SECURITIES AND EXCHANGE COMMISSION

                             Washington, D.C. 20549

                                    FORM 10-K

(Mark One)
[X]                ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
                   SECURITIES EXCHANGE ACT OF 1934
                   For the fiscal year ended September 30, 2001

                                          OR

[ ]                TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
                   SECURITIES EXCHANGE ACT OF 1934
                   For the transition period from        to

                   Commission file number:  0-29672

                              FORECROSS CORPORATION
              (Exact name of registrant as specified in its charter)

                 CALIFORNIA                                94-2823882
        (State or other jurisdiction                    (I.R.S. Employer
       incorporation or organization)                  Identification No.)

90 NEW MONTGOMERY STREET, SAN FRANCISCO, CALIFORNIA            94105
     Address of principal executive offices)                 (Zip Code)

     Registrant's telephone number, including area code:     (415) 543-1515

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

                                  Common Stock
                                (Title of Class)

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

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K (s229.405 of this chapter) is not contained herein, and will
not be contained, to the best of registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this Form 10-K
or any amendment to this Form 10-K.  [X]

     The aggregate market value of the voting common stock held by
non-affiliates of the Registrant as of December 14, 2001 was $3,686,000. As of
December 14, 2001, there are 16,853,380 shares of common stock outstanding.


<PAGE>
INFORMATION REQUIRED IN REGISTRATION STATEMENT

CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

     This Form 10-K of Forecross Corporation ("Forecross" or the "Company")
contains forward-looking statements within the meaning of the Private Securities
Litigation Reform Act of 1995 (the "Litigation Reform Act") that are subject to
risks and uncertainties. Statements indicating that the Company "expects,"
"estimates" or "believes" are forward-looking, as are all other statements
concerning future financial results, product offerings or other events that have
not yet occurred. There are several important factors that could cause actual
results or events to differ materially from those anticipated by the forward-
looking statements contained in this Form 10-K. Such factors include, but are
not limited to, the Company's unprofitable operating history and limited
financial resources; potential requirements for additional financing; volatility
of the Company's common stock; fluctuation of its quarterly operating results;
existing and potential competition; dependence on a small number of customers;
market size; no assurance of success of the Company's marketing strategy; no
assurance of the ability to continue product development as required and in a
timely manner; limited experience of management in the management of growth;
control by officers and directors; dependence on key personnel; the ability to
adequately protect its intellectual property; and general economic and market
conditions. Additional information on these and other certain business concerns
is included elsewhere in this Form 10-K.


ITEM 1.     BUSINESS

GENERAL BUSINESS DESCRIPTION

     Forecross is a software company that, together with our predecessor
corporations, has been in business since 1982. We develop, market and sell
sophisticated software and associated services to large organizations for the
automated conversion ("migration") of existing business software applications to
new computing environments.  During the period from 1996 through 1999, we also
developed, marketed and sold similar software and services to large
organizations for the automated assessment and renovation of business software
applications that were not year 2000 compliant.


INDUSTRY BACKGROUND

     In recent years, dramatic and fundamental changes have taken place in
computers and computer software for businesses with significant data management
needs. These developments have had a significant impact on the way in which
business applications are developed, have extended the useful life of existing
applications and have presented unique challenges to Management Information
Systems ("MIS") departments.

     First, there has been a dramatic reduction in the cost of computer
processing power. This has led to the "downsizing" from larger "mainframe" and
"super-mini" computers to smaller computers capable of processing the same
amount of work at significantly lower cost.


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     Second, standard computing environments, referred to as "open systems"
architecture, have increasingly dominated the market. Previously, large scale
MIS organizations were forced to implement business applications using database
software and languages proprietary to particular vendors.  Open systems
architecture has, to a significant extent, freed the MIS manager from this
constraint by permitting the components of an overall hardware and software
solution to be acquired from a number of different, and frequently competing,
vendors. Examples of these new standards include the UNIX operating system, the
database language called SQL and programming languages such as COBOL, C++ and
JAVA.

     Third, the network which each business establishes to connect the personal
computers on the desks of each user ("clients") to the open systems hardware
("servers") for business applications has expanded over the past five years to
include connections to, and often web sites on, the Internet. The "world-wide
web" enables a business to connect all of its employees to each other and to the
company's vendors and customers easily and inexpensively. This unprecedented
level of connectivity is driving a rapid evolution in the way businesses
inter-relate.

     Fourth, even though there has been a decrease in the cost of some computer
hardware, there has also been a reduction in many MIS budgets with no
corresponding reduction in the costs of software or technical personnel.

     Finally, the broad-based application assessment that was necessitated by
the year 2000 problem has brought unparalleled awareness to MIS management of
the attributes, costs and risks inherent in their business application
portfolios.  What has been discovered is a hodge-podge of environmental and
development software that has resulted in: immense, yet unnecessary, complexity;
duplicated and high costs of ownership; and serious risks of future maintenance
failures caused by a lack of personnel knowledgeable in the older installed
software.

     BUSINESS IMPACT

     Existing systems represent a huge financial investment and are often
functionally rich and mission-critical to the business.  Therefore, many
applications that would have been rewritten after three to five years are now
remaining in service for ten years or more. However, due to their underlying
technologies, they may not be meeting all of the needs of the organization. For
example, they may not be fully integrated with newer business applications, may
have data that is not easily accessible to users, or may operate on technology
platforms which are no longer cost-effective. Furthermore, personnel who
understand and can maintain applications developed using older technologies are
becoming more difficult to find and retain, and are, therefore, more expensive.

     The challenge for businesses is to find a cost-effective way to upgrade
these sizable existing systems to take advantage of the new technologies and
platforms, such as the Internet, while preserving all of their valuable business
functionality.

      AVAILABLE SOLUTIONS

     Our management believes that there are three basic options available to an
MIS manager wishing to take advantage of these developments.


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     One option is to acquire commercially available application software
packages specifically designed to operate on the new technology platforms.
However, a suitable package may not always be available and, even when it is,
the new software package will commonly require adaptation to the distinctive
business policies and practices of the user organization. In addition to the
initial cost of the package, these adaptations are frequently expensive and may
take too long to implement as well as require specialized technical resources.

     Another option is to rewrite the computer source code of the existing
application to make it usable in the new computing environment. This course is
time consuming to implement, can be error-prone, requires significant and
specialized personnel resources not routinely available, and may, therefore, be
expensive and risky.

     Both of these choices also involve the risk that business-specific rules
and functionality currently embedded in the existing application will not be
accurately or completely incorporated into the adapted software package or the
rewritten application.

     Our products represent a third solution. We have developed a proprietary
and innovative technology for the automated migration and on-going standards
compliance of existing applications. This allows businesses to replace existing
technologies (i.e., the system is re-hosted to a new technology platform) while
leaving the application functionally intact. We believe that this option will
ordinarily be the least expensive and least risky alternative.


MARKET

     At its largest, we estimate that the potential worldwide market for our
products includes approximately 30,000 large computer-using organizations,
including the so-called Fortune 2,000 companies, and comparable government,
financial services, healthcare, education and other service organizations. Most
of these organizations automated their major business applications before the
advent of current technologies. These organizations characteristically have a
large inventory of crucial information systems based on rapidly obsolescing
technology.

     We believe that the portion of the North American enterprise computing
market comprised of users of Computer Associates Integrated Database Management
System, or CA-IDMS, amounts to approximately 275 users, based on information
supplied in March 2000 by Harte-Hanks Market Intelligence, Inc., an industry
research organization.   CA-IDMS includes a database management system -
CA-IDMS/DB, user interface language - CA-IDMS/DC, and fourth-generation language
- CA-ADSO which, together with certain other related products, were originally
developed and marketed by Cullinane Corporation, later by Cullinet Corporation,
and now by Computer Associates International. Based on reports in the industry
press, we believe that there is a growing shift of enterprise computing users
away from CA-IDMS and that over the next ten years a substantial number of the
275 users will have decided to move to newer, more cost-effective and flexible
computing environments.  We currently estimate that there are approximately 300
CA-IDMS users outside North America.

     In addition to the CA-IDMS portion of the enterprise computing market,
there are also additional portions related to other proprietary technology
platforms.  They include areas related to computer languages such as
CA-Easytrieve from Computer Associates, CSP from IBM Corporation, CA-UFO from


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Computer Associates and ADF from IBM Corporation, and databases such as IMS from
IBM and Adabas from SoftwareAG. We currently estimate that there are between
15,000 and 20,000 users for all of those products. These additional areas create
opportunities for us to develop other products and give us added flexibility in
responding to changes and developments in the marketplace.


PRODUCTS

     We have licensed and delivered our products and ancillary services to
customers throughout North America, and in Taiwan, France, Belgium, Germany, and
South Africa. Historically, customers have included Aetna Life Insurance, AT&T,
Bank of America NT&SA, Bank of Montreal, Bear Stearns & Co., IBM Corporation,
Home Savings of America, Kimberly-Clark Corporation, New Brunswick Telephone,
Price Waterhouse LLP, Royal Bank of Canada, Charles Schwab & Company, Inc., and
Union Gas Corporation. Recent and current customers include Brown Brothers
Harriman & Co., University of California, San Diego, Ciber, Inc., Electronic
Data Systems Corporation, BDM International (now part of TRW Inc.), Harris Trust
and Savings Bank, and Metropolitan Life Insurance Company.

     Our products are designed to automate up to 100% of the conversion of an
existing application.  It has been our experience that 95% or more of the
business application programs commonly found in large computerized organizations
(see "-Market") can be converted with close to full (100%) automation. The
remaining 5% can usually be processed with a significant degree of automation
(80% or more), enough to make conversion with our products a cost-effective and
lower risk alternative. Converted applications are functionally equivalent to
their unconverted counterparts, and, in our experience, maintainability and
performance in the new environment are typically unaffected or enhanced.  Each
of our products includes a significant number of customization options that can
be selected by the user to obtain results closest to its specific conversion
objectives.

     During 1999, we added two new products aimed at extending the scope of our
conversion solution offerings. One tool, called 'TestSentinel', is used to test
the converted applications to ensure that they are functionally equivalent to
their un-converted counterparts. The second tool, called 'SourceSentinel', is
aimed at ensuring that coding standards and rules that are implemented when
programs are originally developed remain in force as those programs go through
the normal life cycle of on-going maintenance and enhancements. These tools are
currently offered as services only. We intend to offer end-user licenses in the
future.


UNDERLYING PROPRIETARY TECHNOLOGY

     Our powerful and flexible technology known as the XCODE architecture, has
been refined over the last fifteen years and forms the foundation for all of our
products, tools, and associated services.

     Our proprietary XCODE architecture supports all of the functions ordinarily
required to automate the conversion of existing systems. This includes parsing
the source code, storing the code in a common repository, identifying areas of


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the code that require technology upgrades, transforming the old technology and
generating revised source code for the operation of the application in the new
environment.

     The XCODE architecture is modular in design. Modular architecture refers to
the design of a system into separate components that can be connected and
combined together in many different configurations. The strength of modular
architecture is that any one component can be replaced, added or moved without
altering the rest of the system. Our modular XCODE architecture is, therefore,
readily adaptable to the development of new migration products. This lowers the
cost, shortens the time and reduces the risk of new product development.

     COMMERCIALLY AVAILABLE PRODUCTS

     We have, to date, developed nine migration products. Migration products are
named by reference to the source language or database and the target language or
database:

          -    Convert/IDMS-DC  to  CICS  (user  interface  language conversion)
          -    Convert/ADSO  to  COBOL  (language  conversion)
          -    Convert/IDMS-DB  to  SQL  (database  conversion)
          -    Convert/VSAM  to  SQL  (database  conversion)
          -    Convert/CSP  to  COBOL  (language  conversion)
          -    Redirect  II  COBOL/VS  to  COBOL  II  (language  conversion)
          -    IMSADF  II  to  Cross System Product Migration Facility (language
               conversion
          -    Convert/IMSADF  II  to  APS/COBOL  (language  conversion)
          -    Fastforward/VSAM  to  SUPRA  (database  conversion)

     We are the owner of six of these products.  Ownership of the following
products is shared: IMSADF II to Cross System Product Facility, which we
developed, but is owned jointly with IBM; Convert/IMSADF II to APS/COBOL, which
we developed, but is owned jointly with Bank of America; and Fastforward/VSAM to
SUPRA which we developed pursuant to a Development and License Agreement dated
April 22, 1991, with Cincom Systems, Inc. and is jointly owned by the Company
and Cincom. We and IBM have joint marketing rights to the first product, we and
Bank of America have joint marketing rights to the second product, and Cincom
has exclusive marketing rights to the third product. None of these jointly owned
products is presently material to our business or near-term business plans.

     PRODUCT DEVELOPMENT

     Our strategy in developing new migration software and services for existing
applications is to respond to the particular needs of a specific customer after
research has determined that there is an identifiable potential for further
licensing of the product and delivery of associated services, to other
organizations. Before undertaking the development of a new product, we generally
require that the customer agree to share the development cost.

One factor that greatly enhances our ability to employ this strategy is our
proprietary XCODE architecture. The XCODE architecture has historically enabled
us to develop a new migration product in an average of approximately six months
of elapsed time, with three persons


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employed full-time on the project. This is a considerably shorter and less
costly development cycle than traditional industry experience for products of
comparable scope and complexity. It also allows us to fund most or all of the
development cost from the license revenue generated by the initial
development-funding customer.

     In 1999, we commenced the development of additional tools that serve to
extend our offerings in the legacy migration area.  These tools include a
product for testing the migrated applications, a tool for ensuring that
application standards and rules remain in force as the applications are
maintained and a suite of tools aimed at moving legacy applications to the
internet.  Called L2X-SmartXML, these tools provide the native software
infrastructure to enable large-scale commerce projects to succeed with a second
generation technical solution.  SmartXML inserts the functionality for XML data
exchange directly into mainframe programs, eliminating middleware, decreasing
costs and increasing business flexibility. SmartXML consists of software modules
applicable to mainframe CICS programs, batch programs, reports, data file
exchanges and support for mainframe programmers. SmartXML is available now as a
part of our product and service offerings. While we intend to commercialize
these tools and offer product licenses to them to our customers, we are
currently offering consulting services related to these tools.

     Research and development expenses were $835,000, $913,000, and $728,000 in
the years ended September 30, 2001, 2000, and 1999, respectively.


PRODUCT LICENSING

     MIGRATION PRODUCT LICENSING

     We grant our customers a terminable, non-exclusive, non-assignable license
to use our software, including programs, options, documentation, data and
information, at a specified number of locations, for the conversion of a
specified number of application programs and to receive certain upgrades and
enhancements. Each agreement contains a warranty by us against defects in
design, operation and usability in the customer's computer environment, and each
contains a covenant by the licensee not to attempt to decipher, develop source
code, copy, modify, duplicate, create or recreate all or any part of it except
to the extent required by its normal operating procedures. The licensee also
agrees to take reasonable steps to prevent access by anyone whose access is not
reasonably necessary and to ensure that authorized persons with access refrain
from duplicating, reproducing or disclosing information with respect to the
licensed software.


INTELLECTUAL PROPERTY

     We have chosen to protect the intellectual property value of our products
and our proprietary XCODE architecture through trade secret and confidentiality
provisions in our product licensing arrangements, confidentiality agreements
with our employees and through copyright protection for system externals such as
display formats and documentation.  Additional protection is provided by the
complex nature of both the XCODE architecture, and the products themselves. This
approach is consistent with standard practice in the industry, and provides
reasonable assurance against misappropriation. Software theft, which can be a
serious problem in the consumer software market, is relatively rare in the


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large-scale software products market. Large corporate buyers tend not to engage
in product piracy. Our products are also protected against unauthorized use by
imbedded and external access control codes. However, the protection on which we
rely may not be effective. Monitoring and identifying unauthorized use of our
technology may prove difficult, and the cost of litigation may impair our
ability to guard adequately against such infringement.  Our commercial success
may also depend upon our products not infringing any intellectual property
rights of others and on no claims of infringement being made against us. Even if
such claims are found to be invalid, the dispute process could have a materially
adverse effect on our business, results of operations and prospects.


