from the Company's Gateway Server to a
         database to be logged as part of an audit trail. The entire process
         takes place almost instantaneously, typically in two to five seconds.

         The current processing system, released in August 2001, version 5.6, is
         a combination of custom software applications and processes that run on
         the Windows 2000 Advanced Server and Windows NT 4.0 operating systems.
         The primary function of these applications/processes is to perform
         real-time credit card transaction processing through certified links
         with the Royal Bank of Canada and BCE Emergis in Canada and Vital
         Processing Solutions in the United States.

         The Company's system has five components:

         Gateway Server

         Transaction Server

         Remote Transaction Component

         Audit Database

         Secure Web-based Merchant Services

THE GATEWAY SERVER facilitates real-time credit card processing with any of the
major chartered banks and credit unions in Canada. It currently participates
directly with the Royal Bank Merchant Host Network, and also communicates
electronically with the BCE Emergis network. Through the Company's certified
connection with BCE Emergis, the Gateway Server can process transactions to
account holders from any of the major banks in Canada. The Vital Processing
System enables the Gateway Server to process transactions with many of the banks
in the United States.


                                      -3-
<PAGE>


THE TRANSACTION SERVER communicates with the Gateway Server and also provides
communications to the Remote Transaction Component. The Transaction Server
resides within the Company's network and is accessible on the Internet only via
the Remote Transaction Component.

THE REMOTE TRANSACTION COMPONENT is a custom software component that can be
installed/ integrated in various computer environments to enable credit card
transaction processing on the Company's network. Merchants can download this
component from the Company's web site at www.e-xact.com in any of the available
formats, depending upon which operating system the merchant uses.

Once installed on the user's system, the Remote Transaction Component will
connect via the Internet to the Company's Transaction Server and subsequently
the Gateway Server and the financial networks. The Company requires that
merchants have a specific electronic security system known as Secure Socket
Layer protocol operational on their site to provide the security necessary to
conduct transactions securely via the Internet. Encryption is also part of the
component, ensuring that all transmissions between itself and the Transaction
Server are safe from other users on the Internet. The current version of the
Remote Transaction Component processes transactions to all the major Canadian
banks and many of the banks in the United States.

THE AUDIT DATABASE writes every transaction that is processed by the Gateway and
logs all transaction information to create an audit trail. The database stores
all transaction information for a minimum of three years and is the primary
component that drives the Company's web based Merchant Services.

THE SECURE WEB-BASED MERCHANT SERVICES are a group of reporting, auditing,
searching and processing functions available to merchants who have the proper
access credentials for the Company's system. The system can be accessed through
any popular web browser and data is delivered almost instantly. Added
functionality is available through specific tools such as the web based
point-of-sale terminal where merchants can process credit card transactions
directly to their merchant account from anywhere on the Internet. Through the
Company's member services on the web site, merchants can track every sale for up
to three years, check statements for totals, deposits made and customer
spending, among other functions. Security systems limit access to this
information to the merchant authorized for each account.

         Dedicated transaction servers:

           For merchants that require a transaction server that is only used by
           them, the Company can provide a dedicated server to centralize all
           financially based transactions within a single organization. The
           servers allow for local auditing and reporting of all transactions
           conducted through the specific server. Using the Internet (or other
           communications medium), the merchant can interact directly with the
           Company's Gateway Server for a comprehensive electronic transaction
           processing solution, including complete maintenance and audit
           capabilities.

         Non-web based transactions:

           The Company also works with clients to integrate transaction
           processing services with telephone-based electronic funds transfer
           and billing services that do not utilize the Internet. Typically,
           these systems are closed networks that do not require the level of
           additional firewall security as is required for Internet
           transactions which can be accessed by anyone in the world. The
           systems The Company has developed can be applied to virtually any
           type of electronic network.


                                      -4-
<PAGE>


         Financial transaction processing certification:

           Certification with transaction processing networks that handle the
           financial transactions that the Company's product/service is designed
           for is an integral and necessary part of the Company being able to
           offer its services. Banking and other financial networks operate
           under stringent regulation which requires that their computer
           networks be highly secured in order to protect privacy and to ensure
           the integrity of the network. Accordingly, any company that wants to
           offer a service that would access an existing banking or financial
           network must undergo a comprehensive process of review and testing
           prior to being approved to access to the network. Before an applicant
           company is permitted to go through this review, the bank or
           processing system must be satisfied that the company is capable of
           handling mission critical processes meeting its requirements, and
           that its system will operate correctly and securely.

STAGE OF DEVELOPMENT AND COSTS

The Company's current Transaction Software and Processing System have been in
full operation since June of 1999. The system is fully operational and
approximately 8,000 transactions were processed per day through the Company's
systems for the year ended December 31, 2001. Since the software deployment in
September 1998, the Company has processed approximately 7 million transactions.

DEVELOPMENT PLANS

The Company intends to continue to upgrade and enhance its combined systems and
software focusing on the following key areas.

Development and implementation of a new database design to incorporate expanded
functions in support of a new proprietary transaction type called "Tagged
Transactions". Tagged transactions enable merchants to NOT store customer credit
card details but still have access to subsequent transactions with the
cardholder. This is especially valuable to subscription based billing models
where cardholder details are required for each billing period. Merchants
recognize the liability of having card details on their information systems and
by utilizing Tagged Transactions they can elect to NEVER store any cardholder
details, but still be able to charge the cardholder for monthly subscription
fees. Merchants store the transaction TAG and at any time they can send the TAG
back as a new transaction and the Company will "build" the card details on
behalf of the merchant.

In February 2001 the Company released version 5.5 of its transactional software.
This version offered improved transactional speed, expanded reporting abilities
and new transactional screening capabilities for customers. In addition, version
5.5 was certified to process card present or swipe transactions normally
associated with traditional retail environments. This capability opens up a
completely new segment for which the Company can sell its services.

In August 2001, the Company released version 5.6 of its Windows version which
incorporated both the TAG transaction and swipe transaction capabilities for
Canadian and US merchants. In September 2001, Visa International revealed a
program to increase the overall security of Internet transactions by requiring
large volume processors to comply with the requirements for the Visa Account
Information Security Program (AIS). In November 2001, the Company underwent an
extensive security audit by one of Visa's selected auditors to confirm that all
Visa International security requirements were being met. As a result of the
security audit, the Company enhanced its merchant account tools and user profile
management.


                                      -5-
<PAGE>

The Company continues to enhance its reporting capabilities and is researching
the development of a real time audit trail for its customers. This audit trail
will be treated as a value added service to its customers. The Company will
continue its development efforts in moving data transactions via emerging XML
technology.

CONCENTRATION OF SALES

For the year ended December 31, 2001 approximately 19% of the Company's revenues
were obtained from two customers (2000 - two customers contributed approximately
45 % of the sales revenue). Two customers accounted for 14 % of accounts
receivable at December 31, 2001 (2000 - two receivables accounted for 58% of the
Company's total accounts receivable). In 2001 approximately 94% of
processing/monthly fee revenues were derived from Canadian sources and 6% was
derived from US sources while in 2000, 98% of revenue was derived from Canadian
sources and 2% of revenue was obtained from US sources.

THE MARKET FOR THE PRODUCT

         E-commerce:

           The term "E-commerce" encompasses the use of the Internet for
           marketing, advertising, trading, and selling goods and services. The
           ability to use the Internet for marketing and advertising results
           from the power to communicate information through the Internet to a
           large number of individuals, businesses as well as consumers. The
           ability to use the Internet to consummate sales and other commercial
           transactions results from the power to conduct two-way communication
           from merchant to buyer and from buyer to merchant through the
           Internet.

         Business and the Internet:

           In order to conduct business over the Internet and accept payment by
           credit card, a merchant needs a merchant account. A merchant account
           is an identification number that identifies a business that is
           authorized to process credit card payments. A merchant account for
           online sales is different from a merchant account used in a
           traditional store.

         Transaction processing:

           The Internet has opened up new possibilities for processing many
           types of financial transactions. Continued growth of Internet
           commerce will depend in part on: (1) the ability of buyers and
           sellers to use familiar forms of payment online, such as credit and
           debit cards and checks, in a simple and secure manner; and (2) the
           availability of payment software and services that:

                    o    securely transmit and store payment information with
                         minimal interruption of a consumer's online experience;

                    o    are convenient for merchants to install and maintain;

                    o    connect merchants to major payment processors and
                         financial institutions;

                    o    facilitate familiar types of transactions from the
                         physical world -- (such as bill payment) on the
                         Internet; and

                    o    provide common payment platforms for merchants selling
                         goods and services both at physical points-of-sale and
                         electronic storefronts.

MARKETING PLAN

The Company's management has determined that the most effective means by which
to market its transaction processing product/service is in two primary areas.
The first is an automated, approach


                                      -6-
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to penetrate the software developers community by making our software
developer's kit available free of charge with extensive documentation that
developers can use to easily integrate our technology into their specific
solution without direct interaction with the Company. The Company plans on
increasing the visibility of its software by making it available for download
directly from the developer's communities' websites. The second approach is a
direct sales effort through a number of marketing channels rather than pursuing
a mass marketing effort directly to merchants. These channels have been
identified as the primary sources which merchants contact and through which they
typically work in order to establish their Internet e-commerce systems. Firms
within these channels become the Company's partners.

Partners in these market channels provide the Transaction Processing Component
to the merchant, as if it were part of their own product/service. For example, a
financial institution or Internet service provider can provide the Transaction
Processing Component to companies it works with as part of its e-commerce
services.

Where it is necessary, as with financial institutions that become partners, the
Company establishes dedicated network connections in order to ensure the
integrity of the system and to maximize security. Non-Internet based
applications may also require dedicated network connections.

In February 2002 the Company announced that its web-based credit card payment
processing technology was incorporated into Scotiabank's e-commerce payment
plug-in software. Scotiabank is one of Canada's major banks. This relationship
will give E-xact access to many of Scotiabank's customers who require web
merchant technology.

Application developers integrate the Company's payment capabilities into their
products, seamlessly providing merchants setting up their own e-commerce web
site with the ability to accept secure payments by credit card over the
Internet.

The Company will provide the partners with a reduced wholesale cost for its
services that partners can re-sell to their clients. Partners are required to
administer the service to their customers and the Company will bill the partner
directly. The Company has two pricing structures, wholesale and retail.
Wholesale prices apply to partners such as Internet service providers, web
developers, application developers and financial institutions. Retail rates
apply to businesses selling products or services directly to consumers.

The Company charges an activation fee for each customer that uses the Company's
services. This fee is charged only once per account. The monthly service charge
is to maintain the merchant account(s) with the Company's servers. Included in
this charge is access to the Company's member services that feature tools such
as Internet point of sale terminals, transactional searching, and reporting
tools. The Company also charges a transaction fee for each transaction that is
processed by the Company on behalf of its customers.

TARGET MARKET CHANNELS

The Company considers Internet service providers, web developers and application
developers as technical market channels since they understand software, servers,
connectivity and other aspects necessary for integrating the Company's
Transaction Processing Component. A key aspect of the Company's marketing to
these technical channels is the fact that its software is easy to integrate.

The Company provides an interface to communicate with the most common operating
systems such as JAVA, LINUX, UNIX and Windows. This reduces the technical
barrier and makes it easier for these companies to incorporate the Company's
transaction processing component with their existing software and systems.


                                      -7-
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A second key aspect of the Company's marketing to these channels is that its
Transaction Processing Component can be virtually transparent to end users of
products and services provided by the companies in these channels. The Company
can be identified only by a company logo. Internet service providers present a
dual market by providing the Company Transaction Processing Component as part of
e-commerce solutions that they sell to their customers and by using the
Company's system to handle their own transaction processing (accepting payment
for their Internet access programs and other services).

Web developers can provide the Company's Transaction Processing Component as an
integrated part of e-commerce solutions that they develop and manage for
clients. For each transaction processed through those e-commerce solutions, the
web developer would be charged a wholesale fee for the services.

