<PAGE>

                          SECURITIES AND EXCHANGE COMMISSION
                                WASHINGTON, D.C. 20549

                                ----------------------

                                     FORM 10-KSB

                       ANNUAL REPORT UNDER SECTION 13 OR 15(d)
                        OF THE SECURITIES EXCHANGE ACT OF 1934
                       For the fiscal year ended July 31, 1998

                            Commission file number 0-23903

                            TRANSFORMATION PROCESSING INC.
                    ---------------------------------------------
                    (Name of small business issuer in its charter)

            Nevada                                      95-4583945
-------------------------------              ---------------------------------
(State or other jurisdiction of             (I.R.S. Employer Identification No.)
 incorporation or organization)

5500 Explorer Drive, Suite 2000, Mississauga, Ontario       L4W 5C7
-----------------------------------------------------       -------
(Address of principal executive offices)                   (Zip Code)

Issuer's telephone number, including area code:        (905) 206-1366

Securities registered under Section 12(b) of the Exchange Act:   None        

Securities registered under Section 12(g) of the Exchange Act:   Common Shares,
                                                                 $.001 par value

     Check whether the issuer (1) filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such
shorter period that the registrant was required to file such reports), and (2)
has been subject to such filing requirements for the past 90 days.

                                                       Yes /X/  No / /

     Check if there is no disclosure of delinquent filers in response to Item
405 of Regulation S-B contained herein, and no disclosure will be contained, to
the best of the registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-KSB or any
amendment to this Form 10-KSB. /X/

     The issuer's net sales for its most recent fiscal year were $877,198.

     The aggregate market value of the 12,493,865 shares of voting stock held 
by non-affiliates of the Registrant, as of November 11, 1998 when the closing 
sale price was $.30 per share, was $3,748,160 (assuming solely for purposes 
of this calculation that all directors, officers and greater than 5% 
stockholders of the Registrant are "affiliates").

     The number of shares outstanding of the issuer's common stock, par value 
$.001 per share, as of November 11, 1998, was  18,100,915*. Documents 
Incorporated by Reference:  Not Applicable.

* See "Note 13" of the "Notes to the Financial Statements."

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          Exhibit Index is located on page 34


                                        PART I

ITEM 1. DESCRIPTION OF BUSINESS

GENERAL

     In April 1996, Messrs. Paul G. Mighton, Gary G. McCann and Vladimir
Stepanoff (the "Founders") caused Transformation Processing Inc. ("TPI-Ontario")
to be incorporated under the laws of the Province of Ontario, Canada.  The
purpose of TPI-Ontario was to provide computer related services using computer
software that incorporated software technology previously developed by Mr.
Stepanoff.  In July 1996, Mr. Stepanoff assigned his rights to a copyright
covering that software technology to TPI-Ontario in exchange for a one-third
interest in TPI-Ontario.  The Company then acquired the software marketing
rights and recorded them at the fair value of the shares of Common Stock and
notes issued to unrelated third parties, in order to obtain those rights from
these parties.  

     On August 20, 1996 (the "Closing Date") the Founders, as holders of all of
the outstanding Common Stock of TPI-Ontario, entered into an agreement with
Samuel Hamann Graphix, Inc., a Nevada corporation ("SHG-Nevada"), whereby the
Founders exchanged their shares of TPI-Ontario for an aggregate of 5,901,050
shares of the Common Stock of SHG-Nevada.  As a result of this transaction,
which was accounted for as a reverse acquisition (the "Reverse Acquisition"),
TPI-Ontario became a wholly owned subsidiary of SHG-Nevada and the Founders
acquired control of SHG-Nevada.  On the date of the Reverse Acquisition,
SHG-Nevada had not conducted any business operations.

     SHG-Nevada was incorporated on August 7,1996 and had been formed for the
purpose of merging with and into Samuel Hamann Graphix, Inc. ("SHG-California"),
a California corporation with publically traded shares, with SHG-Nevada as the
surviving entity, in order to change the domicile of SHG-California from
California to Nevada (the "Merger").  On the Closing Date the Founders were
informed, and subsequent inquiry revealed, that although SHG-California and
SHG-Nevada had entered into an agreement and plan of merger, dated August 14,
1996 (the "Merger Agreement"), the Merger Agreement stipulated that the Merger
would not be effective until approval of the Merger Agreement by the parties and
the filing of articles of merger with the Secretary of State of the State of
Nevada.  While the Merger Agreement had apparently been approved by both
parties, the articles of merger had not been filed with the State of Nevada nor
had articles of merger been filed with the State of California, as stipulated by
California law.  In order to effect the merger of TPI-Ontario into SHG-Nevada,
the Merger had to be completed by making the required filings.  Those filings
were made in July 1997.

     In March 1997, SHG-Nevada amended its articles of incorporation to change
its name to


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Transformation Processing Inc. ("TPI").  In February 1998, TPI merged its
wholly-owned subsidiary, TPI-Ontario, into TPI with TPI as the surviving entity.
In June 1998, TPI finalized the merger with SHG-California, merging it into TPI
with TPI as the surviving entity.    

     This Form 10-KSB contains certain forward-looking statements that are
subject to significant risks and uncertainties.  There are a number of important
factors that could cause actual results to differ materially from historical
results and results anticipated by the forward looking statements contained in
the following discussion.  Such factors and risks include, but are not limited
to, intense competition, price cutting and profit margins, dependence on key
personnel, the economic environment, the ability to develop, market, support and
acquire new computer-related services and products and the ability of the
Company to manage its growth.

     BUSINESS OF THE COMPANY


     CLIENT/SERVER MIGRATION SERVICES.  The Company has developed software for
the automatic migration of "legacy" computer application source code and data
used on past and current IBM "mid-range" computers  (often referred to as
"minicomputers," as compared to desktop or microcomputers) to a format
compatible with a wide range of open "client/server" computing systems from
various manufacturers.  A client/server system is a network consisting of a
"server" computer and one or more "client" computers in which processing, data
storage and accessibility to data bases are shared among the individual
computers comprising the network.  The Company provides transformation services,
utilizing the Company's migration software, and support services to end-users
seeking to transform their closed proprietary systems to open client/server
systems.

     BACKGROUND.  Historically, the information technology ("IT")  industry has
lacked consistent industry standards.  Major vendors of computer hardware and
software products designed and sold proprietary products, which often were not
compatible with those offered by other vendors. This had the effect of locking
customers into a line of products offered by a single vendor controlled by a
small number of specialized employees, which made changing to a competitive
vendor, or the mixing and matching of products from a variety of vendors,
extremely difficult or impossible.  Over time, the inability of most computer
manufacturers to provide all the software necessary to keep pace with the
evolution of technology led to the adoption of cross-industry standard software
and the advent of enterprise-wide "open" networks.  These industry changes,
combined with the demand for more competitive and cost effective systems, have
caused a shift from the older proprietary systems (known as "legacy systems" in
IT terminology) to open, client/server systems.  The Company believes that the
management of most large business organizations will migrate a substantial
portion of their existing application software to client/server systems, because
such systems are recognized as the best IT infrastructure for current business
realities and objectives.  International Data Corporation, an IT industry
analyst, predicts that, in one form or another, 85% of application software will
be client/server enabled by the Year 2010.