MARKETING AND SALES STRATEGY

     EXISTING APPLICATION MIGRATIONS

     The developments in computer technology described above (see "-Industry
Background: Significant Industry Developments") have converged to produce the
need and create the opportunity to convert existing applications.  After
experimentation with different marketing techniques, we decided in 1992 to
develop and implement our own direct marketing and sales strategy. Our strategy
includes having multiple product offerings to include a broad range of service
and license alternatives that better adapt to meet the needs of the marketplace
and serve to differentiate us from our competitors.  Conventional techniques
including trade publication notices, direct mail, telemarketing, and, most
recently, our own web-site, www.forecross.com, on the internet are being used to
bring our products and their benefits to the attention of prospective customers.
Additionally, we have focused on building a reference base of satisfied
customers.

     Recognizing that aversion to risk is one of the major characteristics of
the decision making process for many MIS organizations, we have created a phased
marketing approach to simplify the process for potential customers to evaluate
and invest in our products. This strategy allows a potential customer to pursue
its interest in automated migration in a series of measured steps, with each
step in the process providing demonstrable value.

     Our principal marketing programs involve the Migration Alternatives
Planning Seminar ("MAPS") and either Factory Compile or License-Only sales.

     MAPS is an introduction, for a fee, to the conversion process through an
intensive two-day customer-site program for those considering a migration
project. Designed to address conversion issues, it includes formal technical
briefings, expert consulting, an evaluation of the risks, costs and benefits of
various alternatives and a feasibility analysis of the automated migration of a
selection of the customer's application software. MAPS is promoted by
telemarketing and is conducted by two senior members of our staff. Evaluations
of prior MAPS sessions suggest that many of our MAPS customers will decide to
select Factory Compile or License-Only within twelve months of the MAPS session.

     We offer our customers the option for us to use our proprietary software on
behalf of the customer to perform the entire conversion process, thus relieving
the customer of the requirements for allocating the personnel and time necessary
to learn to perform the migration.  We call this type of engagement a "Factory
Compile."  By "factory," we mean an array of multiple server-class computers
operated by a small number of computer operators, running two to three shifts


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per day, up to seven days per week, depending on work volume. "Factory services"
implies the methodology by which customer code flows to us, through the factory,
to the rules engineers for issue resolution, to quality assurance for final
review, and back to the customer. The customer's role is limited to testing the
converted application in its new environment. The average Factory Compile
project requires one senior and two junior technical staff members for
approximately four months.

     License-Only is an offering in which the customer licenses our products
and, with training and additional optional consulting provided by us, performs
the entire conversion process with its own personnel. As in the Factory Compile
option, the customer also tests the converted application in the new
environment.  No customer has chosen the License-Only offering in the past few
years, preferring to use our automated factory facilities.

     Although there are no separately chargeable software license fees, Factory
Compile projects require the customer to sign a standard Forecross Product
License Agreement. For both offerings (Factory Compile and License-Only), a
customer's use of our products is limited to the conversion of a specified
maximum number of application programs, at which time the license expires.


SALES AND LICENSING REVENUE CONCENTRATION

     In the fiscal years ended September 30, 2001, 2000 and 1999, year 2000
assessment projects, sales of licenses to the Assess/2000 software, and fees
associated with distributorships for Complete/2000 products and services
accounted for 25%, 41% and 88%, respectively, of total revenue. There was no
year 2000-related work in the fiscal year ended September 30, 2001, but there
was recognition of revenue deferred from earlier periods.  All year 2000
deferred revenue for distributor licenses, fees and maintenance has now been
recognized. Migration projects in 2001 and 2000 accounted for 63% and 52% of
total revenue, respectively.


COMPETITION

     The marketplace for application migrations is served by both software and
services vendors. Forecross is not aware of any vendor, whether of software or
services, which offers the degree of automated conversion achievable through use
of Forecross products.

     SOFTWARE VENDORS

     We believe that the principal focus of other software vendors has been on
the development and licensing of software which speeds the rewriting alternative
for migration. Examples of software delivering this type of migration solution
assistance include Allen Systems Group, Inc.'s tools for application
re-engineering, and Carleton Corporation's software to support data migration.
In both of these cases, as in all others of which we are aware, the software
products do not provide the near-complete and comprehensive automated conversion
of business applications as those performed by our products after various
individual options and parameters have been established.


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     SERVICE SUPPLIERS

     Service organizations such as accounting firms and companies like Perot
Systems, EDS, IBM, Computer Horizons Corporation, Case Consult, GmbH and
Computer Task Group offer conversion services. Automated conversion facilities
provided by these service organizations typically embrace between 25% and 80% of
the source code, with the balance of the conversion being performed manually. We
believe that any manual conversion is subject to inconsistency, high risk of
error, high cost and delays.  Since they are service providers, these companies
tend to focus on turnkey projects costing several millions of dollars that can,
therefore, support the high manpower costs involved.

     Since our software automates significantly more of the conversion (95% to
100%) than can be achieved with other products, we believe that we are able to
compete effectively with such service suppliers. We typically price our Factory
Compile offering (see "-Marketing and Sales Strategy") below the prices quoted
by the service suppliers who perform conversions.  We believe that our Factory
Compile offering can be marketed successfully, because it can be presented to
the marketplace as the solution which uses a significantly greater degree of
automation than is offered by service suppliers, thereby reducing the costs,
time and risks of the project.

     COMPETITIVE EXPERIENCE

     Our experience in the competitive bidding process employed by many of our
prospective customers leads us to believe that we have a price advantage over a
majority of the other bidders. Other bidders' costs are typically higher due to
their dependence on skilled people, as compared with our dependence on less
costly automation.  However, we have not historically enjoyed the same degree of
market recognition as many of our large competitors, such as the national
consulting or accounting firms against whom we often compete.

     Until the emergence of the year 2000 problem, some customers did not
embrace the idea that automation could help them solve their problem. We believe
that such uncertainty would sometimes cause a customer to award a contract to
the more recognizable bidder, in spite of the higher price. This extra cost was
often viewed as an "insurance policy" against any problems in the future.  We
have observed a shift in this trend over the past years, and many customers now
will not entertain bids which do not contain the use of automated software
tools.  We believe that we have the capability to compete favorably because of
these trends, and because we have steadily built our reputation and name
recognition over the same period of time.


COMPETITIVE POSITION

     It is possible that other software or services companies may attempt to
develop new proprietary conversion software or service offerings or to enhance
existing proprietary conversion software or service offerings, to compete
directly in our chosen market. There are, in addition, certain other elements of
risk which bear upon our competitive position (see "Management's Discussion and
Analysis of Financial Condition and Results of Operations: Certain Business
Concerns: Additional Financing; Competition; Market Size; No Assurance of
Success of Marketing Strategy; Product Development; and Limited Experience of
Management in the Management of Growth"). Moreover, (as indicated under
"-Industry Background: Available Solutions") there are alternatives to migration
as a means of adapting to technological change, and there can be no assurance
that enterprise computing users will not prefer one of these alternatives.


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     It is difficult for us to assess how many potential customers have availed
themselves of the other alternatives (i.e., purchased a new software package
that operates on new technology platforms or rewritten the computer source
code), since we do not actively track prospects who fail to meet our initial
sales qualification criteria. Among qualified prospects who ultimately do not
purchase from us, the rewriting option generally prevails.

     CORPORATE HISTORY

     We were formed on January 1, 1987 by a merger pursuant to the provisions of
the California Corporations Code of two predecessor corporations, Jonescast,
Inc., and its wholly owned subsidiary, Genasys Software Systems, Inc.
(subsequently renamed Genasys Technologies, Inc., and later changed to Forecross
Corporation), each incorporated under the laws of California in June, 1982. As a
result of the merger, we succeeded to the business that had been carried on by
the predecessor corporations since 1982.  References in this Form 10-K to
Forecross Corporation, Forecross, or the Company should be taken to include a
reference to its predecessor companies.

     EMPLOYEES

     As of September 30, 2001, we had 33 employees.  Of these, six work
primarily in the Factory, five are engaged primarily in research and development
work, three are in project management, four are in technical support of customer
projects, two are in quality assurance, six are in sales and marketing, two are
in network administration and five are in finance and administration. All
employees are required to enter into a Confidentiality and Proprietary Rights
Agreement which requires that they not disclose any confidential information,
restricts their right to engage or have an interest in competing businesses, and
requires them to promptly disclose to us the product of all work done by them
while employed by and for us, and to assign to us all rights in such work
product.

     BACKLOG

     Backlog, which consists of the remaining portions of projects in process,
was $2,668,000 at September 30, 2001 as compared to $993,000 at September 30,
2000, due primarily to the size and state of completion of current projects.
(See "Management's Discussion and Analysis of Financial Condition and Results of
Operations.)


ITEM 2.   PROPERTIES

     Our principal executive offices are located at 90 New Montgomery Street,
San Francisco, California 94105, where we lease approximately 6,200 square feet
of space under a lease which expires in December 2001. We sublease approximately
2,500 square feet of this space with the approval of our landlord and such
sub-lease terminates with our lease. In September 2001, we terminated  another
lease with respect to approximately 4,000 square feet, which was approved by the
landlord without a penalty. The space currently occupied by our staff is
adequate for our needs. Annual base rent for both leases was approximately
$298,000, of which $143,000 represents the terminated lease.


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     With the expiration of our remaining lease on December 31, 2001, we
anticipate moving our principal offices to a new location in the same vicinity.
We are currently negotiating a new lease for approximately 4,000 square feet, at
an initial annual base rent of $120,000 and for a term of five years.

We also maintain a sales office in Salem, New Hampshire, and a small apartment
in San Francisco for use by our out-of-town staff while visiting the executive
offices.



ITEM 3.   LEGAL PROCEEDINGS
     None.



ITEM 4.   SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
     None.



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

     As of September 30, 2001, we had issued and outstanding 16,853,380 shares
of Common Stock held of record by 91 shareholders. Our Common Stock is traded on
the Over-the-Counter/Bulletin Board market under the symbol FRXX. The
Over-the-Counter/Bulletin Board quotations reflect inter-dealer prices, without
retail mark-up, mark-down or commission, and may not necessarily represent
actual transactions. From August 1994 to October 28, 1998, our Common Stock was
listed on the Vancouver Stock Exchange under the symbol FRX.U. Listed below are
the high and low bid prices (U.S. dollars) for our Common Stock for the periods
indicated.

    THREE MONTHS
       ENDED             HIGH   LOW
    ------------        ------------
      09/30/01          $1.11  $0.41
      06/30/01           1.01   0.31
      03/31/01           1.00   0.25
      12/31/00           1.06   0.16
      09/30/00           2.00   0.56
      06/30/00           2.66   0.72
      03/31/00           5.81   0.27
      12/31/99           0.75   0.11

     We have not paid any dividends to date and do not anticipate that any cash
dividends will be declared in the foreseeable future.



ITEM 6.   SELECTED FINANCIAL DATA

     The selected financial data set forth below with respect to the fiscal
years ended September 30, 2001, 2000, and 1999 and the balance sheet data at
September 30, 2001 and 2000 are derived from the audited financial statements
included elsewhere in this Annual Report. The financial data for the years ended
September 30, 1998 and 1997 and the balance sheet data at September 30, 1999,
1998, and 1997 are derived from audited financial statements not included in
this Annual Report. The information set forth below should be read in
conjunction with the audited financial statements and notes included elsewhere
in this Annual Report and Management's Discussion and Analysis of Financial
Condition and Results of Operations included elsewhere herein.


                                       12
<PAGE>
<TABLE>
<CAPTION>
                                                                                 FOR THE YEARS ENDED
                                                                                    SEPTEMBER 30,
                                                ---------------------------------------------------------------
                                                            2001          2000           1999           1998           1997
                                                -----------  -----------  -----------  -----------  -----------
STATEMENT OF OPERATIONS DATA:
<S>                                                     <C>           <C>            <C>            <C>            <C>
Net revenue:
Services . . . . . . . . . . . . . . . . . . . . . .    $ 3,014,028   $  3,373,798   $  2,895,343   $  6,446,980   $  4,810,350
Year 2000 software licenses, maintenance
  agreements and distributorship fees from related
  parties. . . . . . . . . . . . . . . . . . . . . .        980,409        564,999        565,008        721,772        964,688
                                                -----------  -----------  -----------  -----------  -----------
  Total net revenues . . . . . . . . . . . . . . . .      3,994,437      3,938,797      3,460,351      7,168,752      5,775,038

Cost of services and maintenance including fees to
  related parties of $0, $18,000, $166,000, $346,000
  and $213,000, respectively . . . . . . . . . . . .      1,545,595      1,355,671      2,745,733      4,419,347      3,366,608
                                                -----------  -----------  -----------  -----------  -----------
Gross margin . . . . . . . . . . . . . . . . . . . .      2,448,842      2,583,126        714,618      2,749,405      2,408,430
                                                -----------  -----------  -----------  -----------  -----------




Operating expenses:
Sales and marketing, including fees to related
  parties of $0, $55,000, $497,000, $1,037,000 and
  640,000, respectively. . . . . . . . . . . . . . .        814,089        719,843      1,047,300      1,838,126      1,490,479
Research and development . . . . . . . . . . . . . .        834,720        913,064        728,239      1,520,709      1,006,768
General and administrative . . . . . . . . . . . . .      1,094,230      1,913,832      1,116,528      1,413,312        887,039
                                                -----------  -----------  -----------  -----------  -----------
Total operating expenses . . . . . . . . . . . . . .      2,743,039      3,546,739      2,892,067      4,772,147      3,384,286
                                                -----------  -----------  -----------  -----------  -----------
Loss from operations . . . . . . . . . . . . . . . .       (294,197)      (963,613)    (2,177,449)    (2,022,742)      (975,856)
Interest and other expense, net. . . . . . . . . . .       (133,221)      (313,251)      (553,131)      (305,110)       (68,855)
                                                -----------  -----------  -----------  -----------  -----------
Loss before provision for income taxes . . . . . . .       (427,418)    (1,276,864)    (2,730,580)    (2,327,852)    (1,044,711)
Provision for income taxes . . . . . . . . . . . . .         (1,600)             -           (800)          (800)          (800)
                                                -----------  -----------  -----------  -----------  -----------
Net loss . . . . . . . . . . . . . . . . . . . . . .    $ (429,018)    $(1,276,864)   $(2,731,380)   $(2,328,652)   $(1,045,511)
                                                ===========  ===========  ===========  ===========  ===========
Net loss per share - basic and diluted . . . . . . .    $     (0.03)   $     (0.09)   $     (0.23)   $     (0.20)   $     (0.09)
                                                ===========  ===========  ===========  ===========  ===========
Weighted average shares used in computing per
  share data . . . . . . . . . . . . . . . . . . . .     15,607,226     13,951,186     12,060,919     11,761,920     11,681,035
                                                ===========  ===========  ===========  ===========  ===========


                                       13
<PAGE>
BALANCE SHEET DATA:

Cash and cash equivalents. . . . . . . . . . . . . .    $    30,123   $     18,833   $      2,740   $     98,249   $    275,243
Working capital (deficit). . . . . . . . . . . . . .       (937,032)    (1,246,989)    (4,317,171)    (1,735,813)       442,765
Total assets . . . . . . . . . . . . . . . . . . . .      1,046,491      1,516,422        812,307      1,995,719      3,301,051
Deferred revenue, long-term. . . . . . . . . . . . .              -        415,419        980,418      1,545,417      2,110,417
Long-term debt and capital lease obligations, net of
 current portion . . . . . . . . . . . . . . . . . .        135,448        102,692        769,892        673,059              -
Shareholders' deficit. . . . . . . . . . . . . . . .       (775,167)    (1,339,270)    (5,678,877)    (3,276,564)      (995,912)
</TABLE>

ITEM 7.   MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS

     The following summary of our material activities for the years ended
September 30, 2001, 2000 and 1999 is qualified by, and should be read in
conjunction with more detailed information along with the financial statements
and related notes and other information contained in this report. Each recipient
of this document is urged to read it in its entirety.

     The financial results reported herein do not indicate the financial results
that we may achieve in any future period. Other than the historical facts
contained in this document, this Annual Report contains statements that are
forward-looking, such as statements relating to plans for future activities.
Such forward-looking information involves important risks and uncertainties that
could significantly affect results in the future and, accordingly, such results
may differ from those expressed in any forward-looking statements made by or on
our behalf. These risks and uncertainties include concentration of sales and
credit risk, outstanding indebtedness, limited financial resources and
liquidity, dependence on expansion, activities of competitors, changes in
federal or state laws and the administration of such laws, protection of
trademarks and other proprietary rights and the general condition of the economy
and its effect on the securities markets. See "Certain Business Concerns."