Application developers include both those that are developing software designed
for Internet e-commerce and developers of other transaction processing
applications. An example of another transaction processing application would be
a computerized point-of-sale terminal, as where a customer visits a business,
makes a purchase, pays by credit card and the credit card information is entered
into the terminal or a personal computer by a cashier or sales agent. The
transaction is then sent via the Internet through the Company to the bank for
approval. Although the approval process travels over the Internet, the actual
point of sale may not have been conducted via the Internet.

         Financial Institutions:

           The Company has been able to take advantage of having first
           established a relationship with the Royal Bank to secure additional
           other clients and to develop relationships with other financial
           institutions, such as Shared Network Services and, more recently,
           Scotiabank. Typically, these relationships can provide many referrals
           of other direct clients.

         Direct Marketing to Merchants:

           Direct marketing does not currently comprise a major portion of the
           Company's marketing strategy; however, it is taking place via the
           Company's website and through word-of-mouth. The Company will
           continue to maintain its website making it possible to download the
           Company's transaction processing component from its web site at
           www.e-xact.com. Typically, these downloads are from companies with
           which the Company has had no direct prior contact. .

OPERATIONS

The processing center for the Company is located in Vancouver B.C. This facility
houses the Company's computer center for processing all transactions over the
Internet. Network servers providing connectivity to processing systems and the
Internet are securely co-located in Vancouver.

INTELLECTUAL PROPERTY

Generally speaking, the Company relies on general trademark and copyright law to
protect its products. The Company has formally registered its primary trademark,
E-xact Transactions but has not yet been granted the trademark protection and
has not obtained any patent protection for any of its products.


                                      -8-
<PAGE>


COMPETITION

The market for Internet commerce software and services is relatively new,
intensely competitive, quickly evolving, and subject to rapid technological
change. Numerous companies are developing e-commerce and online financial
transaction technologies and systems. Key competitors include:

Authorize.Net Corporation of Provo, UT -- Authorize.Net Corporation develops,
markets, and sells Authorize.Net, a line of products and services that provide
solutions for authorizing, processing, and managing credit card and electronic
check transactions over the Internet. Authorize.Net's transaction processing
system sends them on to the financial institutions for processing.

Internet Secure Inc. of Oakville, Ontario -- Internet Secure is a Canadian
corporation which provides a secure, on-line, real-time credit card processing
system for Internet merchants. Internet Secure demonstrated a secure, on-line,
real-time credit card processing system that has been approved by two of the top
six banks in Canada. Currently the company offers Canadian dollar merchant
status for Visa, MasterCard and AMEX and US dollar merchant status for Visa and
MasterCard approved and supported by Canadian and American Banks.

Verisign Corporation of Mountain View California -- Verisign bought the assets
of Cybercash and markets a payment product called Payflow along with its
security certificate business. Payflow is a seamless payment processing solution
gives you back-end connectivity to all leading payment processing networks and
allows your Web site to support multiple payment types. Payflow Pro can be
customized to integrate with your existing Web site.

E-Commerce Exchange of Irvine, California -- E-Commerce Exchange is a nationwide
credit card processing company, specializing in merchant account, credit card
and electronic check transaction solutions for non-traditional merchants within
the Internet, home-based, phone order/mail order industries. E-Commerce Exchange
focuses on serving traditionally hard-to-place businesses, such as home-based or
new merchants, business owners with credit problems, high-risk businesses, and
others which are considered non-conventional by banks and other credit card
processors.

RESEARCH AND DEVELOPMENT EXPENDITURES

The Company conducts research and development through internal research
projects. Costs are incurred from time to time, in specific projects that employ
existing technologies for which feasibility has previously been established to
develop applications. Production costs for the development of the software used
for which technological feasibility has been established but before the product
is ready for sale, is capitalized when broad applications are identified within
its existing product lines. The Company incurred $146,903 of expenses relating
to research and development in 2001 compared to $ 463,832 in 2000.

EMPLOYEES

As of December 31, 2001, the Company had 7 full-time employees. That number
includes one technical support, three programmers, one for marketing, and one
accountant/administrator and the President and CEO.


                                      -9-
<PAGE>


ITEM 2. DESCRIPTION OF PROPERTY

The Company maintains leased facilities in the location listed below.

<Table>
<Caption>
                                                                            Current
                                                  Square     Term of         Annual
Function                     Location              Feet       Lease       Lease Costs
--------                     --------             ------     -------      -----------
<S>                 <C>                            <C>       <C>          <C>
Canadian Office     555 West Hastings Street,      1,300     10/31/02     Cdn $45,174
                    Suite 2410 Vancouver, B.C.
</Table>

The facility in Vancouver British Columbia, Canada serves as the Company's
processing center with the lease expiring October 31, 2002.

The Company's business and plan of operations consists of real-time electronic
transaction processing as described in Item 1. Accordingly, the Company has no
particular policy regarding each of the following types of investments:

1.       Investments in real estate or interests in real estate;

2.       Investments in real estate mortgages; or

3.       Securities of or interests in persons primarily engaged in real estate
         activities.


ITEM 3. LEGAL PROCEEDINGS

3.1.     On October 2, 2001 Robert Roker, a former employee (the "Plaintiff")
         filed a Complaint in the Supreme Court of British Columbia, Vancouver
         County against the Company in connection with an employment contract
         dated November 26, 1999. The Plaintiff alleges that he was terminated
         without cause on September 11, 2001 and is seeking damages of
         approximately CDN$50,892. The Plaintiff has also brought a claim for
         punitive damages in the amount of approximately CDN$10,000. On October
         23, 2001 the Company filed a Statement of Defense denying the
         allegation that any money was due to the Plaintiff. The Company is
         represented by legal counsel in this matter and it believes that the
         Plaintiff was terminated with reasonable cause and has sufficient
         evidence to support its case.

3.2.     On November 2, 2001 a supplier of bandwidth brought a small claims
         action against the Company in the Provincial Court of British Columbia
         (Small Claims Court) in the amount of CDN$9,271. The Company disputed
         the claim on the basis that services were never rendered as promised.
         On March 6, 2002, the Company paid the supplier CDN$1,605 in full and
         final settlement of the disputed amount.


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

None.


                                     PART II

ITEM 5. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS

On March 22, 2000 the Company completed an IPO of it common stock in Canada on
the facilities of the Canadian Venture Exchange ("CDNX"). The price to the
public in the initial public offering was $1.00 per share. The stock symbol is
EXZ.U

The Company was a private company for all of 1999 and thus a public quote for
the Company's stock does not exist for that year


                                      -10-
<PAGE>


         Stock quotes for 2001
<Table>
<Caption>
  Date       Open price     High      Low     Close    Quarterly volume
  ----       ----------     -----    -----    -----    ----------------
<S>          <C>            <C>      <C>      <C>      <C>
31-Mar-01       $0.20       $0.20    $0.13    $0.15         106,200
30-Jun-01        0.48        0.49     0.21     0.22          246,300
30-Sep-01        0.16        0.16     0.12     0.12          55,096
31-Dec-01        0.23        0.24     0.15     0.20          93,400
</Table>


         Stock prices for 2000
<Table>
<Caption>
  Date        Open price    High      Low     Close
  ----        ----------    -----    -----    -----
<S>          <C>            <C>      <C>      <C>
31-Mar-00       $5.00       $5.00    $4.60    $4.70
30-Jun-00        1.90        1.90     1.80     1.83
29-Sep-00        1.30        1.30     1.30     1.30
28-Dec-00        0.25        0.25     0.25     0.25
</Table>


There were 57 registered shareholders of the Company as at March 1, 2002 holding
in aggregate 10,502,000 shares of which 55 registered shareholders hold in
aggregate 2,890,560 shares, and 7,611,440 shares are held by CDS & Co. and First
Clearing Corporation in street form.

The Company has never declared a dividend on its common stock and intends for
the foreseeable future, to retain all earnings, if any, for the development of
its business opportunities. The payment of future dividends will be at the
discretion of the Company's board of directors and will depend upon, among other
things, future earnings, capital requirements, financial condition and general
business conditions.

The transfer agent for the Company's common stock is Pacific Corporate Trust
Company, 625 Howe Street, Suite 830 Vancouver, BC, V6C 3B8.


                                      -11-
<PAGE>


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

The following discussion should be read together with the Company's consolidated
financial statements and accompanying notes included elsewhere.

                                 Exchange Rates

All dollar amounts herein are stated in U.S. dollars except where otherwise
indicated. The following table reflects the rate of exchange for Canadian
dollars per U.S. $1.00 in effect at the end of the following periods and the
average rate of exchange during such periods, based on the Federal Reserve Bank
of New York's average noon spot rate of exchange:

<Table>
<Caption>
                                      YEAR ENDED DECEMBER 31
                            ----------------------------------------
                               1999           2000            2001
                            ----------     ----------     ----------
<S>                         <C>            <C>            <C>
Rate at end of period:      CDN$1.4433     CDN$1.4979     CDN$1.4819
Average rate for period:    CDN$1.4858     CDN$1.4851     CDN$1.4995
</Table>

--------
On March 1, 2002, the Federal Reserve Bank of New York noon spot rate of
exchange was U.S. $1.00 = CDN$1.5955

INTRODUCTION

The Company was incorporated under the Company Act of British Columbia, Canada
on August 13, 1998. On July 29, 1999 the Company was reincorporated in the state
of Delaware, USA. The Company earns its revenue by charging its customers a
setup fee, a monthly membership fee and a transaction fee. Transaction fees are
based on the number of transactions processed in a month.

The Company offers electronic commerce software services for real-time
transaction processing. The software allows PC based cash registers, PCs,
point-of-sale terminals, computer systems and proprietary product platforms to
accept credit card payments and to submit those payments to various payment
processing companies for pre-authorization and settlement/deposit. The Company
has acquired and developed software and a network system toast as a third party
payment processor to conduct transaction processing with major banks in North
American. The Company is currently approved to conduct transaction processing
with major banks and credit unions in Canada and the US.


                                      -12-
<PAGE>


During the year ended December 31, 2001, the Company released version 5.5 of its
software in Com, Java and Perl platforms. The Company's e-commerce solution is
functional across major operating environments and it requires minimal
investment of resources from new customers to be fully integrated with E-xact's
services.

In 2001 the Company processed approximately 2.7 million transactions with an
estimated value of approximately $752 million.

       FISCAL YEAR ENDED DECEMBER 31, 2001 COMPARED TO FISCAL YEAR ENDED
          DECEMBER 31, 2000 (ALL AMOUNTS ARE EXPRESSED IN US DOLLARS)

REVENUES

In 2001 the Company focused on improving its customer service as well as
streamlining its operations. The Company's revenue consists of setup fees and
transactions fees. In 2001 total revenues increased by 63% from $240,504 in 2000
to $392,519 in 2001. The revenues were derived primarily from transaction
processing fees and monthly service fees. The Company weeded out many of its
unproductive customers and focused its energy on more established customers.
This resulted in higher revenue, lower bad debts and better cash flow.

GROSS MARGINS

The Company's gross profit margin in 2001 was approximately 81% compared to 52%
in 2000. The Company's cost of sales consists primarily of bandwidth costs, fees
paid to a third party processor and data line charges. Although revenue
increased by approximately 63% over the previous year, the existing cost
structure was sufficient to support the extra volume of business. In 2000, US
bandwidth and data line charges were setup in anticipation of US sales growth.
Although sales in the US did not materialize as anticipated, these fixed costs
were incurred irrespective of the level of activity. The US costs were
terminated in the fourth quarter of 2000. As revenue increases in the future,
cost of sales will remain relatively flat as they will not increase in direct
proportion to revenue. It is relatively inexpensive to increase bandwidth and
data line capacity as all of these services are provided by companies operating
in a competitive environment.