     The Company believes that most corporate information still resides on
closed legacy


                                         -2-
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systems, consisting of a centralized "mainframe" or mid-range computer and a
group of remote "dumb" terminals (i.e., a keyboard and monitor having no local
processing power, used to enter data into the central computer).  Closed
mainframe systems usually utilize MVS operating systems developed by IBM and
"external binary coded decimal interchange code" computer languages to store and
retrieve data.  These types of older computer languages do not comply with the
American Standard Code for Information Interchange ("ASCII," pronounced
"Ask-Key"), a computer code which is the international standard for
client/server systems.  As compared to the newer open systems, legacy systems
require a great deal of expertise to access, do not facilitate information
sharing, are slow to access and are increasingly expensive to maintain.  Users
that decide to migrate to open client/server systems are faced with the problem
that a significant percentage (the Company believes as much as 80%) of the
proprietary code in existing application and data files is incompatible with the
new open systems.  Large organizations usually have many different types of
computers utilizing many different operating systems and languages and different
sets of data bases and files.  The rapid deployment of client/server systems and
desktop computers, which utilize Windows NT-Registered Trademark-, Windows
95-Registered Trademark-, Windows 3.x-Registered Trademark-, Novell NetWare
-Registered Trademark- and OS/2-Registered Trademark- operating systems and
languages, has created a communications barrier between mainframe computers
operating on MVS and mid-range computers utilizing UNIX-Registered Trademark-,
AS/400-Registered Trademark- and DEC operating systems, on the one hand, and
client/server networks utilizing desktop computers, on the other.  The Company
believes that the ability of users to access mainframe and mid-range computer
data and files has become a critical factor in an organization's daily
operations.  Different computing systems (and operating systems) must be able to
communicate with each other.  

     A complete re-write of legacy code for a mainframe computing system usually
requires the transformation of millions of lines of code ("LOC").  A single
computer programmer is generally capable of rewriting about 10 LOC per day,
making this approach time-consuming, financially impracticable and lacking any
degree of certainty of achieving a high-quality product.

     The Company believes that a large market has developed for software
services which will enable mainframe and midrange computers to seamlessly
connect to client/server systems. Existing applications and data that are
important to an organization's operations must be transformed to a format that
is compatible with the new open systems.  Accordingly, there is a demand for
transformation services that will automatically migrate a user's critical
applications and data currently residing in legacy code, into code that is
compatible with the new open client/servers systems. 

     Traditional approaches to migration software have included
"emulation"(sometimes called "re-hosting") and "conversion."  Emulation moves
application code and data to a new hardware system by simulating the original
legacy environment by hardware or software means.  Under the emulation approach,
data is only accessible through legacy logic and, in essence, the new hardware
simply mimics the old hardware.  The conversion method essentially converts one
legacy computer language to another (e.g. "RPG" to "COBOL") and runs in the same
fashion as the original system


                                         -3-
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with few architectural improvements or new benefits to the end-user.  The
Company believes that the emulation and conversion methods have been generally
found to be unsatisfactory in meeting corporate objectives. 

     SERVICES OFFERED.  The Company offers transformation services which enable
companies to automatically migrate legacy application programs and data to any
open system environment, using technology which the Company believes to be
superior to that which is used in the emulation and conversion methods.  The
Company's software disassembles existing application source code at the
operating system level, then automatically translates and reassembles the code
so as to be useable in an open system environment. 

     The Company's current migration software, the "TRANSFORM 
SERIES-TM-"addresses the largest segment of the mid-range computer system
market, the IBM mid-range computer market (having an "installed-base" of over
500,000 (installations) and includes TRANSFORM/3X-TM-, which addresses the IBM
System 34 and System 36 market, and the TRANSFORM/400-TM-, which addresses the
IBM System 38 and IBM AS/400 market.  Each of TPI's migration programs
encompasses a battery of automatic code translators which transform legacy
application source code into machine-independent code-components, except that
certain application software functions  originally coded for particular
functions, such as telecommunications, graphics and office automation functions,
may require manual adjustment and/or redesign of the program.  Software that has
been automatically transformed using the applicable Transform Series program and
any software required to be manually transformed must be integrated to assure
that the automatically converted software and the manually transformed software
will function as a whole (the "Transformed Software").  The Transformed Software
will only execute on a customer's client/server system in conjunction with the
Company's software function support products, offered under the trademark
ORB/400-TM (also known as "Deployment Products").  The Deployment Products
consist of software that permits Transformed Software to execute on the "server"
computer ("Server Software") and software that permits users of the "client"
computers to access Transformed Software available on the server computer
("Client Software").

     The Company typically provides transformation  and support services
pursuant to a software conversion agreement.  Such agreement provides that the
Company will use its migration software to automatically transform the
customer's legacy source code to a format that can be used by the customer's
client/server system and, if necessary, will manually transform  ("rewrite") any
of the customer's legacy code that cannot be automatically transformed using the
migration software.  The customer has the option to separately perform manual
transformation.  If the customer elects this option, the Company disclaims
responsibility for the integration of the automatically transformed software and
the rewritten software.

     The pricing of software conversion agreements is dependent on the number of
Lines of Code ("LOC") to be converted. In the conversion process, there are
three fundamental components. First is project scoping or assessment, secondly
the translation phase and the final component is the testing and implementation
phase. The Company provides assessments to customers on a fixed price


                                         -4-
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basis. The assessment phase is priced according to the scope of the environment.
A typical system size would be in the area of 1,500,000 LOC priced at $10,000 to
$20,000. The Company has completed several assessments priced in this range.

     Price proposals have been issued to numerous companies on the translation
phase. This pricing is done on a price per LOC. The Company's pricing in this
phase of a project will range between $0.50 to $0.70 per line of code. Although
the Company has not provided pricing to the market as it relates to the testing
phase, this area is typically priced on a time and materials basis. The median
gross amount payable under a typical software conversion agreement for an IBM
System 36 or AS/400 System would be approximately $500,000. Sales to smaller
sites will range from $100,000 to $200,000 and larger agreements are expected to
range from $700,000 to $1 million range.  There can be no assurance that the
Company will be able to price such agreements as anticipated. 

     The Deployment Products are made available to a customer pursuant to the
software conversion agreement with such customer, provided the customer has
executed the Company's form of Deployment Product license agreement, which
licenses the customer to install one copy of the Server Software on its server
computer and to install a specified number of copies of the Client Software on
its client computers.  A customer may install the Deployment Products on more
than one computer system provided it executes a separate license agreement for
each such computer system.  Each license agreement provides for the payment of a
one-time license fee and annual maintenance fees.

     Software support services, consisting of advice and assistance in the use
of the Transformed Software and the Deployment Products and the correction of
defects in the execution of such software, are available under each software
conversion agreement by telephone without additional charge during the 90 days
following delivery of the Transformed Software to the customer.  Thereafter,
support services are provided without additional charge so long as the annual
maintenance fees under the applicable license agreement are current. Otherwise,
customers requesting support services are charged TPI's applicable hourly rate
for professional services.

     The Company also offers other professional services in connection with a
customer's migration from a legacy system to a client/server system, including
consulting services to assist in the selection of the optimum client/server
environment and/or the implementation of a physical assets (computer
hardware)management system; education as to client/server systems; and network
and software skills training.  These additional services are provided under the
Company's form of professional services agreement either at the Company's
applicable hourly rates for such services or a negotiated fee.  Also, see
"GROUPWARE SERVICES" below.

