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

                                  FORM 10-KSB
 Annual Report Under Section 13 Or 15(d) Of The Securities Exchange Act Of 1934

                    For the fiscal year ended June 30, 2002.

                                CityXpress Corp
                                ---------------
                               (Name of business)
           Florida                                          98-0232838
           -------                                          ----------
   (State of incorporation)                       (IRS Employer Identification)

           Suite 200-1727 West Broadway Vancouver, BC Canada V6J 4W6
           ---------------------------------------------------------
                   (Address of principal executive offices)

    Issuer's Telephone Number 604-638-3811 Issuer's Fax Number 604-638-3808

         Securities registered under Section 12(g) of the Exchange Act:
                  Common Shares, Par Value of $0.001 per Share
                  --------------------------------------------
                                (Title of Class)

                   Name of each exchange on which registered:
                            NASD OTC BULLETIN BOARD
                            -----------------------

Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Exchange Act during the past 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 [ ]

State issuer's revenues for its most recent fiscal year ended June 30, 2002 is
$414,530.

The aggregate market value of the voting common equity held by non-affiliates
computed at the average bid and asked price of common equity, as of September
21, 2002 based on 13,841,595 non-affiliate common shares is $553,664.

State the number of shares outstanding of each of the issuer's classes of
common equity, as of the latest practicable date: September 27, 2002 24,308,175
common shares

Check if there is no disclosure of delinquent filers in response to Item 405 of
Regulation S-B contained in this form, and no disclosure will be contained, to
the best of registrant's knowledge, in definitive proxy or information
statements incorporated by references in PARTIII of this Form 10-KSB or any
amendment to this Form 10-KSB [ ]

Transitional Small Business Disclosure Format  (Check one): Yes [X] No [ ].
--------------------------------------------------------------------------------


                                       1
<PAGE>

TABLE OF CONTENTS

<TABLE>
<CAPTION>
<S>      <C>                                                                                           <C>
PART I                                                                                                 4
ITEM 1.  Description Of Business.....................................................................  4
ITEM 2.  Description Of Property.....................................................................  13
ITEM 3.  Legal Proceedings...........................................................................  13
ITEM 4.  Submission Of Matters To A Vote Of Security Holders.........................................  13

PART II                                                                                                14
ITEM 5.  Market Price Of And Dividends On The Registrant's Common Equity And Other
Shareholder Matters..................................................................................  14
ITEM 6.  Management's Discussion And Analysis Or Plan Of Operation...................................  15
ITEM 7.  Financial Statements........................................................................  23
ITEM 8.  Changes In And Disagreements With Accountants...............................................  24

PART III                                                                                               25
ITEM 9.  Directors Executive Officers And Significant Employees: Compliance With
Section 16(A) Of The Exchange Act....................................................................  25
ITEM 10.  Remuneration Of Directors And Executive Officers...........................................  28
ITEM 11.  Security Ownership Of Management And Certain Securityholders...............................  33
ITEM 12.  Interest Of Management And Others In Certain Transactions..................................  35
ITEM 13.  Compliance With Section 16(A) Of The Exchange Act..........................................  37
ITEM 14.  Reports On Form 8K.........................................................................  37

PART F/S                                                                                               40

PART III EXHIBITS                                                                                      41
</TABLE>


                                       2
<PAGE>

NOTE REGARDING FORWARD LOOKING STATEMENTS

         Except for statements of historical fact, certain information
contained in this annual report constitutes "forward-looking statements,"
including without limitation statements containing the words "believes,"
"anticipates," "intends," "expects" and words of similar import, as well as all
projections of future results.

         Such forward-looking statements involve known and unknown risks,
uncertainties and other factors which may cause the actual results or
achievements of the Company to be materially different from any future results
or achievements of the Company expressed or implied by such forward-looking
statements. Such factors include, but are not limited to the following: under
capitalization; unpredictability of future revenues; competition; risks of
technological change; the Company's dependence on key personnel; dependence on
continued growth in use of the Internet; the Company's ability to protect its
intellectual property rights and uncertainty regarding infringing intellectual
property rights of others; government regulations; and the other risks and
uncertainties described in this annual report.


                                       3
<PAGE>

PART I

ITEM 1.  DESCRIPTION OF BUSINESS

GENERAL

         CityXpress Corp (the "Company"), a Vancouver-based technology company,
has developed a suite of online products that provide newspapers with powerful
solutions through which they can extend their position as the dominant means
for local advertisers to promote themselves to local consumers. The Company's
auction product allows newspapers to auction vendor's products in exchange for
advertising credits with the newspaper, with the newspaper retaining the cash
from all products that are sold in the auction. The Company's online special
sections, designed to complement the sections newspapers run regularly in their
print editions, integrates niche editorial content with advertising and
promotional tools that leverage a newspaper's brand and traffic. Through
alliances with newspapers, CityXpress is building a North American presence for
its products, utilizing the advertising sales forces of its customers to sell
its suite of promotional products.

         The Company's XpressAuctions(TM) product offers newspapers the
opportunity to boost advertising sales to local merchants through auctions that
the newspaper sponsors throughout the year. The program delivers incremental
revenue to the newspaper, as they retain the cash generated from the auction,
and a unique low-cost promotion to the merchant who receives advertising
credits with the newspaper equivalent to the retail value of the merchandise
placed in the auction. XpressAuctions(TM) provides a complete package for the
management and running of the newspaper's auction, with extensive workflow
features built in to ease the work effort required by the newspaper. The
auction is hosted by CityXpress on its high capacity servers and complete
support is provided to help the newspaper launch, sell and implement a
successful auction program.

         As well as enriching the content on their web sites, the Company's
Special Sections offer newspapers a proven means of engaging print sales reps
in the sale of online products. Sales campaigns can now be implemented that
co-ordinate the selling of print and online products around a niche Special
Section, so that a single call to an advertiser can result in the sale of a
package of print and online advertising and promotions. The Special Section, a
well-used device to "spike" print advertising revenue, becomes the focal point
for a sales blitz. By rolling out online Special Sections throughout the year
in conjunction with their print equivalents, newspapers can effectively engage
their print sales staff in their online efforts throughout the year.

         Through alliances with newspapers whose portals have established a
dominant position in their markets, the Company enjoys two significant
advantages:

    -    We leverage our partners' brand and the traffic they are already
         generating to their sites
    -    We gain immediate distribution for our products in our partners'
         markets through their print sales force.

         Our solutions appeal to our partners' local advertising customers
because:

    -    They are cost effective and easy to implement


                                       4
<PAGE>

    -    They capture viewers from the portal, driving traffic both online and
         off-line to point of purchase.

CORPORATE HISTORY

         The Company was incorporated as a Florida corporation on January 15,
1981 as Wicked Wings of Buffalo (Wicked Wings), a non-operating company traded
on the NASD OTC Bulletin Board. Pursuant to a share purchase agreement dated
January 7, 1999, the shareholders of WelcomeTo Search Engine Inc. sold their
100% interest in WelcomeTo Search Engine Inc. to the Company in consideration
for 8,510,000 shares of the Company, which represented a controlling interest
of 62.5%. This transaction was considered an acquisition of the Company by
WelcomeTo Search Engine and was treated as a recapitalization of WelcomeTo
Search Engine and the reverse acquisition of the Company by WelcomeTo Search
Engine for accounting purposes. For purposes of acquisition, the fair value of
the net assets of the Company amounted to $724,989 and was ascribed to the
5,100,000 previously outstanding common shares of the Company deemed to be
issued in the acquisition. The reverse acquisition resulted in one-time costs
of $225,000 for finder's fees pertaining to the acquisition of WelcomeTo which
was paid for by the issuance of 450,000 common shares issued in an offering
exempt from registration under Regulation S promulgated under the Securities
Act to two Canadian companies. The cost of recapitalization has been charged
against stockholders' equity.

         On January 27, 1999, the Company acquired 100% of the issued and
outstanding shares of Xceedx Technologies Inc., a private British Columbia,
Canada company incorporated on February 11, 1994 whose principal business was
providing Internet technology services and eCommerce software solutions. The
acquisition was accounted for by the purchase accounting method in which the
results of operations have been included in the Company's accounts from the
date of acquisition. The Company issued 6,250,000 common shares for net assets
of $875,000.

         On August 27, 1999, the Company changed its name to CityXpress.com
Corp. The Company's web site is located at www.cityxpress.com. Information
contained in the web site does not constitute a part of this filing.

         On November 29, 2001, the Company changed its name to CityXpress Corp
from CityXpress.com Corp.

CORPORATE STRUCTURE

         CityXpress Corp has the following corporate structure:

         -    A Florida registered public company called CityXpress Corp

         -    CityXpress Corp has two private Canadian-based subsidiaries:

                  -    WelcomeTo Search Engine Inc.

                  -    Xceedx Technologies Inc.

         All financial reporting for the Company is a consolidation of these
three companies.


                                       5
<PAGE>

INDUSTRY BACKGROUND

         Newspapers have long been the primary vehicles through which local
merchants promote their products and services to local consumers. Alone for
years in most markets with few well-funded competitors, newspapers have built
tremendous brand equity. With the advent of the Internet, they moved quickly to
protect their two major sources of advertising revenue, classified and display,
by establishing local web portals to complement their print operations.
Although these sites benefited from superior brand awareness, newspapers are
being seriously challenged by powerful new online only competitors.

         According to studies released by the Newspaper Association of America
(NAA), newspaper sponsored online properties are being outperformed when
measured against the benefits that pure online competitors such as AOL
DigitalCity, CitySearch and Monster.com are delivering to local merchants. This
represents a direct threat to the heart of a newspaper's display and classified
advertising revenue. Newspapers recognize that how they meet this challenge
will directly impact their long-term ability to maintain brand equity and
market share.

         Over and above the external threat, newspapers face the challenge of
quickly adapting business practices that have evolved over decades to meet the
demands of an Internet-based business. Paid subscriptions, one of their major
sources of revenue in the print world, are unpopular in an online environment
where users are provided free access to a vast array of content. Online
advertising revenue is expected to fill this void but the amount of revenue
that is being generated today is insufficient to support a dedicated online
sales force. Newspapers must engage their existing print sales forces to
profitably generate online revenue from their sites.

         Such efforts have met with mixed success, as print reps have resisted
selling online products for a number of reasons. Fear of cannibalization of
their print advertising revenue and the unwillingness to commit time to selling
lower cost online products at the expense of higher grossing print advertising
have been the major deterrents to the drive to leverage a large installed print
sales force.

TARGET MARKET (1)

         The Company distributes its full suite of solutions through alliances
with media companies who have the capacity to sell our advertising and
promotional products in their local markets through the sales forces employed
by their network of newspapers and television stations. The Company's target
market includes both daily and weekly newspapers.

         25 media companies who control 711 daily newspapers with a combined
circulation of 40 million readers dominate the industry in the US. In addition
to the dailies controlled by the top 25 US companies, there are 744 American
dailies owned by smaller companies. In Canada, there are 105 dailies. Of the
1,560 dailies in the US and Canada, 1,325 daily newspapers, 85% of the total,
now operate portal sites.

         Daily newspaper portal sites leverage the well-established brand of
their newspaper and ongoing promotion within their paper to drive significant
traffic to their sites. Nine of the top 20 trafficked news sites on the
Internet, according to a study by Nielson/Net Ratings that was conducted in
August 2002, are operated by daily newspapers or newspaper groups.


                                       6
<PAGE>

<TABLE>
<CAPTION>
                   Number of Daily Newspapers by Circulation
Total Newspapers         <50,000        50,001 to 100,000        100,001 to 250,000        Over 250,000
<S>                      <C>            <C>                      <C>                       <C>
     1,560                1,316                126                       74                     44
</TABLE>

                                    [CHART]

         Note 1.) Data supplied by the Newspaper Association of America.

         In addition to 1,560 daily newspapers, there are 10,905 American and
825 Canadian non-dailies operating a total of approximately 1,899 portal sites.

         The Company's products have been sold successfully in both large and
small markets and by the sales staff of both daily and non-daily newspapers.
Newspapers that have participated in our special section program for a year
have on average launched three Special Sections. Although XpressAuctions(TM) is
a relatively new product, our earliest customers are planning to launch a
second auction within six months of the first. As demonstrated by our
performance to date, our products are appropriate to the needs of both small
and large newspapers.

CITYXPRESS PRODUCTS

         The Company has developed a suite of proprietary products that are
used to deliver a range of services to our partners through our Internet server
facility. These services are integrated into our partner's sites as branded
auctions or special sections. Each of these service offerings, run on our web
and database servers, provides our partners with additional content for their
sites and provides their sales forces with a variety of revenue-generating
services that can be sold to local businesses. The Company provides our
partners with sophisticated Internet-based tools to manage the content within
each of the modules.

XPRESSAUCTIONS(TM)

         XpressAuctions(TM) provides a complete environment to allow a
newspaper to set up, run and fulfill an auction. A comprehensive administrative
workflow environment is provided to allow the newspaper to set up and manage
all aspects of an auction, from entering product information and graphics
directly into the auction database to collecting payments from successful
bidders. The auction engine automatically manages an auction when it is in
progress, from managing bidder registrations to accepting bids and determining
and posting leading bids.


                                       7
<PAGE>

A marketing subsystem is incorporated that, during the course of the auction,
provides bidders with messages encouraging them to continue bidding and with
bid confirmations that include coupons for vendors on whose products they have
bid. A "reverse publishing" feature is also incorporated that automatically
produces a print catalogue of items from the online database in a format
specified by the newspaper. A post-auction fulfillment system provides the
newspaper with online and telephone facilities to collect bids and applicable
taxes from the winning bidder.

XPRESSSECTIONS(TM)

         XpressSections offer a group of stories and features related to the
focus of the special section. To appeal and draw readers back to the site on an
ongoing basis, stories are refreshed daily. As well as the current day's
stories, readers can find previous stories archived by topic (e.g., Decorating
or Home Improvement). From the special section, users can access related
business profiles, a coupon flyer and a shopping guide. Large format, banner
and tile ads may be sold and scheduled on the various pages of a special
section. CityXpress provides the editorial content for the special sections
which is licensed from content providers under content agreements such as
Tribune Media Service, United Press International, Universal Press Syndicate
and Washington Post Writers Group.

         The Company has pioneered the use of contextual links to display
related products and services alongside the editorial copy within a Special
Section. Links are generated automatically based on the applicable promotional
products sold into a Special Section. Contextual links increase the results
enjoyed by an advertiser, as they relate the promotion being displayed to the
niche content of the section and deliver this promotion to a qualified
consumer.

         Similar to there print equivalents, The Company's online Special
Sections targets niche consumers and provide advertisers with direct access to
this valuable audience. XpressSections content areas include:

<TABLE>
     <S>      <C>                                  <C>      <C>
     -------------------------------------------------------------------------------
     -        Home & Garden                        -        Automotive
     -------------------------------------------------------------------------------
     -        Health & Wellness                    -        Weddings
     -------------------------------------------------------------------------------
     -        Outdoors & Recreation                -        Personal Finance
     -------------------------------------------------------------------------------
     -        Dining & Entertainment               -        Senior Living
     -------------------------------------------------------------------------------
     -        Women's Magazine                     -        Holidays
     -------------------------------------------------------------------------------
</TABLE>

OTHER PROPRIETARY INTERNET PRODUCTS

The following products have been developed by CityXpress and, with the
exception of XpressCoupons that is offered as part of both our auction and out
special section products, are only sold as part of our XpressSections product
line.

XPRESSCOUPONS(R)
         The XpressCoupons system is designed to build traffic to a company's
storefront and decrease the cost of customer acquisition. XpressCoupons provide
a means for both online and offline redemption. Online redemption is provided
through the ability to link a banner ad promoting a specific product directly
to the shopping basket of a vendor's eCommerce site. Offline redemption is
provided through the ability for the user to print the coupon, complete with
bar code, for in-store redemption. The XpressCoupons system is implemented as
part of both XpressAuctions(TM) (where it can be configured to deliver a
vendors' coupons to individuals


                                       8
<PAGE>

bidding on the vendor's products) and XpressSections (where available coupons
are linked to and displayed alongside editorial content and in a advertiser's
Business Profile).

XPRESSPROFILES(TM)
         XpressProfiles provide advertisers with a business profile that
includes company name, address, telephone numbers, web site URL, email address
and a 250-character business description. Business profiles also highlight
other promotions that the company has purchased, for example discount coupons
or print ads that are being displayed online; access to these promotions is
provided from links automatically embedded in the business listing.
XpressProfiles are offered in conjunction with XpressSections where access to
business profiles is provided by links that are displayed alongside editorial
content.

XPRESSSHOPPINGGUIDE(TM)
         XpressShoppingGuide allows product listings to be set up and
maintained for multiple vendors as part of a Shopping or Gift Guide. The
shopping guide allows businesses to promote products or services with the
option of allowing viewers to purchase online or to request more information
directly from the vendor. Products in the shopping guide can be linked to
XpressCoupons to encourage users to click-through for discounts.
XpressShoppingGuide is offered in conjunction with XpressSections. Products, as
well as being listed in the Special Section's shopping guide, are listed under
each company's Business Profile and as a link under the Merchandise section
next to editorial content.

XPRESSSTORES(TM)
         XpressStores provides a small business with the ability to build and
maintain an electronic storefront through a browser-based Internet application.
Through a wizard, each user controls the look-and-feel of the site and
configures his/her own payment, tax, shipping options and other business
functions. Products in XpressStores can be linked to XpressCoupons to encourage
users to click-through for online discounts. XpressStores is offered in
conjunction with XpressSections where the electronic storefront is listed under
each company's Business Profile and as a link under the Stores & Kiosks section
next to Special Section editorial content.

XPRESSKIOSKS/WEB BROCHURES(TM)
         XpressKiosks allows a business to build and maintain a three-page
marketing brochure site by selecting templates and adding their own text and
graphics. Companies may link their online stores to their Kiosk. XpressKiosks
is offered in conjunction with XpressSections and are listed under each
company's Business Profile, and under the Kiosks section next to Special
Section editorial content.

XPRESSEXPERTS(TM)
         XpressExperts allows a business to profile itself as a local expert on
a topic of their choice, providing readers with the means to post questions to
the expert and the expert with the tools to manage and respond to questions
that are posted. XpressExperts is offered in conjunction with XpressSections
and links to XpressExperts sites are incorporated into the applicable Special
Section.

TECHNOLOGY PLATFORM

         The Company has built a proprietary software development platform,
XpressWorks, which is used to develop our next generation of products.
XpressWorks development was completed in November 2000. XpressWorks is designed
to speed the development and


                                      9
<PAGE>

deployment of new applications. The Company has ported their XpressWorks
application framework and applications to J2EE architecture. This has allowed
for a quicker development cycle and for more robust applications. The port of
the application framework was completed in September 2001. The port of the last
application was completed in August 2002

         In conjunction with the application development several new enterprise
level systems were deployed. This includes a network load balancer, server
clustering, and management systems. Given the scale of the XpressAuctions(TM)
deployments this allows us to effectively and confidently operate this
application.

         The Company's development program is committed to adding other
products that will grow the number and attractiveness of our offerings. The
focus of new development will be on e XpressAuctions(TM). This product will be
enhanced with extended fulfillment and production features. In addition to the
XpressAuctions(TM) product the promotion based products incorporated in Special
Sections will be extended as the market warrants.

         During the year ended June 30, 2002, the Company capitalized $122,886
of its costs relating to the development of new products. These costs will be
amortized over the next three years.

PRODUCT DEVELOPMENT

         The Company's in-house development staff develops our auction and
special section software products. Our product development environment is based
upon industry-standard technologies, including Linux, Java Server, Microsoft NT
Server, and SQL Server. As of June 30, 2002, the Company employed 8 developers
and software engineers.