GENERAL AND ADMINISTRATIVE EXPENSES ( G&A )

G&A expenses decreased from $1,423,701 in 2000 to $378,039 in 2001. Bad debts
decreased from $62,622 in 2000 to $16,478 in 2001. This was due to a policy of
reviewing the productivity of each receivable. Services were terminated for
unproductive or non-performing customers. This resulted in a stable of
established customers who are able to generate transactions on a daily basis and
therefore more consistent sales revenue for the Company.

Office & miscellaneous expenses decreased from $208,242 in 2000 to $96,977 in
2001, telephone & fax decreased from $91,090 in 2000 to $9,556, legal expenses
decreased from $134,894 in 2000


                                      -13-
<PAGE>
to $14,558 in 2001, rent decreased from $111,025 in 2000 to $32,919 in 2001,
management & consulting expense decreased from $140,736 in 2000 to $43,767 in
2001 and salaries & wages decreased from $470,043 in 2000 to $117,548 in 2001.
The large decrease in G&A was due primarily to the closure of the US office in
Colorado in the fourth quarter of 2000.


SALES & MARKETING  (S&M)

S&M decreased from $1,100,941 in 2000 to $76,961 in 2001. The decrease in
expenses was due to the closure of the US office. The bulk of the S&M expense in
2001 consisted primarily of salaries and wages of personnel engaged in the
marketing of the Company's products.


RESEARCH AND DEVELOPMENT (R&D)

R&D expenses consist of compensation expenses and consulting fees to support the
development of the Company's software and services. Production costs for the
development of the software for which the technological feasibility has been
established but before the product is ready for sale are expensed.

R&D expenses decreased from $742,767 in 2000 to $146,903 in 2001. The decrease
was due to a reduction of consulting fees, equipments leases and programming
expenses as a result of the closure of the US office.

INCOME TAXES

The Company had income taxes payable of approximately $6,182 as at December 31,
2001. As at March 20, 2002 the Company had not been assessed for the Canadian
branch tax return for the tax year June 30, 2000. If the tax loss incurred is
disallowed for setoff against the Company's taxable income in the previous tax
year, there would be a tax liability of approximately $253,000.


NET LOSS

The Company incurred a net loss of $270,765 in 2001, compared to a net loss of
$2,973,572 in 2000. The Company expects to finance future losses from increased
sales revenue and from advances from major shareholders.


      LIQUIDITY AND CAPITAL RESOURCES FOR THE YEAR ENDED DECEMBER 31, 2001

CAPITAL AND DEBT FINANCING

On April 26, 2001 the Company completed a private placement of 2,000,000 special
warrants. Each special warrant entitled the holder to receive, without further
consideration, one common share and a share purchase warrant. Each share
purchase warrant entitled the holder to purchase a further common share over a
period of two years at a price of $0.23 per warrant share in the first year and
at a price of $0.27 per warrant share in the second year. The special warrants
were issued outside the United States pursuant to an exemption from the
registration under Regulation S of the Securities Act of 1933, as amended. The
special warrants were purchased by non-U.S. persons outside the United States.


                                      -14-
<PAGE>

These transactions are regarded as unregistered transactions under the
Securities Exchange Act of 1933. In October 2001 the holders of the special
warrants exercised the special warrants and converted them into 2,000,000 common
shares. The Company also issued 2,000,000 share purchase warrants under terms
and conditions mentioned above. The share purchase warrants expire May 31, 2003.

At December 31, 2001 the Company had a working capital deficiency of $584,782
compared to a deficiency of approximately $747,000 at December 31, 2000. As at
December 31, 2001 the Company had substantial trade accounts payable which have
remained unpaid for over one year. The Company has received co-operation and
support from these creditors in the past. The Company is unable to pay these
debts as they become due. The future operations of the Company is dependant on
the support of the Company's major shareholders, the continued support of its
creditors and a continuation of the Company's efforts to increase its revenue
base in order to achieve break-even point and eventually attain profitability.

CASH FLOW

During the year ended December 31, 2001, the Company used cash from operations
of $247,303 compared to $2,368,672 in 2000.

Cash provided by financing activities was $258,683 for the year ended December
31, 2001 compared to $2,269,981 the previous year. The Company successfully
completed a private placement of $400,000 on April 26, 2001 of which $370,000
was funded by related parties (see item 11). The proceeds were used to repay
advances from stockholders.

Although no new equipment was purchased during the year, the Company
nevertheless believes it has sufficient equipment on hand to support its planned
operations in the short term.


CAPITAL RESOURCES

Management believes that the working capital deficiency as at December 31, 2001
and future operating losses will be financed by additional equity funding and
loans from investors. However, there can be no assurance that such financings
will be successful, or that they may be negotiated on terms which are
unfavorable or dilutive to existing stockholders or acceptable to existing
creditors. The Company's continuation as a going concern is contingent upon
achieving operating levels adequate to support its cost structure, the continued
support of its creditors and obtaining adequate financial resources through a
contemplated financing. The Company has no plans to expand its personnel or
purchase or lease any major capital equipment in 2002. Additional staffing
requirements will be supplemented with part-time workers or consultants.

In the event that cash flow from operations, if any, together with the proceeds
of any future financings, are insufficient to meet the Company's current
operating expenses, the Company will be required to re-evaluate its planned
expenditures and allocate its total resources in such manner as the board of
directors and management deems to be in the Company's best interest. This may
result in a substantial reduction of the scope of existing and planned
operations. As at December 31, 2001 the Company's significant obligations and
commitments include payment of trade accounts payable ($551,701) repayment of
its shareholder advances ($118,241) and continued payment of obligations under
operating premises and equipment leases (see note 10 to the Company's December
31, 2001 consolidated financial statements).


                                      -15-
<PAGE>


RECENT ACCOUNTING PRONOUNCEMENTS

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

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

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

Critical Accounting Policies and Estimates:

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

Revenue Recognition:

New customers are required to complete a Merchant Registration Form and a
Transactions Processing Agreement. The term of the Agreement is normally for a
year with an automatic renewal at the anniversary date.

The Company receives it revenue from three sources: new account activations,
monthly service/membership fees and online transactions fees. New account
activations fees are recognized as revenue when customers' production accounts
are activated while monthly services fees are recognized when customers are
invoiced. Online transaction fees are recognized when services have been
performed.

Accounts Receivable:

The Company performs monthly reviews of its accounts receivable. Customers who
are in arrear are normally given the opportunity to pay off arrear balances
prior to suspension of processing services. Provision for doubtful accounts are
normally based on customers who are 90 days in arrear. However, a review is also
based on a case-by-case basis depending on the customer's circumstances. A
significant change in the financial position of the Company's customers could
have a material adverse impact on the collectability of the accounts receivable.


                                      -16-
<PAGE>


Use of estimates:

The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities at the date of the
financial statements and the reported amounts of revenues and expenses during
the reporting period. Examples include provisions for bad debts, and the
contingencies described in Legal Proceedings in item 3 above. Actual results
could differ from those estimates.


ITEM 7. FINANCIAL STATEMENTS

<Table>
<S>                                                                               <C>
         Independent Auditors' Report                                              F-1

         Consolidated Balance Sheets -- December 31, 2001 and
                                        December 31, 2000                          F-2

         Consolidated Statements of Operations
         -- For the years ended December 31, 2001, 2000 and 1999                   F-3

         Consolidated Statements of (Capital Deficiency) Stockholders' Equity
         -- For the years ended December 31, 2001, 2000 and 1999                   F-4

         Consolidated Statements of Cash Flows
         -- For the years ended December 31, 2001, 2000 and 1999                   F-5

         Notes to Consolidated Financial Statements                                F-6
</Table>


                                      -17-
<PAGE>


                          INDEPENDENT AUDITORS' REPORT


To the Directors and Stockholders of
E-xact Transactions Ltd.


We have audited the consolidated balance sheets of E-xact Transactions Ltd. as
at December 31, 2001 and 2000 the consolidated statements of operations, capital
deficiency and cash flows for each of the years in the three year period ended
December 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 auditing standards generally accepted
in the United States of America. 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. We believe that our audits provide a reasonable basis
for our opinion.

In our opinion, these consolidated financial statements present fairly, in all
material respects, the financial position of the Company as at December 31, 2001
and 2000 and the results of its operations and its cash flows for each of the
years in the three year period ended December 31, 2001 in accordance with
accounting principles generally accepted in the United States of America.

The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. As discussed in Note 1 to the
financial statements, the Company's recurring losses from operations raise
substantial doubt about its ability to continue as a going concern. Management's
plans concerning these matters are also described in Note 1. The financial
statements do not include any adjustments that might result from the outcome of
this uncertainty.

On March 8, 2002, we reported separately to the stockholders of E-xact
Transactions Ltd. on consolidated financial statements for the same periods
prepared in accordance with generally accepted accounting principles in the
Canada.


/s/ DELOITTE & TOUCHE LLP


Chartered Accountants
Vancouver, British Columbia
March 8, 2002


                                      F-1
<PAGE>


                            E-XACT TRANSACTIONS LTD.
                           CONSOLIDATED BALANCE SHEETS
                      (EXPRESSED IN UNITED STATES DOLLARS)

<Table>
<Caption>
                                                                   December 31,    December 31,
                                                                       2001            2000
                                                                   ------------    ------------
<S>                                                                <C>             <C>
ASSETS

Current
   Cash ........................................................   $     20,970    $     10,476
   Accounts receivable (Note 3) ................................         62,512          72,671
   Prepaid expenses and deposits ...............................          7,860           5,356
                                                                   ------------    ------------
Total current assets ...........................................         91,342          88,503
Capital assets (Note 4) ........................................         63,491         103,601
                                                                   ------------    ------------
Total assets ...................................................   $    154,833    $    192,104
                                                                   ============    ============

LIABILITIES

Current
   Accounts payable and accrued liabilities (Note 5) ...........   $    551,701    $    541,163
   Income taxes payable ........................................          6,182          71,909
   Advances payable (Note 6) ...................................        118,241         222,558
                                                                   ------------    ------------
Total current liabilities ......................................        676,124         835,630
                                                                   ------------    ------------

Continuing operations (Note 1)
Commitments (Note 10)

CAPITAL DEFICIENCY

Common stock, common shares issued and outstanding (Note 7)
   10,502,000 at December 31, 2001 and 8,502,000 at
     December 31, 2000 .........................................         10,502           8,502
Share purchase warrants (Note 7 (f)) ...........................        196,500              --
Additional paid-in capital .....................................      3,322,882       3,128,382
Accumulated deficit ............................................     (4,051,175)     (3,780,410)
                                                                   ------------    ------------
Total capital deficiency .......................................       (521,291)       (643,526)
                                                                   ------------    ------------
Total capital deficiency and liabilities .......................   $    154,833    $    192,104
                                                                   ============    ============
</Table>


        See Accompanying Notes to the Consolidated Financial Statements.


                                      F-2
<PAGE>


                            E-XACT TRANSACTIONS LTD.
                      CONSOLIDATED STATEMENTS OF OPERATIONS
                      (EXPRESSED IN UNITED STATES DOLLARS)

<Table>
<Caption>
                                                               Year ended
                                                               December 31,
                                                -----------------------------------------
                                                    2001           2000           1999
                                                -----------    -----------    -----------
<S>                                             <C>            <C>            <C>
Revenues
   Online transactions ......................   $   392,519    $   240,504    $    88,721
   Web development ..........................            --             --          7,070
                                                -----------    -----------    -----------
Total revenues ..............................       392,519        240,504         95,791
                                                -----------    -----------    -----------

Cost of sales
   Cost of online transactions ..............        73,072        115,532         26,262
   Cost of web development ..................            --             --          3,183
                                                -----------    -----------    -----------
Total cost of sales .........................        73,072        115,532         29,445
                                                -----------    -----------    -----------

Expenses
   General and administrative expenses ......       378,039      1,423,701        467,780
   Sales and marketing ......................        76,961      1,100,941         57,180
   Research and development .................       146,903        742,767        193,765
                                                -----------    -----------    -----------
Total expenses ..............................       601,903      3,267,409        718,725
                                                -----------    -----------    -----------
Operating loss ..............................      (282,456)    (3,142,437)      (652,379)
Other income (expense) ......................        11,691        110,140        (15,967)
                                                -----------    -----------    -----------
Loss before income tax ......................      (270,765)    (3,032,297)      (668,346)
Income taxes (Note 11) ......................            --         58,725       (102,557)
                                                -----------    -----------    -----------
Net loss ....................................   $  (270,765)   $(2,973,572)   $  (770,903)
                                                ===========    ===========    ===========

Basic and diluted loss per share ............   $     (0.03)   $     (0.37)   $     (0.17)
                                                ===========    ===========    ===========

Weighted average number of common shares
   used to calculate loss per share .........     9,866,384      7,932,356      4,553,542
                                                ===========    ===========    ===========
</Table>


        See Accompanying Notes to the Consolidated Financial Statements.