BACKGROUND AND OVERVIEW

     Forecross is a software company that, together with our predecessor
corporations, has been in business since 1982. We develop, market and sell
sophisticated software and associated services to large organizations for the
automated conversion ("migration") of existing business software applications to
new computing environments.  During the period from 1996 through 1999, we also
developed, marketed and sold similar software and services to large
organizations for the automated assessment and renovation of business software
applications that were not year 2000 compliant.

     In 1999, we commenced the development of additional tools that serve to
extend our offerings in the legacy migration area. These tools include a product
for testing the migrated applications, a tool for ensuring that application
standards and rules remain in force as the applications are maintained and a
suite of tools aimed at moving legacy applications to the internet. Called
L2X-SmartXML, these tools provide the native software infrastructure to enable


                                       14
<PAGE>
large-scale commerce projects to succeed with a second generation technical
solution. SmartXML inserts the functionality for XML data exchange directly into
mainframe programs, eliminating middleware, decreasing costs and increasing
business flexibility. SmartXML consists of software modules applicable to
mainframe CICS programs, batch programs, reports, data file exchanges and
support for mainframe programmers. SmartXML is available now as a part of our
product and service offerings. Our customers include banks and other
industrial and commercial organizations in the United States, Canada and
Europe.

     Over the past two years, we have focused our efforts on rebuilding our
legacy-to-web migration business, which suffered greatly during the fiscal years
ended September 30, 2000 and 1999, after having enjoyed some growth during the
prior years. As the deadline for correcting the year 2000 problem approached,
most large corporate enterprises worked at correcting their applications, to the
almost complete exclusion of other projects, such as legacy-to-web or related
migrations. Forecross offered products and services to address the year 2000
problem, and we had related revenue of $1,622,000 and of $3,052,000 during
fiscal 2000 and 1999 respectively. However, year 2000 revenue never reached the
amounts anticipated, and at the same time, legacy migration revenue dropped
dramatically.

     While we have not yet been able to achieve the level of the legacy
migration revenue that was displaced by year 2000 spending, we have made solid
progress toward that goal during the fiscal years ended September 30, 2001 and
2000, with related revenue of $3,014,000 and $2,318,000 respectively. We expect
that the positive trend of increasing revenues will continue in the fiscal year
that will end September 30, 2002.  In 2001 we expanded our sales force by adding
two seasoned sales executives, continued to implement cost containment
activities, and developed additional infrastructure automation that we believe
will be reflected in higher gross margins in the future.  Our progress is shown
by the reduction of our overall net loss to $429,000 or $0.03 per share in 2001
despite an adverse economic climate, from $1,277,000 or $0.09 per share in 2000,
based on the weighted average number of shares outstanding during the respective
periods.  In the opinion of management, if we can achieve our objectives of
continuing to expand our legacy-to-web sales while continuing to decrease our
cost of operations, we expect we would be profitable in the coming year.



RESULTS OF OPERATIONS

     YEAR ENDED SEPTEMBER 30, 2001 COMPARED TO YEAR ENDED SEPTEMBER 30, 2000

     Total revenue for the year ended September 30, 2001 was $3,994,000 as
compared to $3,939,000 for the same period of 2000, an increase of 1%. Migration
services revenue for the year contributed $2,499,000 as compared to $2,048,000 a
year ago. Revenue from consulting totaled $515,000 in 2001 as compared to
$270,000 in 2000. There was no year 2000 services revenue in 2001, but
$1,057,000 in 2000. Revenue from the amortization of deferred year 2000
distributor licenses, fees and maintenance totaled $980,000 for the current year
and $565,000 for the prior year. The year 2000 distributor revenue increased
$415,000 since the remaining year 2000 deferred revenue originally scheduled to
be amortized over future years, was recognized in 2001. Year 2000 work
effectively ceased during late 1999, and all remaining clean-up and
documentation work was completed by March 2000. The Company has no remaining


                                       15
<PAGE>
obligations or continuing obligations with respect to its prior arrangement with
year 2000 distributors or customers and does not anticipate any such
obligations.

     Migration and consulting project revenue is recognized on the percentage-
of-completion method, in the ratio that actual costs incurred to date bear to
total estimated costs at completion.

     Backlog was $2,668,000 at September 30, 2001 and $993,000 at September 30,
2000. The increase reflects the Company's having signed a large contract in
March 2001, that is still in process at September 30, 2001.

     Gross margin was $2,449,000 and $2,583,000 for years ended September 30,
2001 and 2000, respectively. Gross margin percentages were 61% and 66% for these
periods. $415,000 of 2001 gross margin (17% of revenue) was directly related to
the increased recognition of year 2000 deferred revenue.  The gross margin
percentage for fiscal 2000 reflects higher margin related to year 2000 services
revenue in the first fiscal quarter.

     Sales and marketing expenses were $814,000 for 2001 and $720,000 for 2000.
The increase was directly related to the employment of two additional sales
representatives during the second half of 2001.

     Research and development expenses were $835,000 for 2001 as compared to
$913,000 in the prior year, which reflect the continuing development efforts in
2001 for enhancements to our migration products and new XML-related offerings.

     General and administrative expenses were $1,094,000 and $1,914,000 at the
respective year ends. The reduction in general and administrative expenses was
due to $652,000 in non-cash compensation expenses related to the issuance of
common stock and warrants in a March 2000 private placement, and the value
assigned to options issued to consultants in April 2000.

     Net interest and other expense was $133,000 for the year ended September
30, 2001, as compared to $313,000 in 2000. This reduction results from the
conversion of much of our non-bank debt to equity in March 2000, and the
continued reduction in bank borrowings.

     The provision for income tax expense is the tax payable for the period plus
the change during the period in deferred tax assets and liabilities. Due to the
uncertainty of realization, a valuation allowance has been provided to eliminate
the net deferred tax assets at September 30, 2001 and 2000.

     The overall net loss for the year was $429,000 or $0.03 per share in 2001,
and $1,277,000 or $0.09 per share in 2000, based on the weighted average number
of shares outstanding during the respective periods. The net loss for the three
months ended September 30, 2001 was $186,000 or $0.01 per share compared to the
net loss of $147,000 or $0.01 per share for the same period in 2000.


     YEAR ENDED SEPTEMBER 30, 2000 COMPARED TO YEAR ENDED SEPTEMBER 30, 1999

     Total revenue for the year ended September 30, 2000 was $3,939,000 as
compared to $3,460,000 for the same period of 1999, an increase of 14%.
Migration services revenue for the year contributed $2,048,000 as compared to


                                       16
<PAGE>
$248,000 a year ago, due primarily to the signing and execution of two contracts
during 2000. Year 2000 services revenue accounted for $1,057,000 of the total as
compared to $2,487,000 for the same period of 1999. Revenue from consulting
totaled $270,000 as compared to $160,000 in 1999, and revenue from the
amortization of deferred year 2000 distributor licenses fees and maintenance
remained at $565,000 for both periods. Backlog was $993,000 at September 30,
2000 and $1,172,000 at September 30, 1999.

     Gross margin was $2,583,000 and $715,000 for years ended September 30, 2000
and 1999, respectively. Gross margin percentages were 66% and 21% for these
periods. The increased gross margin percentage was due to reductions in cost of
revenue and reflects, in part, efforts over the past year to control costs and
improve efficiencies through attrition and by adjusting staff levels for the
reduction and end of year 2000 business, reductions in contractors, and the end
of fees to year 2000 distributors.

     Sales and marketing expenses were $720,000 for 2000 and $1,047,000 for
1999. Year 2000 distributor commissions, which ended at December 31, 1999,
accounted for $442,000 of the change between years.

     Research and development expenses were $913,000 for 2000 as compared to
$728,000 in the prior year, which reflect the increase in development efforts in
2000 for enhancements to our migration products and new XML-related offerings.

     General and administrative expenses were $1,914,000 and $1,117,000 at the
respective year ends. Most of this increase was due to non-recurring $652,000
non-cash compensation expenses related to the issuance of common stock and
warrants in a March 2000 private placement, and the value assigned to options
issued to consultants in April 2000. The $652,000 non-cash compensation expense
was initially reported as $954,000 in our filings on Form 10Q for the March and
June 2000 periods due to a clerical error in calculating the Black-Scholes value
of the warrants related to the transaction.

     Net interest and other expense was $313,000 for the year ended September
30, 2000, as compared to $553,000 in 1999. This reduction reflects the benefit
of the conversion of much of our non-bank debt to equity in March 2000, and the
reduced use of bank borrowings.

     The provision for income tax expense is the tax payable for the period plus
the change during the period in deferred tax assets and liabilities. Due to the
uncertainty of realization, a valuation allowance has been provided to eliminate
the net deferred tax assets at September 30, 2000 and 1999.

     The overall net loss for the year was $1,277,000 or $0.09 per share in
2000, and the loss was $2,731,000 or $0.23 per share in 1999, based on the
weighted average number of shares outstanding during the respective periods. The
net loss for the three months ended September 30, 2000 was $147,000 or $0.01 per
share compared to the net loss of $853,000 or $0.07 per share for the same
period in 1999.


                                       17
<PAGE>
LIQUIDITY AND CAPITAL RESOURCES

     Through September 30, 2001, we have sustained recurring losses from
operations and, at September 30, 2001, we had a net capital deficiency of
$775,000 and a net working capital deficiency of $937,000. These conditions
raise substantial doubts about our ability to continue as a going concern. See
note 1 of the notes to financial statements. The opinion of our independent
certified public accountants on the audited financial statements for the year
ended September 30, 2001 also contained an explanatory paragraph regarding this
doubt about our ability to continue as a going concern.

     For the year ended September 30, 2001, operations were funded primarily by
collection of customer accounts receivable, by cash derived from the sale of
common stock for cash in a private placement transaction (see note 8 of the
notes to the financial statements), by the payment received for future
consulting services, and by deferrals of salaries of senior officers.

     We are aggressively pursuing new opportunities for migration services,
including developing products and services specifically marketable to businesses
currently using legacy systems but needing to migrate to more web-friendly
platforms. We expect additional revenue in the second quarter of fiscal 2002
from some of the migration contracts currently under negotiation. We are closely
monitoring our sales pipeline, work in progress, collections and cash
requirements to determine whether the existing sources of financing are adequate
to support our operations or whether additional means of financing, including
debt or equity financing, may be required to satisfy our working capital and
other cash requirements.

     If we can obtain the anticipated level of new business, and continue the
use of short-term receivables financing, we believe we will have sufficient
funds to meet our needs through the balance of fiscal 2002. Cash from operations
and the other sources described above may not be achieved or may not be
sufficient for our needs.

     A factoring agreement with a financial organization allows us to obtain
financing by borrowing against our accounts receivable on a recourse basis. At
September 30, 2001, $0 was outstanding under the agreement and at September 30,
2000, $501,000 was outstanding. The agreement, established in October 1995, and
modified in March 2001, may be terminated by either the factor or us at any
time.

     In April 2001, the Company, issued notes payable to Kim O. Jones and
Bernadette C. Castello, in the amounts of $55,780 and $60,681, respectively.
These amounts represent the payroll tax portion of prior debts owed to each of
them by the Company that were not converted into Common Stock of the Company in
connection with a private placement conducted in March, 2000.  The unsecured
notes bear interest a 12% per annum, and are due April 15, 2003.

     We anticipate that our capital expenditures for fiscal 2002 will be between
$50,000 and $75,000.

     Cash and cash equivalents on hand at September 30, 2001 were $30,000 as
compared to $19,000 at September 30, 2000.


                                       18
<PAGE>
RECENT ACCOUNTING PRONOUNCEMENTS

     In June 2001, the Financial Accounting Standards Board finalized FASB
Statements No. 141, Business Combinations (SFAS No. 141), and No. 142, Goodwill
and Other Intangible Assets (SFAS No. 142). SFAS No. 141 requires the use of the
purchase method of accounting and prohibits the use of the pooling-of-interests
method of accounting for business combinations initiated after June 30, 2001.
SFAS No. 142 requires, among other things, that companies no longer amortize
goodwill, but instead test goodwill for impairment at least annually. The
Company has not entered into any significant business combinations. As a result,
the Company does not anticipate that adoption of SFAS Nos. 141 & 142 will impact
its financial position and results of operations.

     In June 1998, the FASB issued No. SFAS 133, Accounting for Derivative
Instruments and Hedging Activities. SFAS No. 133 requires companies to recognize
All derivatives contracts as either assets or liabilities in the balance sheet
and to measure and to measure them at fair value. If certain conditions are met,
a derivative may be specifically designated as a hedge, the objective of which
is to match the timing of gain or loss recognition on the hedging derivative
with the recognition of (i) the changes in the fair value of the hedged asset or
liability that are attributable to the hedged risk or (ii) the earnings' effect
of the hedged forecasted transaction. For a derivative not designated as a
hedging instrument, the gain or loss is recognized in income in the period of
change. In June 1999, the FASB issued SFAS No. 137, Accounting for Derivative
Instruments and Hedging Activities - Deferral of the Effective Date of FASB
Statement No. 133, which amends SFAS No. 133 to be effective for all fiscal
quarters of all fiscal years beginning after June 15, 2000. In June 2000, the
FASB issued SFAS No. 138, Accounting for Derivative Instruments and Hedging
Activities - An Amendment of FASB Statement No. 133, which addressed certain
Implementation issues of SFAS No. 133.


                                       19
<PAGE>
     Historically, the Company has seldom entered into derivatives contracts
either to hedge existing risks or for speculative purposes. Accordingly, the
adoption of this new standard on October 1, 2000 has not had a material impact
on its financial position, results of operations or cash flows for fiscal 2001.


CERTAIN BUSINESS CONCERNS

     UNPROFITABLE OPERATING HISTORY AND LIMITED FINANCIAL RESOURCES

     We have not historically been profitable, and as of September 30, 2001, we
had suffered cumulative operating losses aggregating $12,429,000, and at
September 30, 2001, we had a net capital deficiency and a net working capital
deficiency, and $30,000 in cash and cash equivalents. These conditions raise
substantial doubts about our ability to continue as a going concern. During
fiscal 2002, we intend to meet our working capital and other cash requirements
with cash derived from operations, short-term receivables financing, and other
financing as required. In addition, we must continue to improve the efficiency
of our operations to achieve and maintain positive cash flow from operations.
(See "-Liquidity and Capital Resources," and Note 1 of Notes to Financial
Statements). There is no assurance, however, that cash from operations and the
other sources described above will be achieved or will be sufficient for our
needs, nor that we will be able to achieve profitability on a consistent basis.

     ADDITIONAL FINANCING

     We may require additional funds to continue product development and
marketing, and to support our working capital requirements. We may seek such
additional financing through private placements of debt or equity financing, and
through collaborative arrangements with others. If adequate funds are not
available when required or on acceptable terms, we may be required to delay,
scale back or eliminate our product development activities and sales and
marketing efforts, which would adversely impact our ability to obtain new
business. If this were to become necessary, it would adversely affect our
business, results of operations and prospects (see "-Liquidity and Capital
Resources").


                                       20
<PAGE>
     VOLATILITY OF COMMON STOCK

     Our Company's stock price has been volatile since our initial public
offering on the Vancouver Stock Exchange in 1994. After the registration of our
stock in the United States during 1998, the stock has continued to experience
significant volatility. We believe that factors such as quarterly fluctuations
in the results of operations, announcements of new products by us or our
competitors, changes in revenue or earnings estimates by securities analysts,
changes in accounting principles or their application and other factors may
cause the market price of our stock to continue to fluctuate, perhaps
substantially. In addition, stock prices of many technology companies fluctuate
widely for reasons that may be unrelated to operating results. Due to market and
securities analysts' expectations of continued growth and the higher
price/earnings ratio at which our stock may trade, any shortfall in meeting such
expectations may have a rapid and significant adverse effect on the price of our
stock in the future. Fluctuations in our stock may in turn adversely affect our
ability to attract and retain qualified personnel, and to gain access to capital
and financing if needed.

     FLUCTUATION OF QUARTERLY RESULTS

     We have experienced quarterly and other fluctuations in revenues and
operating results and expect these fluctuations to continue in the future. We
believe that these fluctuations have been attributable to the timing, size and
nature of our contracts with our customers; the performance of our distributors;
the timing of the introduction of new products or services by our competitors;
the decision of potential customers to perform such projects using internal
resources; changes in operating expenses; personnel changes; and fluctuations in
economic and financial market conditions.