         The Company has spent approximately $280,836 for the year ended June
30, 2002 and $348,765 for the year ended June 30, 2001 on company-sponsored
research and development activities, expensing both these amounts. The Company
has also spent $122,886 for the year ended June 30, 2002 and $98,322 for the
year ended June 30, 2001 on internal development costs that were capitalized.

         The Company's development efforts focus is on extending its products'
capabilities in areas that will provide increased revenue to our newspaper
clients and greater value to their local advertiser. A secondary focus is
providing additional workflow functions that make it easier for a newspaper to
use our products.

INTELLECTUAL PROPERTY

         The Company regards its software as proprietary and attempts to
protect it with a combination of copyright, trademark and trade secret laws,
employee and third-party non-disclosure agreements, licensing agreements and
other methods of protection. Despite these precautions, it may be possible for
unauthorized third parties to copy certain portions of the Company's products
or reverse engineer or obtain and use information the Company regards as
proprietary.

         As the number of software products in the industry increases and the
functionality of these products further overlaps, the Company believes that
software programs will increasingly become subject to infringement claims.
There can be no assurance that third parties will not


                                      10
<PAGE>

assert infringement claims against the Company in the future. Any such
assertion could require the Company to enter into royalty arrangements or
result in costly litigation.

SALES AND MARKETING

SALES

         With the signing of an agreement with Lee Enterprises Incorporated
("Lee") in November 1999, the Company established its first strategic
relationship with a media company with a strong regional presence in the US.
Lee began rolling out the first version of the Company's Special Sections in
May 2000, with a view to completing a rollout to 12 of its 28 daily newspapers
by October 2000. Lee presented the Company with an opportunity to refine and
validate our products and to build a success story we could take to market.
This phase culminated in February 2001 with the release of version 3 of our
Special Sections that addressed needs identified by Lee's first sites. Lee's
success with our products led to extensive coverage by leading trade journals
and to a direct investment in the Company by Lee (these investments are
explained below in a subsection in Part II entitled Financing and Liquidity).

         With the formal launch of our online special section product in
February 2001, the Company commenced a sales program to secure the next series
of accounts. These efforts are continuing and to date have resulted in sales
agreements with 61 newspapers running 225 XpressSections. These include
agreements with major chains such as Lee incorporated (Lee) and Freedom
Communications and large independents such as the Buffalo News. As of June 30,
2002 Lee newspapers have rolled out 107 Special Sections across 31 newspapers.

         In February 2002, the Company announced its auction product. By June
30, 2002, the Company had conducted auctions for four Canadian and US
newspapers, which ran six auctions. The Company was focusing the efforts of its
sales representatives on introducing the product to US newspapers. In July
2002, the Company acquired 10digit Communications, a Canadian company that had
conducted approximately 30 auctions for more than 24 Canadian newspapers. The
Company and 10digit in combination have run 41 auctions by June 30, 2002
positioning the Company as the leading supplier of auctions to newspapers.

         On June 30, 2002, the Company employed three direct sales
representatives selling the auction product to US and Canadian newspapers and
one representative selling the special sections. Marketing efforts including
direct mail programs and public relations initiatives to keep our name in the
forefront are ongoing to support the activities of the direct sales force.

SALES DEVELOPMENT

         The Company derives revenues by utilizing our media partners' sales
forces that are already calling on and selling advertising to local businesses.
Because we rely on the efforts of our media partners, the Company employs a
sales development team responsible for working with and maximizing the revenues
of each partner's sales force. Our team assists with the initial training of
our partners' sales representatives and delivers ongoing programs to
continually focus each newspaper's sales force on effectively selling our
solutions. The team works with each of our partners to integrate our products
into their existing line cards, so that they can be offered as "up-sells" to
new and existing customers.


                                      11
<PAGE>
MARKET COMMUNICATIONS

         A continuous communications and public relations program has assisted
in establishing the Company's market position and raising trade press coverage.
By securing validation from key industry influencers for the Company's
direction and strategy, this communication program is aimed at contributing to
sales success and lowering the cost of sales efforts. The program has resulted
in regular coverage in major trade journals such as Editor & Publisher,
Presstime, Digital Edge, News Inc., Newspapers & Technology, Classified
Intelligence, and MarketingSherpa.

CITYXPRESS COMPETITION

         The Company is a pioneer in the development of both auctions and
online special sections. With a larger installed base of newspapers using our
products and with superior features and service offerings, the Company is the
leading vendor in both market segments. Both segments are in their infancy and
other companies are emerging with competing products. In the auction segment,
A.M Stone/Auction Media and edeal Services Corp. offer competing products. In
the online special section segment, Content That Works, Publisher's Edge and
PowerAdz each offer special sections that compete with one or more of our
special sections.

COMPETITIVE ADVANTAGE

         In the auction segment, the Company enjoys two significant advantages.
It has a very large and strong reference base of accounts that have
successfully launched auctions over the past year, important in a market that
looks for proven products and solutions. As well, XpressAuctions(TM) offers
unique workflow features that allow newspapers to reduce the overall cost and
effort required to implement an auction. Our built-in marketing module offers a
newspaper's advertisers the means to increase store traffic and revenue. Our
experience over the past three years assisting newspapers introduce new
programs to their sales forces has allowed us to offer a program through our
sales development team that promises strong results.

         In the special section segment, the Company is differentiated from our
competitors by the fact that our products integrate editorial content that is
refreshed daily with a suite of advertising and promotional products that have
been proven to generate revenue for our customers. Competitive products do not
provide fresh editorial content on a daily basis - essential to attract and
maintain an online readership - and do not offer a competitive suite of
advertising and promotional products integrated around the editorial copy. The
Company has established strong reference accounts that are prepared to speak to
the results they have enjoyed rolling out our products and our strong sales and
implementation team that assists them in launching our Special Sections.

CLIENT SERVICES AND CLIENT SUPPORT

         The Company provides each media partners' newspapers with a program
developed by the Company to train the media partners' sales representatives on
the Company's products and selling techniques for each product. The Company
also provides training to the newspaper administrative staff responsible for
entering promotional product information into the Company's applications.
Customer support for the administrative staff of our media partners who enter
promotional products is provided directly by the Company's staff and delivered
via electronic mail and telephone. As at June 30, 2002, 5 people were involved
in the Company's client services and client support departments.


                                      12
<PAGE>
EMPLOYEES

         The Company has a strong core management team with significant
experience in the development of early stage companies and new software
products. It has also built a solid development, client services and customer
support team.

YEAR-END STAFFING LEVELS


<TABLE>
<CAPTION>
DEPARTMENT                                           JUNE 30, 2002        JUNE 30, 2001

<S>                                                  <C>                  <C>
Executive                                                  3                    4
Finance and Administration                                 2                    2
Sales and Marketing                                        2                    4
Investor Relations                                         1                    1
Product Development                                        8                    9
Client Services/Customer Support                           5                    7
TOTAL STAFF                                                21                  27
</TABLE>


ITEM 2.  DESCRIPTION OF PROPERTY

         The Company's principal business office is located at Suite 200, 1727
West Broadway, Vancouver, British Columbia, Canada V6J 4W6. The Company signed
a lease agreement for four years commencing on May 1, 1999. Our monthly
payments are approximately $8,000 U.S.

ITEM 3.  LEGAL PROCEEDINGS

         There are no pending legal proceedings to which the Company is a
party.

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

         No matters were submitted by the Company to a vote of security holders
during the fourth quarter of the Company's fiscal year ended June 30, 2002.


                                      13
<PAGE>


                                    PART II

ITEM 5.  MARKET PRICE OF AND DIVIDENDS ON THE REGISTRANT'S COMMON EQUITY AND
         OTHER SHAREHOLDER MATTERS.

         Shares of the Company's Common Stock trade on the OTCBB under the
symbol CYXP. The following table at month end sets forth the range of high and
low bid quotations (as reported by NASDAQ) for the period September 30, 2000 to
August 31, 2002. These quotations reflect inter-dealer prices without retail
markups or markdowns or commissions and may not represent actual values.


<TABLE>
<CAPTION>
Month Ended                       High Bid               Low Bid
-----------                       --------               -------
<S>                               <C>                    <C>
September 30, 2000                 0.2000                0.1900
October 31, 2000                   0.1900                0.1000
November 30, 2000                  0.2000                0.0750
December 31, 2000                  0.1300                0.0550
January 31, 2001                   0.1250                0.0450
February 29, 2001                  0.1150                0.0700
March 31, 2001                     0.1100                0.0660
April 30, 2001                     0.0900                0.0500
May 31, 2001                       0.0900                0.0420
June 30, 2001                      0.0750                0.0400
July 28, 2001                      0.0600                0.0370
August 31, 2001                    0.0500                0.0300
September 30, 2001                 0.0400                0.0200
October 31, 2001                   0.0500                0.0200
November 30, 2001                  0.0400                0.0200
December 31, 2001                  0.0500                0.0300
January 31, 2002                   0.0600                0.0300
February 28, 2002                  0.0800                0.0400
March 31, 2002                     0.1100                0.0600
April 30, 2002                     0.1000                0.0500
May 31, 2002                       0.0900                0.0500
June 30, 2002                      0.0600                0.0500
July 31, 2002                      0.0600                0.0300
August 31, 2002                    0.0500                0.0300
</TABLE>

         As of June 30, 2002 there were 128 holders of record of shares of the
Company's Common Stock.

         The Company has not declared or paid any cash dividends on its Common
Stock since inception, and the Company's Board of Directors currently intends
to retain all earnings for use in the business for the foreseeable future. Any
future payment of dividends will depend upon results of operations, financial
condition, cash requirements and other factors deemed relevant by the Company's
Board of Directors.

         In December 2001, the Company issued 160,000 common shares to a
consultant outside the United States for consulting services rendered to the
Company with a fair market value of $4,800 (representing $0.03 per share). The
offering was not underwritten. The sale was exempt from registration under
Regulation S promulgated under the Securities Act and Section 4(2) of the
Securities Act.


                                      14
<PAGE>


ITEM 6.  MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION

CURRENT YEAR PERFORMANCE

         The following discussion and analysis explains trends in the Company's
financial condition and results of operations for the years ended June 30, 2002
and 2001. The consolidated financial statements and notes thereto included, as
part of the financial statements should be read in conjunction with these
discussions. All figures are presented in US Currency, unless otherwise stated.

         The Company incurred a net loss for the twelve months ended June 30,
2002 of $1,829,444 as compared to a loss of $2,318,339 for the same period in
2001 a decrease of $488,895. The Company recorded revenue of $414,530 for the
year ended June 30, 2002 compared to revenue of $195,453 for the year ended
June 30, 2001, an increase of 112% or $219,077 over last year. Approximately
57% or $236,160 of this year's revenue resulted from newspapers owned by Lee.

         The decrease in net loss of $488,895 is comprised of increases in
certain expenses and decreases in other expenses and an increase in revenue
primarily as follows:

-        Increase in interest expense of $46,913 for the year ended June 30,
         2002 over the same period ending June 30, 2001 is the result of
         interest paid or payable on the loans from Lee which represented
         $42,856 of the increase and interest on shareholders which represents
         an increase of $4,441 over fiscal year 2001.

-        Increase in the cost of content information of $54,533 for the year
         ended June 30, 2002 compared to the previous year ended June 30, 2001
         is the result of additional cost of editorial content fees and
         licensing fees.

-        Increase in depreciation expense of $35,837 for the year ended June
         30, 2002 over the same period ending June 30, 2001 is the result of
         additional computer equipment and software acquired during the year.

-        Decrease in amortization of eCommerce Technology of $196,866 for the
         year ended June 30, 2002 over the same period ending June 30, 2001 is
         due to smaller remaining balances of eCommerce Technology being
         amortized over its remaining seven months in fiscal year 2002.

-        Decrease in sales promotion and travel expenses of $107,168 for the
         year ended June 30, 2002 over the same period ending June 30, 2001 is
         due to the combination of less expensive printed materials used for
         promotion and fewer sales trips during fiscal 2002.

-        Decrease in consulting expenses of $37,924 for the year ended June 30,
         2002 over the same period ending June 30, 2001 is due to fewer
         technology consultants hired for specialized projects.

-        Increased costs for licensing the Dun & Bradstreet database of
         business information for Canada and the United States of $68,558. This
         increase was due to licensing the Canadian data from Dun & Bradstreet
         for this year. For the year ended June 30, 2002 total cost was
         $195,663 and for the year ended June 30, 2001 total cost was $127,105.

-        Decrease in stock-based compensation expense of $124,701, which
         relates to two non-cash transactions for employee options and
         executive officer warrants granted during the year ended June 30,
         2001. The first component of this non-cash expense resulted from
         granting employee options below the fair market value in the year
         ended June 30, 2000. This resulted in a non-cash expense for the year
         ended June 30, 2001 of $107,951 compared to June 30,


                                      15
<PAGE>


         2002 of nil. The second component of this non-cash expense relates to
         granting 200,000 warrants on November 10, 2000 and 160,000 warrants on
         June 26, 2001 to two executive officers for shareholder loans made to
         the Company, which resulted in a non-cash expense for the year, ended
         June 30, 2001 of $17,200. Stock-based compensation expense for the
         year ended June 30, 2002 was $450.

-        The $219,077 increase in revenue helped to reduce the Operating loss
         for year ended June 30, 2002.

         For the year ended June 30, 2002, revenue increased from $195,453 to
$414,530, an improvement of $219,077 or 112%. The revenue increase reflects the
continuing rollout of Special Sections to our newspaper clients. Special
Sections accounted for $365,867 or 88% of total revenue while
XpressAuctions(TM) accounted for $48,633 of the total or 12%. Special Sections
revenue consisted of the following revenue categories:

-        advertising and promotional fees of $200,290 or 48% of total revenue

-        editorial content fees of $113,595 or 28% of total revenue

-        custom development fees of $34,445 or 8% of total revenue

-        training fees of $17,567 or 4% of total revenue

         These Special Sections revenue amounts cover the following revenue
items:

-        Advertising and promotional revenue covers the revenues received for
         promotional products sold as part of a Special Section, such as
         premier listings, coupons, banner ads, product displays, web brochures
         and experts.

-        Editorial content revenue covers the revenue received for supplying
         editorial content for each Special Section rolled out by a newspaper.

-        Custom development revenue covers the revenue received for custom
         integration of a Xpress Section with a newspaper's web site.

-        Training revenue pertains to training the media partners sales force,
         web designers and support staff on the Company's products and
         administrative tools

-        Auction revenue covers the revenue received for facilitating newspaper
         auctions were newspaper clients products are sold in the auction in
         exchange for advertising space in the newspaper.

         The Company recorded cost of sales for the year ended June 30, 2002 of
$511,425 compared to $389,647 for the year ended June 30, 2001 an increase of
$121,778 or 31%. This increase is primarily the result of the following expense
categories:

-        Increase in Special Section editorial content fees and services of
         $54,533 for the licensing of content for Special Sections.

-        Increase in Dun & Bradstreet database cost of $68,558 for business
         listing information.

         The cost of sales amount of $511,425 reflects the costs to support the
revenue generated by media partners for the period July 1, 2001 to June 30,
2002 and consist of the following expense categories:

-        Dun & Bradstreet database costs of $195,663.

-        Client services and client support employee compensation expense of
         $190,870.

-        Supplies and travel costs of $28,600.

-        Content services and licenses of $96,292.


                                      16
<PAGE>


CURRENT YEAR QUARTERLY PERFORMANCE

         The Company's quarterly results as indicated below demonstrate that
the Company has made quarterly improvements in the following areas:

-        Revenue has increased each quarter over the previous quarter

-        Cost of sales expense has decreased each quarter over the previous
         quarter

-        Total operating expenses has decreased each quarter over the previous
         quarter

-        Net loss has decreased each quarter over the previous quarter


<TABLE>
<CAPTION>
                                                         1ST            2ND             3RD            4TH
                                         YTD             QTR.           QTR.            QTR.           QTR.             YTD
                                      6/30/2001        9/30/01        12/31/01        3/31/02         6/30/02         6/30/02

<S>                                  <C>               <C>            <C>            <C>             <C>            <C>
REVENUE                                 195,453          66,298         96,421        105,615         146,196          414,530
Cost of Sales                           389,647         143,356        137,197        129,678         101,194          511,425
GROSS PROFIT (LOSS)                    (194,194)        (77,058)       (40,776)       (24,063)         45,002          (96,895)
Operating Expenses                    2,160,864         514,426        451,120        380,452         301,493        1,647,491
Operating Loss                       (2,355,058)       (591,484)      (491,896)      (404,515)       (256,491)      (1,744,386)
Other Income (Expense)                  123,281          41,062         42,207         41,798          53,091          178,158
Loss Before Taxes                    (2,478,339)       (632,546)      (534,103)      (446,313)       (309,582)      (1,922,544)
Deferred Taxes                          160,000          40,000         40,000         13,100               0           93,100
NET LOSS                             (2,318,339)       (592,546)      (494,103)      (433,213)       (309,582)      (1,829,444)
</TABLE>


CLIENT PRODUCT ROLLOUT SPECIAL SECTIONS

         In the year ended June 30, 2002 the Company completed a rollout with
Lee to 31 of its 43 daily newspapers. This rollout has resulted in 107 Special
Sections being integrated into these thirty-one newspapers. These Special
Sections cover Home & Garden, Outdoors & Recreation, Weddings, Health &
Wellness, Dining & Entertainment, Personal Finance, Automotive, and Senior
Living. The Company expects that Lee newspapers will launch additional Special
Sections in the fiscal year 2003 in the 12 newspapers who have not launched
their initial Special Section. The Company also expects the current 31 Lee
newspapers who have launched a Special Section to launch additional Special
Sections in the fiscal year 2003. Since we began implementation in July 2000 of
our products at Lee newspapers revenue has increased by 35% from $175,162 last
year to $236,160 for the year ending June 30, 2002.

         In May 2001 the Company signed a media agreement with Buffalo News of
Buffalo New York, a wholly owned subsidiary of Berkshire Hathaway Inc. with
daily circulation of 240,000. Buffalo.com rolled out the Home & Garden Special
Section in June 2001 and Health & Wellness in February 2002. The Company
expects Buffalo.com to launch additional Special Sections during fiscal year
2003.

         In June 2001 the Company signed a media agreement with Freedom
Newspapers Inc. (Freedom) headquartered in Irvine California. Freedom is the
twelfth largest media company in the United States based on weekday circulation
and operates 28 daily newspapers, 37 weekly publications, 8 broadcast
television stations and 50 affiliated Internet sites. The first Freedom


                                      17
<PAGE>


newspaper to rollout a Special Section was the Shelby Star in Shelby North
Carolina, which implemented the Health & Wellness Special Section in June 2001.
The next Freedom paper to launch a Special Section was The Monitor in McAllen
Texas. In January 2002, the Company signed a corporate Special Section
Agreement with the Community Newspaper Group of Freedom Newspapers Inc. to
provide Special Sections to the 25 dailies in the group. As of June 30, 2002,
12 of these newspapers had launched 96 Special Sections. The Company expects
the Freedom Community Newspaper Group to launch additional Special Sections
across their remaining daily newspapers during fiscal year 2003.

         In June 2001 the Company signed a media agreement with THE NOW
COMMUNITY (Now) of Surrey British Columbia. The Now is one of 15 community
newspapers published by VanNet group of newspapers, a division of Lower
Mainland Publishing Group Inc. which is owned by CanWest Global Communications
Corp. The Now rolled out two Special Sections in their first launch Home &
Garden and Dining & Entertainment in June 2001. The Company expects The Now to
launch additional Special Sections in fiscal year 2003.