                                      F-3
<PAGE>


                            E-XACT TRANSACTIONS LTD.
                  CONSOLIDATED STATEMENTS OF CAPITAL DEFICIENCY
                      (EXPRESSED IN UNITED STATES DOLLARS)


<Table>
<Caption>
                                                   Common Stock            Warrants          Additional                    Total
                                               -------------------   ---------------------    Paid-in     Accumulated     Capital
                                                 Shares     Amount     Number      Amount     Capital       Deficit     Deficiency
                                               ----------  -------   ----------  ---------   ----------   -----------   ----------
<S>                                            <C>         <C>       <C>         <C>         <C>          <C>           <C>
Issuance of common stock for cash ..........       42,000  $     1   $       --  $      --   $       --   $        --   $         1
Issuance of common stock for acquired
  software and intangibles .................    4,158,000   42,129           --         --           --            --        42,129
Net loss ...................................           --       --           --         --           --       (35,935)      (35,935)
                                               ----------  -------   ----------  ---------   ----------   -----------   -----------
Balance at December 31, 1998 ...............    4,200,000   42,130           --         --           --       (35,935)        6,195
Reclassification on reincorporation
  (Note 7) .................................           --  (37,930)          --         --       37,930            --            --
Warrants issued for consulting fees
  (Note 7(d)) ..............................           --       --           --         --       58,320            --        58,320
Issuance of common stock on private
  placement, net of offering costs
  of $20,698 and warrants issued
  for financing services of $142,123
  (Note 7 (d)) .............................    1,697,000    1,697           --         --      844,613            --       846,310
Net loss ...................................           --       --           --         --           --      (770,903)     (770,903)
                                               ----------  -------   ----------  ---------   ----------   -----------   -----------

Balance at December 31, 1999 ...............    5,897,000    5,897           --         --      940,863      (806,838)      139,922
Issuance of stock pursuant to exercise of
  warrants, January 2000 ...................      225,000      225           --         --       74,334            --        74,559
Issuance of stock pursuant to IPO, net of
  cash offering of $509,435, stock issued
  to the Underwriter of $75,000, and
  warrants issued for financing services
  of $138,744 ..............................    2,325,000    2,325           --         --    1,738,240            --     1,740,565
Exercise of stock options ..................       25,000       25           --         --       24,975            --        25,000
Warrants issued for compensation
  (Note 7 (d)) .............................           --       --           --         --      320,000            --       320,000
Exercise of warrants .......................       30,000       30           --         --       29,970            --        30,000
Net loss ...................................           --       --           --         --           --    (2,973,572)   (2,973,572)
                                               ----------  -------   ----------  ---------   ----------   -----------   -----------
Balance at December 31, 2000 ...............    8,502,000    8,502           --         --    3,128,382    (3,780,410)     (643,526)
Special warrants issued for cash (net of
  offering costs of $7,000) (Note 7 (f)) ...           --       --    2,000,000    393,000           --            --       393,000
Exercise of special warrants into
  common shares ............................    2,000,000    2,000   (2,000,000)  (393,000)     194,500            --      (196,500)
Purchase warrants issued on exercise of
  special warrants .........................           --       --    2,000,000    196,500           --            --       196,500
Net loss ...................................           --       --           --         --           --      (270,765)     (270,765)
                                               ----------  -------   ----------  ---------   ----------   -----------   -----------
Balance at December 31, 2001 ...............   10,502,000  $10,502  $ 2,000,000  $ 196,500   $3,322,882   $(4,051,175)  $  (521,291)
                                               ==========  =======  ===========  =========   ==========   ===========   ===========
</Table>

        See Accompanying Notes to the Consolidated Financial Statements.

                                      F-4
<PAGE>


                            E-XACT TRANSACTIONS LTD.
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                      (EXPRESSED IN UNITED STATES DOLLARS)

<Table>
<Caption>
                                                                                           Year ended
                                                                                           December 31,
                                                                            -----------------------------------------
                                                                                2001          2000         1999
                                                                            -----------    -----------    -----------
<S>                                                                         <C>            <C>            <C>
Operating activities:

  Net loss ..............................................................   $  (270,765)   $(2,973,572)   $  (770,903)
  Item not affecting cash
    Amortization of capital assets, acquired
     software and other intangible assets ...............................        40,996         58,328         36,014
    Loss on disposal of fixed assets ....................................            --         78,671             --
    Warrants issued to customer .........................................            --        320,000             --
    Warrants issued for financing fees ..................................            --             --         58,320
  Net change in operating assets and liabilities
    Accounts receivable .................................................        10,159          9,166        (69,058)
    Prepaid expenses and deposits .......................................        (2,504)        (1,022)            --
    Accounts payable and accrued liabilities ............................        40,538        170,405        345,887
    Income taxes payable ................................................       (65,727)       (30,648)       102,557
    Advances from stockholders ..........................................            --             --         (7,318)
                                                                            -----------    -----------    -----------
                                                                               (247,303)    (2,368,672)      (304,501)
                                                                            -----------    -----------    -----------
Financing activities:
  Proceeds on issuance of capital stock and warrants,
    net of offering costs ...............................................       363,000      1,870,124        846,310
  Deferred share issue costs ............................................            --        177,299       (177,299)
  Advances from stockholders ............................................       247,977        222,558             --
  Repayment of stockholder advance ......................................      (352,294)            --             --
                                                                            -----------    -----------    -----------
                                                                                258,683      2,269,981        669,011
                                                                            -----------    -----------    -----------
Investing activities:
  Purchase of capital assets ............................................          (886)      (198,075)       (62,948)
  Proceeds on disposal of fixed assets ..................................            --          2,575             --
                                                                            -----------    -----------    -----------
                                                                                   (886)      (195,500)       (62,948)
                                                                            -----------    -----------    -----------
Net cash inflow (outflow) ...............................................        10,494       (294,191)       301,562
Cash, beginning of year .................................................        10,476        304,668          3,106
                                                                            -----------    -----------    -----------
Cash, end of year .......................................................   $    20,970    $    10,477    $   304,668
                                                                            ===========    ===========    ===========
Supplemental non-cash investing and financing cash flow disclosures:

Special warrants issued to supplier .....................................   $    30,000    $        --    $        --
                                                                            ===========    ===========    ===========
Warrants issued for financing services ..................................   $        --    $   138,744    $   142,123
                                                                            ===========    ===========    ===========
Warrants issued to customer .............................................   $        --    $   320,000    $        --
                                                                            ===========    ===========    ===========
Common stock issued to underwriters .....................................   $        --    $    75,000    $        --
                                                                            ===========    ===========    ===========
</Table>


        See Accompanying Notes to the Consolidated Financial Statements.


                                      F-5
<PAGE>


                            E-XACT TRANSACTIONS LTD.
                 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
                      (EXPRESSED IN UNITED STATES DOLLARS)


1.       CONTINUING OPERATIONS

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

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

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

         The Company incurred a net loss of $270,765 for the year ended December
         31, 2001 and at December 31, 2001 had a working capital deficiency of
         $584,782 and capital deficiency of $521,291. The success of the
         Company's future operations is dependent upon attaining profitable
         operations, and upon its ability to raise additional financing.
         Management's plans include obtaining the continued support of
         creditors, raising additional financing and, ultimately, positioning
         the Company for profitable operations.

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

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


                                      F-6
<PAGE>


                            E-XACT TRANSACTIONS LTD.
                 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
                      (EXPRESSED IN UNITED STATES DOLLARS)

2.       SIGNIFICANT ACCOUNTING POLICIES

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

         (a)      Basis of consolidation

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

         (b)      Use of Estimates

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

         (c)      Foreign Currency Translation

                  The Company determined that as of April 1, 2000 its functional
                  currency was the United States dollar ("US Dollars").
                  Previously the functional currency of the Company was the
                  Canadian dollar. The change in the Company's functional
                  currency was made due to the expansion of US operations during
                  the year. The majority of the Company's operating and
                  financing transactions are now denominated in the US dollar.
                  Monetary assets and liabilities denominated in other than the
                  US dollar are translated using the exchange rates prevailing
                  at the balance sheet date. Revenues and expenses are
                  translated using average exchange rates prevailing during the
                  period. Gains and losses on foreign currency transactions are
                  recorded in the consolidated statement of operations. The
                  Company has remeasured its assets, liabilities, revenues and
                  expenses for prior years using the historical exchange rate in
                  existence at the date of the transaction.

         (d)      Research and Development Costs

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


                                      F-7
<PAGE>


                            E-XACT TRANSACTIONS LTD.
                 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
                      (EXPRESSED IN UNITED STATES DOLLARS)


2.       SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

         (e)      Capital Assets and Amortization

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

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

                  The Company periodically evaluates the recoverability of its
                  capital assets whenever events or changes in circumstances
                  indicate that the carrying amount of an asset may not be
                  recoverable. An impairment loss would be recognized when
                  estimates of future cash flows expected to result from the use
                  of an asset and its eventual disposition are less than its
                  carrying amount. No impairment in assets had been identified
                  by the Company in the years ended December 31, 2001, 2000 and
                  1999.

         (f)      Revenue Recognition

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

                  (i)      Online Transactions

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

                  (ii)     Web Development

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


                                      F-8
<PAGE>


                            E-XACT TRANSACTIONS LTD.
                 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
                      (EXPRESSED IN UNITED STATES DOLLARS)

2.       SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

         (g)      Stock-Based Compensation Plans

                  As permitted under Statement of Financial Accounting Standards
                  ("SFAS") No. 123, Accounting for Stock-Based Compensation, the
                  Company has accounted for employee and directors stock options
                  in accordance with Accounting Principles Board ("APB") Opinion
                  No. 25, Accounting for Stock Issued to Employees, and has made
                  the pro forma disclosures required by SFAS No. 123 in Note 7
                  (c).

                  SFAS No. 123, Accounting for Stock-Based Compensation,
                  requires the use of the fair value based method of accounting
                  for stock options. Under this method, compensation cost is
                  measured at the grant date as the fair value of the options
                  granted and is recognized over the vesting period. Where the
                  Company issues options to individuals other than employees and
                  directors deferred share-based compensation is recorded. These
                  amounts are amortized as charges to operations, over the
                  vesting period of the individual stock options.

         (h)      Income Taxes

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

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

         (i)      Basic and Diluted Loss Per Share

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

         (j)      Comprehensive Income

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


                                      F-9
<PAGE>


                            E-XACT TRANSACTIONS LTD.
                 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
                      (EXPRESSED IN UNITED STATES DOLLARS)


2.       SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

         (k)      Business Segments

                  SFAS No. 131, Disclosures about Segments of an Enterprises and
                  Related Information, establishes standards for reporting,
                  information about operating segments in annual financial
                  statements. It also establishes standards for disclosures
                  about products and services, geographic areas and major
                  customers. Information related to SFAS No. 131 is contained in
                  Note 12.