     The timing, size and nature of our contracts with our customers are
important factors in our operating results. Many of these contracts involve
large dollar amounts, and the sales cycle is often lengthy and unpredictable.
Uncertainties include customers' budgetary constraints, the timing of their
budget cycles and their internal approval process. There can be no assurance
that we will be successful in closing such large contracts on a timely basis or
at all. As to the nature of the contracts, most of our migration contracts are
for a fixed fee. Although the contracts contain provisions allowing us to charge
additional fees to our customers in the event that unanticipated or 'out of
scope' work must be done, we nevertheless bear the risk of cost overruns and
inflation. A significant percentage of our revenue that is derived from these
contracts is recognized on the percentage-of-completion method, which requires
revenue to be recorded over the term of the contract. A loss is recorded at the
time when current estimates of project costs exceed unrecognized revenue. Our
operating results may be adversely affected by inaccurate estimates of contract
completion costs.

     Our expense levels are based, in part, on our expectations as to future
revenue and are fixed, to a large extent, in the short term. As a result, we may
be unable to adjust spending in a timely manner to compensate for any unexpected
revenue shortfall. Accordingly, any significant shortfall in revenue relative to
our expectations would have an immediate and material adverse effect on our
business.


                                       21
<PAGE>
     Due to the foregoing factors, we believe that period-to-period comparisons
of our operating results are not necessarily meaningful and that such
comparisons cannot be relied upon as indicators of future performance. There can
be no assurance that future revenue and operating results will not vary
substantially. It is also possible that in some future period, our operating
results will be below the expectations of public market analysts and investors.
In either case, the price of our common stock could be materially adversely
affected.

     COMPETITION

     We are not currently aware of any direct competitors that license, use or
sell fully automated, near-complete migration software. While certain vendors do
offer or use such software, none of the products currently available provides
the near-complete and comprehensive automated conversion performed by our
products. It is possible, however, that other software developers and vendors
may create such software directed at our market.  If this should happen, or if
the costs and risks associated with an enterprise rewriting its business
applications for the new technologies are otherwise significantly reduced, it is
possible that significantly fewer enterprises will choose the migration
alternative using our products. We do have some indirect competitors in the form
of service organizations, such as the accounting and computer consulting
companies which provide a combination of automated and manual conversion, and
certain of these organizations have significantly greater resources, both of
capital and personnel, than we do, and much greater general name recognition
(see "Business: Competition" and "Business: Competitive Position").

     There can be no assurance that our migration products and services will
compete effectively with those of our current and potential competitors, nor
that future competition for product sales and services will not have a material
adverse effect on the business, results of operations and our financial
condition (see "Business: Competition").

     DEPENDENCE ON A SMALL NUMBER OF CUSTOMERS

     The results of our operations are attributable to a limited number of
orders, the average size of which is over $500,000. During the year ended
September 30, 2001, Airline Tariff Publishing Company (26%), our Distributors,
when treated as one customer (25%), the University of California (22%) and the
European Patent Office (13%) represented 86% of total revenue. During the year
ended September 30, 2000, the University of California (26%), MetLife (21%), our
Distributors, when treated as one customer (14%) and Nate Murphy and Associates
(13%) represented 74% of total revenue. Airline Tariff Publishing Company and
the University of California accounted for 69% and 24% respectively, of our
accounts receivable at September 30, 2001.  The University of California and
MetLife accounted for 75% and 22% respectively of our accounts receivable at
September 30, 2000. The loss or deferral of one or more significant sales or
failure to collect on a significant accounts receivable from any customer could
cause substantial fluctuations in our results of operations (see Notes 2 and 3
of Notes to Financial Statements).  While we believe that the market for our
migration services will offer the opportunity to expand the number of customers
and projects in process at any given time, there can be no assurance that we
will be successful in our sales efforts or that a weakening in customer demand
would not have an immediate material adverse effect.


                                       22
<PAGE>
     MARKET SIZE

     The market for our migration products may be smaller than we project,
whether because companies in the marketplace elect for budgetary or other
reasons not to pursue automated migration or any other form of software
conversion, or because they do so at a rate that is much lower than we expect
(see "Business: Market"). If this should happen, it will have a direct impact
upon the rate of our growth.

     NO ASSURANCE OF SUCCESS OF MARKETING STRATEGY

     We have, over the years, experimented with a variety of approaches to the
marketing of our products. Our current strategy for our migration products and
services, based on direct marketing, has been in place for approximately seven
years. While present indications are that the strategy is well-adapted to the
market which we have targeted, there can be no assurance that over the long term
it will be successful. Successful implementation of the marketing plan requires,
among other things, sales and marketing personnel with an ability to communicate
clearly to potential customers our ability to complete migration projects
successfully, and this requires an understanding of both the technology and the
marketplace. (See "Business: Marketing and Sales Strategy").

     LIABILITY EXPOSURE

     We market our products and services to customers for managing the
renovation of mission-critical computer software systems. Our agreements with
our customers typically contain provisions designed to limit our exposure to


                                       23
<PAGE>
potential product and service liability claims. It is possible, however, that
the limitation of liability provisions contained in our customer agreements may
not be effective as a result of existing or future federal, state, local or
foreign laws or ordinances or unfavorable judicial decisions. Although we have
not experienced any material product or service liability claims to date, the
sale and support of our products and services may entail the risk of such claims
that could be substantial in light of the use of our products and services in
mission-critical applications. We do not presently maintain insurance coverage
for our products and services and a successful product or service liability
claim brought against us could have a material adverse effect upon our business,
operating results and financial condition.

     PRODUCT DEVELOPMENT

     The development of complex, large-scale, multiple environment computer
software presents a difficult engineering challenge, and it is possible that we
may not be able to continue to develop products responsive to market
requirements on a timely or cost-effective basis, or at all. If that should
happen, there is a risk that other competing products might be launched earlier
and capture a significant part of the market targeted by us.

     LIMITED EXPERIENCE OF MANAGEMENT IN THE MANAGEMENT OF GROWTH

     While our present management, having been our founders, have been
principally responsible for the growth of our business to date, they may not be
in a position to provide the full range of skills required to manage the further
growth of the Company's business, and it may be necessary to recruit competent
personnel to supplement their skills and experience. While we believe that we
will be able to recruit competent personnel with the required skills,
competition for such personnel is intense and there can be no assurance that we
will be successful in finding, attracting and retaining them. Failure to do so
could have an adverse impact upon our business.

     CONTROL BY DIRECTORS AND OFFICERS

     The current directors and officers of the Company beneficially own
approximately 17% of the actual Common Shares outstanding. As a result, our
current directors and officers exercise considerable control over our affairs.

     DEPENDENCE ON KEY PERSONNEL

     Our progress to date has to a significant extent been dependent on the
skills of certain key personnel, including Kim O. Jones and Bernadette C.
Castello, the founders and principal shareholders and, respectively, the
President and Chief Executive Officer and the Senior Vice President and Chief
Financial Officer of our Company. We have not entered into employment contracts
with these or any other members of management or other employees. In addition,
competition for highly skilled technical, management, financial, marketing and
sales, and other personnel in the computer industry is intense. Loss of the
services of any of our present key personnel, or an inability to attract and
retain needed additional personnel could have a materially adverse effect us.
In addition, we sometimes rely upon qualified, experienced subcontractors to
support our migration services work. The inability to find and retain sufficient
qualified subcontractors may adversely impact our operations.


                                       24
<PAGE>
     INTELLECTUAL PROPERTY PROTECTION

     While we believe that our products and technologies are adequately
protected against infringement by confidentiality agreements, licensing
agreements, copyright laws and the complex nature of the products and
technologies themselves, there can be no assurance of effective protection.
Monitoring and identifying unauthorized use of our technology may prove
difficult, and the cost of, distraction, and time required for litigation may
impair or completely frustrate our ability to guard adequately against such
infringement.

     GENERAL ECONOMIC AND MARKET CONDITIONS

     Forecross products are designed for large organizations that typically make
significant investments in their MIS departments. Expenditures by such
organizations tend to vary in cycles that reflect overall economic conditions.
Our business is, therefore, vulnerable to variations in economic conditions
generally, or to those variations which affect the economic prospects of
corporations and organizations in its target market, and which could affect the
capital spending or budget cycles of prospective customers. Economic conditions
in the United States and elsewhere have recently been adverse.  War or terrorism
in the United States or worldwide have affected those conditions recently and
could do so in the future.



ITEM  8.   FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

     The financial statements required by this item are set forth on pages F-1
through F-20 hereof.



ITEM  9.   CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE

     None.



ITEM 10.   DIRECTORS AND EXECUTIVE OFFICERS

     The directors, executive officers and key employees of our Company are as
follows:

<TABLE>
<CAPTION>
<S>                         <C>  <C>
NAME                        AGE  POSITION
Kim O. Jones . . . . . . .   57  Chief Executive Officer, President and Director
Bernadette C. Castello (1)   47  Senior Vice President, Chief Financial Officer and Director
Richard A. Carpenter (1) .   59  Director
Donald Estes . . . . . . .   53  Director of Product Architecture
Ronald Herbst. . . . . . .   59  Director of Customer Care
Carl H. Johnson (2). . . .   56  Director of Third Party Relationships
Charles T. Nelson. . . . .   55  Director of Software Products
Kenneth J. Paris . . . . .   54  Senior Database Specialist
Peggy A. Payne . . . . . .   52  Director of Migration Services
Robert E. Theurer. . . . .   56  Director of Sales
<FN>
(1)  Denotes member of audit committee. Ms. Castello, as Chief Financial
Officer, is not independent of any financial decisions of our Company.
(2)  We accepted Mr. Johnson's resignation from the Company on December 20,
2001.
</TABLE>


                                       25
<PAGE>
     KIM O. JONES (57) founded Forecross together with Bernadette Castello in
1982 and has been in his present position since that time. Mr. Jones is the
chief architect of our products.  He has been active as a software industry
entrepreneur and industry participant since 1971. Prior to the establishment of
Forecross, Mr. Jones served from 1980 to 1982 as a Director and Vice President
of Computer Systems Design, Inc., of San Francisco, California, in charge of
software product development and marketing. In 1970 Mr. Jones co-founded Genasys
Systems, Inc., a software and services firm based in San Francisco, California,
for which he worked initially as Chief Technology Officer and, later, as
President until 1980.  From 1967 to 1970, he was a Vice President of Liberty
National Bank of San Francisco, California, responsible for data processing. Mr.
Jones was a member of the Board of Directors of the American Software
Association, a division of the Information Technology Association of America.

     BERNADETTE C. CASTELLO (47) co-founded Forecross with Kim Jones in 1982 and
has been in her present position since that time. Ms. Castello manages our day
to day corporate operations.  From 1973 to 1977, Ms. Castello worked for KPMG
Peat Marwick in New York, designing and managing the installation and use of
some of the earliest automated applications in that firm. Thereafter, until
1980, she worked as an analyst in Peat Marwick's computer resources department.
From 1980 to 1982, when she left to found Forecross with Mr. Jones, Ms. Castello
was a Senior Consultant at Computer Systems Design, Inc. in San Francisco,
developing applications for the financial and manufacturing industries.

     RICHARD A. CARPENTER (59) is the President of Carpenter Associates, a
consulting firm that provides strategic planning and product marketing
assistance to early stage software companies. Mr. Carpenter also serves as
Chairman of the Board of two companies which he co-founded,  Corex Technologies
and Healthcourt Technologies.  Prior to co-founding these companies, Mr.
Carpenter had co-founded Index Systems (now CSC/Index) in 1969, and Index
Technology (now part of Intersolv) in 1983 where he served as Chairman/CEO until
its merger with Sage Software in 1991 to form Intersolv Software. Mr. Carpenter
became a director in March 1998. Mr. Carpenter does not provide consulting
services to any direct or indirect competitor of ours.

     DONALD ESTES (53) joined us in April 2000 as Director of  Product
Architecture. For the last 10 of his 27 years in the industry, he specialized in
the design and implementation of products and projects for the mass modification
and automated testing of large bodies of source code using language processing
technologies. He has chief responsibility for legacy-to-web products and
projects.  Mr. Estes holds degrees from the Massachusetts Institute of
Technology and the University of Texas.  From May 1997 through March 2000, Mr.
Estes was the Chief Technical Officer of 2000 Technologies Corp., in Lexington,
Massachusetts, where he built an automated testing system for platform migration
and Year 2000 renovation projects. He also served as a year 2000 advisor to the
State of Rhode Island. From September 1995 through April 1997, he was President


                                       26
<PAGE>
of Don Estes and Associates, in Lexington, Massachusetts, where he designed and
managed the implementation of a mainframe / open systems peer - to - peer
communications product family. Mr. Estes is a member of the Cutter Consortium.

     RONALD HERBST (59) joined us in December 1995 as Director of Project
Management and currently serves as Director of Customer Care. From November 1993
through December 1995, Mr. Herbst was an independent software consultant
providing such services as conceptual and detailed system design and
implementation and system programming. From August 1993 through October 1993,
Mr. Herbst was Vice President, Research and Development for Dynamic Bytes, Inc.
From July 1989 through July 1993, Mr. Herbst served as Vice President, Windsor
Technologies, Inc.  Mr. Herbst has over twenty years of senior management
experience serving the information technology industry.

     CHARLES T. NELSON (55) joined us in December 1991 and has served in a
variety of technical and research and development capacities. In June 1996, Mr.
Nelson was named Director of Software Products.  Prior to joining Forecross, Mr.
Nelson had over twenty years' experience managing and supervising software and
hardware technical support activities for several large corporations.

     KENNETH J. PARIS (54) Senior Database Specialist, worked with us from 1989
through March 1996, and rejoined us in October 1996. From March 1996 through
September 1996, Mr. Paris served as an independent software consultant to
various companies, including Forecross.  Prior to joining us in 1989, Mr. Paris
spent eleven years with KPMG Peat Marwick, both as Database Administrator and as
director of database research and development for the consulting department of
KPMG Peat Marwick's National Technology Center. From 1985 to 1986, Mr. Paris
served as Director of Product Development at Pansophic Systems, Inc. of Oak
Brook, Illinois. He was also for six years a member of the database committee of
the American National Standards Institute (ANSI) that developed the SQL
standard. Mr. Paris was the initial Conference Chairman and then President of
the International DB2 Users Group.

     PEGGY A. PAYNE (52) joined us in May 1996 as Director of Migration
Services.  From February 1993 through May 1996, Ms. Payne was Director of
Information Management and Technology for Revo Corporation. From July 1988 to
February 1993, Ms. Payne was manager, information systems for Westinghouse
Security Electronics.  Ms. Payne has over twenty years of technical experience
and has served in various capacities for technical organizations including
Association of Corporate Computing Professionals, Bay Area MAPICS Users Group,
and Information Technology Executives Association.

     ROBERT E. THEURER (59) joined us in April 2000 as Director of Sales. He has
35 years of experience in the computer industry in many capacities including
technical, corporate management and sales and marketing. From October 1997 until
joining Forecross, Mr. Theurer was Senior Vice President of Sales for 2000
Technologies Corporation, a company that develops and markets automated testing
technology. From 1994 through 1997, he was the Director of Sales for MSS
International, a UK based company that specializes in platform migrations
primarily from Unisys mainframes to UNIX platforms.

     Our executive officers and directors are required under the Securities
Exchange Act of 1934, as amended, to file reports of ownership and changes in
ownership with the Securities and Exchange Commission. Copies of those reports


                                       27
<PAGE>
must also be furnished to our Company. Based solely on our review of the copies
of such reports we have received, we believe that all of our executive officers
and directors and greater than ten percent beneficial owners complied with all
filing requirements applicable to them.


ITEM 11.   EXECUTIVE COMPENSATION

     The following table sets forth the amount of all compensation paid by us
during each of 2001, 2000, and 1999 to the person serving as our Chief Executive
Officer, and to our most highly compensated executive officers, other than the
Chief Executive Officer, whose compensation exceeded $100,000 during any such
year (the "Named Executive Officers").