         In July 2001 the Company signed a media agreement with E.W. Scripps
Company (Scripps) headquartered in Cincinnati Ohio. Scripps is the ninth
largest media company in the United States based on weekday circulation and
operates 22 daily newspapers, 10 broadcast television stations, 3 cable
television networks and 31 Web sites. The first newspaper in Scripps to rollout
a Special Section was the Bremerton Sun in Bremerton Washington. The newspaper
rolled the Special Section Home & Garden in the fall of 2001. The Company
expects that the Scripps newspapers will be launching additional Special
Sections in fiscal year 2003.

         In July 2001 the Company any signed media agreement with the Lower
Mainland Publishing Group, a wholly owned subsidiary of CanWest Global
Communications Corp (VanNet). The Lower Mainland Publishing Group oversees the
publication of the VanNet group of newspapers comprising of 15 community
newspapers. The first newspaper in the VanNet group to launch was the Now.
VanNet plans to launch Special Sections in the fall with their community
newspapers The Courier and The North Shore News. Both of these newspapers will
be launching the Home & Garden Special Section. The Company expects that VanNet
newspapers will be launching additional Special Sections in fiscal year 2003.

CLIENT PRODUCT ROLLOUT XPRESSAUCTIONS(TM)

         Since February 2002 the Company ran six XpressAuctions(TM) for four
newspapers in Canada and the United Sates generating auction revenue of $48,633
for the year ended June 30, 2002.

         In July 2002 the Company acquired 10digit Communications the online
auction division of the Winnipeg Free Press. 10digit Communications which had
run 35 auctions with the majority being for newspapers owned by CanWest Global
Communications Corp. (CanWest). During the period from January 1, to June 30,
2002, 10digit Communications generated auction revenues of approximately
$167,000.

         The Company has contracted to run nine XpressAuctions(TM) with launch
dates from July 2002 to November 2002 with United States newspapers 3 of which
have run by September 2002 with 6 scheduled to run by November 2002. The
Company also has contracts signed with newspapers to run XpressAuctions(TM) in
2003.


                                      18
<PAGE>


FINANCING AND LIQUIDITY

         As of June 30, 2002, the Company had a cash balance of $82,974;
accounts and other receivables of $7,379; prepaid expenses of $16,329; a
working capital deficiency of $1,163,083 that included shareholders' loans of
$272,836; a demand installment loan of $152,910; deferred revenue of $11,266;
current portion of obligations under capital lease of $29,357, accounts
payables and accrued liabilities of $453,396 and current portion of Lee loans
payable of $350,000.

         The Company has a Demand Installment Loan from the Canadian Imperial
Bank of Commerce of $152,910 as of June 30, 2002 and $161,830 at June 30, 2001.
The loan balance bears interest at the Bank's Prime Rate plus 1% per year.
Unless the Bank makes demand for repayment, the indebtedness is repaid in
regular monthly payments of $1,625 until February 2015. The indebtedness is
secured by all personal property of the Company, a collateral mortgage for
$168,000 (Cdn. $250,000) providing the bank a first security interest in the
personal property of two of the Company's officers, personal guarantees of two
of the Company's officers and the assignment of a life insurance policy on the
Company's president.

         On August 16, 2000, the Company entered into a Loan and Security
Agreement with its major customer, Lee. Under this loan agreement, the Company
entered into two $125,000 promissory notes that bear interest at the Wall
Street Journal prime rate and mature in November 2000. The Company also signed
a Collateral License Agreement covering the Licensing of the Company's software
to Lee should the Company default under the agreement occur. The Company also
signed a three party Escrow Agreement to escrow the Company's software with a
third party escrow agent. On September 19, 2000 another Promissory Note
Agreement was entered into for $40,000. The promissory notes bear interest at
the Wall Street Journal prime rate and mature in December 2000. As of September
19, 2000, total cash of $290,000 has been received under this agreement.

         As part of the November 1, 2000, Investment Agreement, the Loan and
Security Agreement dated August 16, 2000, was amended by changing the repayment
terms of the promissory notes detailed below to October 31, 2002:

         -        Two promissory notes for $125,000 each dated August 16, 2000
                  with original maturity dates of November 2000.

         -        One promissory note for $40,000 dated September 19, 2000 with
                  an original maturity date of December 2000.

         On July 12, 2001 an additional $60,000 loan was received from Lee
resulting in a total total loan payable at June 30, 2002 of $350,000. As of
June 30, 2002, accrued interest on the Demand Loans amounted to $39,110.

         On November 1, 2000, the Company entered into an Investment Agreement
with Lee whereby Lee would provide funding of up to $1,500,000 in the form of a
floating rate subordinated convertible debenture. The $1,500,000 subordinated
convertible debenture would consist of a series of debentures (Series A-F
debentures) of $250,000 that would be funded during the period from November
2000 to May 2001. The Company received $1,500,000 in funding under the
debenture from October 2000 to May 2001. The Investment Agreement provides Lee
the right to convert the floating rate subordinated convertible debenture into
6,902,429 common shares of the Company at a conversion price of $0.2173 per
common share.


                                      19
<PAGE>


If Lee does not convert the debenture to common shares the Company will have to
repay the $1,500,000 loan on October 31, 2003. The Investment Agreement also
contains certain affirmative and negative covenants that restrict the Company's
activities. Each series of $250,000 subordinated convertible debenture bears
interest at the Wall Street Journal rate less 1%. The weighted average
effective rate for the year ended June 30, 2002 was 4.25% (2001- 8%). Interest
due on the convertible debenture can be repaid or converted to the Company
shares at fair market value on the date of conversion at Lee's option. As of
June 30, 2002, accrued interest under the debentures totalled $63,832. The
Investment Agreement includes a Registration Rights Agreement providing Lee the
ability to require the company to register the shares issuable under the
Investment Agreement based on certain conditions. A condition resulting in the
Company registering the Lee shares is if the Company did a United States public
offering with a registration statement.

On July 30, 2001, the Company amended the Investment Agreement dated November 1,
2000 with Lee, whereby Lee would provide additional funding of up to $1,500,000
in the form of a floating rate subordinated convertible debenture (series G-R
debentures). This would result in a total investment by Lee of $3,000,000 if all
debentures were converted. The additional $1,500,000 subordinated convertible
debenture would consist of a firm commitment of $710,000 and a discretionary
commitment of $790,000 in the form of a series of debentures (series G-R)
ranging in value from $310,000 to $50,000 each. The series G-R debentures would
be funded from August 10, 2001 to July 1, 2002. The Company received $310,000
under the series "G" debenture by August 14, 2001 and $200,000 under series H
debenture by September 5, 2001. The Amended Investment Agreement provides Lee
the right to convert the second $1,500,000 floating rate subordinated
convertible debenture into 8,522,727 common shares of the Company at a
conversion price of $0.1760 per common share. The first investment of $1,500,000
allowed Lee to convert their series "A-F" debentures to 6,902,429 common shares
of the Company at a conversion price of $0.2173 (Note 9 in the audited financial
statements). Should Lee convert all debentures totalling $3,000,000 it would
result in the Company issuing 15,425,156 common shares. If Lee does not convert
the second debenture to common shares the Company will have to repay the
$1,500,000 loan on October 31, 2003. The Amended Investment Agreement also
contains certain affirmative and negative covenants that restrict the Company's
activities. As of June 30, 2002, the Company is in compliance with all the
covenants in the Investment Agreement. Each Series G-R subordinated convertible
debenture bears interest at the Wall Street Journal rate less 1%. The weighted
average effective rate for the year ended June 30, 2002 was 3.96%. Interest due
on the convertible debenture can be repaid or converted to shares of the Company
at fair market value on the date of conversion at Lee's option. In conjunction
with the Amended Investment Agreement dated July 30, 2001, the Company also
amended the November 30, 2000 Loan and Security Agreement, the Collateral
License Agreement and the Registration Rights Agreements to reflect the series
G-R debentures. Accrued interest on the convertible loan debentures as of June
30, 2002 totalled $33,099.

         On August 1, 2002 the Company amended the Lee Investment Agreement
dated July 30, 2001 adding an additional three subordinated convertible
debentures designated series S-U for a total of $300,000. The Company has
received $100,000 for the Series S debenture and $125,000 for the Series T
debenture as of September 5, 2002.

         As of September 25, 2002 Lee has invested $3,575,000 with the Company
as detailed below:

<TABLE>
         <S>                                                            <C>
         -   Series A-F Debentures                                      $1,500,000
         -   Series G-R Debentures                                       1,500,000
                                                                         ---------
         Total Convertible Loan Debentures as of June 30, 2002          $3,000,000
</TABLE>


                                      20
<PAGE>


<TABLE>
         <S>                                                            <C>
         -  Series S Debenture                                             100,000
         -  Series T Debenture                                             125,000
                                                                           -------
         Total Convertible Loan Debentures as of September 25, 2002     $3,225,000
</TABLE>


<TABLE>
<CAPTION>
         <S>                                           <C>
         -  Loan payable June 30, 2002                    350,000
                                                        ---------
         Total Debentures & Loans                      $3,575,000
                                                        ---------
</TABLE>


         On June 26, 2001, the Company received an additional $66,028 as
unsecured shareholder loans from two of its executive officers. These
shareholder loans have an interest rate of 9.7%.

         During the year ended June 30, 2002, the Company repaid a portion of
the unsecured shareholder loans to the two executive officers totalling
$11,410.

         These shareholder loans have no repayment terms except for two loans
that total $229,063 with monthly repayments terms of $1,526 per month with an
interest rate of 9.7%. See audited consolidated financial statement Note 11 (a)
Shareholder Loans.

         Based on the forecasted expenditures for the year ended June 30, 2003,
the Company forecasts minimum annual operating cash requirements of
approximately $1.8 million. The Lee Enterprise investment of $300,000 provides
the Company 17% of its forecasted operating cash requirements for fiscal year
2003. Revenue from new media companies under contracts in June 2002 will help
to offset the Company's cash flow shortfall of $1.5 million. The Company
expects additional revenues from clients signed in fiscal 2002 as they continue
to launch additional Special Sections over their original Special Section
launched. A number of clients signed in the later part of the year have
multiple newspapers which are commencing to launch Special Sections across
their newspapers. Based on the success the Company has achieved signings new
newspapers, the Company expects to sign additional contracts with new media
companies that will provide additional operating cash.

         The Company is expecting XpressAuctions(TM) to contribute significant
revenues in fiscal 2003 as the Company intensifies its direct marketing efforts
in the United States. Also the Company is having success cross marketing
Special Sections and XpressAuctions(TM) with its existing client base. Special
Sections clients are contracting for XpressAuctions(TM) and new
XpressAuctions(TM) clients are contracting for Special Sections. The Company
also anticipates that clients who ran XpressAuctions(TM) in fiscal year 2002
would run another XpressAuctions(TM) in fiscal year 2003.

         The Company anticipates significant operating revenue improvements
from both XpressAuctions(TM) and Special Sections.

PLAN OF OPERATION

         The Company is dependent on obtaining additional financing for ongoing
operation, capital expenditures and working capital. There is no assurance that
such financing will be available when required by or under terms favorable to
the Company.


                                      21
<PAGE>


         The Company anticipates that media revenue from Lee will grow as Lee
implements the Company's products at more of its daily newspapers. Revenue
generated from Lee for the period ended June 30, 2002 amounted to $236,160.
Revenue from Lee over the next year is expected to increase as Lee is
continuing to roll out Special Sections across their 43 daily newspaper
properties, which will result in increased revenue to the Company. The Company
also expects revenue to grow as each newspaper launches multiple Special
Sections. The Company also expects to see increasing revenues from the Special
Sections launched by VanNet, Scripps and Buffalo.com. Freedom is expected to
continue its rollout to its 25 Community Newspapers (12 out of 25 have rolled
out Special Sections as of June 30, 2002). The Company will work closely with
each contracted media company to ensure that Special Sections are launched in
all their newspapers

         The Company expects to generate auction revenue from auction clients
of 10digit Communications in fiscal year 2003. The Company expects auctions
will generate significant revenue in fiscal year 2003.

         The Company also intends to develop additional products in conjunction
with its media partners that will leverage the sales relationship it has
developed with each media partner. These future products will allow the media
company's sales force to have additional products that they can sell to their
local markets. These additional products will result in incremental revenue for
the Company from its established newspaper customer base. Each additional media
company agreement will generate additional revenue and cash flow. Management is
confident it will be successful in closing additional media agreements in the
next year.

         The Company is presently seeking additional funding through private
offerings with individuals, institutions and media partners. The Company
believes it can raise additional funds through these offerings.

         The management of the Company believes that it will generate
sufficient cash through private offerings, customer revenue and investments
from media partners to fund its operations for the 12-month period ending June
30, 2003.

BUSINESS RISKS

         The Company faces significant business risks on a going forward basis,
which could negatively impact the Company:

-        Raising the equity financing needed to operate the Company at its
         current operating level and providing the operating funds, capital
         additions and repayment of liabilities in a timely manner. If the
         Company is unsuccessful in this regard it will be required to reduce
         operating expenditures to a level that will be in-line with cash
         flows.

-        The Company may be unsuccessful in obtaining additional media partners
         and its agreement with contracted clients may result in lower revenues
         than projected. In either case, the Company would have to re-evaluate
         its business model to determine if there was another partnership
         arrangement that would provide the economic, cash flow or business
         advantages it currently believes will be provided by media companies.
         The Company at this time cannot assess whether it could find other
         business partners and negotiate favorable terms that would provide the
         necessary revenue and cash flow required by the Company. If the
         Company is unsuccessful in this regard it will be required to reduce
         operating expenditures to a level that will be in-line with cash
         flows.


                                      22
<PAGE>


-        The projected revenues and success of newspaper Auctions may not meet
         the expectations of the Company.

-        A major competitor or new company could dominate the market sector
         being targeted by the Company. The Company would then have to assess
         the impact of the situation. The United States and Canadian newspaper
         markets are large and there may be room for multiple suppliers to
         service existing media companies. If not, then the Company would have
         to assess other market sectors it could penetrate successfully. If the
         Company is unsuccessful in this regard it will be required to reduce
         operating expenditures to a level that will be in-line with cash
         flows.

-        The Company is dependent on key senior development personnel who have
         developed the Company's core product offering. Should these
         individuals leave the employ of the Company it would have a setback to
         its future development plans. This setback would be overcome by hiring
         new senior developers that would have to become familiar with the
         Company's products.

-        The Company is dependent on the continual growth of the Internet as
         an advertising medium for local advertisers. Should this prove untrue
         the Company will have to assess other business strategies for selling
         promotional products to local advertisers.

-        Technologies may change making the Company's products obsolete. The
         Company is aware of changes in technology and is integrating new
         technologies into its product offerings to ensure that they do not
         become obsolete because of changing technology.

ITEM 7.  FINANCIAL STATEMENTS

         SELECTED FINANCIAL DATA

         The consolidated operating results and financial position of the
Company are presented in the following tabulated format. The selected financial
data has been derived from our audited consolidated financial statements, which
have been prepared in accordance with accounting principles generally accepted
in the United States ("US GAAP"). See Item 6 Management's Discussion and
Analysis or Plan of Operation. The following selected financial data is
qualified in its entirety by, and should be read in conjunction with, the
audited consolidated financial statements for the year ended June 30, 2002 and
June 30, 2001. All figures are presented in U.S. Currency, unless otherwise
stated.


<TABLE>
<CAPTION>
                                                     FISCAL YEAR ENDED                    FISCAL YEAR ENDED
                                                       JUNE 30, 2002                        JUNE 30, 2001
                                                             $                                    $

<S>                                                  <C>                                  <C>
Revenue                                                    414,530                               195,453
Cost of sales                                              511,425                               389,647
Gross profit (loss)                                        (96,895)                             (194,194)
Operating expenses                                       1,647,491                             2,160,864
Net loss for the year                                   (1,829,444)                           (2,318,339)
Net loss per common share                                    (0.08)                                (0.10)
</TABLE>


                                      23
<PAGE>


<TABLE>
<CAPTION>
                                                      FISCAL YEAR ENDED                    FISCAL YEAR ENDED
                                                       JUNE 30, 2002                        JUNE 30, 2001
                                                             $                                    $

<S>                                                   <C>                                  <C>
Cash                                                        82,974                                32,274
Total current assets                                       106,682                                82,200
Total assets                                               358,548                               556,712
Total current liabilities                                1,269,765                               784,705
Obligations under capital leases                            40,030                                40,960
Loan payable                                                     0                               290,000
Loan debenture                                           3,000,000                             1,500,000
Deferred tax liabilities                                         0                                93,100
Stockholders' equity (deficit)                          (3,951,247)                           (2,152,053)
Cash dividends                                                   0                                     0
</TABLE>


ITEM 8.  CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS

On December 17, 2001, the Company filed a Form-8K regarding changing its
independent chartered accountants replacing Ernst & Young LLP with Grant
Thornton L.L.P.


                                      24
<PAGE>

                                    PART III

ITEM 9.  DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND SIGNIFICANT EMPLOYEES:
         COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE ACT.

         DIRECTORS AND EXECUTIVE OFFICERS

         The following information sets forth-certain information concerning
the executive officers and directors of the Company:

<TABLE>
<CAPTION>
     --------------------------------------------------------------------------------------
                                                                        DIRECTOR/OFFICER
     NAME AND PRESENT OFFICE HELD                                       EMPLOYEE SINCE
     --------------------------------------------------------------------------------------
     <S>                                                                <C>
     Phil M Dubois                                                      January 27, 1999
     President & CEO, Director
     --------------------------------------------------------------------------------------
     Ken R Bradley                                                      January 27, 1999
     Chief Operating Officer & CFO, Director
     --------------------------------------------------------------------------------------
     Ken Spencer                                                        August 3, 1999
     Chairman, Director
     --------------------------------------------------------------------------------------
     Bob Smart                                                          August 25, 1999
     Director
     --------------------------------------------------------------------------------------
     Ian Thomas                                                         August 25, 1999
     Director (1)
     --------------------------------------------------------------------------------------
     Derek Mather                                                       September 18, 2002
     Director
     --------------------------------------------------------------------------------------
     Jim MacKay                                                         April 17, 2000
     Vice President Sales & Marketing
     --------------------------------------------------------------------------------------
</TABLE>

     Note (1) Mr. Thomas resigned as director of the company on November
     29, 2001.

         The following is a brief biography of each of the executive officers
and directors listed above:

PHIL M. DUBOIS, age 55, has served as President, CEO and a director of the
Company since the acquisition of Xceedx on January 27, 1999. From January 1996
to present, Mr. Dubois serves as President, CEO and a director of Xceedx a
company he co-founded in 1996. Xceedx was a developer of eCommerce software
solutions. Since January 27, 1999, Mr. Dubois is also President, CEO and a
director of WelcomeTo. From September 1994 to December 1995, Mr. Dubois was an
independent consultant providing consulting services to technology companies.
From May 1992 to August 1994, Mr. Dubois served as President and CEO of
Modatech Systems Inc., a company in the North American sales force automation
marketplace. From May 1989 to May 1992, Mr. Dubois served as Vice President of
Development of Modatech. From May 1989 to August 1994, Mr. Dubois was a
director of Modatech. Mr. Dubois is the past chair of AceTech and a director of
AceTech, a not-for-profit association of high tech CEOs.