     BUSINESS STRATEGY.  While the Company is offering its transformation and
support services directly  to end-users, the Company believes that the largest
percentage of its revenues will be generated by providing transformation
services to IT vendors in the hardware, database and application software
sectors of the IT industry ("IT Vendors").  Such IT Vendors have many


                                         -5-
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strategic partners who can enhance their revenue potential by utilizing the
Company's services to facilitate end-user migration to, and the installation of,
their products.

     To implement this strategy, TPI plans to negotiate formal strategic
alliances with important IT Vendors having a vested interest in the migration
from IBM mid-range computer systems; to perform technology reviews with such IT
Vendors; participate in the first migration project with each such IT
Vendor; and gain access to, and acceptance from, strategic partners of  such IT
Vendors by seeking to successfully complete each such project.  There can be no
assurance that TPI will be able to successfully implement this strategy or that
the implementation of such strategy will generate significant revenues or
income.

     As discussed above, TPI's current transformation services address the IBM
mid-range computing  device  marketplace.  The Company expects this marketplace 
to be large enough to sustain TPI's business objectives for many years to come. 
However, to assure long-term growth, TPI will have to enter the transformation
processing market for mainframe computing systems.  The offering of services to
facilitate migration from mainframe systems would  increase TPI's market. 
Currently, TPI plans to enter this market by identifying the best software
migration toolsets developed by third parties and seeking to obtain licenses to
either use such software to perform transformation services for mainframe
customers and/or to customize and remarket such toolsets to mainframe customers.
The Company has identified several such software tools and is assessing their
viability.

     MARKETING AND SALES. The following factors will assist the Company to
implement its business strategy:

          (a) customer demand to move toward client/server systems appears to
the Company to be strong and customer awareness of the Year 2000 problem has
focused  attention on the need to address problems inherent in legacy systems
(see "YEAR 2000 REMEDIATION SERVICES," below);

          (b) the Company believes, based on its knowledge of the industry, that
no competitor's migration software transforms legacy code to a client/server
format in as rapid, comprehensive and effective a method as the Company's
software;

          (c) the Company believes that if it positions itself as a provider of
transformation services in the migration process and as a facilitator for
strategic partners to sell their own products, the Company will not be perceived
as a competitive threat to the major IT Vendors with whom the Company may desire
to negotiate strategic alliances; and 

          (d) the marketplace is easily identified and targeted in terms of
end-users. 

     Given these factors, TPI expects to generate revenues from services and
software licenses as the result of service agreements with end-users and
strategic alliances it expects to enter into with



                                         -6-
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major IT Vendors.

     TPI hopes to generate awareness of its services through the efforts of its
in-house sales force and outside sales representatives; implementation of its
referral program (described below); direct mail, especially to independent
software vendors;  advertising in publications that are focused on TPI's market
(e.g.,  NEWS/400); targeted advertising, broadcasting and corporate/services
message delivery on the Internet.   

     The amount of time required to close a software conversion agreement for a
client/server migration project (from the time of submission of a proposal to
the prospective customer to execution of the contracts) varies depending on the
configuration of the customer's legacy  system, the number of LOC to be
transformed and the target client/server system.  Typically, a large project
takes longer to close than a smaller project.  The Company anticipates that the
sales cycle for most of its client/server migration projects will be from three
to four months.

     The Company anticipates that the sizes and volumes of its software
conversion agreements will increase over time as initial projects are secured
and completed and can serve as reference sites to validate the performance and
functionality of the Company's services and software for prospective customers
(the "Referral Program"). The Company anticipates that its Referral Program will
result in shorter closing times for agreements  and increased market
penetration.  There can be no assurance that the Company will obtain any
agreements through implementation of its Referral Program.  See "YEAR 2000
REMEDIATION SERVICES - MARKETING AND SALES" as to the Company's plan to use Year
2000 projects to cross-sell post-Year 2000 client/server migration projects.

     The Company's sales force currently consists of three sales persons who are
employees and report to the Company's Director of Sales.  Such employees are
compensated on a salary plus commission basis.  To augment its sales force, the
Company has entered into Referral Program agreements with MCW Business Systems
Ltd. ("MCW"), a company that provides sales representation services in Canada,
and Y2K Plus Inc. ("Y2K"), a company that provides sales representation services
in the United States.  Under such agreements, MCW and Y2K  personnel will
receive extensive training relating to TPI services.  MCW and Y2K use an
"account management team" approach to the provision of hardware, software and
professional services and have committed to offering TPI services through
account executives located throughout Canada and the United States.  The
Referral Program agreements provide that each of MCW and Y2K will be compensated
based on a percentage of the fees charged for referrals of new customers that
result in the execution of service agreements with such customers which are
fully performed by TPI.

YEAR 2000 REMEDIATION SERVICES

     The Company offers Year 2000 remediation consulting and training services
to commercial and industrial end-users of mainframe and mid-range computing
systems.  Currently, the Company is targeting manufacturing companies and
companies in the financial, insurance and healthcare


                                         -7-
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industries. 

     BACKGROUND.  Adding impetus to the demand for transformation services has
been the inability of many computer systems to properly interpret dates for the
Year 2000 and beyond.  This is a pervasive, time-critical problem confronting
the computer user community as a whole.  The essence of the problem is simple. 
System components that store the year within a date as a two-digit number (a
standard even in client/server systems) are unable to properly process
transactions with dates beyond 1999.  Many application programs that use
projected dates are failing at present, and without timely and apt management of
this problem, entire computer systems could be adversely affected.

     Year 2000 remediation is, in essence, a mammoth project that has been
avoided or ignored for the past 20 years.  A mid-range computer utilizes one to
two million LOC, while many mainframe computers utilize tens of millions of LOC.
If such code is to be utilized in the Year 2000 and thereafter, it all must be
scanned and date impacted LOC must be "repaired".  The Securities and Exchange
Commission ("SEC") has estimated that the cost to U.S. corporations to resolve
the problem to be in excess of $600 billion.  The entry of TPI into the Year
2000 remediation services business was a natural adjunct to its client/server
migration software business. 

     SERVICES OFFERED.  In March 1997, the Company decided to offer Year 2000
remediation services.  The Company initially decided to offer "scan and repair"
services to companies requiring Year 2000 remediation services, as a
subcontractor to IT Vendors providing Year 2000 project management remediation
services.  Such services were to be rendered commencing in September 1997 at a
scan and repair "factory" to be located at the Company's facility in
Mississauga, Ontario.  The decision was also made not to develop a Year 2000
conversion toolset based on the Company's existing proprietary technology, but
to continuously search for, and seek to license, the best available Year 2000
software remediation tools.  More recently, the Company has observed that while
there is no shortage of Year 2000 software conversion tools, there is a
significant demand for the application of state-of-the-art project management
methodologies that permit Year 2000 conversion projects to be performed in the
shortest possible time, in some cases at a fixed cost, and with the least
disruption to a customer's continuing operations.  Accordingly, the Company
decided to offer a full range of services, based largely on the project
management methodology it employs in providing client/server transformation
services.