         (l)      Accounting for derivative instruments and hedging activities

                  The Company adopted SFAS No. 133, Accounting for Derivative
                  Instruments and Hedging Activities, as amended, as of the
                  beginning of 2001. The standards require the Company to
                  recognize all derivatives on the balance sheet at fair value.
                  Derivatives that are not hedges must be adjusted to fair value
                  through income. If the derivative is a hedge, depending on the
                  nature of the hedge, changes in the fair value of the
                  derivatives will either be offset against the change in fair
                  value of the hedged assets, liabilities or firm commitments
                  through earnings, or recognized in other comprehensive income
                  until the hedged item is recognized in earnings. The change in
                  a derivative's fair value related to the ineffective portion
                  of a hedge, if any, will be immediately recognized in
                  earnings. As the Company does not enter into derivative
                  transactions, the effect of adopting SFAS No. 133, as amended,
                  did not have a material effect on the Company's financial
                  position or overall results of operations.

         (m)      Recent Accounting Pronouncements

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

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


                                      F-10
<PAGE>


                            E-XACT TRANSACTIONS LTD.
                 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
                      (EXPRESSED IN UNITED STATES DOLLARS)


2.       SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

         (m)      Recent Accounting Pronouncements (continued)

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


3.       ACCOUNTS RECEIVABLE

         Accounts receivable are recorded net of a $12,916 allowance for
         doubtful accounts at December 31, 2001 (2000 - $65,581).


4.       CAPITAL ASSETS

<Table>
<Caption>
                                                 December 31,
                                -----------------------------------------------
                                         2001                            2000
                                ----------------------------------     --------
                                           Accumulated    Net Book     Net Book
                                  Cost     Amortization    Value         Value
                                --------   ------------   --------     --------
<S>                             <C>        <C>            <C>          <C>
Leasehold improvements ....     $  4,940     $  1,477     $  3,463     $  4,446
Computer software .........       88,138       87,616          522       14,344
Computer equipment ........      119,165       59,659       59,506       84,811
                                --------     --------     --------     --------
                                $212,243     $148,752     $ 63,491     $103,601
                                ========     ========     ========     ========
</Table>


                                      F-11
<PAGE>


                            E-XACT TRANSACTIONS LTD.
                 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
                      (EXPRESSED IN UNITED STATES DOLLARS)


5.       ACCOUNTS PAYABLE AND ACCRUED LIABILITIES

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

<Table>
<Caption>
                                     December 31,
                                 -------------------
                                   2001       2000
                                 --------   --------
<S>                              <C>        <C>
Trade payables ...............   $530,651   $498,149
Other accrued liabilities ....     21,050     43,014
                                 --------   --------
                                 $551,701   $541,163
                                 ========   ========
</Table>


6.       ADVANCES PAYABLE

         The advances payable from certain stockholders of the Company bear
         interest at prime plus one per cent and have no fixed terms of
         repayment. $30,000 of advances are secured by stock of the Company held
         by a major stockholder. Advances are secured by certain assets of the
         Company.


7.       STOCKHOLDERS' EQUITY

         (a)      Authorized Stock

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

                  The Company has authorized 50,000,000 common stock with a par
                  value of $0.001 per share. As a result of the reincorporation
                  and change to par value shares, $37,930 was reclassified
                  during 1998 from common stock to additional paid in capital.

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

         (c)      Stock-Based Compensation Plans

                  During 1999, the Company established a Share Option Plan (the
                  "option plan") which provides for options to be granted by the
                  Company to its directors, officers, employees and consultants
                  of the Company and affiliated companies. No options were
                  granted prior to the establishment of the plan. At the date
                  options are granted, the exercise price for an option shall
                  not be less than the then market price of the common shares of
                  the Company. Options granted are subject to certain vesting
                  requirements.


                                      F-12
<PAGE>


                            E-XACT TRANSACTIONS LTD.
                 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
                      (EXPRESSED IN UNITED STATES DOLLARS)


7.       STOCKHOLDERS' EQUITY (CONTINUED)

         (c)      Stock-Based Compensation Plans (continued)

                  During 2001, the Company amended the stock option plan,
                  reserving a maximum of 2,095,000 common shares for issuance
                  under the plan.

                  A summary of the status of the Company's stock option plan as
                  of December 31, 2001, 2000 and 1999 and changes during the
                  periods ending on those dates is presented below:

<Table>
<Caption>
                                               2001                      2000                      1999
                                    ------------------------    ----------------------   -----------------------
                                                   Weighted-                 Weighted-                 Weighted-
                                                    Average                   Average                   Average
                                      Common       Exercise      Common      Exercise      Common      Exercise
Options                               Shares        Price        Shares        Price       Shares       Price
-------                             ----------    ----------    --------    ----------   ----------   ----------
<S>                                 <C>           <C>           <C>         <C>          <C>          <C>
Outstanding at beginning
  of period .....................      545,500    $     1.42     650,000    $     1.00           --   $       --
    Granted .....................      675,000          0.25     900,500          1.34      650,000         1.00
    Exercised ...................           --            --     (25,000)         1.00           --           --
    Cancelled ...................     (147,000)         0.72    (980,000)         1.10           --           --
                                    ----------    ----------    --------    ----------   ----------   ----------
Outstanding at end of period ....    1,073,500    $     0.74     545,500    $     1.42      650,000   $     1.00
                                    ==========    ==========    ========    ==========   ==========   ==========

Exercisable at end of period ....      380,821    $     1.17     200,000    $     1.39        4,167   $     1.00
                                    ==========    ==========    ========    ==========   ==========   ==========
</Table>


                  The following table summarizes information about stock options
                  outstanding at December 31, 2001:

<Table>
<Caption>
                       Options Outstanding
------------------------------------------------------------------
                Number             Weighted-            Number
Range of      Outstanding           Average          Exercisable
Exercise    at December 31,       Remaining        at December 31,
 Price           2001          Contractual Life          2001
--------    ---------------    ----------------    ---------------
<S>         <C>                <C>                 <C>
$   0.25            625,000           4.3 years             75,342
    1.00            370,000           3.0 years            253,584
    3.35             78,500           3.4 years             51,895
                  ---------                                -------
                  1,073,500                                380,821
                  =========                                =======
</Table>


                  Under APB No. 25, because the exercise price of the Company's
                  employee stock options generally equals the fair value of the
                  underlying stock on the date of grant, no compensation expense
                  is recognized.


                                      F-13
<PAGE>


                            E-XACT TRANSACTIONS LTD.
                 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
                      (EXPRESSED IN UNITED STATES DOLLARS)


7.       STOCKHOLDERS' EQUITY (CONTINUED)

         (c)      Stock-Based Compensation Plans (continued)

                  Statement of Financial Accounting Standards No. 123,
                  Accounting for Stock-Based Compensation, issued in October
                  1995, requires the use of the fair value based method of
                  accounting for stock options. Under this method, compensation
                  cost is measured at the grant date as the fair value of the
                  options granted and is recognized over the exercise period.
                  During the periods ended December 31, 2001 and 2000, the
                  Company issued no options to individuals other than employees
                  and directors. SFAS 123, allows the Company to continue to
                  measure the compensation cost of employee related stock
                  options in accordance with APB 25. The Company has therefore
                  adopted the disclosure-only provision of SFAS 123.

                  Had compensation cost for the Company's share options granted
                  to employees and directors been determined based on the
                  Black-Scholes value at the grant dates for awards as
                  prescribed by SFAS No. 123, pro forma net loss and net loss
                  per share would have been as follows:

<Table>
<Caption>
                                                  Year Ended December 31,
                                           -----------------------------------------
                                               2001           2000           1999
                                           -----------    -----------    -----------
<S>                                        <C>            <C>            <C>
Net loss
  As reported ..........................   $  (270,765)   $(2,973,572)   $  (770,903)
  SFAS No. 123 pro forma adjustment ....      (285,422)      (429,209)        (9,271)
                                           -----------    -----------    -----------
Pro forma net loss .....................      (556,187)    (3,402,781)      (780,174)
                                           ===========    ===========    ===========

Loss per share, as reported ............   $     (0.03)   $     (0.37)   $     (0.17)
SFAS No. 123 pro forma adjustment ......         (0.03)         (0.02)            --
                                           -----------    -----------    -----------
Pro forma loss per share ...............   $     (0.06)   $     (0.39)   $     (0.17)
                                           ===========    ===========    ===========
</Table>


                  The weighted average Black-Scholes option pricing model value
                  of options granted under the share option plan during the
                  periods ended December 31, 2001, 2000 and 1999 were $0.18,
                  $1.04 and $0.17 per share, respectively. The fair value for
                  these options was estimated at the date of grant using the
                  following weighted average assumptions:

<Table>
<Caption>
                                                        Year Ended December 31,
                                                     -----------------------------
                                                      2001        2000      1999
                                                     -------    -------    -------
<S>                                                  <C>        <C>        <C>
Assumption
  Volatility factor of expected market price
    of the Company's shares .....................     144.0%     109.0%       5.3%
  Dividend yield ................................       0.0%       0.0%       0.0%
  Weighted average expected life of
    stock options ...............................    5 years    5 years    3 years
  Risk free interest rate .......................      4.61%      5.32%      6.55%
</Table>


                                      F-14
<PAGE>


                            E-XACT TRANSACTIONS LTD.
                 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
                      (EXPRESSED IN UNITED STATES DOLLARS)


7.       STOCKHOLDERS' EQUITY (CONTINUED)

         (d)      Warrants

                  On August 2, 2000, under an arrangement with a customer, the
                  Company granted warrants to purchase 549,532 shares of the
                  Company. The term of the warrant was two years and will
                  terminate earlier if not exercised on the fifteenth day that
                  the Company's common shares close trading at a price equal to
                  200% of the warrant exercise price of $2.25 per share. The
                  Company recorded a non-cash charge of $320,000. This amount
                  was determined using an option pricing model assuming no
                  dividends, full vesting on date of grant, a volatility of 43%
                  and a weighted-average annualized risk-free rate of 6.0%.

                  On July 28, 1999, and amended January 18, 2000 and February
                  15, 2000, the Company entered into an agreement with Bolder
                  Venture Partners ("BVP") to have BVP complete a financing plan
                  which will include an initial private placement (b), an
                  Initial Public Offering ("IPO") (c), and a Follow-On
                  Placement. In partial consideration of BVP's services, the
                  Company will issue BVP warrants to purchase 1,232,136 shares
                  exercisable for a five-year term from July 28, 1999. 225,000
                  of the Warrants were exercised at $0.25 per share on January
                  18, 2000. As these Warrants became exercisable on August 28,
                  1999, the Company has recorded the fair value of these
                  warrants of $58,320 as a corporate finance fee in the year
                  ended December 31, 1999. The remaining Warrants became
                  exercisable or will be exercisable as follows:

                  (i)      557,136 of the Warrants became exercisable as of
                           October 14, 1999 at a price of $1.00 per share;

                  (ii)     225,000 of the Warrants were exercisable upon
                           completion of the IPO as of March 22, 2000 at a price
                           per share equal to the IPO price (estimated to be
                           $1.00 per share); and

                  (iii)    225,000 of the Warrants will be exercisable
                           immediately upon completion of the Follow-On
                           Placement of not less than $3,000,000, at a price
                           equal to the Follow-On private placement price.

                  The exercise price of all warrants increase by 15% in each of
                  the second, third, fourth and fifth years of the term of the
                  Warrants.


                                      F-15
<PAGE>


                            E-XACT TRANSACTIONS LTD.
                 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
                      (EXPRESSED IN UNITED STATES DOLLARS)


7.       STOCKHOLDERS' EQUITY (CONTINUED)

         (d)      Warrants (continued)

                  The 225,000 Warrants exercised January 18, 2000 were not
                  contingent on obtaining financing and therefore have been
                  accounted for as a compensatory finance fee equal to the fair
                  market value of the shares on August 28, 1999 less the option
                  price which amounted to $58,320. The remaining tranches will
                  be accounted for in a similar manner except any difference
                  between the fair value and the option price will be offset
                  against share capital as receiving the warrants is contingent
                  on raising the applicable capital. On October 14, 1999,
                  557,136 Warrants became exercisable on completion of a private
                  placement. These warrants had a fair value of $142,123 and
                  were recorded as an additional cost of raising the applicable
                  capital. Under the agreement, BVP agreed to serve as corporate
                  and financial advisors to the Company for a period of twelve
                  months, commencing July 1, 1999 at a rate of $10,000 per
                  month.