                                      25
<PAGE>

KEN R. BRADLEY, age 55, and has served as Chief Operating Officer, CFO and a
director of the Company since the acquisition of Xceedx on January 27, 1999.
From January 1996 to present, Mr. Bradley serves as Vice President Finance,
Vice President of Operations and a director of Xceedx a company he co-founded
in 1996. Since January 27, 1999, Mr. Bradley serves as Vice President Finance
and director of WelcomeTo. From September 1994 to December 1995, Mr. Bradley
was an independent consultant providing consulting services to technology
companies. From September 1990 to August 1994, Mr. Bradley was Vice President
Finance and Administration at Modatech Systems Inc., a company in the North
American sales force automation marketplace. Mr. Bradley's past experience also
includes serving as Regional Controller at Domtar Packaging, a national company
involved in the manufacturing of corrugated containers. From February 1983 to
January 1987, Mr. Bradley served as Manager of Finance and Administration at
Mobile Data International Inc., a company that developed mobile data terminals
that operated over radio frequency. Mr. Bradley is a Certified Management
Accountant.

JIM MACKAY, age 58, joined the Company in April 2000 as Vice President Sales &
Marketing based in Denver Colorado. Prior to joining the Company, Mr. Mackay
worked for First Union Management Inc., from January 1995 to January 2000, a
company specializing in parking management with locations throughout Canada and
the US. During this period, he held the positions of Vice President US Parking
Operations, Vice President Western Region Imperial Parking division and Vice
President Western Canada Region Imperial Parking division. From 1982 to 1994
Mr. MacKay worked for the "The Jim Pattison Group" holding various positions
with the Group such as President of the Out of Home Media Group, President of
Seaboard Advertising Company and President & General Manager CJJR-FM and
CKBD-AM radio stations. Mr. MacKay has an MBA from Hamilton University.

KEN SPENCER, age 57, and has served as Chairman and a director of the Company
since August 3, 1999. In 1983, Mr. Spencer co-founded Creo Products, a company
that manufactures complex, high-value equipment utilizing precision mechanics,
digital design, lasers, optics and software for the printing industry. He
served as CEO of Creo Products from 1985 to 1995, and as Chairman of the Creo
Products Board of Directors from 1985 to 1996. Mr. Spencer remains a director
of Creo Products. Mr. Spencer also serves as a director of De Novo Enzymes, a
bio-technology company, Science World, a government organization that promotes
science and technology throughout the province of British Columbia and the BC
Institute of Technology and as Chairman of the Board of Spectrum Signal
Processing, a position he has held since December, 1997.

BOB SMART, age 51, has served as a director since August 25, 1999. Mr. Smart
has over 20 years of senior management experience in a variety of businesses.
He currently is a Partner in the consulting firm of Radford & Smart, a position
he has held since February 1999. From June 1998 to February 1999, he served as
Executive Vice President and a director of Bargain Castle International
Discount Centres Ltd., a wholesale and retail products liquidator. From
December 1997 to June 1998, Mr. Smart served as President of Webcastsystems
Inc., a software developer. From October 1996 to December 1997, he served as
President of ActionView Advertising Ltd. an outdoor advertising media company.
From October 1994 to October 1996 Mr. Smart served as Vice President Corporate
Development of Imperial Ginseng Products Ltd., a grower and distributor of
ginseng and ginseng products.


                                      26
<PAGE>

IAN THOMAS, age 55, has served as a director since August 25, 1999. In 1979, he
founded Thomas Consultants Inc., which presently operates offices in Vancouver
Canada and the Gold Coast Australia. Mr. Thomas serves as CEO of Thomas
Consultants Inc. a position he has held since the company was founded. Thomas
Consultants Inc. specializes in the planning and development of large-scale
retail projects and undertakes strategic planning assignments for major
national and international retailers, and currently works in over 30 countries.
Mr. Thomas sits on the Board of Trustees of the International Council of
Shopping Center's Education Foundation in New York, and was a director of
Future Shop, North America's third largest electronics chain, a position he
held from August 1993 to May 2000. Mr. Thomas resigned as director of the
company on November 29, 2001.

DEREK MATHER, age 69, has for the past 5 years has been President and CEO of
Ventures Management Inc., which is active in various technology infrastructure
initiatives such as AceTech and Science World. Mr. Mather's career included
several years with the Investment Department of the Sun Life Assurance Co.
followed by a career in venture capital, first with Canadian Enterprise
Development Corp. (CED) which he helped create and then as founding President
and CEO of Vencap Equities Alberta Ltd. While with CED, he was appointed
President and CEO of Westmills Carpets Ltd., which he assisted to return to
profitable operations. Mr. Mather's is a graduate in Business from McGill
University.

         Directors are elected annually by the Company's shareholders and hold
office until the next annual meeting of shareholders or until their successors
are duly elected and qualified, unless they resign or cease to be directors in
accordance with the Company's Articles of Incorporation and Bylaws. The Board
of Directors meets periodically to review significant developments affecting
the Company and to act on matters requiring Board approval. Although the Board
of Directors delegates many matters to others, it reserves certain powers and
functions to itself. The Company's Audit Committee is comprised of Ken Spencer,
Bob Smart and Phil Dubois. The Audit Committee is directed to review the scope,
costs and results of the independent audit of the Company's books and records,
the results of the annual audit with management and the adequacy of the
Company's accounting, financial and operating controls; to recommend annually
to the Board of Directors the selection of the independent auditors; and to
report to the Board of Directors, when so requested, on any accounting or
financial matters. The Company's Compensation Committee is comprised of Ken
Spencer and Ken Bradley. The role of this committee is to set executive
compensation for the senior executives and administer the Options Plan for
executive officers and employees.

         No director or executive officer is a party to any arrangement or
understanding with any other person pursuant to which he was elected as a
director or officer. No director or executive officer has any family
relationship with any other officer or director.

         No officer or director has been involved in the past five years in any
of the following: (1) bankruptcy proceedings; (2) subject to criminal
proceedings or convicted of a criminal act; (3) subject to any order, or decree
entered by any court limiting in any way his or her involvement in any type of
business, securities or banking activities; or (4) subject to any order for
violation of federal or state securities laws or commodities laws.


                                      27
<PAGE>

ITEM 10.  REMUNERATION OF DIRECTORS AND EXECUTIVE OFFICERS.

         As of June 30, 2002, the Company's executive officers consisted of
Phil Dubois, President and CEO, Ken R. Bradley, Chief Operating Officer and CFO
and Jim MacKay, Vice President Sales & Marketing.

         During the year ended June 30, 2002, salary compensation was paid to
our executive officers. The following table contains information concerning
compensation paid to named executive officers for the fiscal years ended June
30, 2002, June 30, 2001 and June 30, 2000.
<TABLE>
<CAPTION>
-------------------------------------------------------------------------------------------------------------------------------

                                                 SUMMARY COMPENSATION TABLE
-------------------------------------------------------------------------------------------------------------------------------
                                     ANNUAL COMPENSATION                      LONG-TERM COMPENSATION
                            --------------------------------------- --------------------------------------------
                                                                               AWARDS                PAY-OUTS
                                                                    ------------------------------ -------------

                                                        OTHER                        SECURITIES
                                                        ANNUAL       RESTRICTED        UNDER-                      ALL OTHER
                                                       COMPEN-          STOCK          LYING                        COMPEN-
    NAME AND                  SALARY      BONUS         SATION        AWARD(S)        OPTIONS          LTIP         SATION
   PRINCIPAL        YEAR       ($)         ($)           ($)             ($)          SARS(#)        PAYOUTS          ($)
    POSITION
-------------------------------------------------------------------------------------------------------------------------------
<S>                 <C>       <C>        <C>           <C>           <C>             <C>             <C>           <C>
Phil Dubois         2002      68,852       Nil           Nil             Nil          350,000          Nil            Nil
President & CEO     2001      67,752       Nil           Nil             Nil            Nil            Nil            Nil
                    2000      48,629       Nil           Nil             Nil            Nil            Nil            Nil
-------------------------------------------------------------------------------------------------------------------------------

Ken Bradley         2002      68,852       Nil           Nil             Nil          350,000          Nil            Nil
COO & CFO           2001      67,752       Nil           Nil             Nil            Nil            Nil            Nil
                    2000      48,629       Nil           Nil             Nil            Nil            Nil            Nil
-------------------------------------------------------------------------------------------------------------------------------

Brent Forgeron      2002       Nil         Nil           Nil             Nil            Nil            Nil            Nil
VP (1)              2001      21,173       Nil           Nil             Nil            Nil            Nil            Nil
                    2000      40,759       Nil           Nil             Nil            Nil            Nil            Nil
-------------------------------------------------------------------------------------------------------------------------------

Jim MacKay VP       2002      81,000       Nil           Nil             Nil          100,000          Nil            Nil
(2)                 2001      80,000       Nil           Nil             Nil          250,000          Nil            Nil
                    2000      12,500       Nil           Nil             Nil            Nil            Nil            Nil
-------------------------------------------------------------------------------------------------------------------------------
</TABLE>

     Note (1) Mr. Forgeron ceased employment with the Company on
 September 5, 2000.

     Note (2) Mr. MacKay commenced employment with the Company on
April 17, 2000.

STOCK OPTIONS

         The following stock purchase options were granted by the Company
during the fiscal years ended June 30, 2001 and June 30,2002.


                                      28
<PAGE>

         On November 10, 2000, the Company granted 65,000 share purchase
options for its common shares to certain of its employees. These share purchase
options are exercisable until November 10, 2004 at an exercise price of $0.25
per common share. The share purchase options become exercisable as to one third
of the option shares on each of the first, second, and third anniversaries of
the date the share purchase options are granted, provided that the employee is
employed by the Company on each such anniversary date. These share purchase
options were granted under the Company's 1999 Stock Option Plan.

         On March 29, 2001, 90,000 share purchase options to acquire common
shares were granted to certain employees. These share purchase options are
exercisable until March 29, 2005 at an exercise price of $0.25 per common
share. The share purchase options become exercisable as to one third of the
option shares on each of the first, second, and third anniversaries of the date
the share purchase options are granted, provided that the employee is employed
by the Company on each such anniversary date. These share purchase options were
granted under the Company's 1999 Stock Option Plan.

         On May 29, 2001, 60,000 share purchase options to acquire common
shares were granted to an employee. These share purchase options are
exercisable until May 29, 2005 at an exercise price of $0.25 per common share.
The share purchase options become exercisable as to one third of the option
shares on each of the first, second, and third anniversaries of the date the
share purchase options are granted, provided that the employee is employed by
the Company on each such anniversary date. The share purchase options were
granted under the Company's 1999 Stock Option Plan.

         On June 14, 2001, 600,000 share purchase options to acquire common
shares were granted to certain employees. These share purchase options are
exercisable until June 14, 2004 at an exercise price of $0.25 per common share.
The share purchase options become exercisable as to one third of the option
shares on June 14, 2001 and one third on the second, and third anniversaries of
the date the share purchase options are granted, provided that the employee is
employed by the Company on each such anniversary date. These share purchase
options were granted under the Company's 1999 Stock Option Plan.

         On November 29, 2000, the Company granted 85,000 share purchase
options to directors. These share purchase options are exercisable until
November 30, 2003 at an exercise price of $0.25 per common share. These share
purchase options are exercisable from November 29, 2001 to November 30, 2003.

         On December 8, 2000, the Company cancelled 490,000 stock options that
were granted to certain employees in July 1999. These share purchase options
were granted on May 15, 2000 at an exercise price of $0.25 per common share
until May 15, 2004. The share purchase options become exercisable as to one
third of the option shares on each of the first, second, and third
anniversaries of the date the share purchase options are granted, provided that
the employee is employed by the Company on each such anniversary date. The
share purchase options were granted under the Company's 1999 Stock Option Plan.

         On November 29, 2001, the Company granted 75,000 share purchase
options to a consultant for services rendered. These share purchase options are
exercisable until November 30, 2004 at an exercise price of $0.25 per common
share.


                                      29
<PAGE>

         On November 29, 2001, 70,000 share purchase options to acquire common
shares were granted to certain employees. These share purchase options are
exercisable until November 29, 2005 at an exercise price of $0.25 per common
share. The share purchase options become exercisable as to one-third of the
option shares on November 29, 2002 and one-third on the second and third
anniversaries of the date the share purchase options are granted, provided that
the employee is employed by the Company on each anniversary date. These share
purchase options were granted under the Company's 1999 Stock Option Plan.

         On June 28, 2002, 1,225,000 share purchase options to acquire common
shares were granted to certain employees. These share purchase options are
exercisable until June 28, 2005 at an exercise price of $0.25 per common share.
The share purchase options become exercisable as to one-third of the option
shares on June 28, 2003 and one-third on the second and third anniversaries of
the date the share purchase options are granted, provided that the employee is
employed by the Company on each anniversary date. These share purchase options
were granted under the Company's 1999 Stock Option Plan.

         As of June 30, 2002 350,000 stock options have been granted to Mr.
Phil Dubois President & Chief Executive Officer and Mr. Ken Bradley Chief
Operating Officer & Chief Financial Officer and, 350,000 options have been
granted to Mr. Jim MacKay VP Sales & Marketing

         As of June 30, 2002, 2,890,000 stock options are outstanding as
explained in Note 14(b) of the audited consolidated financials, which are
enclosed.

         The following table summarizes information concerning options granted
to named executive officers and directors for the fiscal year ended June 30,
2002:

<TABLE>
<CAPTION>
   -------------------------------------------------------------------------------------------------------

                                  OPTIONS / SAR GRANTS IN LAST FISCAL YEAR
   -------------------------------------------------------------------------------------------------------

                                             INDIVIDUAL GRANTS
   -------------------------------------------------------------------------------------------------------

                              NUMBER OF         % OF TOTAL     EXERCISE OR BASE
                              SECURITIES       OPTIONS/SARS     PRICE ($/SHARE)
            NAME              UNDERLYING        GRANTED TO                           EXPIRATION DATE
                             OPTIONS/SARS      EMPLOYEES IN
                               GRANTED          FISCAL YEAR
   -------------------------------------------------------------------------------------------------------
<S>                          <C>               <C>             <C>                   <C>
   Phil Dubois                 350,000           27.0% (2)           $0.25            June 28, 2006
   -------------------------------------------------------------------------------------------------------

   Ken Bradley                 350,000           27.0% (2)           $0.25            June 28, 2006
   -------------------------------------------------------------------------------------------------------

   Jim MacKay                  100,000           7.7% (2)            $0.25            June 28, 2006
   -------------------------------------------------------------------------------------------------------

   Ken Spencer (1)               Nil                N/A               N/A                  N/A
   -------------------------------------------------------------------------------------------------------

   Bob Smart (1)                 Nil                N/A               N/A                  N/A
   -------------------------------------------------------------------------------------------------------

   Ian Thomas (1)                Nil                N/A               N/A                  N/A
   -------------------------------------------------------------------------------------------------------

   TOTAL GRANTED               800,000           61.7% (2)
   -------------------------------------------------------------
</TABLE>


                                      30
<PAGE>

   NOTE (1) there were no options granted by the Company to these specified
directors during the year ended June 30, 2002.

   NOTE (2) the percentage of total options granted was based on 1,295,000
   options granted to employees and officers in the year ending June 30, 2002.

         The following is a summary of the share purchase options exercised by
the Company's directors and officers during the fiscal year ended June 30,
2002:

<TABLE>
<CAPTION>
  -----------------------------------------------------------------------------------------------------------------------

                                     AGGREGATED OPTION/SAR EXERCISES DURING THE LAST
                                  FISCAL YEAR END AND FISCAL YEAR END OPTION/SAR VALUES
  -----------------------------------------------------------------------------------------------------------------------
                                                                                                          VALUE OF
                         COMMON SHARES                            NO. OF SECURITIES UNDERLYING           UNEXERCISED
         NAME             ACQUIRED ON       AGGREGATE VALUE       UNEXERCISED OPTIONS AT FISCAL         IN-THE-MONEY
                          EXERCISE (#)       REALIZED ($)                   YEAR-END                   OPTIONS/SARS AT
                                                                  -----------------------------             FISCAL
                                                                                                           YEAR-END
                                                                                                             ($)
  ---------------------------------------------------------------------------------------------

                                                                EXERCISABLE        UNEXERCISABLE
  -----------------------------------------------------------------------------------------------------------------------
  <S>                    <C>                <C>                <C>                 <C>                 <C>
  Phil Dubois                 Nil                 Nil               Nil               350,000                N/A
  -----------------------------------------------------------------------------------------------------------------------

  Ken Bradley                 Nil                 Nil               Nil               350,000                N/A
  -----------------------------------------------------------------------------------------------------------------------

  Ken Spencer (1)             Nil                 Nil             111,667             23,333                 Nil
  -----------------------------------------------------------------------------------------------------------------------

  Bob Smart (1)               Nil                 Nil              58,333             16,667                 Nil
  -----------------------------------------------------------------------------------------------------------------------

  Ian Thomas (1)              Nil                 Nil              58,333             16,667                 Nil
  -----------------------------------------------------------------------------------------------------------------------

  Jim MacKay                  Nil                 Nil             166,667             183,333                Nil
  -----------------------------------------------------------------------------------------------------------------------

  TOTAL                       NIL                 NIL             395,000             940,000                NIL
  -----------------------------------------------------------------------------------------------------------------------
</TABLE>

  NOTE (1) There were no options granted by the Company to these specified
directors noted during the year ended June 30, 2002.

         The following is a summary of long-term incentive plans granted to the
Company's directors and officers and during the fiscal year ended June 30,
2002:

<TABLE>
<CAPTION>
  ------------------------------------------------------------------------------------------------------------------

  LONG-TERM INCENTIVE PLANS  - AWARDS IN LAST FISCAL YEAR
  ------------------------------------------------------------------------------------------------------------------

                                                     PERFORMANCE OR
                              NUMBER OF SHARES,    OTHER PERIOD UNTIL
                            UNITS OR OTHER RIGHTS     MATURATION OR     THRESHOLD      TARGET          MAXIMUM
            NAME                      #                  PAY-OUT         ($ OR #)     ($ OR #)         ($ or #)
  ------------------------------------------------------------------------------------------------------------------
  <S>                       <C>                    <C>                  <C>            <C>             <C>
  Phil Dubois (1)                    Nil                   Nil               Nil          Nil            Nil
  ------------------------------------------------------------------------------------------------------------------

  Ken Bradley (1)                    Nil                   Nil               Nil          Nil            Nil
  ------------------------------------------------------------------------------------------------------------------

  Ken Spencer                        Nil                   Nil               Nil          Nil            Nil
  ------------------------------------------------------------------------------------------------------------------

  Bob Smart                          Nil                   Nil               Nil          Nil            Nil
  ------------------------------------------------------------------------------------------------------------------

  Ian Thomas                         Nil                   Nil               Nil          Nil            Nil
  ------------------------------------------------------------------------------------------------------------------

  Jim MacKay                         Nil                   Nil               Nil          Nil            Nil
  ------------------------------------------------------------------------------------------------------------------
</TABLE>


                                      31
<PAGE>

DESCRIPTION OF 1999 STOCK OPTION PLAN

         The Company's 1999 Stock Option Plan (the "Stock Option Plan") was
adopted by the Board of Directors and approved by the Company's shareholders on
August 25, 1999. The purpose of the Plan is to reward the contributions made to
the Company by employees, directors and consultants, to provide such persons
with additional incentive to devote themselves to the future success of the
Company, and to improve the ability of the Company to attract, retain and
motivate individuals upon whom the Company's sustained growth and financial
success depend. Pursuant to the Stock Option Plan, the Company may grant or
issue stock options to directors, officers, advisors and employees of the
Company or any other person or company engaged to provide ongoing services to
the Company. The Company reserved on August 25, 1999, 2,000,000 shares under
the stock option.

         The Board of Directors determines the terms and provisions of the
stock options granted under the Stock Option Plan. The Stock Option Plan may be
amended at any time by the Board of Directors, although certain amendments may
require shareholder approval. On November 29, 2000, the Board of Directors
amended the stock option plan to increase the number of common shares available
for grant from 2,000,000 to 3,000,000 shares of common shares. This amendment
was approved by the shareholders at the Annual Meeting of shareholders held on
November 29, 2000, The Board of Directors may terminate the Stock Option Plan
at any time.