     The Company now offers the following Year 2000 remediation services:

     Rapid Assessment and Delivery for Year 2000-SM- ("RAD/2000"), which
involves the application of an accelerated project management methodology and
the best available software tools (as determined by the Company) to assess,
remediate, deliver and test Year 2000 compliant systems in 60 to 90 days cycles,
using small groups or "cells" of software professionals working in parallel on
desktop computers (rather than on the customer's mainframe or mid-range
computing system) to achieve assessment and remediation of the application
source code.  This solution is "iterative" in that knowledge gained from each
phase of remediation, delivery and testing will be continuously


                                         -8-
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used to refine the assessment phase of a project plan.

     Mobile Lab/2000-SM entails the establishment at a customer's premises,
within a period  of six weeks, for a fixed price, of a Year 2000 remediation 
facility  specifically  designed to meet the customer's Year 2000 requirements. 
The center can be connected to a customer's network or established as an
independent group, using the customer's newly acquired or existing technology,
and have the customer's staff support the project or have the Company  manage
the project. The Company believes that the fixed cost of this solution will be
attractive to most customers because over the next two years the demand for Year
2000 remediation services will far exceed the supply and the price for such
services will rise significantly as January 1, 2000 gets closer.  In addition,
the Mobile/Lab 2000 solution does not require the removal of application source
code and data from the customer's premises.

     Boot Camp/2000-SM- is a five week training course offered by the Company,
that can be conducted at the Company's facility in Mississauga, Ontario or at a
customer's premises, for the purpose of training the customer's  existing IT
personnel to support the customer's Year 2000 project.  The course involves four
weeks of classroom training and one week of apprenticeship training in the
application of the Company's RAD/2000-SM- methodology and licensed software
tools to the customer's Year 2000 project.  The Company believes that this is
the appropriate solution for customers that cannot recruit a sufficient number
of already qualified personnel to staff its Year 2000 project.

     Mobile Lab/2000-SM and Boot Camp/2000-SM- are based on the concept that,
wherever possible, existing technology and personnel should be deployed while
maintaining a reasonable cost structure. 

     The Company has entered into a strategic affiliation arrangement with
Allegiant Legacy Solutions, Inc. ("ALS") pursuant to which the Company licenses,
on a non-exclusive basis, the right to use and sublicense the use of Adapt
2000-TM- software remediation tools developed by ALS.  The term of the license
is one year and automatically renews upon payment and acceptance of the annual
renewal fee.  The Company is authorized under its agreements with ALS to use the
Adapt 2000 software to perform Year 2000 remediation services and to relicense
the software to end-users at such license fees as the Company may determine.  If
the Company utilizes Adapt 2000 to perform Year 2000 remediation services it is
obligated to process a minimum of two million LOC per year for a three year
period at each site at which it performs remediation services and to make
quarterly royalty payments to ALS based on the number of  LOC processed.  If the
Company sublicenses the Adapt 2000 software it is required to pay ALS 50% of the
scheduled LOC fee and 50% of ALS's listed one-time license fee of $12,900.

     The Company has also entered into an informal strategic alliance with
Deevan Computer Services Inc. ("Deevan"), an IT consulting company that provides
asset management services to end-users, to offer hardware evaluation and
procurement services under the name Asset/2000-SM-.  Deevan has informed the
Company that 60% of the computer hardware currently in use is not Year


                                         -9-
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2000 compliant and must be either replaced or  repaired and that 10% of existing
hardware cannot be repaired.  Deevan will offer Year 2000 computer hardware
evaluation, procurement and installation services in conjunction with the
software remediation services offered by the Company.

     BUSINESS STRATEGY.  The Company's strategy is to position itself as a
provider of Year 2000 remediation services over the next 14  months so as to
take advantage of what the Company deems to be a significant  opportunity to
attain accelerated growth, ordinarily difficult to attain  under normal IT
industry conditions.  Over such period, the Company estimates that revenues
generated by Year 2000 remediation services will represent in  excess of 50% of
gross revenues.  Year 2000 services will continue to be provided well past the
year 2000.  There can be no assurance, however, that  the Company will be able
to successfully implement this business strategy or,  if it is able to gain a
share of the Year 2000 services market, that it will  realize the anticipated
growth in revenues.

     MARKETING AND SALES. The Company intends to implement substantially the 
same marketing and sales plan described under the caption "CLIENT/SERVER
MIGRATION  SERVICES - MARKETING AND SALES" to access the market for Year 2000 
remediation services, e.g., the Company will seek to utilize strategic  business
relationships with IT Vendors and the implementation of its Referral  Program to
access the market.  The Company believes also, that to the extent  it is
selected to perform major Year 2000 remediation projects and  successfully
completes such projects, it will be in a preferred position to  be selected to
perform post-Year 2000 client/server migration projects by the  same customers,
by reason of knowledge of the computer systems and businesses  of such customers
gained by the Company in performing such projects, and by  prospective
customers, based on the Company's demonstrated ability to  successfully
implement major conversion projects.  However, there can be no  assurance that
the Company will be selected to perform any major Year 2000  remediation
projects or, if selected, that it will be able to successfully  implement such
projects.  Moreover, there can be no assurance that the  Company will be
selected to perform any major post-Year 2000 projects.

GROUPWARE SERVICES

     Groupware is a type of software designed to allow users on a client/server
network to use the same software and work on the same project at the same time. 
Notes-Registered Trademark- ("Notes") is a groupware product of Lotus
Development Corporation, an IBM subsidiary ("Lotus"), that, among other
applications, allows users to work on the same document and exchange electronic
mail.  Notes permits the integration of information from desktop computer
applications, relational databases, legacy systems and the World Wide Web. 
Notes contains an application development environment, a document database and
sophisticated messaging system which permit the development of custom
applications for improving business processes in areas such as product
development, customer service, sales and account management.

     The Company has entered a "business partner" agreement with Lotus, pursuant
to which the Company has been designated a "Consultant."  As a Consultant, the
Company undertakes to promote


                                         -10-
<PAGE>

the sale of Lotus products and is authorized to provide business process or
technology consulting and custom application development services using Lotus
technologies.  As a business partner, the Company is required, among other
things, to use Lotus products internally, be connected to Lotus electronically
via the Lotus Notes Network/Partner Information Network and have a "certified
Lotus professional" on staff.  Lotus provides the Company with software
development tools, information, marketing services and support .

     The Company has also entered into a value-added reseller agreement with
IntellAgent Control Corporation ("ICC"), a provider of sales force automation
software, which has appointed the Company as a non-exclusive distributor in the
United States for such software, which runs on Lotus Notes.  Such software
includes artificial intelligence-like features which enables the marketing and
sales personnel of an organization to obtain the latest data concerning a
customer or sales prospect stored in any database on the organization's
enterprise-wide computer system.  The Company has acquired a license for such
software product from ICC and the right to grant sublicenses of the product, and
provide custom application development and support services with respect to such
product to end-users.

     Groupware services consist of consulting, analysis, custom application 
software development and implementation of Notes software solutions and 
specific application programs which operate in the Notes environment and the 
training of customer personnel in the use of such software.

     Groupware services are rendered under the Company's form of professional
services agreement at fees based on time and materials estimated to be expended
by the Company in the performance of such services plus a reasonable profit.

     BUSINESS STRATEGY.  Since the Company's core business is to assist 
customers to migrate to open client/server systems, the Company believes it  can
enhance its ability to attract customers for its core business and  increase its
revenues by assisting such customers with the development of  application
software that can greatly enhance the use and productivity of  their
client/server systems.  The Company believes that the rights it has  obtained
under its agreements with Lotus and ICC will enable it to implement  such
strategy.