                  On March 22, 2000 the second tranche of 225,000 warrants
                  vested upon completion of the initial public offering.

         (e)      Initial Public Offering

                  On March 22, 2000, the Company successfully completed its
                  initial public offering in Canada of 2,250,000 shares of the
                  Company's common stock at an offering price of $1.00 per share
                  on the Canadian Venture Exchange ("CDNX").

                  In connection with the Company's Initial Public Offering (the
                  "IPO"), the Company granted to Canaccord Capital Corporation
                  and Haywood Securities Inc. (the "Agents"), an aggregate of
                  225,000 share purchase warrants (the "Agents' Warrants")
                  entitling the Agents up to 225,000 shares of the Company's
                  common stock at any time up to the close of business on the
                  first anniversary of the Company's listing on the CDNX at a
                  price of $1.00 per share. 30,000 of these Agents' Warrants
                  were exercised in September 2000, leaving an aggregate of
                  195,000 Agents' warrants, which expired March 22, 2001.

                  The Company incurred cash costs of $509,435 in connection with
                  the initial public offering. In addition, the Company recorded
                  non-cash share issue costs of $138,744 and $75,000 relating to
                  the issuance of Warrants and common stock as a result of the
                  offering. The Company received net proceeds from the initial
                  public offering of $1,740,565.

         (f)      Special Warrants

                  On April 26, 2001, the Company completed an offering of
                  2,000,000 special warrants at $0.20 per special warrant for
                  total proceeds of $400,000. Each warrants consists of one
                  common share and one purchase warrant. Each purchase warrant
                  will entitle the holder to purchase one additional common
                  share at a price of $0.23 per share in the first year and
                  $0.27 per share in the second year.


                                      F-16
<PAGE>


                            E-XACT TRANSACTIONS LTD.
                 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
                      (EXPRESSED IN UNITED STATES DOLLARS)


7.       STOCKHOLDERS' EQUITY (CONTINUED)

         (f)      Special Warrants (continued)

                  150,000 of the special warrants were purchased by a supplier.
                  The consideration received by the Company was the settlement
                  of a $30,000 trade liability. In October 2001, the special
                  warrants were exercised for 2,000,000 common shares and
                  2,000,000 purchase warrants. Upon conversion, the net proceeds
                  of $393,000 from the special warrants were allocated $196,500
                  to common shares and $196,500 to the purchase warrants based
                  on the relative fair values.


8.       FINANCIAL INSTRUMENTS

         (a)      Fair Value

                  The carrying values of cash, accounts receivable, deposits,
                  accounts payable and accrued liabilities, income taxes payable
                  and advances payable, as reflected in the balance sheet,
                  approximate their respective fair values as at December 31,
                  2001 and 2000 because of the demand or short-term maturity of
                  these instruments.

         (b)      Credit Risk and Economic Dependence

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

                  The Company is subject to credit risk as it earns revenue from
                  a limited number of customers. During the year ended December
                  31, 2001 - $58,661 (year ended December 31, 2000 - $75,973;
                  year ended December 31, 1999 - $58,418) of revenue was derived
                  from a single customer. As at December 31, 2001 accounts
                  receivable included $6,235 (2000 - $45,398) due from a single
                  customer.

         (c)      Foreign Exchange Risk

                  The Company also undertakes certain transactions in Canadian
                  dollars and as such is subject to risk due to fluctuations in
                  exchange rates. The Company does not use derivative
                  instruments to reduce exposure to foreign exchange risk.


                                      F-17
<PAGE>


                            E-XACT TRANSACTIONS LTD.
                 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
                      (EXPRESSED IN UNITED STATES DOLLARS)


9.       RELATED PARTY TRANSACTIONS

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

         (a)      During the year ended December 31, 2001 the Company paid
                  consulting fees of $Nil (year ended December 31, 2000 -
                  $118,196; year ended December 31, 1999 - $181,784) to a
                  corporate stockholder for research, development and computer
                  services;

         (b)      As at December 31, 2001 accounts payable and accrued
                  liabilities include $52,127 (2000 - $58,649) due to a
                  corporate stockholder for operating costs paid on its behalf

         (c)      During the year ended December 31, 2001, the Company incurred
                  interest of $12,364 (year ended December 31, 2000 - $1,973;
                  year ended December 31, 1999 - $Nil) on advances from certain
                  stockholders of the Company;

         (d)      As at December 31, 2001, accounts payable and accrued
                  liabilities include $145,965 (2000 - $86,154) due to
                  stockholders and directors of the Company; and

         (e)      During the year ended December 31, 2001, the Company paid
                  management fees of $27,207 (2000 - $Nil) to a director of the
                  Company.


10.      COMMITMENTS

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

<Table>
<S>                                                                 <C>
2002 .............................................................  $28,516
2003 .............................................................    4,614
2004 .............................................................      627
                                                                    -------
                                                                    $33,757
                                                                    =======
</Table>

11.      INCOME TAXES

         Income tax expense for the periods ended December 31, 2001, 2000 and
         1999 was as follows:

<Table>
<Caption>
                                                 Year Ended December 31,
                                             ------------------------------
                                               2001       2000       1999
                                             -------   ---------   --------
<S>                                          <C>       <C>         <C>
Current ..................................   $    --   $(58,725)   $102,557
Deferred (recovery) ......................        --         --          --
                                             -------   --------    --------
                                             $    --   $(58,725)   $102,557
                                             =======   ========   =========
</Table>


                                      F-18
<PAGE>


                            E-XACT TRANSACTIONS LTD.
                 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
                      (EXPRESSED IN UNITED STATES DOLLARS)


11.      INCOME TAXES (CONTINUED)

         The reported income tax provision differs from the amount computed by
         applying the statutory rate to the loss before income taxes. The
         reasons for this difference and the related tax effects are as follows:

<Table>
<Caption>
                                                         Year Ended December 31,
                                                 -------------------------------------------
                                                     2001           2000             1999
                                                 -----------     -----------     -----------
<S>                                              <C>             <C>             <C>
Statutory tax rate ...........................            35%             35%             35%
Expected income tax (recovery) ...............   $   (94,768)    $(1,061,304)    $  (232,866)
Foreign tax rate differences and other .......        (6,633)         57,975         (48,185)
Losses producing no current tax benefit ......       101,084         782,030         148,054
Non-deductible expenses ......................           317         162,574              --
Benefit of prior year losses (recognized) ....            --              --         (16,172)
Foreign taxes on redomocile of Company .......            --              --         251,726
                                                 -----------     -----------     -----------
                                                 $        --     $   (58,725)    $   102,557
                                                 ===========     ===========     ===========
</Table>


         On July 28, 1999, the Company was continued into the State of Delaware.
         This event resulted in a deemed tax year-end and a taxable gain for
         Canadian tax purposes, based on the excess of the fair market value of
         the Company's assets over their related tax cost. Accordingly, a
         provision for the Canadian taxes on the estimated taxable gain has been
         recorded, which has been partially eliminated by the use of available
         current tax losses in Canada.

         Deferred income taxes result principally from temporary differences in
         the recognition of certain revenue and expense items for financial and
         income tax reporting purposes. Significant components of the company's
         deferred tax assets and liabilities as of December 31, 2001 and 2000
         are as follows:

<Table>
<Caption>
                                                                 December 31,
                                                         --------------------------
                                                            2001            2000
                                                         -----------    -----------
<S>                                                      <C>            <C>
Deferred income tax assets
  Book tax base difference in assets .................   $   354,835    $   170,936
  Net operating tax loss carry forwards ..............     1,301,948        930,084
  Valuation allowance for deferred income tax asset ..    (1,656,783)    (1,101,020)
                                                         -----------    -----------
Net deferred income tax assets .......................            --             --
                                                         -----------    -----------
Deferred income tax liabilities ......................   $        --    $        --
                                                         ===========    ===========
</Table>

         Due to the uncertainty surrounding realization of the deferred income
         tax assets, the Company has 100% valuation allowance against its future
         income tax assets.

         As of December 31, 2001, the Company has U.S. and Canadian tax loss
         carry forwards of approximately $3.6 million, which expire between 2007
         and 2021, available to reduce future years' income for tax purposes.


                                      F-19
<PAGE>


                            E-XACT TRANSACTIONS LTD.
                 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
                      (EXPRESSED IN UNITED STATES DOLLARS)


12.      SEGMENTED INFORMATION

         The Company operates in one segment - electronic commerce services.

         The Company attributes revenue among geographical areas based on the
         location of the customers. During the year ended December 31, 2001, 94%
         of revenues were derived in Canada (year ended December 31, 2000 -
         98%). Long-lived assets include capital assets and are located in
         Canada.

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


                                      F-20
<PAGE>


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

None.

                                    PART III

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

The directors and executive officers of the Company are listed below. Directors
are elected to hold office until the next annual meeting of shareholders and
until their respective successors have been elected and qualified. Executive
officers are elected by the Board of Directors and hold office until their
successors are elected and qualified. The Board of Directors has established a
compensation committee and an audit committee.

<Table>
<Caption>
Name                            Age     Positions
----                            ---     ---------
<S>                             <C>     <C>
Peter Fahlman(2)                 38     President, Chief Executive Officer and
                                        Director

Lance Tracey(1)(2)               55     Director

Dieter Heidrich(1)               62     Director

Paul MacNeill(2)                 47     Director

John Rose(1)                     56     Director

Edmund Shung                     47     Chief Financial Officer
</Table>

(1) Member of the Company's Compensation Committee.

(2) Member of the Company's Audit Committee.

BIOGRAPHICAL INFORMATION

Peter Fahlman -- Mr. Fahlman, has been President of the Company since November
11, 2000 and director since September 1, 1998. Mr. Fahlman was previously the
Vice President of Business Development from September 1, 1998 to November 11,
2000. Mr. Fahlman was a partner in Data Direct Consulting Services, an Internet
software development company, since November, 1997; prior to that he was
President of Prophase Development Corp., an online print services company, from
May 1996 to December 1997; prior to that he was a consultant to Cybernet
Technologies, from September 1995 to April 1996; prior to that he was a partner
in Hyper Sound Recording, a high-tech music retail operation located in Vernon,
British Columbia from May 1989 to January 1996.

Lance Tracey -- Secretary and a director of the Company since September 1,
1998; President of Code Marketing Ltd. since January 1990; President and
Director of Sutton Group Realty Services Inc. from January 1986 to present.


                                      -18-
<PAGE>

Dieter Heidrich -- Managing Director of Opus Capital, LLP, a Boulder, Colorado
venture capital company, since October 1993 and a Director of the Company since
September 1, 1998. Prior to that he was a general partner with Weiss, Peck, and
Greer Venture Partners from October 1986 to October 1993

Paul C. MacNeill -- Partner with Campney & Murphy, Barristers and Solicitors, of
Vancouver B.C., since 1981 and a Director of the Company since September 1,
1999.

John T. Rose -- Mr. Rose is currently an active investor in nine Internet,
software and communications companies. He also serves on the board of FatPipeU,
a nation wide broadband skills training company based in Irvine, California. Mr.
Rose was formerly the Senior Vice-President and General Manager for Compaq
Computer Corporation's enterprise business with the responsibility for twelve
operating divisions and approximately $14 billion in revenue. Prior to that
appointment, he was the Group General Manager for Compaq's Desktop and Consumer
Businesses. Mr. Rose led the acquisitions of both Tandem Computers and Digital
Equipment Corporation. Mr. Rose has been a director of the Company since May 17,
2000.