COMPENSATION OF DIRECTORS

         The only compensation received for serving as Directors is the options
granted to each director.

EXECUTIVE OFFICERS CONSULTING AGREEMENT

         On January 21, 1999, the Company entered into separate Consulting
Agreements with Phil Dubois and Ken Bradley, named executive officers of the
Company. Pursuant to these Consulting Agreements, Mr. Dubois and Mr. Bradley
provide corporate financing and business strategy consulting services to and on
behalf of the Company and each receive compensation of $6,000 Canadian per
month.

         On November 1, 2000, the Company increased compensation to $10,000
Canadian per month for both Mr. Dubois and Mr. Bradley.

         Each consulting agreement is for a term of two years. The Company may
renew either or both of the consulting agreements for successive terms of a
duration decided by the Company by written notice to the other party. Absent
agreement by the parties or notice by the Company, each of the Consulting
Agreements automatically renews for a one-year term. Each consulting agreement
contains confidentiality and certain non-compete provisions. Each consulting
agreement provides that the Company determines what corporate benefit plans and
programs Mr. Dubois or Mr. Bradley will participate in and the terms of such
participation.


                                      32
<PAGE>
         The Company has the right to terminate Mr. Dubois at any time for legal
cause without notice or payment to him. If the Company terminates the consulting
agreement of Mr. Dubois without cause, the Company is obligated to pay him
$12,000 Canadian for each month remaining in the term of the Consulting
Agreement.

         The Company has the right to terminate Mr. Bradley at any time for
legal cause without notice or payment to him. If the Company terminates the
Consulting Agreement of Mr. Bradley without cause, the Company is obligated to
pay him $12,000 Canadian for each month remaining in the term of the Consulting
Agreement.

         Either Mr. Dubois or Mr. Bradley may terminate his Consulting Agreement
on three-(3) month's prior notice to the Company.

         On December 31, 2000, the consulting agreements with Phil Dubois and
Ken Bradley were not renewed. Subsequently, on January 1, 2001, Mr. Dubois and
Mr. Bradley became fulltime employees of the Company and each receives
compensation of $10,000 Canadian per month.

ITEM 11. SECURITY OWNERSHIP OF MANAGEMENT AND CERTAIN SECURITYHOLDER SECURITY
OWNERSHIP OF MANAGEMENT AND CERTAIN BENEFICIAL OWNERS

         The following table sets forth certain information concerning the
number of shares of the Company's common stock owned beneficially as of
September 27, 2002 by (i) each of the Company's directors; (ii) each of the
Company's named executive officers; and (iii) all directors and executive
officers of the Company as a group; and (iv) each person (including any group)
known to us to own more than five percent (5%) of any class of voting securities
of the Company. Unless otherwise indicated, the shareholders listed possess sole
voting and investment power with respect to the shares shown.


<TABLE>
<CAPTION>
---------------------------------------------------------------------------------------------------------------------
TITLE OF CLASS         NAME AND ADDRESS OF                 AMOUNT AND NATURE OF                PERCENTAGE OF CLASS (8)
                         BENEFICIAL OWNER                  BENEFICIAL OWNERSHIP
---------------------------------------------------------------------------------------------------------------------
<S>                   <C>                                  <C>                                     <C>
Common Shares         Phil Dubois                           3,538,050 (1),(7),(11)                 14.0% (8)
                      Suite 200
                      1727 West Broadway
                      Vancouver, BC V6J 4W6
---------------------------------------------------------------------------------------------------------------------

Common Shares         Ken Bradley                           3,578,050 (2),(7),(12)                 14.2% (8)
                      Suite 200
                      1727 West Broadway
                      Vancouver, BC V6J 4W6
---------------------------------------------------------------------------------------------------------------------

Common Shares         Brent Forgeron                          875,000 (9)                           3.6% (8)
                      23-1243 Thurlow Street
                      Vancouver, BC V6E 1X4
---------------------------------------------------------------------------------------------------------------------
</TABLE>


                                       33
<PAGE>


<TABLE>
<CAPTION>

---------------------------------------------------------------------------------------------------------------------
<S>                   <C>                                  <C>                                     <C>
Common Shares         Ken Spencer                           1,975,480 (3),(7),(10)                  7.8% (8)
                      Suite 200
                      1727 West Broadway
                      Vancouver BC V6J 4W6
---------------------------------------------------------------------------------------------------------------------

Common Shares         Jim MacKay                              350,000 (4),(13)                      1.4% (8)
                      Suite 200
                      1727 West Broadway
                      Vancouver BC V6J 4W6
---------------------------------------------------------------------------------------------------------------------

Common Shares         Bob Smart                                75,000 (5)                           0.3%  (8)
                      Suite 200
                      1727 West Broadway
                      Vancouver BC V6J 4W6
---------------------------------------------------------------------------------------------------------------------

Common Shares         Ian Thomas                               75,000 (6)                           0.3%  (8)
                      Suite 200
                      1727 West Broadway
                      Vancouver BC V6J 4W6
---------------------------------------------------------------------------------------------------------------------
ALL OFFICERS AND DIRECTORS AS A GROUP (7)                  10,466,580                              37.9% (8)
---------------------------------------------------------------------------------------------------------------------
</TABLE>

(1)      Includes 71,000 shares of common stock owned by Mr. Dubois's wife. Also
         includes 555,800 shares of common stock, which may be purchased
         pursuant to warrants granted by the Company.

(2)      Includes 71,000 shares of common stock owned by Mr. Bradley's wife.
         Also includes 595,800 shares of common stock, which may be purchased
         pursuant to warrants granted by the Company.

(3)      Includes 795,240 shares of common stock that may be purchased pursuant
         to warrants granted by the Company. These warrants were purchased by
         him from the Company in two private placements.

(4)      Includes 350,000 shares of common stock, which may be purchased
         pursuant to options granted by the Company.

(5)      Includes 75,000 shares of common stock, which may be purchased pursuant
         to options granted by the Company.

(6)      Includes 75,000 shares of common stock which may be purchased pursuant
         to options granted by the Company

(7)      Certain of these shares are subject to transfer restrictions.

(8)      The percentages in this table are based on a total number of
         outstanding common shares at September 27, 2002 of 24,308,175 plus it
         assumes the warrants or options granted to each director or executive
         officer has been 100% exercised by them. Therefore each executive
         officer or directors percentage has been adjusted by their specific
         option or warrants grants. If all the options and warrants granted to
         executive officers and directors were exercised the total outstanding
         common shares would be 27,590,015.

(9)      Mr. Forgeron ceased employment with the Company on September 5, 2000.

(10)     Includes 135,000 shares of common stock, which may be purchased
         pursuant to options granted by the Company.

(11)     Includes 350,000 shares of common stock, which may be purchased
         pursuant to options granted by the Company.

(12)     Includes 350,000 shares of common stock, which may be purchased
         pursuant to options granted by the Company.

         Should Lee convert their $3,000,000 of convertible debenture to common
stock of the Company it would own 15,425,156 common shares in the Company, which
would represent a percentage ownership of 38.8%. This percentage ownership is
based on outstanding shares of 39,733,331.


                                       34
<PAGE>

ITEM 12.  INTEREST OF MANAGEMENT AND OTHERS IN CERTAIN TRANSACTIONS.

GENERAL

         Pursuant to a share purchase agreement dated January 7, 1999, the
shareholders of WelcomeTo sold their 100% interest in WelcomeTo to CityXpress
for 8,510,000 shares in CityXpress which represented a controlling interest of
approximately 62.5%. For accounting purposes this transaction was considered the
recapitization of WelcomeTo and the acquisition of CityXpress by WelcomeTo. For
a more detailed description of this transaction see Item 1 "Description of
Business - Corporate History".

         On January 27, 1999, CityXpress acquired all of the issued and
outstanding shares of Xceedx by exchanging one share of CityXpress for each
share of common stock of Xceedx. As a result CityXpress issued 6,250,000 shares
of common stock in a private offering under section 4(2) of the Securities Act.
For a more detailed description of this transaction see Item 1 "Description of
Business - Corporate History".

         The following table details the number of shares issued to the
following executive officers resulting from theses two purchase agreements:

<TABLE>
<CAPTION>
--------------------------------------------------------------------------------
NAME              ACQUISITION DATE     COMPANY                NUMBER OF SHARES
--------------------------------------------------------------------------------
<S>               <C>                  <C>                    <C>
Phil Dubois       January 27, 1999     Xceedx Technologies    2,561,250
--------------------------------------------------------------------------------
Ken Bradley       January 27, 1999     Xceedx Technologies    2,561,250
--------------------------------------------------------------------------------
Brent Forgeron    January 7, 1999      WelcomeTo Search       1,130,000
--------------------------------------------------------------------------------
</TABLE>

         Except for (a) the issuance of shares of its stock to Mr. Forgeron
pursuant to the Acquisition Agreement between WelcomeTo Search Engine, Inc. and
the Company and the issuance of shares of its stock to Messrs. Dubois and
Bradley pursuant to the Acquisition Agreement between Xceedx Technologies, Inc.
and the Company, (b) the compensation described herein, and (c) advances to and
by certain officers to cover expenses, all of which were reimbursed or repaid
without interest, no director, executive officer, holder of ten percent of the
Company's outstanding common stock, or any relative or spouse of any of the
foregoing persons, or any relative of such spouse, who has the same house as
such person or who is a director or officer of any parent or subsidiary of the
Company, to the Company's knowledge, had a material interest either direct or
indirect, in any particular transaction or series of transactions to which the
Company or any subsidiary was a party, during the two fiscal years ended June
30, 2002 and June 30, 2001.

SHAREHOLDER LOANS

         The Company entered into unsecured shareholder loan agreements with Mr.
Phil Dubois, the Company's President & CEO and Mr. Ken Bradley, Chief Operating
Officer & CFO. As of June 30, 2002, the installment and demand shareholder loans
have various interest rates attached to them as detailed below:


                                       35
<PAGE>
<TABLE>
<CAPTION>
                                                      ANNUAL INTEREST
NAME                LOAN DESCRIPTION                  RATE AT JUNE 30, 2002                OUTSTANDING AMOUNT
----                ----------------                  ---------------------                ------------------
<S>                 <C>                               <C>                                  <C>
Phil Dubois         Loan payable equal monthly        Interest rate of 9.7%                       $114,532
                    installments of $763

Phil Dubois         Loan payable on demand            CIBC Visa interest rate of 19.5%            $ 13,344

Phil Dubois         Loan payable on demand            Scotia McLeod interest rate of 6%           $  5,873
                                                                                                  --------

TOTAL PHIL DUBOIS                                                                                 $133,749
                                                                                                  ========

Ken Bradley         Loan payable equal monthly        Interest rate of 9.7%                       $114,531
                    installments of $763

Ken Bradley         Loan payable on demand            Interest rate of 4.5%                       $  7,876


Ken Bradley         Loan payable on demand            TD Bank select line interest rate           $ 16,680
                                                      of 6.75%                                    --------

TOTAL KEN BRADLEY                                                                                 $139,087
                                                                                                  ========

TOTAL SHAREHOLDER LOANS                                                                           $272,836
</TABLE>


EXECUTIVE OFFICER STOCK PURCHASE WARRANTS

         On June 13, 2000, the Company granted 541,600 stock purchase warrants
to two of the Company's executive officers as consideration for their guarantee
of the demand installment loan with the CIBC bank and for two shareholder loans
totaling $168,600.

         On November 10, 2000, the Company granted additional 200,000 stock
purchase warrants to two of the Company's executive officers as consideration
for two shareholder loans to the Company totaling $83,400

         On June 26, 2001, the Company granted 160,000 stock purchase warrants
to two of the Company's executive officers as consideration for their
additional two shareholder loans totaling $66,028.


                                      36
<PAGE>


         The details of the stock purchase warrants are listed below as of June
30, 2002:


<TABLE>
<CAPTION>
                       WARRANT GRANT               WARRANT PRICE       WARRANT GRANT          WARRANT
NAME                       DATE                         $US               AMOUNT            EXPIRY DATE
----                   -------------               -------------       -------------        -----------
<S>                   <C>                          <C>                 <C>                <C>
Phil Dubois           June 13, 2000                    $0.25             270,800          June 13, 2005

Phil Dubois           November 10, 2000                $0.25              80,000          November 10, 2005

Phil Dubois           June 26, 2001                    $0.25              80,000          June 26, 2006

Ken Bradley           June 13, 2000                    $0.25             270,800          June 13, 2005

Ken Bradley           November 10, 2000                $0.25             120,000          November 10, 2005

Ken Bradley           June 26, 2001                    $0.25              80,000          June 26, 2006
                                                                         -------

TOTAL                                                                    901,600
</TABLE>


ITEM 13. COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE ACT.

         During the year ended June 30, 2002, Form 4's for Mr. Dubois, Mr.
Bradley and Mr. MacKay were not timely filed.

ITEM 14. REPORTS ON FORM 8-K.

                  On June 17, 2002, the Company filed a Form 8-K Item 5
announcing the signing of a non-binding offer to acquire the business and other
assets of 10digit Communications.

         On July 10, 2002, the Company filed a Form 8-K Item 2 announcing the
completion of its acquisition of the online auction business and related assets
of 10digit Communications.


                                      37
<PAGE>


                                   SIGNATURES

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


                                CityXpress Corp


                         By    /s/ Ken Bradley
                            --------------------------
                                  Ken Bradley
                         Chief Operating Officer & CFO


                            Date September 19, 2002


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


<TABLE>
<S>                                 <C>                                                   <C>
/s/ Phil Dubois                     Director, President and CEO                           September 25, 2002
------------------

/s/ Ken Bradley                     Director, Chief Operating Officer & CFO               September 25, 2002
------------------

/s/ Ken Spencer                     Director                                              September 25, 2002
------------------

/s/ Bob Smart                       Director                                              September 25, 2002
------------------
</TABLE>


                                 CERTIFICATION

         I, Phil Dubois, certify that:

         1.       I have reviewed this annual report on Form 10-KSB of
CityXpress Corp.;

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


                                      38
<PAGE>


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


Date: October 10, 2002

                                                          /s/ Phil Dubois
                                                 ------------------------------
                                                           [Signature]
                                                         President & CEO


                                 CERTIFICATION

         I, Ken Bradley, certify that:

         1.       I have reviewed this annual report on Form 10-KSB of
CityXpress Corp.;

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

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


Date: October 10, 2002

                                                       /s/ Ken Bradley
                                                 ------------------------------
                                                        [Signature]
                                                  Chief Financial Officer &
                                                   Chief Operating Officer


                                      39
<PAGE>


                                    PART F/S

FINANCIAL STATEMENTS

         Audited Consolidated Financial Statements of CityXpress Corp as at
June 30, 2002.


<PAGE>


CONSOLIDATED FINANCIAL STATEMENTS

CITYXPRESS CORP.
(Expressed in U.S. dollars)
June 30, 2002 and 2001


<PAGE>


GRANT THORNTON LLP
CHARTERED ACCOUNTANTS
MANAGEMENT CONSULTANTS
Canadian Member of
Grant Thornton International

REPORT OF INDEPENDENT AUDITORS

To the Shareholders of
CITYXPRESS CORP. (formerly CityXpress.com Corp.)

We have audited the accompanying consolidated balance sheets of CITYXPRESS
CORP. (formerly CityXpress.com Corp.) as of June 30, 2002, and the related
consolidated statements of operations, stockholders' deficiency and cash flows
for the year then ended. 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 audit.

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

IN OUR OPINION, THE FINANCIAL STATEMENTS REFERRED TO ABOVE PRESENT FAIRLY,
IN ALL MATERIAL RESPECTS, THE CONSOLIDATED FINANCIAL POSITION OF CITYXPRESS
CORP. AT JUNE 30, 2002 AND THE RESULTS OF ITS OPERATIONS AND ITS CASH FLOWS FOR
THE YEAR THEN ENDED IN CONFORMITY 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 has incurred recurring operating losses and
has a working capital deficiency. The Company is dependent on its ability to
raise capital from shareholders or other sources to sustain operations. These
factors, along with other matters set out in Note 1, raise substantial doubt
that the Company will be able to continue as a going concern. Management's
plans in regard to 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.


                                                      /s/ Grant Thornton LLP

Vancouver, Canada,
August 16, 2002                                       Chartered Accountants


<PAGE>


                         REPORT OF INDEPENDENT AUDITORS


To the Shareholders of
CITYXPRESS.COM CORP.

We have audited the accompanying consolidated balance sheets of CITYXPRESS.COM
CORP. (the "Company") as of June 30, 2001, and the related consolidated
statements of operations, stockholders' deficiency and cash flows for the year
then ended. 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 audit.

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

In our opinion, the financial statements referred to above present fairly, in
all material respects, the consolidated financial position of CityXpress.com
Corp. at June 30, 2001 and the results of its operations and its cash flows for
the year then ended in conformity with accounting principles generally accepted
in the United States.

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 has incurred recurring operating losses and
has a working capital deficiency. The Company is dependent on its ability to
raise capital from shareholders or other sources to sustain operations. These
factors, along with other matters as set forth in Note 1, raise substantial
doubt that the Company will be able to continue as a going concern.
Management's plans in regard to 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.


Vancouver, Canada,                                    /s/ Ernst & Young LLP
August 23, 2001 (except for note 18[ii]
which is as of September 5, 2001).                    Chartered Accountants


<PAGE>


CITYXPRESS CORP.


                          CONSOLIDATED BALANCE SHEETS
         [See Nature of Operations and Basis of Presentation - Note 1]


As at June 30                                       (Expressed in U.S. dollars)


<TABLE>
<CAPTION>
                                                                          2002               2001
                                                                            $                  $
-------------------------------------------------------------------------------------------------

<S>                                                                 <C>                <C>
ASSETS [note 9]
CURRENT
Cash and cash equivalents                                               82,974             32,274
Accounts receivable, net of allowance for doubtful accounts
   of $nil in 2002 and 2001 [note 4]                                     3,091             19,087
Other receivables                                                        4,288              7,192
Prepaid expenses and other                                              16,329             23,647
-------------------------------------------------------------------------------------------------
TOTAL CURRENT ASSETS                                                   106,682             82,200

Property and equipment, net [note 5]                                   102,232            117,243
Product development costs [note 6]                                     149,634             81,935
eCommerce technology, net of amortization of $1,416,484 at
   June 30, 2002 and $1,141,150 at June 30, 2001                            --            275,334
-------------------------------------------------------------------------------------------------
TOTAL ASSETS                                                           358,548            556,712
=================================================================================================

LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT
Accounts payable [note 7]                                              209,200            183,941
Accrued liabilities [note 7]                                           244,196            136,965
Demand instalment loan [note 10]                                       152,910            161,830
Stockholders' loans [note 11]                                          272,836            284,246
Deferred revenue                                                        11,266                514
Current portion of obligations under capital leases [note 12]           29,357             17,209
Current portion of loans payable [note 8]                              350,000                 --
-------------------------------------------------------------------------------------------------
TOTAL CURRENT LIABILITIES                                            1,269,765            784,705

Obligations under capital leases [note 12]                              40,030             40,960
Loans payable [note 8]                                                      --            290,000
Convertible loan debentures [note 9]                                 3,000,000          1,500,000
Deferred income taxes [note 15]                                             --             93,100
-------------------------------------------------------------------------------------------------
TOTAL LIABILITIES                                                    4,309,795          2,708,765
-------------------------------------------------------------------------------------------------
Commitments [note 15]

STOCKHOLDERS' DEFICIENCY
Share capital [note 14]
   Common stock - $0.001 par value
     Authorized shares: 100,000,000
     Issued and outstanding: 23,303,898 at June 30, 2002 and
     23,043,898 at June 30, 2001                                        23,304             23,044
   Additional paid in capital                                        5,843,305          5,813,315
Accumulated other comprehensive income                                  19,625             19,625
Deficit                                                             (9,837,481)        (8,008,037)
-------------------------------------------------------------------------------------------------
TOTAL STOCKHOLDERS' DEFICIENCY                                      (3,951,247)        (2,152,053)
-------------------------------------------------------------------------------------------------
TOTAL LIABILITIES AND STOCKHOLDERS' DEFICIENCY                         358,548            556,712
=================================================================================================
</TABLE>

See accompanying notes


<PAGE>


CITYXPRESS CORP.