     MARKETING AND SALES.  The Company intends to implement substantially the
same marketing and sales plan for GROUPWARE SERVICES as is described under the
caption "CLIENT/SERVER MIGRATION  SERVICES - MARKETING AND SALES".  TPI is
currently developing a sales  strategy and partnering plan with ICC which the
Company believes will  increase its Notes sales force automation software
business.  The Company  anticipates that sales referrals will come from both
ICC, the Toronto offices  of Lotus and the implementation of its Referral
Program.  In addition, the  Company intends to sponsor information seminars to
create interest and  generate sales leads.


                                         -11-
<PAGE>

BACKLOG

     Since the Company is primarily a provider of services, it does not deem
purchase order backlog to be material to its operations.

COMPETITION

     The market in which the Company competes is characterized by intense
competition.  The Company faces competition from other providers of
computer-related services, most of which have significantly greater financial,
technological, marketing and personnel resources than the Company.  In addition,
the Company believes that the significant size of the market for legacy code
transformation services and Year 2000 remediation services will lead to the
emergence of a number of additional competitors.  The Company's competitors
include Keane Computer, IBM, Cap Gemini, Viasoft Solutions, LGS Group and many
others.

     There are currently over one hundred companies providing Year 2000
remediation services in the United States and Canada.  Most do not offer the
range of services provided by  the Company, but rather only one or two discrete
services.  Moreover, there is a consensus in the IT industry that the demand for
Year 2000 remediation services is so great, and the available remediation
resources are so limited, that all of the necessary remediation cannot be
completed by January 1, 2000.

     The markets for computer-related services are characterized by rapidly
changing technology and evolving industry standards, often resulting in the
obsolescence of software and related services or short life cycles for software
and related services.  While the Company is not currently aware of any
competitor offering client/server migration services that transforms legacy
codes to a format usable in client/server systems as rapidly and comprehensively
as the Company's software, the development of technologies that might adversely
affect the market for client/server systems or that permit the development of
software that outperforms the Company's software could have a material effect on
the Company's potential market share and revenues.

     The Company believes that it competes on the basis of the value to its
markets of its proprietary software and project management methodology and its
comprehensive offering of computer-related services.  Furthermore, the Company
is constantly seeking to acquire and develop new services and products and to
further develop and enhance its existing software.  The Company's success will
depend on its continued ability to provide needed information technology and to
successfully market its services.

INTELLECTUAL PROPERTY

     In July 1996, TPI-Ontario acquired the intellectual property rights for 
"IBM midrange migration tools" software from Vladimir Stepanoff, Vice 
President-Technology and a director of the Company.  All enhancements of  such
software are wholly-owned by the Company.

     Prior to April 1, 1996, the Company's date of incorporation, Mr. Stepanoff
entered into an agreement with Raconix Corporation ("Raconix") pursuant to which
he granted certain rights in such


                                         -12-
<PAGE>

technology.  To obtain clear title to such technology, as of the Closing Date,
the Company issued 455,000 shares of Common Stock to Jaford Holdings Ltd. and
100,000 shares of Common Stock and a promissory note in the principal amount of
$72,500 to Innovations Ontario Corp. (which companies had liens on such
marketing rights) and 150,000 shares of Common Stock and a promissory note in
the principal amount of $116,000 to Ronald Content as successor in interest to
Raconix.

     The Company does not have any patents or registered copyrights to  protect
its proprietary technology.  In addition, none of the trade or  service marks
utilized by the Company are registered with any United States  or foreign
trademark registry.  The Company employs various methods to  protect its
technology and the associated documentation including  confidentiality
agreements with its employees and license agreements with its  customers and
strategic partners.  Such methods may not afford adequate  protection and there
can be no assurance that others will not independently develop such technology
or software incorporating technology that significantly out performs the
Company's software.

EMPLOYEES

     The Company has 30 employees, all of whom are full-time, of which three are
executive officers, four are engaged in marketing and sales, three are engaged
in administration and the balance are technical personnel engaged in providing
the Company's computer-related services. The Company considers its relations
with its employees to be satisfactory.

ITEM 2. DESCRIPTION OF PROPERTY 
                              
       The Company currently leases approximately 14,652 square feet of office
and  production space (the "Leased Premises") in Mississauga, Ontario under a 
lease expiring on October 30, 2000 at an annual rental of  approximately
$144,000 which includes real estate taxes,  utility and operating costs
allocable to the Leased Premises. 
     
     The Company leases approximately 5,477 square feet of office and production
space (the "Leased Premises") in Mississauga, Ontario which it has vacated and
is seeking  to sublet.  The lease expires on September 30, 2001 at an annual
base rental of approximately $23,000 plus additional rent equal to real estate
taxes, utility and operating costs allocable to the Leased Premises.  The
Company had the right to terminate the lease at any time after the 36th month
(October 1, 1999) of the original term by giving the landlord at least nine
months' prior written notice and paying the landlord approximately $18,000,
however, the Company vacated the Leased Premises prior to the end of 36 months.

ITEM 3: LEGAL PROCEEDINGS

     The Company is not currently subject to any legal proceedings.


                                         -13-
<PAGE>

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

          None.

                                       PART II

ITEM 5. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS

     The Company's Common Stock is traded on the OTCBB under the symbol "TPII". 
The following table sets forth, the high and low bid prices of the Common Stock
for the periods shown as reported by the National Quotation Bureau.  The bid
prices quoted on the OTCBB reflect inter-dealer prices without retail mark-up,
mark-down or commission and may not represent actual transactions.

                                                          High Bid    Low Bid
                                                          --------    -------
     FISCAL YEAR ENDED JULY 31, 1997
     First Quarter (August 21, 1996 to October 31, 1996)    $4.78       2.63
     Second Quarter (November 1, 1996 to January 31, 1997)   3.19       0.56
     Third Quarter (February 1, 1997 to April 30, 1997)      1.06       0.63
     Fourth Quarter (May 1, 1997 to July 31, 1997)           1.22       0.69

     FISCAL YEAR ENDED JULY 31, 1998
     First Quarter (August 1, 1997 to October 31, 1997)      0.75       0.30
     Second Quarter (November 1, 1997 to January 31, 1998)   0.75       0.38
     Third Quarter (February 1, 1998 to April 30, 1998)      2.19       0.28
     Fourth Quarter (May 1, 1998 to July 31, 1998)           1.75       0.75

     FISCAL YEAR ENDED JULY 31, 1999    
     First Quarter (August 1, 1998 to October 31, 1998)      0.78       0.22

     Second Quarter (November 1, 1998 to November 11, 1998)  0.43       0.30

     On October 29, 1998, there were approximately 144 holders of record of
Common Stock.   

     Since the Company's inception it has not paid any dividends on its Common
Stock and does not anticipate paying such dividends in the foreseeable future.
The Company intends to retain earnings, if any, to finance its operations.

     RECENT SALES OF UNREGISTERED SECURITIES.

     The following discussion includes certain information as to transactions 
which occurred prior to the current Management's assumption of control of the 
Registrant on the Closing Date and is based on information which Management 
believes to be reasonably accurate, but not all of which does it have direct 
knowledge. Notwithstanding the above, TPI is responsible for the information 


                                         -14-
<PAGE>

contained in this Form 10-KSB.