<TABLE>
<CAPTION>
                                                              LONG-TERM
                                      ANNUAL COMPENSATION    COMPENSATION
                                                              SECURITIES
                                                              UNDERLYING
NAME AND PRINCIPAL POSITION    YEAR    SALARY (2)   BONUS    OPTION (#)(1)   ALL OTHER COMPENSATION
<S>                            <C>     <C>          <C>      <C>              <C>
Kim O. Jones. . . . . . . .    2001    $   185,000  None         None                  None
  Chief Executive Officer      2000        185,000  None         None                  None
                               1999        131,813  None         None                  None

Bernadette C. Castello. . .    2001    $   185,000  None         None                  None
  Senior Vice President        2000        185,000  None         None                  None
                               1999        131,813  None         None                  None
</TABLE>

(1) There are no other long-term incentive compensation plans that require
disclosure.
(2) Both Kim O. Jones and Bernadette C. Castello took a voluntary pay reduction
of 5% of 1998 salary, and additionally did not take a salary for the first three
months of fiscal year 1999. Salary for the last nine months of fiscal year 1999
was accrued but not paid.  Accrued salaries were converted into shares of common
stock and warrants during the year ended September 30, 2000.

     Stock Option Grants in Last Fiscal Year. There were no grants of stock
options to either of the Company's Named Executive Officers during the fiscal
year ended September 30, 2001.

     Aggregated Option Exercises in Last Fiscal Year and Fiscal Year End Option
Values.  There were no options held by either of the Company's Named Executive
Officers.  All options previously held expired unexercised in November 2000.

DIRECTOR COMPENSATION

     Non-employee directors are reimbursed for reasonable out-of-pocket expenses
incurred in connection with the attendance of board meetings. Non-employee
directors are entitled to participate in our 1994 Stock Option Plan. During the
years ended September 30, 2001 and 1999, no options were granted to non-employee
directors. During the year ended September 30, 2000, Mr. Carpenter received a
stock option grant of 80,000 shares at an exercise price of $3.25 per share,
with a vesting period of one-fifth immediately and the remainder over four years
on a monthly basis.


                                       28
<PAGE>
ITEM 12.   SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

     The following table sets forth certain information regarding the beneficial
ownership of our Company's outstanding shares of Common Stock as of September
30, 2001 by (i) each person known to us beneficially to own 5% or more of the
outstanding shares of our Common Stock, (ii) each of our directors, (iii) each
of our executive officers named in the Summary Compensation Table below, and
(iv) all directors and officers as a group. Except as indicated in the footnotes
to this table, the persons named in the table have sole voting and investment
power with respect to all shares of Common Stock shown as beneficially owned by
them, subject to community property laws where applicable. Except as noted
below, the address of each party below is: c/o Forecross Corporation, 90 New
Montgomery Street, San Francisco, CA  94105.


     NAME OF OWNER                        NUMBER OF SHARES    PERCENT OF CLASS
                                         BENEFICIALLY OWNED  BENEFICIALLY OWNED
     ----------------------------------  ------------------  ------------------
     Kim O. Jones (1). . . . . . . . . .      1,441,434                 8.5%
     Bernadette C. Castello (2). . . . .      1,389,404                 8.2%
     Richard A. Carpenter (3). . . . . .         90,290                 0.5%
     All 3 directors and executive
       officers as a group (4) . . . . .      2,921,128                17.1%


(1) Includes a warrant to purchase 101,530 shares.
(2) Includes a warrant to purchase 71,820 shares.
(3) Includes fully vested and exercisable stock options covering 48,167 shares
and a warrant to purchase 4,041 shares.  Mr. Carpenter's business address is 25
Marion Street, Hingham, MA 02043.
(4) Includes fully vested and exercisable stock options covering 48,167 shares
and warrants to purchase 177,391 shares.



ITEM 13.   CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

     As of September 30, 2001 the Company had the following notes payable to a
related parties of the Company:

     In August 2000, the Company borrowed $100,000 from an employee of the
Company under a secured promissory note due August 27, 2002. The note bears
interest at 11.5% per annum, and is secured by certain company technology.

     In April 2001, the Company, issued notes payable to Kim O. Jones and
Bernadette C. Castello, in the amounts of $55,780 and $60,681, respectively.
These amounts represent the payroll tax portion of prior debts owed to each of
them by the Company that were not converted into Common Stock of the Company in
connection with a private placement conducted in March, 2000.  The unsecured
notes bear interest a 12% per annum, and are due April 15, 2003.


                                       29
<PAGE>
     Notes  payable to officers and related parties consist of the following:

<TABLE>
<CAPTION>
                                              SEPTEMBER 30,
                                           ------------------
NOTES PAYABLE                                2001      2000
---------------------------------------    ------------------
<S>                                        <C>       <C>
11.5% collateralized note payable to a
  related party, due August 27, 2002. .    $100,000  $100,000
12% uncollateralized note payable to
  president, due April 15, 2003 . . . .      55,780         0
12% uncollateralized note payable to
  senior vice president, due
  April 15, 2003. . . . . . . . . . . .      60,681         0
Accrued interest payable. . . . . . . .      18,987     1,082
                                           --------  --------
Total payable to officers and related
  parties . . . . . . . . . . . . . . .    $235,448  $101,082
                                           ========  ========

</TABLE>
SOFTWARE LICENSES AND DISTRIBUTORSHIPS:

     The Company entered into agreements with several entities (the
"Distributors") for licenses and distributorship arrangements for its year 2000
software products, Assess/2000 and Complete/2000, and related services. The
Distributors are related to each other through some common ownership and
management; a shareholder of the Company is a founding investor and officer of
each of the other entities. At least one other shareholder of the Company is
also an investor in at least one of the Distributors. Under the distributorship
agreements, the Distributors received territorially exclusive rights to market
year 2000 renovation projects to be performed by the Company using the
Complete/2000 software, and year 2000 assessment projects to be performed either
by the Company or the Distributor using the Assess/2000 software. In exchange
for sales and marketing services and support, customer contact, project
management services and staffing for a portion of the on-site work, the
Distributor generally received a fee equal to 25% of collected revenues. The
Company allocated those fees 25% to cost of services and maintenance, and 75% to
sales and marketing expense. The exclusivity rights under these contracts were
generally for an initial one-year period, but were renewable for up to four
additional years based on certain performance conditions. The Distributors
generally had separate agreements for license rights for unlimited usage of the
Assess/2000 product. In the case of one contract, fees payable were 50% of
collected revenues until $1,500,000 was received by the Distributor, and 25% of
revenue collected thereafter. During fiscal 1998, the $1,500,000 amount had been
earned, with all subsequent fees earned at the 25% rate.

     The licensing and distributorship fees received from the Distributors,
totaling $3,125,000 and $200,000 in 1997 and 1996, respectively, were generally
deferred and recognized over a five year period commencing with the signing of
the respective agreements. Of these amounts, none remains deferred at September
30, 2001, and approximately $865,000 and $1,410,000 was deferred at September
30, 2000 and 1999, respectively. Additional fees of approximately $672,000 for
training programs, annual software maintenance, and customer support were
received in 1997. Of this amount, none remains deferred at September 30, 2001,
and approximately $115,000 and $135,000 was deferred at September 30, 2000 and
September 30, 1999, respectively.  The year 2000 project fee expense related to
the distributor contracts, included in cost of revenues in the accompanying
statements of operations, was approximately $0, $18,000, and $166,000 for the
years ended September 30, 2001, 2000 and 1999, respectively. The year 2000
expenses related to the distributor contracts, included in sales and marketing
expenses, were approximately $0, $55,000 and $497,000 for the years ended
September 30, 2001, 2000 and 1999.


                                       30
<PAGE>
ITEM 14.  EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K

(a)  Financial Statements

1.   FINANCIAL STATEMENTS. The following Financial Statements of Forecross
Corporation, and the Report of Independent Public Accountants are included at
pages F-1 through F-20 of this Annual Report.

<TABLE>
<CAPTION>
DESCRIPTION                                                                                             PAGE NO.
------------------------------------------------------------------------------------------------------  -----------
<S>                                                                                                     <C>
Report of BDO Seidman, LLP, Independent Certified Public Accountants . . . . . . . . . . . . . . . . .  F-1
Balance Sheets as of September 30, 2001 and 2000 . . . . . . . . . . . . . . . . . . . . . . . . . . .  F-2
Statements of Operations for each of the Three Years in the Period Ended September 30, 2001. . . . . .  F-3
Statements of Shareholders' Deficit for each of the Three Years in the Period Ended September 30, 2001  F-4
Statements of Cash Flows for each of the Three Years in the Period Ended September 30, 2001. . . . . .  F-5
Notes to the Financial Statements. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  F-6 to F-20
</TABLE>

2.   FINANCIAL STATEMENT SCHEDULE. The following financial statement schedule
of Forecross Corporation for each of the three years in the period ended
September 30, 2001 is filed as part of this Annual Report and should be read in
conjunction with the Financial Statements of Forecross Corporation.

Valuation and Qualifying Accounts     S-1


3.   INDEX  AND  DESCRIPTION  OF  EXHIBITS

<TABLE>
<CAPTION>

<S>          <C>
EXHIBIT NO.  DESCRIPTION
3.1+         Restated Articles of Incorporation
3.2+         By-Laws
10.1+        Lease Agreement, dated January 1, 1997 between the Company and The Canada Life Assurance Company
10.2+        Form of Indemnification Agreement entered into between the Company and each of its officers and directors
10.3+        1993 Restricted Stock Purchase Plan
10.4+        1994 Stock Option Plan and Form of Option Agreement
10.8+        Factoring Agreement, dated October 30, 1995, between the Company and Silicon Valley Financial Services
10.10+       Factoring Modification Agreement, dated January 13, 1998, between the Company and Silicon Valley Financial Services
</TABLE>

+  Previously filed as part of the Company's Form 10/A, effective June 16, 1998.


4.  REPORTS ON FORM 8-K

    None


                                       31
<PAGE>
SIGNATURES


Pursuant to the requirements of Section 12 of the Securities Exchange Act of
1934, the registrant has duly caused this Annual Report to be signed on its
behalf by the undersigned, thereunto duly authorized.

                      Registrant

                      FORECROSS  CORPORATION


December 31, 2001     BY: /s/ Bernadette C. Castello
                         -------------------------------------------------
                         Bernadette C. Castello
                         Senior Vice President and Chief Financial Officer



     Pursuant to the requirements of the Securities and Exchange Act of 1934,
this Report on Form 10-K has been signed on behalf of the Registrant by the
following persons and in the capacities and on the dates indicated:

<TABLE>
<CAPTION>
SIGNATURE                   TITLE                                            DATE
<S>                         <C>                                              <C>
/s/ Kim O. Jones            Chief Executive Officer, President and           December 31, 2001
                            Director (principal executive officer)
Kim O. Jones

/s/ Bernadette C. Castello  Senior Vice President, Chief Financial Officer   December 31, 2001
                            and Director (principal financial and
                            accounting officer)
Bernadette C. Castello

/s/ Richard A. Carpenter    Director                                         December 31, 2001
Richard A. Carpenter
</TABLE>


                                       32
<PAGE>
INDEPENDENT  CERTIFIED  PUBLIC  ACCOUNTANTS'  REPORT


To the Stockholders and Board of Directors of Forecross Corporation


We have audited the accompanying balance sheets of Forecross Corporation as of
September 30, 2001 and 2000, and the related statements of operations,
shareholders' deficit and cash flows for each of the three years in the period
ended September 30, 2001.  We have also audited the Schedule listed in the
accompanying index at Item 14. These financial statements and the Schedule are
the responsibility of Forecross Corporation's management. Our responsibility is
to express an opinion on these financial statements and the Schedule based on
our audits.

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

In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Forecross Corporation at
September 30, 2001 and 2000, and the results of its operations and its cash
flows for each of the three years in the period ended September 30, 2001 in
conformity with accounting principles generally accepted in the United States of
America.  Also, in our opinion, the Schedule presents fairly, in all material
respects, the information set forth therein.

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 sustained recurring losses from operations
and has a net capital deficiency that raise substantial doubt about the ability
of the Company to continue as a going concern. Management's plans as to these
matters are also discussed in Note 1. The financial statements do not include
any adjustments that might result from the outcome of this uncertainty.



                              /s/ BDO SEIDMAN, LLP
                                  BDO SEIDMAN, LLP
                                  San Francisco, California

December 10, 2001


                                       F-1
<PAGE>
<TABLE>
<CAPTION>
                                              FORECROSS CORPORATION
                                                 BALANCE SHEETS

                                                                                           SEPTEMBER 30,
                                                                                    ----------------------------
ASSETS                                                                                  2001           2000
                                                                                    -------------  -------------
<S>                                                                                 <C>            <C>
Current assets:
Cash (Note 2). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  $     30,123   $     18,833
Accounts receivable, including unbilled receivables of $525,000 and $722,000, net
  of allowances of $20,000 and $20,000, respectively (Notes 3 and 6) . . . . . . .       696,842      1,043,260
Other current assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .        22,213         28,499
                                                                                    -------------  -------------
     Total current assets. . . . . . . . . . . . . . . . . . . . . . . . . . . . .       749,178      1,090,592

Equipment and furniture, net (Note 5). . . . . . . . . . . . . . . . . . . . . . .       177,934        310,639
Notes receivable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .        76,183         72,445
Other assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .        43,196         42,746
                                                                                    -------------  -------------
      TOTAL ASSETS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  $  1,046,491   $  1,516,422
                                                                                    =============  =============

LIABILITIES AND SHAREHOLDERS' DEFICIT

Current liabilities:
Accounts payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  $    275,482   $    356,685
Accrued compensation and related benefits. . . . . . . . . . . . . . . . . . . . .       921,303        634,903
Accured liabilities. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .        26,989        122,149
Accrued commissions. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .       104,026         68,375
Payable to factor (Note 6) . . . . . . . . . . . . . . . . . . . . . . . . . . . .             -        501,243
Notes payable to officers and related parties, current portion (Note 4). . . . . .       100,000              -
Accrued warranty costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .        67,835         33,922
Capital lease obligations due within one year. . . . . . . . . . . . . . . . . . .             -         18,094
Deferred revenue-projects. . . . . . . . . . . . . . . . . . . . . . . . . . . . .       190,575         37,220
Deferred revenue-Y2K licenses, maintenance, distributorships (Note 4). . . . . . .             -        564,990
                                                                                    -------------  -------------
      Total Current Liabilities. . . . . . . . . . . . . . . . . . . . . . . . . .     1,686,210      2,337,581

Deferred revenue--Y2K licenses, maintenance, distributorships, less current
  portion (Note 4) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .             -        415,419
Notes payable to officers and related parties, less current portion (Note 4)             135,448        101,082
Capital lease obligations, less current portion. . . . . . . . . . . . . . . . . .             -          1,610
                                                                                    -------------  -------------
     TOTAL LIABILITIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .     1,821,658      2,855,692

Commitments and contingencies (Notes 6, 10, 11 and 12)
Shareholders' deficit (Notes 8, 9 and 10):
Common stock, no par value; authorized 20,000,000 shares; issued and
  outstanding 16,853,380 and 15,053,380 respectively . . . . . . . . . . . . . . .    10,577,253      9,677,253
Additional paid in capital . . . . . . . . . . . . . . . . . . . . . . . . . . . .     1,076,921        983,800
Accumulated deficit. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .   (12,429,341)   (12,000,323)
                                                                                    -------------  -------------
     TOTAL SHAREHOLDERS' DEFICIT . . . . . . . . . . . . . . . . . . . . . . . . .      (775,167)    (1,339,270)
                                                                                    -------------  -------------
     TOTAL LIABILITIES AND SHAREHOLDERS' DEFICIT . . . . . . . . . . . . . . . . .  $  1,046,491   $  1,516,422
                                                                                    =============  =============
</TABLE>

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


                                      F-2
<PAGE>
<TABLE>
<CAPTION>
                                           FORECROSS CORPORATION
                                          STATEMENTS OF OPERATIONS


                                                                          FOR THE YEARS ENDED
                                                                               SEPTEMBER 30,
                                                                 ------------------------------------------
                                                                     2001          2000           1999
                                                                 ------------  -------------  -------------
<S>                                                              <C>           <C>            <C>
Net revenue: (Note 4)
Migration services . . . . . . . . . . . . . . . . . . . . . .   $ 2,499,033   $  2,047,561   $    248,385
Consulting . . . . . . . . . . . . . . . . . . . . . . . . . .       514,995        269,507        159,853
Year 2000 services . . . . . . . . . . . . . . . . . . . . . .             -      1,056,730      2,487,105
Year 2000 software licenses, maintenance agreements and
  distributorship fees from related parties. . . . . . . . . .       980,409        564,999        565,008
                                                                 ------------  -------------  -------------
Total net revenues . . . . . . . . . . . . . . . . . . . . . .     3,994,437      3,938,797      3,460,351