Edmund Shung -- Chief Financial Officer of the Company since November 1998. Mr.
Shung is currently a part-time independent contractor to the Company. Mr. Shung
devotes 25% of his time to the Company and has served the Company in this
capacity since November 1998. In June 2000 Mr. Shung was appointed CFO and
Secretary of Sourcesmith Industries Ltd. Mr. Shung has also been the CFO of
Sutton Group Financial Services Ltd., a technology based real estate franchise
company from October 1998 to present. Prior to that he was President of
Totemcolor Film Labs Ltd., a photo processing facility, from October 1991 to
November 1995.


                                      -19-
<PAGE>


Other Associations

During the past five years, the principals of the Company have served as
principals of the following reporting issuers during the periods and in the
capacities noted below:

<Table>
<Caption>
                                                         SYMBOL/
PRINCIPAL          REPORTING ISSUER                      EXCHANGE         CAPACITY       PERIOD
---------          ----------------                      --------         --------       ------
<S>                <C>                                   <C>              <C>
Lance Tracey       Sutton Group Financial Services Ltd.  SUG/TSE          Director     12/98 - present
                   I.D. Internet Direct Ltd.             LKC/CDNX         Director     01/93 - 11/99
                                                                          Officer      01/93 - 11/99
                   Sourcesmith Industries Ltd.           SSM/CDNX         Director     06/00 - present

Paul C. MacNeill   American Minerals Fields Inc.         AMZ/TSE          Director     03/98 - present
                   Anaconda Uranium Corp.                ANU/CDNX         Director     12/97 - 12/01
                   Axion Communications Inc.             AXN/CDNX         Director     08/96 - present
                   Diagem International Resource Corp    DGM/CDNX         Director     12/97 - present
                   Jordex Resources Inc.                                  Director     05/95 - present
                   Minefinders Corp. Inc.                MFL/TSE          Secretary    07/95 - present
                                                                          Director     05/95 - present
                   Prospex Mining Inc.                   PRN/CDNX         Director     07/97 - 01/01
                   Unique Broadband Systems Inc.         UBS/CDNX         Secretary    07/97 - 08/97
                                                                          Director     07/97 - 01/01
                   Vision Gate Ventures Limited          VGV/CDNX         Director     12/99 - present

Edmund Shung       Sutton Group Financial Services Ltd   SUG/TSE          Secretary    10/98 - present
                                                                          CFO          10/00 - present
                   Sourcesmith Industries Ltd.           SSM/CDNX         Sec/CFO      06/00 - 03/02
</Table>

There are no family relationships amongst the directors and executive officers.

During the past five years, none of the principals of the Company was a
principal of another reporting issuer that was, during his tenure, struck from
the register of companies (or a similar authority in the issuer's jurisdiction
of incorporation if the issuer was incorporated outside of B.C.), or the
securities of which were the subject of a cease trade or suspension order for a
period of more than 30 consecutive days. Similarly, none of the principals of
the Company has, during the past ten years, been the subject of any penalties or
sanctions by a court or securities regulatory authority relating to the trading
in securities or the promotion, formation or management of a publicly traded
company or involving theft or fraud.

None of the principals of the Company has, during the past five years, been
declared bankrupt or made a voluntary assignment in bankruptcy or made a
proposal under bankruptcy or insolvency legislation or been subject to or
instituted any proceedings, arrangement or compromise with creditors or had a
receiver, receiver manager or trustee appointed to hold his assets.


                                      -20-
<PAGE>


ITEM 10. EXECUTIVE COMPENSATION

The following table sets forth information regarding compensation paid during
the past three fiscal years to the Company's Chief Executive Officer and the
named executive officers as required under the regulation. All figures are in US
dollars.


                           SUMMARY COMPENSATION TABLE

<Table>
<Caption>
                                                                                                 Long term compensation
                           Annual compensation                         Awards                            payouts
                      -----------------------------  ----------------------------------------   -------------------------
        (a)            (b)       (c)         (d)           (e)          (f)           (g)           (h)           (i)

                                                                                  Securities
                                                                    Restricted    underlying                   All other
Name and Principal                                   Other annual     Stock      Option/SAR's      LTIP       compensation
Position              Year   Salary ($)   Bonus ($)   Comp. ($)     Awards ($)       ($)        payouts ($)        ($)
------------------    ----   ----------   --------   ------------   ----------   ------------   -----------   ------------
<S>                   <C>    <C>          <C>        <C>            <C>          <C>            <C>           <C>
Peter Fahlman
 President & CEO      2001     $72,000    $      --  $         --   $       --   $         --   $        --   $         --
 President & CEO      2000      63,780           --            --           --             --            --             --
 Interim President    1999       5,196           --            --           --             --            --             --
 & CEO

Edmund Shung          2001    $     --    $      --  $         --   $       --   $         --   $        --   $         --
 CFO                  2000          --           --            --           --             --            --             --
                      1999          --           --            --           --             --            --             --
</Table>


                      OPTION/SAR GRANTS IN FISCAL YEAR 2001

Prior to the adoption of the stock option plan described below, no stock options
were ever granted to or exercised by executive officers of the Company.

On October 14, 1999, the Board of Directors adopted a stock option plan (the
"Plan"), which provides for incentive stock options and non-statutory options to
be granted to officers, employees, directors and consultants to the Company. The
Plan was amended on June 29, 2001. The exercise price of each stock option
granted shall not be less than the fair market value of the common stock of the
Company listed on the CDNX. The options granted pursuant to the Plan shall vest
according to the terms set forth in each particular grant. The options granted
pursuant to the Plan shall not vest at a rate which is less than 20% per year
from the date of grant. The term of the options cannot exceed five years.
Options to purchase up to 2,095,000 shares of the Company's common stock may be
granted under the Plan. During 2001, 675,000 options were granted to employees
and 50,000 of those options were subsequently cancelled. As of March 2, 2002,
1,073,500 stock options remained outstanding under the Plan.


                                      -21-
<PAGE>


In the fiscal year ending December 31, 2001, stock options were granted as
follows:

                     OPTIONS/SAR GRANTS IN FISCAL YEAR 2001
<Table>
<Caption>
                       Number of     % of total
                        shares        options
                      underlying     granted to
                       options        employees        Exercise    Expiration
     Name              granted      in fiscal year       price       date
     ----             ----------    --------------     --------    ----------
<S>                   <C>           <C>                <C>         <C>
Peter Fahlman          150,000         24.00%           $0.25      23/04/2006
Brian Archer           100,000         16.00%            0.25      23/04/2006
Edmund Shung            35,000          5.60%            0.25      23/04/2006
Shawn Harrison          75,000         12.00%            0.25      23/04/2006
Tara Gregg              50,000          8.00%            0.25      23/04/2006
Derek Thompson          50,000          8.00%            0.25      23/04/2006
Jan Mark                15,000          2.40%            0.25      23/04/2006
John McKitrick          50,000          8.00%            0.25      23/04/2006
Paul MacNeill           25,000          4.00%            0.25      23/04/2006
Lance Tracey            25,000          4.00%            0.25      23/04/2006
K. Dieter Heidrich      25,000          4.00%            0.25      23/04/2006
John Rose               25,000          4.00%            0.25      23/04/2006
                       -------        ------
                       625,000        100.00%
                       -------        ------
</Table>

     AGGREGATED OPTION/SAR EXERCISES FISCAL YEAR END 2001 OPTION/SAR VALUES

<Table>
<Caption>
            (a)                   (b)              (c)                (d)                          (e)
                                                              Number of securities        Value of Unexercised
                                                              underlying unexercised      in-the money options/SARs
                           Shares acquired                    options/SARs at fiscal YE   at fiscal YE
Name                        on exercise      Value Realized   Exercisable/Unexercisable   Exercisable/unexercisable
----                       ---------------   --------------   -------------------------   --------------------------
<S>                        <C>               <C>              <C>                         <C>
Peter Fahlman, President
and CEO                         $Nil             $Nil               123,611/101,389              $Nil/$Nil(1)

Edmund Shung, Chief
Financial Officer               $Nil             $Nil                13,750/26,250               $Nil/$Nil(1)
</Table>

     Note 1: The year-end value represents the difference between the option
     exercise prices of US $0.25 to $1.00 and the current market value of the
     common stock. The market price as at December 29, 2001 was US$0.20 with the
     result that none of the options were in the money.

Compensation of Directors: The directors of the Company are not currently
compensated for serving as directors, each director has been granted an option
to purchase 75,000 shares of Common Stock at $1.00 per share. 25,000 shares
vested on January 12, 2000 and 25,000 will on each anniversary date through
2002. On August 22, 2001, an additional 25,000 stock options were granted to
each of the directors exercisable at a price of $0.25 per share. These options
vest over a period of 36 months. Outside director's travel expenses are
reimbursed by the Company. Mr. Fahlman receives compensation as an officer of
the Company.



                                      -22-
<PAGE>

ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

The following table sets forth, as of March 22, 2002, the number of the
Company's Common Shares beneficially owned by (a) owners of more than five
percent of the Company's outstanding Common Shares who are known to the Company
and (b) the directors and executive officers of the Company individually, and
the executive officers and directors of the Company as a group, and (c) the
percentage of ownership of the outstanding Common Shares represented by such
shares. The security holders listed below are deemed to be the beneficial owners
of shares of Common Shares underlying options and warrants which are exercisable
within 60 days from the above date.

Unless otherwise indicated, the shareholders listed possess sole voting and
investment power with respect to the shares shown. The information appearing
below concerning persons other than officers and directors of the Company is to
the Company's best knowledge based on information obtained from the Company's
transfer agent.

<Table>
<Caption>
                   Name and Address of            Amount and Nature
Title of Class     Beneficial Owner              of Beneficial Owner    Percent of Class
--------------     -------------------           -------------------    ----------------
<S>                <C>
Common             Peter Fahlman                        101,389(1)            0.95%
                   855-55A Street,
                   Delta. B.C., V4M 3M3

Common             Paul C. MacNeill                      81,250(2)            0.76%
                   2100-1111 West Georgia
                   Street Vancouver, B.C.
                   V6J 5B3

Common             Lance Tracey                         101,250(3)            0.95%
                   1628-555 West Hastings
                   Street, Vancouver, B.C.
                   V6B 4N6

Common             K. Dieter Heidrich                 1,279,610(4)           12.09%
                   230 Green Rock Drive,
                   Boulder, Colorado  80302

Common             John T. Rose                         861,250(5)            8.14%
                   13826 Vintage Center Drive,
                   Houston, Texas, 77069
</Table>


                                      -23-
<PAGE>


<Table>
<Caption>
                   Name and Address of            Amount and Nature
Title of Class     Beneficial Owner              of Beneficial Owner    Percent of Class
--------------     -------------------           -------------------    ----------------
<S>                <C>
Common             Edmund Shung                          27,750(6)            0.26%
                   C/O 1628-555 West Hastings
                   Street, Vancouver, B.C.
                   V6B 4N6

Common             Sutton Group Financial             1,750,000(7)           16.67%
                   Services Ltd.


Common             DataDirect Holdings Ltd.           1,750,000(8)           16.67%


Common             Acacia Management Ltd.               700,000               6.67%
                   Kuttellgasse 4 CH-8001,
                   Zurich, Switzerland

Common             Bolder Venture Partners LLC          782,136(9)            6.93%
                   1327 Spruce Street, Suite
                   300, Boulder, Colorado
                   80302

Common             Layton Management Ltd.               925,000(10)           8.10%
                   1797 Layton Drive, North
                   Vancouver, B.C. V7H 1X7

Common             Maine Securities Ltd.                925,000(11)           8.10%
                   3251 West 3rd Avenue,
                   Vancouver, B.C. V6K 1N5

Common             Officers and directors             2,452,499(12)          23.17%
                   as a group
</Table>


(1)      Consists of 101,389 options exercisable presently or within 60 days.

(2)      Consists of 81,250 options exercisable presently or within 60 days.

(3)      Includes 81,250 options exercisable presently or within 60 days and
         20,000 shares held in the name of Mr. Tracey's wife.