      On August 20, 1996, the Closing Date, in satisfaction of gross proceeds of
$155,000  received by, and certain services rendered, to TPI-Ontario, in the
period  April 11 to July 25, 1996, the Registrant issued 160,000 shares of
Common  Stock to 15 investors (155,000 shares were issued for $1.00 per share
and 5,000 shares were issued in exchange for consulting services and a technical
review of TPI-Ontario's conversion software).  TPI-Ontario received such gross
proceeds pursuant to a  private offering prior to the Closing Date. The 160,000
shares of Common  Stock were issued in reliance on the exemption from
registration provided by  Rule 504 of Regulation D promulgated under the Act.

      On the Closing Date, Samuel Hamann Graphix Inc. ("SHGI") issued 4,936,050
shares of Common Stock to Joter and 965,000 shares of Common Stock  to DTL, in
exchange for common shares of TPI-Ontario, which common shares were issued as of
April 1, 1996.  Joter and DTL, which are controlled by Messrs. Mighton, McCann
and Stepanoff, executive officers and directors of the Registrant, acquired the
common shares of TPI-Ontario in consideration for certain rights in technology
transferred to, and certain services rendered to, TPI-Ontario prior to the
Closing Date, which shares, for accounting purposes are deemed to have been
issued in exchange for nominal  consideration as "founder's shares".  Such
shares were issued to management in  reliance on the exemption from registration
provided by Section 4(2) of the  Securities Act of 1933, as amended (the "Act").

      Prior to the Closing Date, SHGI issued 740,469 shares of Common Stock,
which remain outstanding.   The Registrant has no records concerning the
transactions in which such shares were issued or the consideration received by
the Company in respect of such issuances.

      Prior to the Closing Date (from August 9 through August 19, 1996), SHGI
issued, pursuant to a private offering, an aggregate of 1,465,000 shares of
Common Stock in consideration for gross proceeds of $14,654 received by SHGI 
from investors.  These transactions were not disclosed to current management of
the Registrant prior to or on the Closing Date.  Present management is not 
aware of the exemption relied on for the issuance of such shares; however, 
Samuel Hamann Graphix Inc. filed a Form D dated August 16, 1996 claiming
exemption under Rule 504. Management believes that SHGI relied on Rule 504 of
Regulation D under the Act in issuing such securities.

      On the Closing Date, SHGI issued 1,888,000 shares of Common Stock to
certain consultants in consideration for certain services rendered in 
connection with the reverse acquisition.  Current management of the Registrant
is uncertain of the exemption relied on for the issuance of such shares, but
believes prior management relied on the exemption from registration provided by
Section 4(2) of the Act.

      On the Closing Date, SHGI issued 455,000 shares of Common Stock to Jaford
Holdings Ltd., 100,000 shares of Common Stock to Innovations Ontario Corp. and
150,000 shares of


                                         -15-
<PAGE>

Common Stock to Ronald Content, in consideration for the release by such
companies and individual of certain claims with respect to marketing rights as
to the technology previously  transferred to the Registrant by Vladimir
Stepanoff, an executive officer and director of  the Registrant.  Prior to the
incorporation of TPI-Ontario, Mr. Stepanoff had granted marketing rights with
respect to such technology to Raconix, of which Mr. Content was the sole
shareholder. Ronald Content is a sophisticated investor, who was involved in the
operations of the Registrant and received  the shares for investment.  The
shares were issued in reliance on the exemption from registration provided by
Section 4(2) of the Act.  See Item 1, "Description of Business -- Intellectual
Property."

      On November 25, 1996, the Registrant issued options to purchase 15,000
shares of Common Stock at an exercise price of $1.99 expiring on November 27,
1997, to a public relations firm, in consideration for certain services.  The
options were issued in reliance on the exemption from registration provided by
Section 4(2) of the Act. The holder of the option, as the Registrant's public
relations firm, was fully familiar with the Registrant's operations and is a
sophisticated investor.

      On August 23, 1996, Registrant issued 500,000 units to Mayfair Advisory
Group Limited in consideration for gross proceeds of $500,000.  Each unit 
consisted of one share of Common Stock and a Common Stock purchase warrant (the
"Warrants").  When issued, the Warrants had a per share exercise price  of
$1.00, were exercisable for a period of two years, commencing 30 days  after the
closing of the offering, and were redeemable on 20 days prior written notice at
a redemption price of $.005 per Warrant.  Pursuant to an amendment to the terms
of the Warrants dated August 26, 1998, the Warrants will not be exercisable
until a registration statement has become effective  covering the Common Stock
issuable upon the exercise thereof; the term of such Warrants has been extended
through six months following the effective date of such registration statement,
and the exercise price has been reduced to $.80 per share of Common Stock,
subject to certain adjustments in the event the market for the Company's Common
Stock is less than $.80 at the time  of the exercise, but in no event shall the
exercise price be reduced below  $.50 per share.  The Common Stock and the
Warrants were issued in reliance on the exemption from registration provided by
Rule 504 of Regulation D under the Act.

      On January 27, 1997, Registrant issued 208,333 shares of Common Stock to
Olive Investments, in consideration for gross proceeds of $150,000.  These
shares were issued in reliance on the exemption from registration provided by
Rule 504 of Regulation D under the Act.

      On March 6, 1997, Registrant issued 501,030 shares of Common Stock to
Thomson Kernaghan & Co., Ltd. ("Thomson Kernaghan") in consideration for gross
proceeds of $375,000. These shares were issued in reliance on the exemption from
registration provided by Rule 504 of Regulation D under the Act.

     On June 27, 1997, Registrant issued 100,000 units to Pinetree Capital Corp.
("Pinetree") in consideration for gross proceeds of $70,000. The units  were
issued to Pinetree pursuant to a Subscription Agreement by and between TPI and
Pinetree (the "Subscription Agreement") by which


                                         -16-
<PAGE>

Pinetree subscribed for a minimum of 700,000 units and a maximum of 1,000,000
units. The  Subscription Agreement was later amended to lower the minimum to
100,000 Units.   Pinetree purchased the foregoing securities for its own
account. Each unit consisted of one share of Common Stock and a common stock
purchase warrant  expiring two years from the date of issuance, and exercisable
at $1.00 per share during the first year and $1.50 per share during the second 
year. These securities were issued in reliance on the exemption from
registration provided by Rule 506 of Regulation D under the Act.

      On August 1, 1997, Registrant sold to Thomson Kernaghan an 8% 
convertible subordinated debenture due July 31, 1998 in the principal amount 
of $108,750 (the "Debenture") for a gross purchase price of $108,750.  The 
Debenture was converted, on August 28, 1997, into 198,000 shares of Common 
Stock at the conversion rate of $0.55 per share. The Debenture was issued in 
reliance on the exemption from registration provided by Rule 504 of 
Regulation D, under the Act and the shares of Common Stock issued on 
conversion of the Debenture were issued in reliance on the exemption from 
registration provided by Section 3(a)(9) of the Act.

      On September 4, 1997, Registrant issued 589,000 shares of Common Stock  to
Thomson Kernaghan in consideration for gross proceeds of $125,000 ($.21 a 
share). These shares were issued in reliance on the exemption from  registration
provided by Rule 504 of Regulation D under the Act.