                     CONSOLIDATED STATEMENTS OF OPERATIONS
         [See Nature of Operations and Basis of Presentation - Note 1]


Years ended June 30                                 (Expressed in U.S. dollars)


<TABLE>
<CAPTION>
                                                                          2002               2001
                                                                            $                  $
-------------------------------------------------------------------------------------------------

<S>                                                                 <C>                <C>
REVENUE [note 4]
Advertising and promotional fees                                       200,290            136,791
Editorial content fees                                                 113,595              4,957
Auction fees                                                            48,633                 --
Training fees                                                           17,567             43,670
Custom development fees                                                 34,445             10,035
-------------------------------------------------------------------------------------------------
TOTAL REVENUES                                                         414,530            195,453
Cost of sales                                                          511,425            389,647
-------------------------------------------------------------------------------------------------
GROSS LOSS                                                             (96,895)          (194,194)

OPERATING EXPENSES
Sales and marketing                                                    439,882            505,969
Product development and technology [note 17]                           280,836            348,765
Finance and administration                                             651,439            833,930
Amortization of eCommerce technology                                   275,334            472,200
-------------------------------------------------------------------------------------------------
                                                                     1,647,491          2,160,864
-------------------------------------------------------------------------------------------------
Operating loss                                                      (1,744,386)        (2,355,058)
OTHER INCOME (EXPENSE)
Loss on disposal of property and equipment                                  --               (423)
Interest expense                                                      (165,467)          (118,554)
Interest and miscellaneous income                                           78                196
Foreign exchange loss                                                  (12,769)            (4,500)
-------------------------------------------------------------------------------------------------
Total other expense                                                   (178,158)          (123,281)
-------------------------------------------------------------------------------------------------
Loss before income taxes                                            (1,922,544)        (2,478,339)
Deferred income tax recovery [note 15]                                  93,100            160,000
-------------------------------------------------------------------------------------------------
NET LOSS AND COMPREHENSIVE LOSS FOR THE YEAR                        (1,829,444)        (2,318,339)
=================================================================================================

NET LOSS PER COMMON SHARE [note 14[d]]
   Basic and diluted                                                     (0.08)             (0.10)
=================================================================================================

WEIGHTED AVERAGE NUMBER OF COMMON SHARES [note 14[d]]
   Basic and diluted                                                23,222,231         23,008,294
=================================================================================================
</TABLE>

See accompanying notes


<PAGE>


CITYXPRESS CORP.


              CONSOLIDATED STATEMENTS OF STOCKHOLDERS' DEFICIENCY
         [See Nature of Operations and Basis of Presentation - Note 1]

                                                    (Expressed in U.S. dollars)


<TABLE>
<CAPTION>
                                                         COMMON    COMMON               ACCUMULATED                        TOTAL
                                              COMMON     STOCK      STOCK   ADDITIONAL     OTHER                       STOCKHOLDERS'
                                   COMMON    STOCK TO  ISSUED AND   TO BE    PAID IN   COMPREHENSIVE                      EQUITY
                                   STOCK    BE ISSUED  OUTSTANDING ISSUED   CAPITAL       INCOME        DEFICIT          (DEFICIT)
                                     #          #          $         $         $             $            $                 $
----------------------------------------------------------------------------------------------------------------------------------
<S>                             <C>         <C>        <C>         <C>      <C>        <C>             <C>             <C>
YEAR ENDED JUNE 30, 2001

Balance at June 30, 2000        23,008,098      --      23,008      --      5,679,250      19,625      (5,689,698)          32,185
Shares issued for services
  rendered [note 14[a]]             35,800      --          36      --          8,914          --              --            8,950
Stock based compensation
  [notes 11[b] and 14[b]]               --      --          --      --        125,151          --              --          125,151
Net loss                                --      --          --      --             --          --      (2,318,339)      (2,318,339)
----------------------------------------------------------------------------------------------------------------------------------
BALANCE AT JUNE 30, 2001        23,043,898      --      23,044      --      5,813,315      19,625      (8,008,037)      (2,152,053)

YEAR ENDED JUNE 30, 2002

Shares issued on exercise of
  warrants [note 14[a]]            100,000      --         100      --         24,900          --              --           25,000
Shares issued for services
  rendered [note 14[a]]            160,000      --         160      --          4,640          --              --            4,800
Stock based compensation
  [notes [note 14[b]]                   --      --          --      --            450          --              --              450
Net loss                                --      --          --      --             --          --      (1,829,444)      (1,829,444)
----------------------------------------------------------------------------------------------------------------------------------
BALANCE AT JUNE 30, 2002        23,303,898      --      23,304      --      5,843,305      19,625      (9,837,481)      (3,951,247)
==================================================================================================================================
</TABLE>

See accompanying notes


<PAGE>


CITYXPRESS CORP.


                     CONSOLIDATED STATEMENTS OF CASH FLOWS
         [See Nature of Operations and Basis of Presentation - Note 1]


Years ended June 30                                (Expressed in U.S. dollars)


<TABLE>
<CAPTION>
                                                                          2002            2001
                                                                            $               $
-------------------------------------------------------------------------------------------------
<S>                                                                 <C>                <C>
OPERATING ACTIVITIES
Net loss for the year                                               (1,829,444)        (2,318,339)
Adjustments to reconcile net loss to net cash used in
   operating activities:
   Amortization                                                        275,334            472,200
   Depreciation                                                        110,851             75,014
   Loss on disposal of property and equipment                               --                423
   Shares issued for services rendered                                   4,800            217,971
   Stock based compensation                                                450            125,151
   Deferred income tax recovery                                        (93,100)          (160,000)
Changes in operating assets and liabilities:
   Accounts receivable                                                  15,996              9,816
   Other receivables                                                     2,904             19,028
   Prepaid expenses and other                                            7,318            (73,111)
   Accounts payable                                                     50,259           (130,370)
   Accrued liabilities                                                 107,231             89,355
   Deferred revenue                                                     10,752               (692)
-------------------------------------------------------------------------------------------------
NET CASH USED IN OPERATING ACTIVITIES                               (1,336,649)        (1,673,554)
-------------------------------------------------------------------------------------------------

INVESTING ACTIVITIES
Sale of property and equipment                                              --                910
Purchase of property and equipment                                      (8,964)           (43,985)
Development costs                                                     (122,886)           (98,322)
-------------------------------------------------------------------------------------------------
NET CASH USED IN INVESTING ACTIVITIES                                 (131,850)          (141,397)
-------------------------------------------------------------------------------------------------

FINANCING ACTIVITIES
Proceeds from loans payable                                             60,000            290,000
Proceeds from convertible loan debentures                            1,500,000          1,500,000
Repayment of demand instalment loan                                     (8,920)            (5,383)
Repayments under capital leases                                        (20,471)            (7,701)
Proceeds from stockholders' loans                                           --             66,028
Repayment of stockholders' loans                                       (11,410)           (34,682)
-------------------------------------------------------------------------------------------------
NET CASH PROVIDED BY FINANCING ACTIVITIES                            1,519,199          1,808,262
-------------------------------------------------------------------------------------------------

NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS
  DURING THE YEAR                                                       50,700             (6,689)
Cash and cash equivalents, beginning of year                            32,274             38,963
-------------------------------------------------------------------------------------------------
CASH AND CASH EQUIVALENTS, END OF YEAR                                  82,974             32,274
=================================================================================================

NON CASH FINANCING AND INVESTING TRANSACTIONS NOT
  INCLUDED IN CASH FLOWS:
Settlement of accounts payable through the
  issuance of shares                                                    25,000                 --
Investing and Acquisition of capital assets financed
  with capital leases                                                   31,689             65,870
=================================================================================================

SUPPLEMENTAL DISCLOSURE
Interest paid                                                           50,265             46,207
=================================================================================================
</TABLE>

See accompanying notes


<PAGE>


1.       NATURE OF OPERATIONS AND BASIS OF PRESENTATION

CityXpress Corp. ("Company") was incorporated under the laws of the State of
Florida on January 7, 1999.

The Company has developed a suite of online products that provide newspapers
with solutions through which they can defend and extend their position as the
dominant means for local advertisers to promote themselves to local consumers.
The Company's online special section product integrates niche editorial content
with advertising and promotional tools that leverage a newspaper's brand and
traffic. The Company's auction product allows newspapers to auction advertising
clients' products in exchange for advertising credits with the newspaper, with
the newspaper retaining the cash from all products that are sold in the
auction. The Company intends to build further alliances with media companies
who own newspaper and television stations. The Company currently operates in
only one industry segment and its marketing efforts are currently targeted to
the North American market.

The consolidated financial statements for the year ended June 30, 2002 have
been prepared on a going concern basis, which contemplates the realization of
assets and the settlement of liabilities and commitments in the normal course
of business for the foreseeable future. The Company incurred a net loss of
$1,829,444 for the year ended June 30, 2002 and has a working capital
deficiency of $1,163,083 and an accumulated deficit of $9,837,481 at June 30,
2002. These factors raise substantial doubt about the Company's ability to
continue as a going concern. The ability of the Company to continue as a going
concern is dependent upon its ability to achieve profitable operations and to
obtain additional capital. Management expects to raise additional capital
through private placements and other types of venture fundings and through
financing agreements with its clients. Also, management expects to generate
higher revenues and lower expenses over the 2003 fiscal year. The outcome of
these matters cannot be predicted at this time. No assurances can be given that
the Company will be successful in raising sufficient additional capital or
increasing revenues. Further, there can be no assurance, assuming the Company
successfully raises additional funds or increases revenues, that the Company
will achieve positive cash flow. If the Company is unable to obtain adequate
additional financing or additional revenues, management will be required to
curtail the Company's operating expenses. These consolidated financial
statements do not include any adjustments to the specific amounts and
classifications of assets and liabilities which might be necessary should the
Company be unable to continue in business.

2.       SIGNIFICANT ACCOUNTING POLICIES

The consolidated financial statements have been prepared by management in
accordance with accounting principles generally accepted in the United States
of America. The Company's significant accounting policies are summarized below


<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 amounts reported in the financial statements and accompanying
notes. Actual results could differ from these estimates.

PRINCIPLES OF CONSOLIDATION

The consolidated financial statements include the accounts of CityXpress Corp.
and its wholly-owned subsidiaries: WelcomeTo Search Engine Inc. (British
Columbia, Canada) and Xceedx Technologies Inc. (British Columbia, Canada). All
significant intercompany balances and transactions have been eliminated on
consolidation.

CASH EQUIVALENTS

The Company considers all highly liquid financial instruments purchased with an
original maturity of three months or less to be cash equivalents. Cash
equivalents are recorded at cost, which approximates market value.

LEASES

Leases are classified as either capital or operating leases. Leases which
transfer substantially all the benefits and risks of ownership of the property
to the Company are accounted for as capital leases. Capital lease obligations
reflect the present value of future lease payments, discounted at the
appropriate interest rate. All other leases are accounted for as operating
leases whereby rental payments are expensed as incurred.

PROPERTY AND EQUIPMENT

Property and equipment are recorded at cost. Depreciation is computed on the
straight-line method over the estimated useful life of the assets as follows:


<TABLE>
     <S>                                                  <C>
     Computer equipment and software                      3 years
     Office furniture and equipment                       5 years
     Leasehold improvements                               Lease term
</TABLE>


<PAGE>


Computer equipment acquired under capital leases is also depreciated on the
straight-line method over the shorter of the lease term and the estimated
useful life on the asset.

PRODUCT DEVELOPMENT COSTS

Product development costs incurred after technological feasibility of a product
has been established are capitalized until the developed product is available
for general release.

Product development costs are amortized on the straight-line method over a 3
year period.

ECOMMERCE TECHNOLOGY

eCommerce technology arose as part of the acquisition of Xceedx Technologies
Inc. and is being amortized on the straight-line method over its useful life,
which is 36 months. As of June 30, 2002, this asset was completely amortized.

WEBSITE DEVELOPMENT COSTS

Website development costs are charged to expense as incurred unless the
development costs meet the criteria under generally accepted accounting
principles for deferral and amortization. The Company has not deferred any
website development costs to date.

IMPAIRMENT OF LONG-LIVED ASSETS

The Company monitors the recoverability of long-lived assets, including capital
and intangible assets, based upon estimates using factors such as future asset
utilization, business climate and future non-discounted cash flows expected to
result from the use of the related assets or to be realized on sale. The
Company's policy is to write down assets to their fair value in the year when
it is likely that the carrying amount of the asset will not be recovered.


<PAGE>


STOCK-BASED COMPENSATION

The Company accounts for stock-based compensation to employees based on
Accounting Principles Board Opinion No. 25, "Accounting for Stock Issued to
Employees" and related interpretations, whereby the intrinsic value of options
granted is recorded at the measurement date. Compensation expense is calculated
based on the difference, on the date of grant, between the fair value of the
Company's stock and the exercise price and is recorded over the vesting period
of the options.

The Company has adopted the disclosure-only provisions of Statement of
Financial Accounting Standards ("SFAS") No. 123, "Accounting for Stock-Based
Compensation" for stock options granted to employees.

Stock options granted to non-employees are accounted for under SFAS No. 123
using the fair value method. Compensation expense is calculated using the Black
Scholes option pricing model and recorded over the period the services are
rendered.

CAPITAL STOCK ISSUED FOR CONSIDERATION OTHER THAN CASH

Capital stock issued for consideration other than cash is recorded at an
estimate of the fair value of the stock issued or issuable or at an estimate of
the fair value of the goods or services received (whichever is more readily
ascertainable).

FOREIGN CURRENCY TRANSLATION

Until March 31, 2000, the functional currency of the Company was the Canadian
dollar, while the reporting currency in the consolidated financial statements
was the U.S. dollar. Consolidated asset and liability accounts were translated
into U.S. dollars at the exchange rate in effect at the balance sheet date.
Consolidated revenue and expense amounts were translated at the average
exchange rate for the period. Gains or losses resulting from this process were
recorded in stockholders' equity as an adjustment to accumulated other
comprehensive income.

Effective April 1, 2000, the functional currency of the Company and its
subsidiaries changed to the U.S. dollar. Accordingly, for the Canadian
subsidiaries, monetary assets and liabilities are translated into U.S. dollars
at exchange rates prevailing at the balance sheet date and non-monetary items
are translated at exchange rates prevailing at the historic rate. Revenue and
expenses are translated at the average exchange rate for the year. Gains or
losses arising on this foreign currency translation are recorded in income.


<PAGE>


REVENUE RECOGNITION

The Company enters into sales contracts that may encompass multiple elements,
including advertising and promotional fees, editorial content fees, training
fees, custom development fees and auction fees. Advertising and promotional,
and editorial content fees are recognized monthly as the services are
performed. Custom development fees are recognized when the client's web site is
activated for the world wide web, at which time the Company retains no material
conditions or obligations to the customer. Training fees are recognized as the
services are performed. Cash received in advance of services rendered is
recorded as deferred revenue.

Auction fees are recognized on completion of the auction per customer
newspaper. The Company receives a unit fee per auction article and a percentage
of total auction revenue received by the newspaper

GOVERNMENT GRANTS

Government grants towards current expenditures are applied to reduce product
development and technology expenditures when there is reasonable assurance the
Company has complied with all conditions necessary to receive the grants and
collectibility is reasonably assured.

ADVERTISING COSTS

Advertising costs are expensed as incurred and amounted to $58,398 in the year
ended June 30, 2002 [2001 - $145,532].

INCOME TAXES

The Company uses the liability method of accounting for income taxes. Under
this method, deferred tax assets and liabilities are determined based on
differences between the financial reporting and tax bases of assets and
liabilities and are measured using the enacted tax rates and laws that are
expected to be in effect when the differences are expected to reverse.
Recognition of deferred tax assets is limited to amounts considered by
management to be more likely than not of realization in future periods.


<PAGE>


LOSS PER COMMON SHARE

The basic loss per common share is computed by dividing net loss available to
common stockholders by the weighted average number of common shares outstanding
for the year. Diluted loss per common share is computed giving effect to all
potential dilutive options and warrants that were outstanding during the year.
For the years ended June 30, 2002 and 2001, all outstanding options and
warrants were anti-dilutive.

RECENT PRONOUNCEMENTS

In July 2001, the Financial Accounting Standards Board (FASB) issued Statement
of Financial Accounting Standards (SFAS) 141. Business Combinations, and SFAS
142. Goodwill and Intangible Assets. SFAS 142 is effective for fiscal years
beginning after December 15, 2001; however, certain provisions of this
statement apply to goodwill and other intangible assets acquired between July
1, 2001 and the effective date of SFAS 142. Major provisions of these
Statements and their effective dates for the company are as follows:

         -        all business combinations initiated after June 30, 2001 must
                  use the purchase method of accounting. The pooling of
                  interest method of accounting is prohibited except for
                  transactions initiated before July 1, 2001.

         -        Intangible assets acquired in a business combination must be
                  recorded separately from goodwill if they arise from
                  contractual or other legal rights or are separable from the
                  acquired entity and can be sold, transferred, licenced,
                  rented or exchanged, either individually or as part of a
                  related contract, asset or liability.

         -        Goodwill, as well as intangible assets with indefinite lives,
                  acquired after June 30, 2001, will not be amortized.
                  Effective January 1, 2002, all previously recognized goodwill
                  and intangible assets with indefinite lives will no longer be
                  subject to amortization.

         -        Effective January 1, 2002, goodwill and intangible assets
                  with indefinite lives will be tested for impairment annually
                  and whenever there is an impairment indicator.

         -        All acquired goodwill must be assigned to reporting units for
                  purposes of impairment testing and segment reporting.
<PAGE>

In July 2001, the Financial Accounting Standards Board (FASB) issued Statement
of Financial Accounting Standards (SFAS) No.143. Accounting for Asset Retirement
Obligations. This statement addresses financial accounting and reporting for
obligations associated with the retirement of tangible long-lived assets and the
associated asset retirement costs. This statement applies to all entities. It
applies to legal obligations associated with the retirement of long-lived assets
that result form the acquisition, construction, development and /or the normal
operation of a long-lived asset, except for certain obligations of lessees. This
Statement is effective for financial statements issued for fiscal years
beginning after June 15, 2002.

In August 2001, the FASB issued SFAS No. 144. Accounting for the Impairment or
Disposal of Long-Lived Assets. This Statement addresses financial accounting and
reporting for the impairment or disposal of long-lived assets and supersedes
FASB Statement No. 121, Accounting for the impariment of Long-Lived Assets and
for Long-Lived Assets to Be Disposed Of. The provisions of the statement are
effective for financial statements issued for fiscal years beginning after
December 15, 2001.