(4)      Includes 81,250 options exercisable presently or within 60 days, 45,450
         of the shares are held jointly by Mr. Heidrich and his wife. 80,000
         shares are held by Heidrich Family LLP, 882,000 shares are owned by
         Opus Capital Fund, LLC of which Mr. Heidrich is a general partner and
         manager of the fund giving beneficial ownership to Mr. Heidrich,
         190,910 shares are held by Opus Capital LLC.

(5)      Included 81,250 options exercisable presently or within 60 days.

(6)      Includes 13,750 options exercisable presently or within 60 days


                                      -24-
<PAGE>


(7)      Mr. Tracey, a director of the Company is a director and officer Sutton
         Group Financial Services Ltd. ("Sutton"), and he and his wife are the
         beneficial owners of 16.26% and 12.035% respectively, of the issued and
         outstanding shares of Sutton.

(8)      Mr. Fahlman, a director of this company, is a director of DataDirect
         Holdings, Inc. ("DataDirect"), a private company and is a beneficial
         shareholder of 40% of the issued and outstanding shares of DataDirect.

(9)      Consists of 782,136 warrants exercisable presently or within 60 days.

(10)     Consists of 925,000 warrants exercisable presently or within 60 days.

(11)     Consists of 925,000 warrants exercisable presently or within 60 days.

(12)     Includes 440,139 options held by the directors and officers as
         disclosed above, exercisable presently or within 60 days.


ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

The Company has entered into transactions with its officers and directors, and
with principal shareholders listed in Item 11 or affiliated entities as
described below.



               EMPLOYMENT CONTRACTS AND TERMINATION OF EMPLOYMENT
                       AND CHANGE-IN-CONTROL ARRANGEMENTS

Peter Fahlman -- On November 26, 1999 the Company and Mr. Fahlman, the current
President and CEO and a director of the Company and formerly the Vice President
of Business Development, entered into an employment agreement commencing on
November 26, 1999. Under the terms of the agreement, the Company will pay to Mr.
Fahlman the sum of Cdn. $7,500 per month. Effective November 16, 2000 Mr.
Fahlman's salary was increased to CAD $ 9,860 per month or US$6,000 per month
Mr. Fahlman continues to hold incentive stock options to acquire 50,000 shares
of the Company's common stock at a price of US $1.00 per share for a period of
five years. The options vest over a thirty-six month period. The options vest
immediately if Mr. Fahlman is terminated for good reason or is terminated
without cause. In his capacity as a director of the Company, Mr. Fahlman was
subsequently granted stock options to acquire an additional 25,000 common shares
at $1.00 per share which stock options vested immediately. On April 24, 2001 Mr.
Fahlman was granted 150,000 stock options exercisable at a price of $0.25 per
share. These options vest over a period of 36 months.

Other Employment Agreements

The Company entered into employment agreements with Brian Archer and Robert
Roker. Mr. Roker and Mr. Archer were each paid CAD$7,500 per month. The
employment agreements have no fixed term. Under the agreements the employees
were each granted incentive stock options to purchase 50,000 shares of the
Company's common stock at exercise prices of US $1.00 per share. On August 22,
2001, Mr. Archer and Mr. Roker were granted a total of 150,000 stock options
exercisable at $0.25 per share. These options vest over a period of 36 months.

The employment agreements also contain twelve months non-competition and
confidentiality provisions, and provide for the immediate vesting of all stock
options and six months severance pay in the event the agreement is terminated by
the employee as a result of a failure by the Company


                                      -25-
<PAGE>


to pay an amount due to the employee under the agreement, or if the agreement is
terminated by the Company without cause.

Mr. Roker's employment with the Company was terminated on September 11, 2001.
Mr. Roker's options were cancelled thirty days after he left the Company.

The Company and executives of the Company have entered into confidentiality
agreements that include non-confidential and non-disclosure provisions with
respect to confidential information obtained by the executives in the course of
their employment with the Company.


RELATED PARTIES

Consulting Agreement

The Company is party to a consulting agreement (the "Consulting Agreement") with
Bolder Venture Partners L.L.C. ("Bolder") made July 28, 1999 and amended on
February 15, 2000. Bolder Venture Partners is a limited liability company
incorporated under the laws of the State of Colorado.

Under the terms of the Consulting Agreement, Bolder agreed to provide consulting
services to the officers of the Company relating to matters of corporate
development, strategic planning, raising of capital and other financial matters,
and to assist with certain private placements and public offerings of the
Company's securities, including this offering. In consideration of these
services, the Company agreed to pay Bolder Venture Partners a monthly retainer
of US $10,000, and purchase warrants to acquire up to 1,232,136 shares of the
Company's common stock for a period of five years from July 28, 1999. The
remaining warrants will be exercisable as follows:

     o    225,000 of the warrants at US $0.25 per share on July 28, 1999 were
          exercised;

     o    557,136 at US $1.00 per share as amended on February 15, 2000;

     o    225,000 at US $1.00 per share upon completion of this offering; and

     o    225,000 at a price per share equal to the price per share under a
          future private placement of not less than US $3,000,000, if such a
          private placement is made.

The exercise price of all of the Warrants referred to herein will increase by
15% in each of the second, third, fourth and fifth year of the term of the share
purchase warrants until exercised. The exercise price of the warrants as at
March 22, 2002 was approximately $1.32. The term of the Consulting Agreement
ended on June 30, 2000.


Sutton Group Financial Services Ltd.

The Company has accounts payables and accrued liabilities of $52,127
(2000-$58,649) due to Sutton Group Realty Services Ltd. ("SGRS") for operating
costs paid by SGRS on behalf of the Company. SGRS is a wholly owned subsidiary
of Sutton Group Financial Services Ltd. ("Sutton"). Sutton is 16.26%
beneficially owned by Lance Tracey.


                                      -26-
<PAGE>


                                     PART IV

ITEM 13. EXHIBITS AND REPORTS ON FORM 8-K

(a) EXHIBITS. The following Exhibits are filed herewith or have been previously
filed with the Securities and Exchange Commission and are incorporated by
reference herein:

<Table>
<Caption>
EXHIBIT
NUMBER   DESCRIPTION OF EXHIBIT
-------  ----------------------
<S>      <C>
  3.1    Certificate of Domestication of E-xact Transactions Ltd.*

  3.2    Certificate of Incorporation of E-xact Transactions Ltd.*

  3.3    Bylaws*

 10.1    Amended Sponsorship Agreement dated January, 2000 between E-xact
         Transactions Ltd., Inc. and Canaccord Capital Corporation*

 10.2    Lease dated April 22, 1999 between Harbour Centre Complex Limited as
         attorney-in-fact for Lord Realty Holdings Limited and Privest
         Properties Ltd. (Landlord) and E-xact Transactions Ltd.*

 10.3    Stock Option Plan*

 10.4    Letter Agreement dated September 16, 1999 between E-xact Transactions
         Ltd. And Ted Henderson.*

 10.5    Letter Agreement dated July 28, 1999 between E-xact Transactions Ltd.
         And Bolder Venture Partners, LLC.*

 10.6    Management Agreement dated April 15, 1999 between DataDirect Holdings,
         Inc. and Peter Fahlman, and Robert Roker, and E-xact Transactions Ltd.*

 10.7    Form of Employment Agreement executed between E-xact Transactions Ltd.
         and each of Peter Fahlman, Robert Roker and Brian Archer**

 10.8    Confidentiality Agreement dated December 10, 1999 between E-xact
         Transactions Ltd. and Ted Henderson**

 10.9    Amended Letter Agreement dated January 18, 2000 between E-xact
         Transactions Ltd. and Bolder Venture Partners, LLC.***

 10.1    Agency Agreement Amendment dated January 19, 2000 between E-xact
         Transactions Ltd. and Canaccord Capital Corporation.***

10.11    Sublease Agreement dated December 14, 1999 between E-xact Transactions
         Ltd. and Kinder Morgan, Inc.***

 23.1    Consent of Deloitte & Touche LLP, Independent Auditors.
</Table>
---------

     *    Filed with Registration Statement on Form SB-2 filed October 22, 1999.

     **   Filed with Registration Statement on Amendment No. 1 to Form SB-2
          filed December 22, 1999.

     ***  Filed with Registration Statement Amendment No. 2 to Form SB-2 filed
          February 8, 2000.

     **** Filed with Registration Statement Amendment No. 3 to Form SB-2 filed
          February 11,2000.

     b)   Reports on Form 8-K. During the last quarter of the period covered by
          this report:

          There were no reports on Form 8-K filed during the last quarter of the
          Company's fiscal year ended December 31, 2001.


                                      -27-
<PAGE>


                                   SIGNATURES

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

E-xact Transaction Ltd.

Date: April 1, 2002                            By: /s/ Peter Fahlman
      -------------                                -----------------------------
                                                   Peter Fahlman
                                                   President and CEO


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

<Table>
<Caption>
Signatures                Title                             Date
----------                -----                             ----
<S>                       <C>                               <C>
/s/ Peter Fahlman         President and                     April 1, 2002
-------------------       Director
Peter Fahlman

/s/ Edmund Shung          Chief Financial Officer and       April 1, 2002
-------------------       Principal Accounting Officer
Edmund Shung

/s/ Lance Tracey          Director                          April 1, 2002
-------------------
Lance Tracey

/s/ Dieter Heidrich       Director                          April 1, 2002
-------------------
Dieter Heidrich

 /s/  John Rose           Director                          April 1, 2002
-------------------
John Rose

 /s/ Paul MacNeill        Director                          April 1, 2002
-------------------
Paul MacNeill
</Table>


                                      -28-
<PAGE>

                               INDEX TO EXHIBITS

<Table>
<Caption>
EXHIBIT
NUMBER   DESCRIPTION OF EXHIBIT
-------  ----------------------
<S>      <C>
  3.1    Certificate of Domestication of E-xact Transactions Ltd.*

  3.2    Certificate of Incorporation of E-xact Transactions Ltd.*

  3.3    Bylaws*

 10.1    Amended Sponsorship Agreement dated January, 2000 between E-xact
         Transactions Ltd., Inc. and Canaccord Capital Corporation*

 10.2    Lease dated April 22, 1999 between Harbour Centre Complex Limited as
         attorney-in-fact for Lord Realty Holdings Limited and Privest
         Properties Ltd. (Landlord) and E-xact Transactions Ltd.*

 10.3    Stock Option Plan*

 10.4    Letter Agreement dated September 16, 1999 between E-xact Transactions
         Ltd. And Ted Henderson.*

 10.5    Letter Agreement dated July 28, 1999 between E-xact Transactions Ltd.
         And Bolder Venture Partners, LLC.*

 10.6    Management Agreement dated April 15, 1999 between DataDirect Holdings,
         Inc. and Peter Fahlman, and Robert Roker, and E-xact Transactions Ltd.*

 10.7    Form of Employment Agreement executed between E-xact Transactions Ltd.
         and each of Peter Fahlman, Robert Roker and Brian Archer**

 10.8    Confidentiality Agreement dated December 10, 1999 between E-xact
         Transactions Ltd. and Ted Henderson**

 10.9    Amended Letter Agreement dated January 18, 2000 between E-xact
         Transactions Ltd. and Bolder Venture Partners, LLC.***

 10.1    Agency Agreement Amendment dated January 19, 2000 between E-xact
         Transactions Ltd. and Canaccord Capital Corporation.***

10.11    Sublease Agreement dated December 14, 1999 between E-xact Transactions
         Ltd. and Kinder Morgan, Inc.***

 23.1    Consent of Deloitte & Touche LLP, Independent Auditors.
</Table>
---------

     *    Filed with Registration Statement on Form SB-2 filed October 22, 1999.

     **   Filed with Registration Statement on Amendment No. 1 to Form SB-2
          filed December 22, 1999.

     ***  Filed with Registration Statement Amendment No. 2 to Form SB-2 filed
          February 8, 2000.

     **** Filed with Registration Statement Amendment No. 3 to Form SB-2 filed
          February 11,2000.