      On September 26, 1997, Registrant issued 400,000 shares of Common Stock 
to Thomson Kernaghan in consideration for gross proceeds of $200,000 ($.50 a 
share). These shares were issued in reliance on the exemption from  registration
provided by Rule 504 of Regulation D under the Act.

      On October 23, 1997, Registrant issued 400,000 shares of Common Stock to 
Thomson Kernaghan in consideration for gross proceeds of $200,000 ($.50 a 
share).  These shares were issued in reliance on the exemption from 
registration provided by Rule 504 of Regulation D under the Act.

      On October 31, 1997, Registrant issued 100,000 shares of Common Stock to 
Thomson Kernaghan in consideration for gross proceeds of $50,000 ($.50 a 
share).  These shares were issued in reliance on the exemption from 
registration provided by Rule 504 of Regulation D under the Act.

      On December 10, 1997, Registrant issued 977,778 shares of Common Stock  
to Thomson Kernaghan in consideration for gross proceeds of $225,000 ($.23 a 
share).  These shares were issued in reliance on the exemption from 
registration provided by Rule 504 of Regulation D under the Act.

      On January 26, 1998, Registrant issued 444,445 shares of Common Stock 
to Thomson Kernaghan in consideration for gross proceeds of $99,629 ($.22 a 
share). These shares were issued in reliance on the exemption from  
registration provided by Rule 504 of Regulation D under the Act.

      On April 14, 1998, the Registrant sold 6% Convertible Debentures, due 
April, 2000, in the


                                         -17-
<PAGE>

aggregate principal amount of $1,000,000 and issued warrants to purchase 301,228
shares of Common Stock for gross proceeds of  $1,000,000 (of which $550,000 had
a conversion rate of 70% of the 5-day  average closing bid price and $450,000
had a conversion rate of 80% of the 5-day average closing asked price) as
follows: Canadian Advantage LP  ($275,000); Dominion Capital Fund ($275,000);
Fetu Holdings ($250,000); and  Livingstone Asset Management ($200,000).  Each of
the above claim the status as  accredited investors as organizations described
in section 501(c)(3) of the  Internal Revenue Code, corporation, Massachusetts
or similar business trust,  or partnership, not formed for the specific purpose
of acquiring the  securities purchased, with total assets in excess of
$5,000,000. Each  purchased its debentures and warrants for investment. Canadian
Advantage LP  ("Canadian") was issued warrants to purchase 16,500 shares of
Common Stock at  $1.50 per share through April 14, 2000 and warrants to purchase
66,338 shares  of Common Stock at $.456 per share through April 14, 2000;
Dominion Capital  Fund ("Dominion") was issued a like number of identical
warrants; Fetu  Holdings ("Fetu") was issued like warrants to purchase 15,000
shares at $1.50  and 60,307 shares at $.456, and Livingstone Asset Management
("Livingstone")  was issued like warrants to purchase 12,000 shares at $1.50 and
48,245 shares  at $.456.  From May 14, 1998 through October 26, 1998, the
aggregate principal amount of $1,000,000 plus interest was converted into
1,935,223 shares of Common Stock as follows: Dominion and Canadian each
converted $275,000 plus interest of Debentures into 532,186 shares of Common
Stock, Fetu converted $250,000 plus interest into 483,806 shares of Common Stock
and Livingstone converted $200,000 plus interest into 387,045 shares of Common
Stock.

     On May 21, 1998, the Registrant sold to Canadian 6% convertible debentures
due May 21, 2000 in the aggregate principal amount of $500,000.  Warrants to
purchase 50,200 shares of Common Stock exercisable at the price of $1.99 through
May 21, 2000,  were also issued to Canadian.  The debentures and warrants were
issued in reliance upon the exemption from registration provided by Section 4(2)
of the Securities Act and Rule 506 of Regulation D.  On October 27, 1998 and
October 29, 1998 an aggregate of $150,000 of debentures plus interest was
converted into 747,187 shares of Common Stock.

     On July 10, 1998 the Registrant sold to each of Canadian and Advantage
(Bermuda) Fund 6% convertible debentures due July 9, 2000 in the amount of
$250,000 for an aggregate of $500,000.  Warrants to purchase 34,153 shares of
Common Stock exercisable at the price of $1.464 through July 9, 2000, were also
issued to each of Canadian and Advantage (Bermuda) Fund.  The debentures and
warrants were issued in reliance upon the exemption from registration provided
by Section 4(2) of the Act and Rule 506 of Regulation D.

     The Debentures, the warrants and the Common Stock issued on conversion  of
the Debentures were issued in reliance upon the exemption set forth in  Sections
4(2) of the Act and Rule 506 thereunder. Such securities were  purchased for
investment and not with a view to the public distribution  thereof. The Common
Stock issued upon conversion of the Debentures were  further issued in reliance
on Section 3(a)(9) of the Act. In both the  issuance of the Debentures and the
Common Stock the certificates representing  such securities bear a legend
preventing resale in the absence of  registration with the Commission or an
exemption therefrom.


                                         -18-
<PAGE>

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

     The following discussion and analysis should be read in conjunction with
the Company's audited financial statements as of July 31, 1998 and July 31, 1997
and the notes thereto all of which financial statements are included elsewhere
in this form 10-KSB.

RESULTS OF OPERATIONS

     Results of Operations for the period April 1, 1996 (date of incorporation)
to July 31, 1996 were not material. Accordingly, the Company has reported
results of operations for the 16-month period from April 1, 1996 to July 31,
1997 (the "1997 Fiscal Period"). Operations actually commenced in October of
1996 when the Company moved into a permanent facility.

NET LOSSES

     For the year ended July 31, 1998 ("Fiscal 1998"), the Company incurred a 
net loss of $4,300,553.  For the 1997 Fiscal Period the Company incurred a 
net loss of $2,784,536. Cumulative losses from April 1, 1996 through July 31, 
1998 (the "Development Period") were $7,085,089.  Explanations of these 
results are set forth below. The Company expects to continue to incur 
operating losses until such time, if ever, as it generates substantial 
revenues from the performance of its service offerings.

REVENUE

     For Fiscal 1998 and the 1997 Fiscal Period the Company's revenues were
$877,198 and $47,317, respectively. Cumulative revenue during the Development
Period was $924,515.  During Fiscal 1998, the Company saw continuing gains in
the Groupware business and recording of its first Year 2000 revenue. Conversion
Services, the Company's core business, accounted for $96,492, or 11%, of gross
revenue during Fiscal 1998, as compared to $19,533, or 41%, for the 1997 Fiscal
Period.

     The Company expects to generate revenue from (a) the performance of (i)
transformation services for end-users of IBM midrange computing systems and
application software development services related to client/server migration;
(ii) Year 2000 consulting, analysis, remediation and training services; and
(iii) groupware services, consisting primarily of the performance of application
software development services relating to Lotus Notes and ICC products and
related instructional services; and (b) the licensing of the Company's
proprietary software and ICC software products. The Company is not able to
project the amount or proportion of revenue expected to be received from each of
the foregoing activities as the Company has not offered each of its services for
a sufficient period of time to have such knowledge.