Cost of services and maintenance, including fees to related
  parties of $0, $18,000, $166,000 (Note 4). . . . . . . . . .     1,545,595      1,355,671      2,745,733
                                                                 ------------  -------------  -------------
Gross margin . . . . . . . . . . . . . . . . . . . . . . . . .     2,448,842      2,583,126        714,618
                                                                 ------------  -------------  -------------
Operating expenses:
Sales and marketing, including fees to related parties of $0,
  55,000, $497,000 (Note 4). . . . . . . . . . . . . . . . . .       814,089        719,843      1,047,300
Research and development (Note 2). . . . . . . . . . . . . . .       834,720        913,064        728,239
General and administrative . . . . . . . . . . . . . . . . . .     1,094,230      1,913,832      1,116,528
                                                                 ------------  -------------  -------------
Total operating expenses . . . . . . . . . . . . . . . . . . .     2,743,039      3,546,739      2,892,067
                                                                 ------------  -------------  -------------
Loss from operations . . . . . . . . . . . . . . . . . . . . .      (294,197)      (963,613)    (2,177,449)
Interest and other expense, net (Notes 4 and 6). . . . . . . .      (133,221)      (313,251)      (553,131)
                                                                 ------------  -------------  -------------
Loss before provision for income taxes . . . . . . . . . . . .      (427,418)    (1,276,864)    (2,730,580)
Provision for income taxes (Note 7). . . . . . . . . . . . . .        (1,600)             -           (800)
                                                                 ------------  -------------  -------------
Net loss . . . . . . . . . . . . . . . . . . . . . . . . . . .   $  (429,018)  $ (1,276,864)  $ (2,731,380)
                                                                 ============  =============  =============
Net loss per share - basic and diluted . . . . . . . . . . . .   $     (0.03)  $      (0.09)  $      (0.23)
                                                                 ============  =============  =============
Weighted average shares used in computing per share data . . .    15,607,226     13,951,186     12,060,919
                                                                 ============  =============  =============
</TABLE>


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


                                      F-3
<PAGE>
<TABLE>
<CAPTION>
                                             FORECROSS CORPORATION
                                      STATEMENTS OF SHAREHOLDERS' DEFICIT


                                                                        ADDITIONAL
                                                    COMMON STOCK         PAID IN     ACCUMULATED      TOTAL
(Notes 8, 9, and 10)                             SHARES      AMOUNT      CAPITAL       DEFICIT       DEFICIT
                                               ----------  -----------  ----------  -------------  ------------
<S>                                            <C>         <C>          <C>         <C>            <C>
BALANCES AT OCTOBER 1, 1998. . . . . . . . .   11,763,612  $ 4,715,515  $        -  $ (7,992,079)  $(3,276,564)
Issuances of common stock to warrant holders       10,000       11,250           -             -        11,250
Warrants extended. . . . . . . . . . . . . .            -            -      27,000             -        27,000
Issuance of common stock for cash,
  net of stock issuance cost of $22,933. . .      418,332      290,817           -             -       290,817
Net loss . . . . . . . . . . . . . . . . . .            -            -           -    (2,731,380)   (2,731,380)
                                               ----------  -----------  ----------  -------------  ------------
BALANCES AT SEPTEMBER 30, 1999 . . . . . . .   12,191,944    5,017,582      27,000   (10,723,459)   (5,678,877)

Issuance of common stock for cash, net of
  stock issuance costs of $18,626. . . . . .    1,175,000      216,374           -             -       216,374
Issuance of common stock for cash, net of
  stock issuance costs of $36,099. . . . . .      613,530    1,595,901           -             -     1,595,901
Issuance of common stock for debt conversion    1,063,006    2,827,596           -             -     2,827,596
Warrants issued. . . . . . . . . . . . . . .            -            -     652,000             -       652,000
Exercise of employee stock options . . . . .        9,900       19,800           -             -        19,800
Issuance of options to consultants . . . . .            -            -     304,800             -       304,800
Net loss . . . . . . . . . . . . . . . . . .            -            -           -    (1,276,864)   (1,276,864)
                                               ----------  -----------  ----------  -------------  ------------
BALANCES AT SEPTEMBER 30, 2000 . . . . . . .   15,053,380    9,677,253     983,800   (12,000,323)   (1,339,270)

Issuance of common stock for cash. . . . . .    1,800,000      900,000           -             -       900,000
Issuance of options to consultants . . . . .            -            -      36,416             -        36,416
Warrants issued to financial organization. .            -            -      56,705             -        56,705
Net loss . . . . . . . . . . . . . . . . . .            -            -           -      (429,018)     (429,018)
                                               ----------  -----------  ----------  -------------  ------------
BALANCES AT SEPTEMBER 30, 2001 . . . . . . .   16,853,380  $10,577,253  $1,076,921  $(12,429,341)  $  (775,167)
</TABLE>


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


                                      F-4
<PAGE>
                                            FORECROSS CORPORATION
                                           STATEMENTS OF CASHFLOWS
<TABLE>
<CAPTION>
                                                                                         FOR THE YEARS ENDED
                                                                                             SEPTEMBER 30,
                                                                               ------------------------------------------
(NOTE 13)                                                                          2001          2000           1999
-----------------------------------------------------------------------------  ------------  -------------  -------------
INCREASE (DECREASE) IN CASH RESULTING FROM:
CASH FLOWS FROM OPERATING ACTIVITIES:
<S>                                                                            <C>           <C>            <C>
Net loss. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  $  (429,018)  $ (1,276,864)  $ (2,731,380)
ADJUSTMENTS TO RECONCILE NET LOSS TO NET CASH USED IN OPERATING ACTIVITIES-
Provision for uncollectible amounts . . . . . . . . . . . . . . . . . . . . .            -        (25,000)       (65,001)
Value of common stock issued and value assigned to extension of warrant term             -              -         38,250
Non-cash compensation expense related to private placement. . . . . . . . . .            -        652,000              -
Non-cash compensation to consultants. . . . . . . . . . . . . . . . . . . . .       30,416         29,300              -
Non-cash compensation to financial organization . . . . . . . . . . . . . . .       56,705              -              -
Depreciation and amortization . . . . . . . . . . . . . . . . . . . . . . . .      146,659        249,724        290,703
Loss on disposal of assets. . . . . . . . . . . . . . . . . . . . . . . . . .        1,129              -              -
CHANGES IN OPERATING ASSETS AND LIABILITIES-
Accounts receivable . . . . . . . . . . . . . . . . . . . . . . . . . . . . .      346,417       (642,368)       859,225
Other assets and accrued interest on notes receivable from officers . . . . .          222         12,452            594
Accounts payable and accrued liabilities. . . . . . . . . . . . . . . . . . .       97,284        (83,475)       907,785
Accrued compensation. . . . . . . . . . . . . . . . . . . . . . . . . . . . .      216,683        257,701        416,972
Deferred revenue from year 2000 distributors. . . . . . . . . . . . . . . . .     (980,409)      (564,999)      (565,008)
Deferred revenue from projects. . . . . . . . . . . . . . . . . . . . . . . .      153,355        (82,442)        86,468
                                                                               ------------  -------------  -------------
     Net cash used in operating activities. . . . . . . . . . . . . . . . . .     (360,557)    (1,473,971)      (761,392)
                                                                               ------------  -------------  -------------

CASH USED IN INVESTING ACTIVITIES:
Fixed asset acquisition . . . . . . . . . . . . . . . . . . . . . . . . . . .       (9,082)        (7,332)             -
Payments received on loans to key employees . . . . . . . . . . . . . . . . .            -              -            250
                                                                               ------------  -------------  -------------
     Net cash provided by (used in) investing activities. . . . . . . . . . .       (9,082)        (7,332)           250
                                                                               ------------  -------------  -------------

CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from factoring of accounts receivable. . . . . . . . . . . . . . . .    1,329,620      1,647,042      3,916,279
Repayment of borrowings under factoring arrangement . . . . . . . . . . . . .   (1,830,863)    (2,007,225)    (3,522,586)
Borrowings under notes payable to officers or related parties . . . . . . . .            -        100,000        192,000
Repayment of borrowings under notes payable-officers. . . . . . . . . . . . .            -        (51,269)      (192,038)
Repayment of borrowings under capitalized leases. . . . . . . . . . . . . . .      (17,828)       (23,227)       (18,839)
Net proceeds from issuance of common shares . . . . . . . . . . . . . . . . .      900,000      1,832,075        290,817
                                                                               ------------  -------------  -------------
     Net cash provided by financing activities. . . . . . . . . . . . . . . .      380,929      1,497,396        665,633
                                                                               ------------  -------------  -------------
NET INCREASE (DECREASE) IN CASH . . . . . . . . . . . . . . . . . . . . . . .       11,290         16,093        (95,509)
CASH AT BEGINNING OF YEAR . . . . . . . . . . . . . . . . . . . . . . . . . .       18,833          2,740         98,249
                                                                               ------------  -------------  -------------
CASH AT END OF YEAR . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  $    30,123   $     18,833   $      2,740
                                                                               ============  =============  =============
</TABLE>

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


                                      F-5
<PAGE>
                              FORECROSS CORPORATION
                          NOTES TO FINANCIAL STATEMENTS

1.   THE COMPANY:

     OPERATIONS:

     Forecross Corporation ("Forecross" or the "Company") is a publicly held
California corporation whose common stock is traded on the Over-the-Counter/
Bulletin Board market. Prior to October 28, 1998, the Company's common stock was
traded on the Vancouver Stock Exchange. The Company develops, markets and sells
sophisticated software and associated services to large organizations for the
automated conversion ("migration") of existing business software applications to
new computing environments.  During the period from 1996 through 1999, Forecross
also developed, marketed and sold similar software and services to large
organizations for the automated assessment and renovation of business software
applications that were not year 2000 compliant.

     In 1999, the Company commenced the development of additional tools that
extend its offerings in the legacy migration area. These tools include a product
for testing the migrated applications, a tool for ensuring that application
standards and rules remain in force as the applications are maintained and a
suite of tools aimed at moving legacy applications to the internet. Called
L2X-SmartXML, these tools provide the native software infrastructure to enable
large-scale commerce projects to succeed with a second generation technical
solution. SmartXML inserts the functionality for XML data exchange directly into
mainframe programs, eliminating middleware, decreasing costs and increasing
business flexibility. SmartXML consists of software modules applicable to
mainframe CICS programs, batch programs, reports, data file exchanges and
support for mainframe programmers. SmartXML is available as a part of the
Company's product and consulting service offerings. The Company's customers
include banks and other industrial and commercial corporations in Canada, the
United States and Europe.

     BASIS OF PRESENTATION AND GOING CONCERN:

     Through September 30, 2001, the Company had sustained recurring losses from
operations and had a net capital deficiency and negative working capital as of
September 30, 2001. These conditions raise substantial doubt about the ability
of the Company to continue as a going concern. During fiscal 2002, the Company
expects to meet its working capital and other cash requirements with cash
derived from operations, short-term receivables financing and other financing
as required, and software license fees from organizations desiring access to
the Company's various product offerings.  The Company's continued existence is
dependent upon its ability to achieve and maintain profitable operations by
controlling expenses and obtaining additional business. Management believes
that the return of migration contracts combined with increased automation of
its services for migration projects and cost reduction actions previously
implemented should improve the Company's profitability in fiscal 2002.
However, there can be no assurance that the Company's efforts to achieve and
maintain profitable operations will be, successful.  The financial statements
do not include any adjustments that might result from the outcome of this
uncertainty.


                                      F-6
<PAGE>
2.  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:

     USE OF ESTIMATES:

     The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosures, contingent assets and liabilities at the date of the financial
statements, and the reported amounts of revenue and expenses during the
reporting period. Accordingly, actual results could differ from those estimates.
The most significant estimates subject to future uncertainties are those
relating to calculations of percentage of completion for projects in process and
estimations of warranty liability. It is at least reasonably possible that the
significant estimates used will change within a year.

     CASH:

     The Company maintains its cash balances with one financial institution. At
times, such balances may be in excess of the FDIC insurance limit.

     EQUIPMENT AND FURNITURE:

     Equipment and furniture is recorded at cost. Depreciation and amortization
is calculated using the straight-line method over the assets' estimated useful
lives, which range from three to five years. Leasehold improvements are
amortized over the life of the lease, generally five years.

     CAPITALIZED SOFTWARE COSTS:

     Costs incurred internally in creating computer software products to be
sold, leased, or otherwise marketed are charged to expense when incurred as
research and development until technological feasibility has been established
for the product. Thereafter, such costs are capitalized until the product is
available for general release to customers and amortized based on either
estimated current and future revenue for each product or straight-line
amortization over the remaining estimated life of the product, whichever
produces the higher expense for the period. Purchased computer software to be
sold, leased, or otherwise marketed is treated the same if it has no alternative
future use, or, if it has an alternative future use, it is capitalized when
acquired and amortized over its estimated useful life. Non-capitalizable
development and marketing costs related to the software licenses are included
in research and development expense or sales and marketing expense, as discussed
in "Net Revenues and Cost of Services and Maintenance" below.

     The Company has capitalized certain purchased software technology rights
that can be used both in connection with its internally developed software
products and in alternative standalone applications (see Note 10.)  Accordingly,
these rights are included with other purchased software in fixed assets, and are
being amortized over their estimated useful life of three years.


                                      F-7
<PAGE>
     LONG-LIVED ASSETS:

     Long-lived assets are assessed for possible impairment whenever events or
changes in circumstances indicate that the carrying amounts may not be
recoverable, or whenever management has committed to a plan to dispose of the
assets. Such assets are carried at the lower of book value or fair value as
estimated by management based on appraisals, current market value, and
comparable sales value, as appropriate. Assets to be held and used affected by
such impairment loss are depreciated or amortized at their new carrying amount
over the remaining estimated life; assets to be sold or otherwise disposed of
are not subject to further depreciation or amortization. In determining whether
an impairment exists, the Company uses undiscounted future cash flows compared
to the carrying value of the asset.

     NET REVENUES AND COST OF SERVICES AND MAINTENANCE:

     The Company's migration and consulting projects generally range from six to
eighteen months in duration.  The Company's year 2000 projects ranged from two
to eighteen months in duration. Revenues for migration services and year 2000
assessment or renovation projects are recognized using the percentage of
completion method in the ratio that actual costs incurred to date bear to total
estimated costs at completion. Consulting projects are recognized on a time and
materials basis as work is performed.  Provisions for estimated losses on
uncompleted contracts are recognized in the period in which the likelihood of
such losses is determined. Reserves provided for estimated adjustments of
contract revenues are included as reductions of gross revenues. Cost of revenues
is primarily comprised of subcontractors' fees and salaries and benefits of
employees assigned to the contracts, and distributors' fees. Subcontractors'
fees, salaries and benefits are allocated based on the amount of time devoted to
each contract by the subcontractors and employees; distributors' fees are
accrued based on revenues earned for specific projects for which the
distributors provide services. Billings are issued based upon specific
contractual terms that may or may not relate to the percentage of completion for
the respective contracts. Unbilled receivables represent revenue recognized in
excess of amounts billed. Amounts for billings in excess of revenue recognized
are included in deferred revenue.

     The Company had authorized several exclusive distributor agreements for
specified areas for its Complete/2000 automated conversion software products and
related services and methodologies. Under the agreements, the distributor
retained exclusive rights for the territory for a specified period. In addition,
the Company licensed the rights to use its Assess/2000 software, which as of
September 30, 2000, had been sold primarily to the exclusive distributors above.
Once the collection of the distributor and license fees was reasonably assured,
and there was no significant post-delivery obligations, the Company recognized
the fees associated with exclusivity and the software licenses ratably over the
contractual term (including renewals), generally five years, commencing with the
date of the respective signing of the agreements.  Costs associated with the
licenses for Assess/2000 have been included in research and development expense,
as such costs did not qualify for capitalization. Costs associated with the
marketing and negotiation of distributor customer proposals and/or sales
contracts have been included in sales and marketing expense.

     Revenues for technical and sales training, maintenance and support were
recognized ratably over the term of the support period.