In April 2002, FASB issued SFAS No.145, "Rescission of FASB Statements No. 4,
44, and 64, Amendment of FASB Statement No. 13, and Technical Corrections". This
statement eliminates the current requirement that gains and losses on debt
extinguishment must be classified as extraordinary items in the income
statement. Instead, such gains and losses will be classified as extraordinary
items only if they are deemed to be unusual and infrequent, in accordance with
the current GAAP criteria for extraordinary classification. In addition, SFAS
145 eliminates an inconsistency in lease accounting by requiring that
modifications of capital leases that result in reclassification as operating
leases be accounted for consistent with sale-leaseback accounting rules. The
statement also contains other nonsubstantive corrections to authoritative
accounting literature. The rescission of SFAS 4 is effective in fiscal years
beginning after May 15, 2002. The amendment and technical corrections to SFAS 13
are effective for transactions occuring after May 15, 2002. All other provisions
of SFAS 145 are effective for financial statements issued on or after May 15,
2002.


<PAGE>


In June 2002, the FASB issued SFAS No. 146, "Account for Costs Associated with
Exit or Disposal Activities", which addresses accounting for restructuring and
similar costs. SFAS No. 146 supersedes previous accounting guidance, principally
Emerging Issues Task Force Issue No. 94-3. SFAS No. 146 requires that the
liability for costs associated with an exit or disposal activity be recognized
when the liability is incurred SFAS No. 146 also establishes that the liability
should initially be measured and recorded at fair value. Accordingly, SFAS
No.146 may affect the timing of recognizing future restructuring costs as well
as the amount recognized. SFAS No. 146 is effective for exit or disposal
activities that are initiated after December 31, 2002.

Management assessment of these statements is that they will not have a material
impact on the company's financial position or results of operations.

3. FINANCIAL INSTRUMENTS

Amounts reported for cash and cash equivalents, accounts receivable, other
receivables, accounts payable and accrued liabilities, and stockholders' loans
approximate their fair values due to the relatively short term nature or demand
nature of the instruments. The carrying value of the demand instalment loan,
loans payable, loan debentures and obligations under capital leases approximate
fair value due to variable interest rates being charged on outstanding balances.

4. CREDIT RISK AND OTHER

Financial instruments, which potentially subject the Company to concentrations
of credit risk, consist principally of accounts receivable. The Company performs
ongoing credit evaluations of its customers and maintains allowances for
potential credit losses which, when realized, have been within range of
management's expectations.

For the year ended June 30, 2002, approximately 57% of the Company's total
revenues were generated through sales to Lee Enterprises Incorporated [2001 -
90%]. At June 30, 2002, approximately nil% of the Company's accounts receivable
balance was due from this customer [2001 - 73%].

The Company currently licenses the business listing content for its regional
business directory under an annual license agreement. Failure of the licensor to
renew this license agreement on favourable terms or on a timely basis could
result in adverse consequences.


<PAGE>


5. PROPERTY AND EQUIPMENT

<TABLE>
<CAPTION>
                                                2002                              2001
                                      ------------------------------      --------------------------
                                                        ACCUMULATED                     ACCUMULATED
                                      COST             DEPRECIATION       COST          DEPRECIATION
                                        $                    $              $               $
-----------------------------------------------------------------------------------------------------
<S>                                  <C>      <C>      <C>               <C>     <C>    <C>
Computer equipment and software      165,534             140,040         157,780          114,458
Computer equipment under capital
   leases                             96,081              33,907          65,870            9,497
Office furniture and equipment        20,853               7,814          18,458            4,105
Leasehold improvements                 7,692               6,167           7,692            4,497
-----------------------------------------------------------------------------------------------------
                                     290,160             187,928         249,710          132,557
-----------------------------------------------------------------------------------------------------
NET BOOK VALUE                                102,232                            117,243
-----------------------------------------------------------------------------------------------------
</TABLE>


6. PRODUCT DEVELOPMENT COSTS

<TABLE>
<CAPTION>
                                                                         2002               2001
                                                                           $                  $
-----------------------------------------------------------------------------------------------------
<S>                                                                    <C>                 <C>
Cost                                                                   221,208             98,322
Accumulated depreciation                                                71,574             16,387
-----------------------------------------------------------------------------------------------------
Total Accrued liabilities                                              149,634             81,935
-----------------------------------------------------------------------------------------------------
</TABLE>


7. ACCOUNTS PAYABLE AND ACCRUED LIABILITIES

<TABLE>
<CAPTION>
                                                                        2002               2001
                                                                          $                  $
-----------------------------------------------------------------------------------------------------
<S>                                                                    <C>                <C>
Trade accounts payable                                                 209,200            183,941
-----------------------------------------------------------------------------------------------------

Accrued interest                                                       188,676             72,347
Accrued vacation                                                        33,341             39,680
Accrued liabilities                                                     22,179             24,938
-----------------------------------------------------------------------------------------------------
Total Accrued liabilities                                              244,196            136,965
-----------------------------------------------------------------------------------------------------
</TABLE>


<PAGE>


8. LOANS PAYABLE

On August 16, 2000, the Company entered into a Loan and Security Agreement with
Lee Enterprises Incorporated ("Lee"). Under this agreement, the Company has
received $350,000 in funding in the form of promissory notes that bear interest
at the monthly Wall Street Journal rate, as detailed below:


<TABLE>
<CAPTION>
                                                                               WEIGHTED AVERAGE
                                                                                  EFFECTIVE
                                                                              INTEREST RATE (%)
                                                                              FOR THE YEAR ENDED
 LOAN DATE                         AMOUNT              MATURITY DATE            JUNE 30, 2002
                                      $
 -----------------------------------------------------------------------------------------------
<S>                                <C>                <C>                     <C>
 August 17, 2000                   125,000            October 31, 2002               5.35
 August 28, 2000                   125,000            October 31, 2002               5.35
 September 19, 2000                 40,000            October 31, 2002               5.35
 July 12, 2001                      60,000            October 31, 2002               5.35
 -----------------------------------------------------------------------------------------------
                                   350,000
 -----------------------------------------------------------------------------------------------
</TABLE>

Pursuant to an Investment Agreement [note 9], the maturity dates of these loans
payable were extended from November 17, 2000, November 28, 2000 and December 19,
2000 respectively, to October 31, 2002. Interest payable on these loans is
payable on demand.

In conjunction with these agreements, the Company entered into a Collateral
License Agreement and Escrow Agreement covering the licensing of the Company's
software to Lee in the event of a default pursuant to the loan and security
agreement. Interest for the year ended June 30, 2002 on these loans amounted to
$18,272.




<PAGE>


9. CONVERTIBLE LOAN DEBENTURES

On November 1, 2000, the Company entered into an Investment Agreement with Lee
whereby Lee provided funding of $1,500,000 in the form of a floating rate
subordinated convertible debenture. The $1,500,000 subordinated convertible
debenture consists of a series of six debentures of $250,000 that were received
by the Company during the year ended June 30, 2001. The Investment Agreement
provides Lee the right to convert the floating rate subordinated convertible
debenture into 6,902,429 common shares of the Company at a conversion price of
$0.2173 per common share. If Lee does not convert the debenture into common
shares, the Company will be required to repay the $1,500,000 loan on October 31,
2003. Each series of $250,000 subordinated convertible debenture bears interest
at the Wall Street Journal rate less 1%. The weighted average effective rate for
the year ended June 30, 2002 on these debentures was 4.25%. Interest for the
year ended June 30, 2002 on these debentures amounted to $63,832.

On July 30, 2001, the Company amended the Investment Agreement dated November 1,
2000 [note 9] with Lee whereby Lee would provide additional funding of up to
$1,500,000 in the form of a floating rate subordinated convertible debenture.
This would result in a total investment by Lee of $3,000,000 if all debentures
were funded. The additional $1,500,000 subordinated convertible debenture would
consist of a firm commitment of $710,000 and a discretionary commitment of
$790,000 in the form of a series of twelve debentures (debentures "G-R") ranging
in value from $50,000 to $310,000 each that would be funded during the period
from August 10, 2001 to July 1, 2002. As of June 30, 2002 the Company received
all payments under the series "G-R" debentures.

The Amended Investment Agreement provides Lee the right to convert the second
$1,500,000 floating rate subordinated convertible debenture into 8,522,727
common shares of the Company at a conversion price of $0.176. Should Lee convert
both investments of $3,000,000 it would result in the Company issuing 15,425,156
common shares. If Lee does not convert the second debenture to common shares the
Company will have to repay the $1,500,000 loan on October 31, 2003. Each Series
"G-R" subordinated convertible debenture for the second investment of $1,500,000
bears interest at the Wall Street Journal rate less 1%. The weighted average
effective rate for the year ended June 30, 2002 on these debentures was 3.96%.
Interest for the year ended June 30, 2002 on these debentures amounted to
$33,099.

The Amended Investment Agreement also contains certain affirmative and negative
covenants that restrict the Company's activities. As of June 30, 2002, the
company is in compliance with the covenants in both investment agreements.
Interest due on the convertible debenture can be repaid or converted into shares
of the Company's common stock at fair market value on the date of conversion at
the option of Lee.



<PAGE>




In conjunction with the Amended Investment Agreement dated July 30, 2001, the
Company also amended the November 30, 2000 Loan and Security Agreement [note 8]
and the Collateral License Agreement and the Registration Rights Agreement to
reflect the Series G-R debentures.

These debentures rank subordinate to the demand instalment loan [note 10], loans
payable [note 8] and shareholders' loans totaling $218,218 [note 11].

SUBSEQUENT TO YEAR END, THE COMPANY RECEIVED $100,000 FROM LEE AS THE FIRST OF
THREE INSTALMENTS ON THE AMENDED SECOND DEBENTURE AGREEMENT. THIS AGREEMENT WAS
AMENDED TO ADD THREE ADDITIONAL DEBENTURE SERIES (S, T AND U) WHICH TOTAL AN
ADDITIONAL $300,000. PAYMENTS UNDER THE AMENDMENT ARE AUGUST 1, 2002 FOR
$100,000, SEPTEMBER 1, 2002 FOR $125,000 AND $75,000 ON OCTOBER 1, 2002. ALL THE
TERMS OF THE SECOND DEBENTURE REMAIN WITH THE EXTENSION.

10. DEMAND INSTALMENT LOAN

The Company has a demand instalment loan of $169,687 that bears interest at the
bank's prime rate plus 1% and is repayable in equal monthly principal and
interest instalments of $1,625 through February 2015, unless the loan is called
on demand by the bank.

Annual principal repayments for this loan for the years succeeding June 30, 2002
are:

<TABLE>
<CAPTION>
                                                   $
--------------------------------------------------------------------------------
<S>                                            <C>

2003                                             8,897
2004                                             9,554
2005                                            10,259
2006                                            11,016
2007                                            11,829
Thereafter                                     101,355
--------------------------------------------------------------------------------
                                               152,910
================================================================================
</TABLE>

The loan is collateralized by a general security agreement on substantially all
of the Company's assets, a collateral mortgage security for $168,600 (Cdn.
$250,000) providing the bank a first security interest in the personal property
of two of the Company's officers, personal guarantees from two of the Company's
officers [note 11[b]] and the assignment of a life insurance policy on the
Company's president.

At June 30, 2002, the bank prime's rate was 5.50% [2001 - 6.25%].


<PAGE>


11. RELATED PARTY TRANSACTIONS

[A]   STOCKHOLDERS' LOANS

At June 30, 2002, the Company has several unsecured stockholder loans
denominated in Canadian dollars outstanding with the Company's chief executive
officer and chief financial officer. The stockholders' loans, all of which are
without stated terms of repayment unless otherwise stated, are payable on
demand.

<TABLE>
<CAPTION>
                                                                         ANNUAL
                                                                        INTEREST        BALANCE OUTSTANDING
                                                                         RATE AT             AT JUNE 30,
                                                                      JUNE 30, 2002      2002            2001
                                                                              %            $               $
---------------------------------------------------------------------------------------------------------------
<S>                                                                   <C>              <C>              <C>
Loans payable bearing interest at 9.7% and repayable in
  equal monthly blended instalments of $1,526 through
   January 2011 [note 11[b][i]]                                             9.70       229,063          231,537

Loan payable bearing interest at the CIBC Visa monthly
  interest rate [note 11[b][ii]]                                           19.50        13,344            2,669

Loan payable bearing interest at the Scotia McLeod monthly
  interest rate [note 11[b][ii]]                                            9.50         5,873           16,680

Loan payable bearing interest at 4.5% per annum
   [note 11[b][ii]]                                                         4.50         7,876           16,680

Loan payable bearing interest at Toronto Dominion Bank monthly
  TD Select Line rate [note 11[b][ii]]                                      6.75        16,680           16,680
---------------------------------------------------------------------------------------------------------------
                                                                                       272,836          284,246
===============================================================================================================
</TABLE>

Interest incurred on the loans amounted to $26,711 for the year ended June 30,
2002 [2001 - $22,270].



<PAGE>



[B]      OTHER


[i]      On November 10, 2000, the Company granted 200,000 warrants to two of
         the Company's officers, as consideration for their guarantee of the
         demand instalment loan [note 9] and as consideration for stockholders'
         loans totaling $84,300 that were made to the Company during the year
         ended June 30, 2000 [note 11[a]]. Each warrant is exercisable into one
         common share of the Company at a price of $0.25 per share through
         November 10, 2005 [note 14[c]]. The estimated fair value of these
         warrants at the date of issuance of $14,000 was recorded as an expense
         in the consolidated statement of loss for the year ended June 30, 2001.
         The Black Scholes option pricing model was used to value the warrants
         with the following assumptions: no dividend yield; risk-free interest
         rate of 6.0%; expected volatility of 154%; and an expected life of 2.0
         years.

[ii]     On June 26, 2001, the Company granted 160,000 warrants to two of the
         Company's officers, as consideration for stockholders' loans totaling
         $66,028 that were made to the Company during the year ended June 30,
         2001 [note 11[a]]. Each warrant is exercisable into one common share of
         the Company at a price of $0.25 per share through June 26, 2006 [note
         14[c]]. The estimated fair value of these warrants at the date of
         issuance of $3,200 was recorded as an expense in the consolidated
         statement of loss for the year ended June 30, 2001. The Black Scholes
         option pricing model was used to value the warrants with the following
         assumptions: no dividend yield; risk-free interest rate of 5.0%;
         expected volatility of 140%; and an expected life of 2.0 years.




<PAGE>


12. OBLIGATIONS UNDER CAPITAL LEASES

The Company leases certain of its computer equipment under capital leases
through fiscal year 2005. The future minimum lease payments required under
capital leases as at June 30, 2002 are as follows:

<TABLE>
<CAPTION>
                                                                        $
--------------------------------------------------------------------------------
<S>                                                                 <C>
2003                                                                 40,309
2004                                                                 33,900
2005                                                                 11,545
2006                                                                    375
--------------------------------------------------------------------------------
Total minimum lease payments                                         86,129
Less: amount representing interest                                  (16,742)
--------------------------------------------------------------------------------
Present value of minimum lease payments                              69,387
Less: current portion of obligations under capital leases           (29,357)
--------------------------------------------------------------------------------
Long-term portion of obligations under capital leases                40,030
================================================================================
</TABLE>


13. COMMITMENTS

The Company leases its building premises and certain office equipment under
operating leases expiring through fiscal year 2006. Future minimum lease
commitments under these leases are as follows:

<TABLE>
<CAPTION>
                                                                  OPERATING
                                                                   LEASES
                                                                      $
--------------------------------------------------------------------------------
<S>                                                               <C>
2003                                                              101,181
2004                                                               14,752
2005                                                                4,682
2006                                                                  846
--------------------------------------------------------------------------------
Total future minimum lease payments                               121,461
================================================================================
</TABLE>

Rent expense for the year ended June 30, 2002 amounted to approximately $134,892
[2001 - $106,841].


<PAGE>


14. SHARE CAPITAL

[A]   COMMON STOCK

On June 29, 2001, the Company issued 35,800 common shares at $0.25 per share to
a vendor for public relations services with a fair market value of $8,950.

On July 25, 2001, the Company issued 100,000 common shares at $0.25 per share
upon exercise of warrants. In lieu of cash payment, the exercise price was
settled in payment of accounts payable of $25,000.

On December 12, 2001, the Company issued 160,000 common shares to a vendor for
marketing services with a fair market value of $4,800.

[B]   STOCK OPTIONS

In July 1999, subject to the Board approval of the Plan, the Company granted
675,000 stock options to employees below the fair market value of the underlying
common shares on the date of grant. Compensation expense of $228,924, calculated
based on the intrinsic value method, has been recorded in the consolidated
statement of loss for the year ended June 30, 2000. On December 8, 2000, the
Company cancelled the remaining 490,000 unforfeited stock options and recorded
the remaining unvested compensation expense of $107,951 in the consolidated
statement of loss for the year ended June 30, 2001. On June 14, 2001, 490,000
stock options were granted with an exercise price of $0.25, which was greater
than the then-market price of the Company's common stock and a vesting schedule
as follows: 1/3 immediate vesting at date of grant and 1/3 vesting each year
thereafter for two years.

On August 25, 1999, and as amended on November 29, 2000 the Board of Directors
approved the creation of the Corporate Stock Option Plan ("Plan") pursuant to
which the Company has reserved 3,000,000 [2000 - 2,000,000] shares of common
stock. The term and vesting period of options are determined by the directors at
the date of grant. The majority of the options granted to date are exercisable
over a four year period and vest on a cumulative basis at 1/3 per year.

On November 29, 2001, the Company granted 75,000 stock options to a consultant
for services rendered to the Company during the quarter ended December 31, 2001.
Each stock option is exercisable into one common share of the Company at a price
of $0.25 per share through November 30, 2004. The estimated fair value of these
stock options at the date of issuance of $450 was recorded as an expense in the
consolidated statement of operations for the quarter ended December 31, 2001.
The Black Scholes option pricing model was used to value the warrants with the
following assumptions: no dividend yield; risk-free interest rate of 5.0%;
expected volatility of 153%; and an expected life of 3.0 years.


<PAGE>



[B]   STOCK OPTIONS

Stock option transactions for the years ended June 30, 2002 and 2001 are
summarized below:


<TABLE>
<CAPTION>
                                                                       OUTSTANDING OPTIONS
                                                 SHARES          ---------------------------------
                                               AVAILABLE                          WEIGHTED AVERAGE
                                              UNDER OPTION         SHARES          EXERCISE PRICE
                                                   #                  #                  $
--------------------------------------------------------------------------------------------------
<S>                                           <C>                <C>              <C>
 BALANCE, JUNE 30, 2000                            362,500        1,637,500            0.68
 Shares reserved                                 1,000,000               --              --
 Granted, November 10, 2000                        (65,000)          65,000            0.25
          November 29, 2000                        (85,000)          85,000            0.25
          March 29, 2001                           (90,000)          90,000            0.25
          May 29, 2001                             (60,000)          60,000            0.25
          June 14, 2001                           (600,000)         600,000            0.25
 Forfeited                                         147,500         (147,500)           0.89
 Cancelled                                         490,000         (490,000)           1.50
--------------------------------------------------------------------------------------------------
 BALANCE, JUNE 30, 2001                          1,100,000        1,900,000            0.25
 Granted, November 29, 2001                       (145,000)         145,000            0.25
          June 28, 2002                         (1,225,000)       1,225,000            0.25
 Forfeited                                         380,000         (380,000)           0.25
--------------------------------------------------------------------------------------------------
 BALANCE, JUNE 30, 2002                            110,000        2,890,000            0.25
===================================================================================================
</TABLE>

The following table summarizes information about stock options that are
outstanding at June 30, 2002:

<TABLE>
<CAPTION>
                                                                    OPTIONS EXERCISABLE
                                       OPTIONS OUTSTANDING   -------------------------------------
                          NUMBER            WEIGHTED-            NUMBER            WEIGHTED-
      EXERCISE        OUTSTANDING AT         AVERAGE         OUTSTANDING AT         AVERAGE
       PRICE           JUNE 30, 2002        REMAINING        JUNE 30, 2002      EXERCISE PRICE
         $                  #           CONTRACTUAL LIFE           #                   $
--------------------------------------------------------------------------------------------------
<S>                   <C>              <C>                   <C>                <C>
       0.25              2,890,000             2.79            1,066,667               0.25
==================================================================================================
</TABLE>



<PAGE>



The weighted average fair value of options granted during the year ended June 30
was as follows:

<TABLE>
<CAPTION>
                                                                    WEIGHTED
                                                                     AVERAGE
                                                OPTIONS            FAIR VALUE
                                                   #                    $
-------------------------------------------------------------------------------
<S>                                            <C>                 <C>

2002

Exercise price:
   Greater than fair market value              1,370,000               0.05
-------------------------------------------------------------------------------
                                               1,370,000               0.05
===============================================================================

2001

Exercise price:
   Greater than fair market value                900,000               0.07
-------------------------------------------------------------------------------
                                                 900,000               0.07
===============================================================================
</TABLE>

Pro forma information regarding net income and earnings per share is required by
Statement of Financial Accounting Standard ("SFAS") No. 123, which also requires
that the information be determined as if the Company had accounted for its
employee stock options under the fair value method of that statement. The fair
value of each option granted during the year was estimated at the date of grant
using the Black-Scholes pricing model with the following weighted average
assumptions: risk free interest rates of 5% [2001 - 5%]; dividend yields of nil;
volatility factors of the expected market price of the Company's common stock of
170% [2001 - 139%] and a weighted average expected life of the option of 2.79
years [2001 - 2.99 years].