                                      F-8
<PAGE>
RESEARCH AND DEVELOPMENT EXPENSE:

     Research and development costs are expensed as incurred. In prior years,
certain research and development projects have been funded in part by customers.
In such cases, the Company retains ownership of the resulting products, which
are developed for resale to multiple customers; both the initial and subsequent
customers acquire licenses to use the developed products. During the three years
ended September 30, 2001, there were no such customer-funded research and
development projects.

     WARRANTY EXPENSE:

     The Company provides warranties on its migration projects covering the cost
of software error correction.  A reserve for warranty costs based on estimates
of such related costs and expenses is accrued ratably as revenues are earned.
The accrued warranty reserve is amortized over the related warranty period for
the respective contract, typically a period of three months to one year for
application migration projects, and six months for year 2000 projects.
Amortization for year 2000 projects commenced January 2000 and was completed
June 2000.

     INCOME TAXES:

     The Company accounts for income taxes in accordance with Statement of
Financial Accounting Standards (SFAS) No. 109, Accounting for Income Taxes,
which requires recognition of deferred tax liabilities and assets for the
expected future tax consequences of events that have been recognized in the
financial statements or tax returns. Under this method, deferred tax liabilities
and assets are determined based on the difference between the financial
statement and tax bases of assets and liabilities using enacted tax rates in
effect for the year in which the differences are expected to affect taxable
income. Valuation allowances are established when necessary to reduce deferred
tax assets to the amount expected to be realized. The provision for income tax
expense is the tax payable for the period plus the change during the period in
deferred tax assets and liabilities.

     NET LOSS PER SHARE:

     Basic earnings per share is computed by dividing income or loss available
to common shareholders by the weighted average number of shares outstanding for
the period. Diluted earnings per share reflect the Potential dilution of
securities that could share in the earnings of an entity. Due to the losses,
there were no includable equivalents in any period presented.

     Options and warrants to purchase 2,985,268, 2,524,268, and 975,300 shares
of common stock were outstanding at years ended 2001, 2000 and 1999,
respectively. These were not included in the calculation of net loss per share
as they were anti-dilutive due to losses in all years.

     STOCK-BASED COMPENSATION:

     The Company follows the disclosure provisions of Statement of Financial
Accounting Standards (SFAS) No. 123, Accounting for Stock-Based Compensation,
which requires pro forma disclosure of net income and earnings per share as if
the SFAS No. 123 fair value method had been applied. The Company continues to
apply the provisions of Accounting Principles Board (APB) Opinion No. 25,
Accounting for Stock Issued to Employees, for the preparation of its basic
financial statements.


                                      F-9
<PAGE>
     FINANCIAL INSTRUMENTS:

     At September 30, 2001 and 2000, the Company's financial instruments consist
of cash, and accounts and notes receivable, amounts payable to factor and notes
payable to related parties. The carrying value of cash and accounts receivable
approximate fair value based upon the liquidity and short-term nature of the
assets. The carrying value of notes receivable and amounts payable to factor
substantially approximate fair value based upon current market interest rates,
the short-term maturity of certain of the notes and relative amounts owed. The
fair value of notes payable to related parties is not determinable due to the
unavailability of similar instruments.

     RECLASSIFICATIONS:

     Certain prior-year amounts have been reclassified to conform to current
year presentation.

RECENTLY ISSUED ACCOUNTING STATEMENTS:

     In June 2001, the Financial Accounting Standards Board finalized FASB
Statements No. 141, Business Combinations (SFAS No. 141), and No. 142, Goodwill
and Other Intangible Assets (SFAS No. 142). SFAS No. 141 requires the use of the
purchase method of accounting and prohibits the use of the pooling-of-interests
method of accounting for business combinations initiated after June 30, 2001.
SFAS No. 142 requires, among other things, that companies no longer amortize
goodwill, but instead test goodwill for impairment at least annually. The
Company has not entered into any significant business combinations. As a result,
the Company does not anticipate that adoption of SFAS No. 141 & 142 will impact
its financial position and results of operations.


                                      F-10
<PAGE>
     In June 1998, the FASB issued SFAS No. 133, Accounting for Derivative
Instruments and Hedging Activities. SFAS No. 133 requires companies to recognize
all derivatives contracts as either assets or liabilities in the balance sheet
and to measure them at fair value. If certain conditions are met, a derivative
may be specifically designated as a hedge, the objective of which is to match
the timing of gain or loss recognition on the hedging derivative with the
recognition of (i) the changes in the fair value of the hedged asset or
liability that are attributable to the hedged risk or (ii) the earnings' effect
of the hedged forecasted transaction. For a derivative not designated as a
hedging instrument, the gain or loss is recognized in income in the period of
change. In June 2000, the FASB issued SFAS No. 138, Accounting for Derivative
Instruments and Hedging Activities - An Amendment of FASB Statement No. 133,
which addressed certain implementation issues of SFAS No. 133.

     Historically, the Company has seldom entered into derivatives contracts
either to hedge existing risks or for speculative purposes. Accordingly, the
adoption of this new standard on October 1, 2000 has not had a material impact
on its financial position, results of operations or cash flows.

     In December 1999, the SEC staff released Staff Accounting Bulletin (SAB)
No. 101, Revenue Recognition in Financial Statements, which provides
interpretive guidance on the recognition, presentation and disclosure of revenue
in financial statements. There was no material impact from the application of
SAB No. 101 on the Company's financial position, results of operations or cash
flows upon adoption.


3. CONCENTRATIONS OF CREDIT RISK AND FOREIGN SALES:

     The Company performs ongoing credit evaluations of its customers and
generally does not require collateral on accounts receivable as the majority of
the Company's customers are large, well-established companies. Customer
concentrations are detailed below. In the following table, revenues from the
Company's Distributors are treated as resulting from one customer (see Note 4).

<TABLE>
<CAPTION>
             CONCENTRATIONS OF ACCOUNTS RECEIVABLE

                                                         SEPTEMBER 30,
                                                  2001                 2000
                                              ------------         -----------
Accounts Receivable
<S>                                             <C>                  <C>
     Number of Customers Represented . . . . .      2                    2
     Percentage of Accounts Receivable . . . .  69%, 24%             75%, 22%
</TABLE>


<TABLE>
<CAPTION>
             CONCENTRATIONS OF REVENUE GENERATION

                                               FOR THE TWELVE MONTHS ENDED SEPTEMBER 30,
                                                       2001                  2000
                                                   SEPTEMBER 30          SEPTEMBER 30
                                                ------------------    ------------------
Revenue
<S>                                             <C>                   <C>
     Number of Customers Represented . . . . .         4                     4
     Percentage of Total Revenue . . . . . . .  26%, 25%, 22%,         26%, 21%, 14%,
                                                      13%                   13%
Revenue by Geographic Area
     Canada Percentage of Total Revenue. . . .         1%                    0%
     Europe Percentage of Total Revenue. . . .         11%                   0%
     United States and all Other Percentage
       of Total Revenue. . . . . . . . . . . .         88%                 100%
</TABLE>


                                      F-11
<PAGE>
4.   RELATED PARTY TRANSACTIONS:

The Company has certain transactions with related parties in the ordinary course
of business as set forth below.

     NOTES PAYABLE:

     Notes payable to officers and related parties consist of the following:

                                                     SEPTEMBER 30,
     NOTES PAYABLE                                  2001      2000
     -------------------------------------------  --------  --------
     11.5% note payable to a related party,
       collateralized by software and
       technology, due August 27, 2002 . . . . .  $100,000  $100,000
     12% uncollateralized note payable to
       president, due April 15, 2003 . . . . . .    55,780         0
     12% uncollateralized note payable to
       senior vice president, due April 15, 2003    60,681         0
     Accrued interest. . . . . . . . . . . . . .    18,987     1,082
                                                  --------  --------
                                                   235,448   101,082

     Less current maturities . . . . . . . . . .   100,000         0
                                                  --------  --------
     Payable to officers and related parties
       (less current portion). . . . . . . . . .  $135,448  $101,082
                                                  ========  ========

     SOFTWARE LICENSES AND DISTRIBUTORSHIPS:

     The Company entered into agreements with several entities (the
"Distributors") for licenses and distributorship arrangements for its year 2000
software products, Assess/2000 and Complete/2000, and related services. The
Distributors are related to each other through some common ownership and
management; a shareholder of the Company is a founding investor and officer of
each of the other entities.  At least one other shareholder of the Company is
also an investor in at least one of the Distributors.  Under the distributorship
agreements, the Distributors received territorially exclusive rights to market
year 2000 renovation projects to be performed by the Company using the
Complete/2000 software, and year 2000 assessment projects to be performed either
by the Company or the Distributor using the Assess/2000 software. In exchange
for sales and marketing services and support, customer contact, project
management services and staffing for a portion of the on-site work, the
Distributor generally received a fee equal to 25% of collected revenues. The


                                      F-12
<PAGE>
Company allocates those fees 25% to cost of services and maintenance, and 75% to
sales and marketing expense.  The exclusivity rights under these contracts were
generally for an initial one-year period, but were renewable for up to four
additional years based on certain performance conditions. The Distributors
generally had separate agreements for license rights for unlimited usage of the
Assess/2000 product. In the case of one contract, fees payable were 50% of
collected revenues until $1,500,000 was received by the Distributor, and 25% of
revenue collected thereafter. During fiscal 1998, the $1,500,000 amount had been
earned, with all subsequent fees earned at the 25% rate.

     The licensing and distributorship fees received from the Distributors,
totaling $3,125,000 and $200,000 in 1997 and 1996, respectively, were generally
deferred and recognized over a five year period commencing with the signing of
the respective agreements. Of these amounts, approximately $0, $865,000 and
$1,410,000 was deferred at September 30, 2001, 2000 and 1999, respectively.
Additional fees of approximately $672,000 for training programs, annual software
maintenance, and customer support were received in 1997. Of this amount,
approximately $0, $115,000 and $135,000 was deferred at September 30, 2001, 2000
and 1999, respectively.  The year 2000 project fee expense related to the
distributor contracts, included in cost of revenues in the accompanying
statements of operations, was approximately $18,000 and $166,000 for the years
ended September 30, 2000, and 1999, respectively. The year 2000 expenses related
to the distributor contracts, included in sales and marketing expenses, were
approximately $55,000 and $497,000 for the years ended September 30, 2000 and
1999. No project fees or other year 2000 expenses were incurred in fiscal 2001.


5.  EQUIPMENT AND FURNITURE:

     Equipment and furniture is comprised of the following:

                                                              SEPTEMBER 30,
                                                          2001          2000
                                                      ------------  ------------
     Computer equipment and software (see Note 10)    $ 1,148,149   $ 1,133,067
     Furniture and equipment . . . . . . . . . . .        310,890       310,890
     Leasehold improvements. . . . . . . . . . . .         41,212        77,117
                                                      ------------  ------------
                 Total Assets. . . . . . . . . . .      1,500,251     1,521,074
     Accumulated depreciation and amortization . .     (1,322,317)   (1,210,435)
                                                      ------------  ------------
               Net book value. . . . . . . . . . .    $   177,934   $   310,639
                                                      ============  ============

     The net book value of internally developed software, including certain
purchased software technology rights, at September 30, 2001 and 2000, was
$139,000 and $230,000 respectively. Amortization of software technology rights
was $92,834, $83,417, and $50,000 in the years ended September 30, 2001, 2000,
and 1999, respectively.


6.  PAYABLE TO FACTOR:

     In October 1995, the Company entered into a recourse factoring agreement
with a financial organization whereby the Company is able to obtain financing of
up to 80% of purchased trade accounts receivable, with a maximum available limit
of $1,250,000. In March 2001, the Company signed an agreement modifying its
factoring terms to reduce the interest rate to 1.75% per month and the
administrative fees to 0.75%. As part of the agreement, the Company granted to
the financial organization 100,000 warrants to purchase shares of the Company's
Stock (see Note 8) The Company's obligations under this agreement are secured by
the assets of the Company and have been personally guaranteed by the president
and senior vice president of the Company, who are significant shareholders of
the Company. At September 30, 2001 and 2000, the Company's outstanding
indebtedness under the agreement was $0 and $501,000, respectively.  The
agreement may be terminated by either the factor or the Company at any time.


                                      F-13
<PAGE>
7.  INCOME TAXES:

     The components of the provision for income taxes are summarized as follows:

                                           YEARS ENDED SEPTEMBER 30,
                                            2001     2000      1999
                                           -------  -------  -------
     Current:
     State . . . . . . . . . . . . . . .   $ 1,600  $     0  $   800
     Foreign . . . . . . . . . . . . . .         0        0        0
     Total provision for income taxes. .   $ 1,600  $     0  $   800

     The effective income tax rate differs from the statutory federal income tax
rate as follows:

                                           YEARS ENDED SEPTEMBER 30,
                                            2001     2000      1999
                                           -------  -------  -------
     Federal statutory rate. . . . . . .    (34.0%)  (34.0%)    (34.0%)
     Beneficial stock and warrant pricing     0.0%    17.4%       0.0%
     State taxes and other . . . . . . .      1.8%     9.4%      10.5%
     Valuation account changes . . . . .     32.7%     7.2%      23.5%
                                           -------  -------  ---------
                                              0.3%     0.0%       0.0%
                                           =======  =======  =========

     Significant components of the Company's net deferred tax balances are as
follows:

                                                SEPTEMBER 30,
                                             2001          2000
                                         ------------  ------------
     Deferred tax assets (liabilities):
     Accrual vs. cash basis adjustment . $    47,000   $    94,000
     Deferred revenues . . . . . . . . .      82,000       436,000
     Deferred compensation . . . . . . .     175,000        82,000
     Net operating loss carryforwards. .   3,349,000     3,050,000
     State taxes and other . . . . . . .      94,000       (44,000)
                                         ------------  ------------
          Total deferred tax assets. . .   3,747,000     3,618,000
     Valuation allowance . . . . . . . .  (3,747,000)   (3,618,000)
                                         ------------  ------------
          Net deferred tax assets. . . . $         0   $         0
                                         ============  ============

     Effective September 30, 1999, the Company changed from the cash basis
method to the accrual method for income tax purposes. Certain amounts will be
amortized into income over a four year period.

     Since the Company could not determine if it was more likely than not that
the deferred tax assets would be realized, a 100% valuation allowance has been
provided against the deferred tax assets at September 30, 2001 and 2000. The
increase in the valuation allowance was $129,000, $93,000 and $643,000 in the
years ended September 30, 2001, 2000 and 1999, respectively.


                                      F-14
<PAGE>
     At September 30, 2001, the Company had net operating loss carryforwards for
federal and California state income tax purposes of approximately $9,091,000 and
$2,913,000, respectively. These carryforwards expire in varying amounts through
2021.  Pursuant to the provisions of the Tax Reform Act of 1986, utilization of
these net operating loss carryforwards may be subject to an annual limitation
due to any greater than 50% change in the ownership of the Company within a
three-year period.


8.  COMMON STOCK:

     In December 1998, the Company extended the expiration date of 270,000
warrants to purchase common stock at $4.00 per share, scheduled to expire in
December 1998, to a new expiration date of December 31, 1999. The value assigned
to the warrant extension was $0.10 per warrant.  Also, in exchange for the
surrender of certain demand registration rights which were held by the same
warrant holders, the Company issued 10,000 shares of common stock valued at
$1.125 per share.

     In January 1999, the Company sold in a private placement 418,332 shares of
common stock at $0.75 per share, resulting in gross proceeds of $313,750. In
connection with the private placement, the Company issued to the placement
agent, warrants to purchase 35,000 shares of common stock at $0.75 per share,
expiring in five years.

     In January 2000, the Company completed a private placement of 1,175,000
shares of common stock at $0.20 per share, resulting in gross proceeds of
$235,000.

     In March 2000, the Company completed a private placement of 613,530 shares
at $2.66 per share, resulting in gross proceeds of $1,632,000. Additionally,
1,063,006 shares were issued to the Company's senior officers and employees,
year 2000 distributors and a director, converting Company debt from loans,
deferred payroll, travel expenses and year 2000 distributor revenue sharing, to
equity at a conversion price of $2.66 per share. The total debt converted into
equity was $2,827,596.  With each share issued to investors in this private
placement and to those converting debt, the Company also issued a warrant to
purchase one half share of stock at $2.66 per share at a future date for a total
of 838,268 warrant shares. The warrants expire upon the earlier of three years,
or 30 days after the 10-day trading average closing price of the Company's
common stock equals or exceeds $7.98 per share (if a registration statement
covering the underlying shares has been declared effective). In connection with
this private placement, the Company also issued to a finder warrants to purchase
200,000 shares of common stock at $2.66 per share which expire in three years. A
total of $652,000 in non-cash compensation expense was recorded for the
beneficial pricing effect to senior officers, employees, year 2000 distributors
and a director.