<PAGE>



For purposes of pro forma disclosures, the estimated fair value of the options
is amortized to expense over the vesting period. The Company's pro forma
information for the year ended June 30, is as follows:

<TABLE>
<CAPTION>
                                                                         2002               2001
                                                                           $                  $
-----------------------------------------------------------------------------------------------------
<S>                                                <C>              <C>                <C>
Net loss                                           As reported      (1,829,444)        (2,318,339)
APB 25 compensation expense                        As recorded              --            107,951
SFAS 123 compensation expense                      Pro forma           (49,700)          (497,523)
-----------------------------------------------------------------------------------------------------
Pro forma net loss attributable to common
   stockholders                                    Pro forma        (1,879,144)        (2,707,911)
-----------------------------------------------------------------------------------------------------
Weighted average number of common shares
   outstanding                                                      23,222,231         23,008,294
=====================================================================================================

Pro forma net loss per common share:
   Basic and diluted                               Pro forma            (0.08)             (0.12)
=====================================================================================================
</TABLE>

[C]   WARRANTS

The following represents a summary of warrants outstanding at June 30, 2002:

<TABLE>
<CAPTION>
                                                           OUTSTANDING WARRANTS
                                       --------------------------------------------------------------
                                         SHARES         EXERCISE PRICE
 GRANT DATE                                #                   $                    EXPIRY DATE
-----------------------------------------------------------------------------------------------------
<S>                                    <C>              <C>                        <C>
 September 30, 1999                      465,800              0.25                 September 30, 2004
 October 13, 1999                        132,138              0.25                   October 13, 2004
 December 10, 1999                       408,000              0.25                  December 10, 2004
 January 18, 2000                        138,000              0.25                   January 18, 2005
 January 31, 2000                        500,000              0.25                   January 31, 2005
 May 1, 2000                             405,240              0.25                        May 1, 2005
 May 18, 2000                            280,000              0.25                       May 18, 2005
 June 13, 2000                           541,600              0.25                      June 13, 2005
 November 10, 2000                       200,000              0.25                  November 10, 2005
 June 26, 2001                           160,000              0.25                      June 26, 2006
-----------------------------------------------------------------------------------------------------
 BALANCE, JUNE 30, 2002                3,230,778
=====================================================================================================
</TABLE>



<PAGE>



On July 14, 2001, 45,260 warrants with an exercise price of $0.25 expired
unexercised.

On September 29, 2001, the Company extended the expiry dates of all outstanding
warrants issued in connection with private placements and loan guarantees by one
year.

On June 28, 2002, the Company extended the expiry dates of all outstanding
warrants issued by an additional two years.

[D]   LOSS PER COMMON SHARE

The following table sets forth the computation of basic and diluted loss per
share:

<TABLE>
<CAPTION>
                                                             2002               2001
                                                              $                   $
-----------------------------------------------------------------------------------------
<S>                                                       <C>                <C>
Net loss for the year                                     (1,829,444)        (2,318,339)
-----------------------------------------------------------------------------------------
Net loss attributable to common shareholders              (1,829,444)        (2,318,339)

Weighted average number of common shares outstanding      23,222,231         23,008,294

Basic and diluted loss per common share                        (0.08)             (0.10)
-----------------------------------------------------------------------------------------
</TABLE>

For the years ended June 30, 2002 and 2001, all of the Company's common shares
issuable upon the exercise of 2,890,000 stock options and 3,230,778 warrants
were excluded from the determination of diluted loss per common share as their
effect would be anti-dilutive.

[E]   AUTHORIZED SHARE CAPITAL

On November 29, 2001, the shareholders approved in the Annual General Meeting an
increase in the Company's authorized share capital from 50,000,000 no par value
common shares to 100,000,000 no par value common shares.

<PAGE>
15. INCOME TAXES

The Company is subject to United States Federal Taxes at an approximate rate of
34%. It is also subject to Canadian Federal and British Columbia provincial
taxes of approximately 45%. No current provision or benefit for income taxes has
been recorded for the years ended June 30, 2002 or 2001 as the Company has
incurred operating losses and has no carryback potential.

The Company's deferred income tax recovery for the year ended June 30 comprises:

<TABLE>
<CAPTION>
                                                                         2002           2001
                                                                           $             $
-----------------------------------------------------------------------------------------------------------------------------------
<S>                                                                     <C>             <C>
United States                                                           (93,100)      (160,000)
Canada                                                                       --             --
-----------------------------------------------------------------------------------------------------------------------------------
                                                                        (93,100)      (160,000)
-----------------------------------------------------------------------------------------------------------------------------------
</TABLE>

The reconciliation of income tax attributable to continuing operations computed
at the U.S. federal statutory tax rates to income tax expense for the years
ended June 30 is:

<TABLE>
<CAPTION>
                                                                         2002           2001
                                                                           $              $
-----------------------------------------------------------------------------------------------------------------------------------
<S>                                                                    <C>            <C>
Tax at U.S. statutory rates                                            (653,000)      (842,000)
Higher effective income taxes of other country                         (168,000)      (197,000)
Deferred tax assets not recognized for accounting purposes               52,000          3,000
Tax losses not recognized for accounting purposes                       640,000        808,000
Non-deductible expenses                                                   4,500         86,000
Other                                                                    31,400        (18,000)
-----------------------------------------------------------------------------------------------------------------------------------
Income tax recovery                                                     (93,100)      (160,000)
-----------------------------------------------------------------------------------------------------------------------------------
</TABLE>


<PAGE>

Net deferred tax assets (liabilities) consist of the following at June 30:

<TABLE>
<CAPTION>
                                                                            2002                   2001
                                                                              $                      $
-----------------------------------------------------------------------------------------------------------------------------------
<S>                                                                      <C>                    <C>
DEFERRED TAX ASSETS
Loss carryforwards                                                        2,800,000              2,187,000
Tax value in excess of book value                                            44,000                 11,000
Valuation allowance for future tax assets                                (2,844,000)            (2,198,000)
-----------------------------------------------------------------------------------------------------------------------------------
Net deferred tax assets                                                          --                     --
-----------------------------------------------------------------------------------------------------------------------------------

DEFERRED TAX LIABILITY
Excess book versus tax difference on eCommerce technology                        --               (93,100)
-----------------------------------------------------------------------------------------------------------------------------------
</TABLE>

The losses expire as follows:

<TABLE>
<CAPTION>
                                                                            U.S.                 CANADIAN
-----------------------------------------------------------------------------------------------------------------------------------
                                                                             $                      $
<S>                                                                          <C>                 <C>

2003                                                                             --                 55,000
2004                                                                             --                  4,000
2005                                                                             --                180,000
2006                                                                             --              1,180,000
2007                                                                             --              1,610,000
2008                                                                             --              1,790,000
2009                                                                             --              1,410,000

2019                                                                         78,000                     --
2020                                                                          5,000                     --
2021                                                                         13,000                     --

-----------------------------------------------------------------------------------------------------------------------------------
                                                                             96,000              6,229,000
-----------------------------------------------------------------------------------------------------------------------------------
</TABLE>


<PAGE>

16. SEGMENT INFORMATION

Predominantly all of the Company's assets and employees are located in Canada
for the years presented. The following table represents total revenues based on
the location of the customer:

<TABLE>
<CAPTION>
                                                                             2002                   2001
                                                                              $                       $
-----------------------------------------------------------------------------------------------------------------------------------
<S>                                                                         <C>                    <C>
U.S.A.                                                                      363,509                185,466
Canada                                                                       51,021                  9,987
-----------------------------------------------------------------------------------------------------------------------------------
Total revenues                                                              414,530                195,453
-----------------------------------------------------------------------------------------------------------------------------------
</TABLE>

17. PRODUCT DEVELOPMENT AND TECHNOLOGY

Government grants of $Nil for the year ended June 30, 2002 [2001 - $32,412] have
been applied to reduce product development and technology expenditures in the
consolidated statement of loss.


18. COMPARATIVE FIGURES

Certain comparative figures have been reclassified from statements previously
presented to conform to the presentation adopted in the current year.


<PAGE>

19. SUBSEQUENT EVENTS


On July 10, 2002, the Company completed the acquisition of 10digit
Communications, the online auction division of the Winnipeg Free Press owned by
FP Canadian Newspapers Limited Partnership. The purchase price for the
acquisition will be calculated on revenue recognized from current customers for
2002 and be satisfied through the issuance of CityXpress shares in two tranches
at $0.25 US per share. The first tranche of shares to be issued will be
1,004,277 common shares based on revenue generated by 10 digit auctions for the
first six month of 2002. These shares were issued on September 9, 2002.

The second tranche of shares will be issued in January 2003 based on revenue
generated from existing 10digit auction customers for the final six months of
2002. CityXpress also entered into a thirty month Equipment Lease Agreement with
payments of $2,215 commencing October 1, 2002 to lease the computer hardware
used by 10digit Communications to run their auctions. As part of the acquisition
CityXpress also entered into the following agreements with FP Newspapers Limited
Partnership a Noncompete and Nonsoliciation Agreement, Registration Rights
Agreement, Assignment of Intellectual Property and Assignment and Assumption of
Contracts.


<PAGE>


                                PART III EXHIBITS

         The following Exhibits are filed herewith. The Company shall furnish
copies of Exhibits for a reasonable fee covering the expenses of furnishing
copies upon request.

<TABLE>
<CAPTION>
Exhibit
Number             Description
-----------------------------------------------------------------------------------------------------------------------------------
<S>                <C>
99.1               Certificate of Chief executive Officer dated October 10, 2002

99.2               Certificate of Chief Financial Officer dated October 10, 2002

                   The following Exhibits are incorporated by reference to Exhibits
                   previously filed with the Commission. The Company shall furnish
                   copies of Exhibits for a reasonable fee covering the expenses of
                   furnishing copies upon request.
</TABLE>

<TABLE>
<CAPTION>
Exhibit
Number                                       Description
-----------------------------------------------------------------------------------------------------------------------------------
<S>            <C>
3 (i)          Articles of Incorporation of Wicked Wings of Buffalo Inc. effective January 15, 1981.
               Incorporated by reference to Exhibit 1 to the Company's Form 10SB.

3 (i)          Articles of amendment of Wicked Wings of Buffalo Inc. effective August 3, 1998.
               Incorporated by reference to Exhibit 2 to the Company's Form 10SB.

3.(i)          Articles of name change from Wicked Wings of Buffalo to WelcomeTo Search Engine,
               Inc. effective January 7, 1999.
               Incorporated by reference to Exhibit 3 to the Company's Form 10SB.

3.(i)          Articles of name change from WelcomeTo Search Engine, Inc. to CityXpress Corp effective August 25, 1999.
               Incorporated by reference to Exhibit 4 to the Company's Form 10SB.

3.(ii)         Bylaws of CityXpress Corp
               Incorporated by reference to Exhibit 5 to the Company's Form 10SB.

10.1.          Promissory Note with Ken Bradley for $50,000 Canadian funds dated June 26, 2001.

10.2           Promissory Note with Phil Dubois for $50,000 Canadian funds dated June 26, 2001

10.3           Acquisition Agreement by and between WelcomeTo Search Engine, Inc. and Xceedx
               Technologies Inc. dated January 27, 1999.
               Incorporated by reference to Exhibit 6 to the Company's Form 10SB.

10.4           Acquisition Agreement by and between WelcomeTo Search Engine, Inc. and WelcomeTo Search Engine Inc.
               dated January 7, 1999. Incorporated by reference to Exhibit 7 to the Company's Form 10SB.
</TABLE>


<PAGE>

<TABLE>
<CAPTION>
<S>            <C>
10.5           Pooling Agreement by and between The Shareholders of WelcomeTo Search Engine,
               Inc. listed on Schedule A to the Agreement and Russell & DuMoulin dated as of
               December  11, 1999.
               Incorporated by reference to Exhibit 8 to the Company's Form 10SB.

10.6           Voluntary Pooling Agreement by and between the undersigned Shareholders of
               WelcomeTo Search Engine, Inc., Welcome To Search Engine, Inc. and Russell
               & DuMoulin dated as of December 11, 19999.
               Incorporated by reference to Exhibit 9 to the Company's Form 10SB.

10.7           Stock Option Agreement.
               Incorporated by reference to Exhibit 10 to the Company's Form 10SB.

10.8           Service Agreement by and between WelcomeTo Search Engine, Inc. and Phil Dubois,
               dated January 27, 1999.
               Incorporated by reference to Exhibit 11 to the Company's Form 10SB.

10.9           Service Agreement by and between WelcomeTo Search Engine, Inc. and Ken R.
               Bradley, dated January 27, 1999.
               Incorporated by reference to Exhibit 12 to the Company's Form 10SB.

10.10          Data and service Agreement by and between WelcomeTo Search Engine, Inc. and Dun
               and Bradstreet dated March 5, 1999.
               Incorporated by reference to Exhibit 13 to the Company's Form 10SB.

10.11          Strategic Partner Agreement by and between CityXpress Corp and Lee Enterprises Incorporated.
               Incorporated by reference to Exhibit 14 to the Company's Form 10SB.

10.12          Canadian Imperial Bank of Commerce Credit Agreement with the Company.
               Incorporated by reference to Exhibit 16 to the Company's Form 10SB.

10.13          Canadian Imperial Bank of Commerce Securities Pledge Agreement with the Company.
               Incorporated by reference to Exhibit 17 to the Company's Form 10SB.

10.14          Canadian Imperial Bank of Commerce Security Agreement with the Company.
               Incorporated by reference to Exhibit 18 to the Company's Form 10SB.

10.15          Guarantee of Mr. Phil Dubois.
               Incorporated by reference to Exhibit 19 to the Company's Form 10SB.

10.16          Guarantee of Mr. Ken Bradley.
               Incorporated by reference to Exhibit 20 to the Company's Form 10SB.

10.17          CyberCash Agreement.
               Incorporated by reference to Exhibit 21 to the Company's Form 10SB.
</TABLE>


<PAGE>

<TABLE>
<CAPTION>
<S>            <C>
10.18          CityXpress Corp specimen share certificate.
               Incorporated by reference to Exhibit 22 to the Company's Form 10SB.

10.19          Loan and Security Agreement with Lee Enterprises Incorporated. dated August 16, 2000.
               Incorporated by reference to Exhibit 1 to the Company's Annual
               Report on Form 10-KSB for the fiscal year ended June 30, 2000.

10.20          Promissory Note Agreement with Lee Enterprises Incorporated. dated August 17, 2000.

10.21          Promissory Note Agreement with Lee Enterprises Incorporated. dated August 28, 2000.
               Incorporated by reference to Exhibit 3 to the Company's Annual Report on Form 10-KSB
               for the fiscal year ended June 30, 2000.

10.22          Promissory Note Agreement with Lee Enterprises Incorporated dated September 19, 2000.
               Incorporated by reference to Exhibit 4 to the Company's Annual Report on Form 10-KSB
               for the fiscal year ended June 30, 2000.

10.23          Collateral License Agreement with Lee Enterprises Incorporated dated August 16, 2000.
               Incorporated by reference to Exhibit 5 to the Company's Annual Report on Form 10-KSB
               for the fiscal year ended June 30, 2000.

10.24          Escrow Agreement with Lee Enterprises Incorporated. dated August 16, 2000.
               Incorporated by reference to Exhibit 6 to the Company's Annual Report on Form 10-KSB
               for the fiscal year ended June 30, 2000.

10.25          Promissory Note with Ken Bradley for $50,000 Canadian funds dated January 14, 2000.
               Incorporated by reference to Exhibit 7 to the Company's Annual Report on Form 10-KSB
               for the fiscal year ended June 30, 2000.

10.26          Promissory Note with Phil Dubois for $25,000 Canadian funds dated January 31, 2000.
               Incorporated by reference to Exhibit 8 to the Company's Annual Report on Form 10-KSB
               for the fiscal year ended June 30, 2000.

10.27          Promissory Note with Phil Dubois for $25,000 Canadian funds dated April 20, 2000.
               Incorporated by reference to Exhibit 9 to the Company's Annual Report on Form 10-KSB
               for the fiscal year ended June 2000.

10.28          Promissory Note with Ken Bradley for $25,000 Canadian funds dated April 25, 2000.
               Incorporated by reference to Exhibit 10 to the Company's Annual Report on Form 10-KSB
               for the fiscal year June 30, 2000.

10.29          Promissory Note with Ken Bradley for $125,000 Canadian funds dated June 13, 2000.
               Incorporated by reference to Exhibit 11 to the Company's Annual Report on Form 10-KSB
               for the fiscal year ended June 30, 2000.

10.30          Promissory Note with Phil Dubois for $125,000 Canadian funds dated June 13, 2000.
</TABLE>


<PAGE>

<TABLE>
<CAPTION>
<S>            <C>
               Incorporated by reference to Exhibit 12 to the Company's Annual Report on Form 10-KSB
               for the fiscal year ended June 30, 2000.

10.31          First Amendment to Investment Agreement dated July 30, 2001.
               Incorporated by reference to Exhibit 10.1 to the Company's Form 8-K dated Sept. 18, 2001.

10.32          Amended and Restated Loan and Security Agreement dated July 30, 2001.
               Incorporated by reference to Exhibit 10.2 to the Company's Form 8-K dated Sept. 18, 2001.

10.33          Amended Collateral License Agreement dated July 30, 2001.
               Incorporated by reference to Exhibit 10.3 to the Company's Form 8-K dated Sept. 18, 2001.

10.34          Amended and Restated Registration Rights Agreement dated July 30, 2001.
               Incorporated by reference to Exhibit 10.4 to the Company's Form 8-K dated Sept. 18, 2001.

10.35          Asset Purchase Agreement dated July 10, 2002. Incorporated by reference to Exhibit 2.1
               to the Company's Form 8-K dated July 10, 2002.

10.36          Equipment and Lease Agreement dated July 10, 2002. Incorporated by reference to
               Exhibit 2.2 to the Company's Form 8-K dated July 10, 2002.

10.37          Non-Compete and non-Solicitation Agreement dated July 10, 2002. Incorporated by
               reference to Exhibit 2.3 to the Company's Form 8-K dated July 10, 2002.

10.38          Registration Rights Agreement dated July 10, 2002. Incorporated by reference to Exhibit
               2.4 to the Company's Form 8-K dated July 10, 2002.
</TABLE>