     In March 2001, the Company signed an agreement modifying its factoring
terms to reduce the interest rate and fees charged. As part of the agreement,
the Company granted to the financial organization 100,000 warrants to purchase
shares of the Company's stock. These warrants have an exercise price of $1.12
per share, and an expiration date of September 1, 2005. The Company has recorded
$56,705 in expense for these warrants.

     In June 2001, the Company completed a private placement of 1,800,000 shares
of common stock at $0.50 per share, resulting in gross proceeds of $900,000.
With each share the Company also issued a warrant to purchase one half share of
stock at $0.75 per share at a future date. The warrants expire upon the earlier
of three years, or 10 days after the 20-day trading average closing price of the
Company's stock equals or exceeds $1.25 per share (if a registration statement
covering the underlying shares has been declared effective.)


                                      F-15
<PAGE>
9.  RESTRICTED STOCK PURCHASE PLAN:

     In June 1993, the Board of Directors approved the 1993 Restricted Stock
Purchase Plan (the "Plan"). The Plan allows employees and consultants to
purchase shares of the Company's common stock at a price not less than the fair
value. The maximum aggregate number of shares which may be sold under the Plan
is 1,000,000 shares of common stock. No shares were sold under the Plan in 2001,
2000 or 1999.

     Shares purchased under the Plan are subject to a right of repurchase by the
Company at the original purchase price upon the termination of the purchaser's
employment or consulting relationship with the Company. Except for the initial
stock purchases in 1993, for which the vesting commenced on June 25, 1992, the
right to repurchase generally lapses at the rate of one-third (1/3) after one
year from the date of purchase, and one-thirty-sixth (1/36) of the original
number of shares purchased per month thereafter. At September 30, 2001 and 2000,
no shares are subject to the Company's repurchase option under this provision.
No shares were repurchased during the years ended September 30, 2001, 2000 and
1999.


10. STOCK OPTIONS:

     In April 1994, the Board of Directors approved the 1994 Stock Option Plan,
whereby employees and consultants may be granted incentive and non-statutory
stock options.  Depending on the employee's stock ownership percentage,
incentive stock options are granted with exercise prices ranging from 100% to
110% of the fair value of stock at the date of grant. Depending on stock
ownership percentage, non-statutory stock options are granted with exercise
prices ranging from 85% to 110% of the fair value of stock at the date of grant.
The maximum aggregate number of shares of common stock which may be optioned and
sold under the plan is 950,500. The term of each option is that stated in each
specific option agreement provided that the term does not exceed ten years from
the date of grant (five years in the case of an optionee already owning common
stock representing 10% or more of the voting power), and generally vest over
three years.

     Stock option activity under the Plan is as follows:
<TABLE>
<CAPTION>
                                     SHARES                         OPTIONS OUTSTANDING
                                   AVAILABLE    ---------------------------------------------------------
                                   FOR GRANT      NUMBER          PRICE      AGGREGATE    WEIGHTED AVG.
                                   UNDER PLAN    OF SHARES      PER SHARE      PRICE      EXERCISE PRICE
                                   ----------  -----------  --------------  ----------- ----------------
<S>                                <C>         <C>          <C>             <C>         <C>
Balance, September 30, 1998 . . .    212,700      723,800   $   1.43-11.50  $2,556,371  $          3.53
Cancelled during 1999 . . . . . .     53,500      (53,500)      4.75-11.50    (516,180)            9.65
                                   ----------  -----------  --------------  ----------- ---------------
Balance, September 30, 1999 . . .    266,200      670,300   $   1.43-11.50  $2,040,191  $          3.04

Granted during 2000, including
 629,400 shares outside of the
 plan . . . . . . . . . . . . . .   (231,800)     861,200        0.58-3.25   2,121,099             2.46
Exercised during 2000 . . . . . .          -       (9,900)            2.00     (19,800)            2.00
Cancelled during 2000 including
 22,000 shares outside of the
 plan . . . . . . . . . . . . . .     48,600      (70,600)      0.58-11.50    (375,555)            5.32
                                   ----------  -----------  --------------  ----------- ---------------
Balance, September 30, 2000 . . .     83,000    1,451,000   $   0.58-11.50  $3,765,935  $          2.60

Granted during 2001 including
 86,000 sharres outside the plan.          -       86,000       0.50- 0.97      64,120             0.75
Cancelled during 2001 including
 43,000 shares outside the plan .    582,000     (625,000)      0.58-11.50  (1,284,915)            2.06
                                   ----------  -----------  --------------  ----------- ---------------
Balance, September 30, 2001 . . .    665,000      912,000   $   0.58-11.50  $2,545,140  $          2.79
                                   ==========  ===========  ==============  =========== ===============
</TABLE>

     The following table summarizes information with respect to stock options
outstanding at September 30, 2001:

<TABLE>
<CAPTION>

                              OPTIONS OUTSTANDING                                   OPTIONS EXERCISABLE
--------------------------------------------------------------------------------  ------------------------
                NUMBER             WEIGHTED AVG.                         NUMBER
RANGE OF        OUTSTANDING AT     REMAINING CONTRACTUAL WEIGHTED AVG.   EXERCISABLE AT     WEIGHTED AVG.
EXERCISE PRICE  SEPTEMBER 30, 2001 LIFE (YEARS)          EXERCISE PRICE  SEPTEMBER 30, 2001 EXERCISE PRICE
=============== ================== ===================== =============== ================== ==============
<S>             <C>                <C>                   <C>             <C>                <C>
$0.50-2.00. . .           237,800                  3.75  $         0.68            192,973  $        0.63
2.66-4.75 . . .           613,900                  3.49            2.92            347,716           2.90
8.02-11.50. . .            60,300                  0.99            9.77             60,300           9.77
---------------  ----------------- --------------------  --------------- ------------------ --------------
$0.50-11.50 . .           912,000                  2.93  $         2.79            600,989  $        2.86
===============  ================= ==================== ================ ================== ==============
</TABLE>



                                      F-16
<PAGE>
     SHARES GRANTED OUTSIDE OF THE PLAN:

     On March 17, 2000, the Company's Board of Directors approved the grant of
options to purchase 80,000 shares of its common stock to a member of its Board
of Directors under its 1994 Stock Option Plan and the grant of options to
purchase an aggregate of 258,900 shares of its common stock to various employees
outside the 1994 Stock Option Plan. All of these options vest over various
periods of up to four years, and are exercisable at a price of $3.25 per share
for a period of five years.

     In April 2000, the Company's Board of Directors approved the grant of
options to purchase an aggregate of 340,000 shares of its common stock to two
principals of 2000 Technologies, Inc.  140,000 of these options, valued at
$246,000, were issued in exchange for perpetual, exclusive rights to a software
product owned and marketed by them, and were fully vested upon issuance. The
remainder, which relate to services to be received by the Company, vest ratably
on the first, second and third anniversaries of the date of issuance.  All of
these options were issued outside the 1994 Stock Option Plan, and are
exercisable at a price of $2.66 per share for a period of five years. The
$246,000 fair value of the options issued for capitalized software is included
with other purchased software in fixed assets, and is amortized over a
three-year life. Additional capitalized software costs related to these grants
were $6,000 and $29,000 in fiscal 2001 and 2000, respectively.  Additional
consulting expense related to these grants was $6,000 and $29,000 for 2001 and
2000, respectively.

     In addition, throughout the 2000 fiscal year, the Company's Board of
Directors approved the grant of options to purchase 30,500 shares of its common
stock to various employees.  All of these options were issued outside the 1994
Stock Option Plan, and are exercisable at various prices from $1.00 to $1.44 per
share for a period of five years.

     The Company applies APB Opinion No. 25, Accounting for Stock Issued to
Employees, in accounting for its plan. Accordingly, no compensation cost has
been recognized for stock options granted to employees and to non-employee
directors for ordinary director services.  Had compensation cost for the
Company's stock option plan been determined consistent with SFAS No. 123,
Accounting for Stock-Based Compensation, the Company's net loss and net loss per
share would have been the unaudited pro forma amounts indicated below:

<TABLE>
<CAPTION>
                                                           YEARS ENDED SEPTEMBER 30,
                                                        2001         2000          1999
                                        -----------  ----------  ------------  ------------
<S>                                     <C>          <C>         <C>           <C>
Net loss . . . . . . . . . . . . . . .  As reported  $(429,018)  $(1,276,864)  $(2,731,380)
                                        Pro forma    $(761,347)  $(1,477,568)  $(2,771,871)

Net loss per share (basic and diluted)  As reported  $   (0.03)  $     (0.09)  $     (0.23)
                                        Pro forma    $   (0.05)  $     (0.11)  $     (0.23)
</TABLE>


                                      F-17
<PAGE>
     The fair value of the Company's stock option grants is amortized over the
service period.  The average fair values of options granted during the years
ended September 30, 2001 and 2000, were $0.66 and $1.90, respectively. There
were no stock options granted in the year ended September 30, 1999. The fair
value was estimated as of the date of grant using a modified Black-Scholes
option pricing method based upon the following weighted average assumptions for
2001 and 2000:

                                   YEARS  ENDED
                                   SEPTEMBER 30,
                                   -------------
                                   2001     2000
     Expected life (years) . . .   2.50     2.25
     Expected volatility . . . .   199%     185%
     Risk free interest rate . .  4.00%    6.00%

11.  PROFIT SHARING AND RETIREMENT PLANS:

     The Company has a 401(k) profit sharing plan covering substantially all
employees, under which employees may defer their eligible compensation (up to
the statutorily and 401(k) plan prescribed limits) and have the amount of the
deferral contributed to the 401(k) plan.  Employees who have completed one year
of service may, at the company's sole discretion, receive a matching
contribution from the company up to a maximum of 4% of the participants'
eligible compensation.  The Company's cost of the 401(k) profit sharing plan was
$-6,564 (net expense after adjustment), $61,010 and $71,682 in the fiscal years
ended September 30, 2001, 2000 and 1999, respectively. For the plan years ended
December 31, 2000 and 1999, respectively, $66,149 and $84,337, plus penalties
and interest, have not yet been funded by the Company.


12. LEASE COMMITMENTS:

     The Company leases office space and equipment under operating leases. Rent
expense under operating leases was $336,382, $318,277, and $302,495 in the
fiscal years ended September 30, 2001, 2000 and 1999, respectively. Subsequent
to year-end, the Company began negotiations with a new landlord for new office
space. The pending lease, which will begin during the first calendar quarter of
2002, is expected to have an initial base rent of $120,000 per year for a term
of five years. As of September 30, 2001, future minimum lease payments under
operating leases, including expected payments under the new pending operating
lease, are as follows:

     YEARS ENDING SEPTEMBER 30,
     --------------------------
       2002        $138,000
       2003         119,000
       2004         124,000
       2005         132,000
       2006         134,000
       Thereafter    45,000
                   --------
       Total       $690,833
                   ========


                                      F-18
<PAGE>
13.  SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:

                               YEARS ENDED SEPTEMBER 30,
                             2001        2000        1999
                           --------    --------    --------
Interest Paid . . . . . .  $159,197    $184,430    $260,410


SUPPLEMENTAL DISCLOSURE OF NON-CASH INVESTING AND FINANCING ACTIVITIES:

<TABLE>
<CAPTION>
                                                        YEARS ENDED SEPTEMBER 30,
                                                       2001       2000       1999
                                                     ---------  ---------  ---------
<S>                                                  <C>        <C>        <C>
Accrued interest on notes payable to officers and
  related parties . . . . . . . . . . . . . . . .     $ 17,905   $  1,082   $120,954
Options issued to purchase software . . . . . . .        6,000    275,500          0
Assumption of payroll tax obligation by officers
  in exchange for notes payable . . . . . . . . .      116,461          0          0

</TABLE>
14.  QUARTERLY INFORMATION (UNAUDITED)

     The summarized quarterly financial data presented below reflect all
adjustments which, in the opinion of management, are of a normal and recurring
nature necessary to present fairly the results of operations for the periods
presented.

<TABLE>
<CAPTION>
                                FIRST       SECOND         THIRD       FOURTH        FISCAL
                               QUARTER      QUARTER       QUARTER      QUARTER        2001
                             -----------  ------------  ----------   -----------  ------------
        YEAR ENDED 2001
<S>                          <C>          <C>           <C>          <C>          <C>
Net revenue . . . . . . . .  $  471,581   $   926,190   $1,695,834   $  900,832   $ 3,994,437
Gross profit. . . . . . . .      67,380       552,600    1,286,625      542,237     2,448,842
Operating income (loss) . .    (551,431)     (150,168)     585,064     (177,662)     (294,197)

Net income (loss) . . . . .  $ (599,478)  $  (193,758)  $  549,805   $ (185,587)  $  (429,018)

Basic and diluted income
(loss) per common share . .  $    (0.04)  $     (0.01)  $     0.04   $    (0.01)  $     (0.03)


                                FIRST       SECOND         THIRD       FOURTH           FISCAL
                               QUARTER      QUARTER       QUARTER      QUARTER           2000
                             -----------  ------------  ----------   -----------  ------------
        YEAR ENDED 2000
Net revenue . . . . . . . .  $1,416,905   $   512,816   $  993,567   $1,015,509   $ 3,938,797
Gross profit. . . . . . . .     864,852       296,551      790,885      630,838     2,583,126
Operating income (loss) . .     107,268      (912,305)     (48,347)    (110,229)     (963,613)

Net loss. . . . . . . . . .  $  (34,586)  $(1,029,364)  $  (66,155)  $ (146,759)  $(1,276,864)

Basic and diluted loss per
common share. . . . . . . .  $    (0.00)  $     (0.08)  $    (0.00)  $    (0.01)  $     (0.09)

</TABLE>


                                      F-19
<PAGE>
<TABLE>
<CAPTION>
                                        FORECROSS CORPORATION
                                  VALUATION AND QUALIFYING ACCOUNTS

                                                           ADDITIONS-
                                                           CHARGES TO     DEDUCTIONS-
                                             BALANCE,      REVENUES OR    WRITE-OFFS
                                           BEGINNING OF     COSTS AND     CHARGED TO     BALANCE, END
                                              PERIOD      EXPENSES (1)      RESERVE       OF PERIOD
                                           -------------  ------------   ------------   -------------
ALLOWANCES AGAINST RECEIVABLES
Year ended September 30,
<S>                                        <C>            <C>            <C>            <C>
        2001 . . . . . . . . . . . . . .   $      20,000  $          -   $          -   $      20,000
        2000 . . . . . . . . . . . . . .          45,000       (25,000)             -          20,000
        1999 . . . . . . . . . . . . . .         136,650       (65,001)        29,649          45,000

DEFERRED TAX ASSET VALUATION ALLOWANCE
Year ended September 30,
        2001 . . . . . . . . . . . . . .   $   3,618,000  $          -   $   (129,000)  $   3,747,000
        2000 . . . . . . . . . . . . . .       3,525,000             -        (93,000)      3,618,000
        1999 . . . . . . . . . . . . . .       2,882,000             -       (643,000)      3,525,000
</TABLE>

(1)    Certain allowances related to contract estimations for amounts of revenue
recognized on percentage-of-completion basis are charged directly to revenues.

                                       S-1


                                      F-20
<PAGE>
<TABLE>
<CAPTION>
<S>          <C>
EXHIBIT NO.  DESCRIPTION
3.1+         Restated Articles of Incorporation
3.2+         By-Laws
10.1+        Lease Agreement, dated January 1, 1997 between the Company and The Canada Life Assurance
             Company
10.2+        Form of Indemnification Agreement entered into between the Company and each of its officers
             and directors
10.3+        1993 Restricted Stock Purchase Plan
10.4+        1994 Stock Option Plan and Form of Option Agreement
10.8+        Factoring Agreement, dated October 30, 1995, between the Company and Silicon Valley
             Financial Services

10.10+       Factoring Modification Agreement, dated January 13, 1998, between the Company and Silicon
             Valley Financial Services
</TABLE>

+  Previously filed as part of the Company's Form 10/A, effective June 16, 1998.


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