                                         -19-
<PAGE>

     During the autumn of 1996, the Company positioned itself to market 
transformation services utilizing the Company's client/server migration 
software, targeting the IBM mid-range computer market. In this connection, 
the Company planned to enhance its client/server migration software in the 
1997 Fiscal Period. Such plan received less attention during such period as 
the Company directed its attention to the opportunity presented by the demand 
for the Year 2000 remediation services. Because of the scope of the Year 2000 
problem and the significant dollar volumes which were expected to be expended 
by users of information technology to remediate the problem, the Company 
shifted its marketing and sales efforts to promoting Year 2000 remediation 
services. The Company has negotiated relationships with a vendor of Year 2000 
software conversion tools and a company providing computer hardware 
assessment services to support these efforts. By April 1997, the Company was 
offering Year 2000 remediation services. The Company has entered into 
agreements with Canadian and United States sales representation companies to 
implement the Company's marketing and sales strategies. During Fiscal 1998, 
approximately $385,967, or 44%, of the Company's revenues were derived from 
Year 2000 services. Currently, the Company is bidding on Year 2000 
remediation projects ranging in size from $100,000 to $1,000,000. There can 
be no assurance that the Company will enter into any additional contracts 
with respect to any of such projects.  

EXPENSES

     The Company is in the development stage and since April 1, 1996 has
incurred costs relating to the start up of operations, such as the costs of
raising capital, establishing a facility, recruiting personnel, acquiring and
installing furniture and equipment, acquiring development and accounting 
software, developing its client/server migration software, marketing and sales
efforts.

     For Fiscal 1998 and the 1997 Fiscal Period, cost of consulting services
accounted for  $1,314,356 and $11,271, respectively.  The cumulative cost of
consulting services for the Development Period accounted for $1,325,627, or 19%
of total expenses. The Company anticipates managed growth in this area as people
are added to satisfy consulting services provided to our customers. As the
employment market has become more competitive as the result of channeling
human resources toward the Year 2000 problem, the Company has had to pay a
premium for skilled consultants and engineers. These consulting services have
been allocated to projects in which the Company has signed contracts.

     Cost of software transformation services accounted for $1,107,208 and
$192,729 of total expenses for Fiscal 1998 and the 1997 Fiscal Period,
respectively. The cumulative cost of software transformation services for the
Development Period was $1,299,937 or 18% of total expenses. The Company added
approximately two people to this area during Fiscal 1998. Future growth will
depend on the volume of transformation services and year 2000 remediation
services being provided by the Company.

     Software development costs accounted for $35,197 and $218,212 during Fiscal
1998 and the 1997 Fiscal Period, respectively. The cumulative amount of software
development costs incurred


                                         -20-
<PAGE>

during the Development Period amounted to $253,409, or 4% of total expenses. 
Software development costs decreased during Fiscal 1998 due to the Company's
shift in focus to the selling and reselling of completed products. The Company
intends to continue to incur software development costs to enable it to offer
client/server migration services, which targets a broad range of client/server
systems. The cost of software development is expected to increase as the Company
seeks to further develop and enhance its client/server software. The Company
believes that development of translators to transform application source code
from any type of machine language to a format useable on any client/server
system will serve as the benchmark of the Company's ability to respond
effectively to end-user requirements.  The Company relates the variable cost of
consulting services, transformation services and software developments to
revenues. The Company believes that, as a percentage of revenues, these costs
will vary due to the nature of the project and the specific services required to
satisfy customer requirements. The Company anticipates that revenues based on a
mature service offering (e.g. client/server migration services) will yield a
higher profit margin, while Year 2000 remediation and groupware development
projects may require a higher degree of manpower and travel costs.
Transformation services and Year 2000 remediation services are based on the
number of LOC to be processed or repaired, while consulting and application
software development services are provided on time and materials basis to assure
profitability.

     General and administrative expense accounted for $1,871,105 of expenses for
Fiscal 1998 compared to $874,425 for the 1997 Fiscal Period. The cumulative
amount of general and administrative expenses incurred during the Development
Period amounted to $2,745,530, or 38% of total expenses. General and
administrative expenses consisted primarily of salaries and benefits, consulting
fees, travel, investor and public relations, office and equipment rents,
professional services, office and telephone expenses. During Fiscal 1998, the
Company incurred significant costs related to the registration of its Common
Stock under Section 12 of the Securities Exchange Act of 1934, as amended. Such
status may increase professional fees significantly and the cost of investor 
relations may increase as reports and other investor information are required to
be filed with the SEC or otherwise made publicly available. The Company
anticipates that general and administrative expense (as percentage of total
costs and expenses) will decline as the Company's operations expand.

     During Fiscal 1998 the Company incurred two unusual expenses. The first was
the settlement of an outstanding issue regarding the distribution of additional
shares of the Company to Jaford Holdings Limited ("Jaford") in relation to
software marketing rights. The Company elected to pay $259,500 in cash to settle
the dispute. In turn, the Company received full release from Jaford with no
further exposure to the Company. In the second instance, the Company negotiated
an out of court settlement with IBS Conversions, Inc. ("IBS") concerning an
outstanding lawsuit filed by IBS with the District Court of Illinois. The
Settlement Agreement called for the payment of approximately $90,000 to IBS over
a period of six months. In return, the Company received full release from IBS of
any future claims.


                                         -21-
<PAGE>

LIQUIDITY AND CAPITAL RESOURCES

     The Company has funded its activities during the Development Period
primarily from the net proceeds of private placements of its securities and, to
a lesser extent, from cash flow from operations and the proceeds of two bank
loans. The outstanding principal balance of the loans was approximately
$1,300,000 at July 31, 1998, and the loans bear interest at an annual rate equal
to 2.5% over the bank prime rate of interest ( the current Canadian Prime rate
is 7.5%, therefore the Company is paying interest at the rate of 10%) in effect
from time to time. Repayment of the loans, together with interest thereon, is
secured by a lien on substantially all of the assets of the Company and the
Company's executive officers and directors guarantee repayment of the loans.

     At July 31, 1998, the Company had a deficit accumulated during the
Development Period of $7,085,089, current assets of $589,930, total liabilities
of $1,699,649 and available cash of $150,687.  During Fiscal 1998, the Company
issued convertible debentures with two private placement investors sponsored by
Thomson Kernaghan a registered broker dealer. The convertible debt will require
the issuance of common stock at date of conversion, not cash resources of the
Company. The Company will continue to raise capital through these vehicles to
fund operating activities and other capital requirements. Failure to obtain such
equity capital could have a material adverse impact on the Company's ability to
expand its operations. There can be no assurance that equity capital will be
available to the Company on acceptable terms or at all. In addition, the
Company's auditors, in their report on the Company's financial statements as of
July 31, 1998 and for the period then ended, have expressed substantial doubt as
to the Company's ability to continue as a going concern.

     In addition, implementation of the Company's business plan requires capital
resources substantially greater than those currently available to the Company.
The Company may determine, depending on the opportunities available to it, to
seek additional debt or equity financing to fund the cost of continuing
expansion. To the extent that the Company finances expansion through the
issuance of additional equity securities, any such issuance would result in
dilution of the interests of the Company's stockholders. Additionally, to the
extent that the Company incurs indebtedness or issues debt securities to finance
expansion activities, it will be subject to all of the risks associated with
incurring substantial indebtedness, including the risks that interest rates may
fluctuate and cash flow may be insufficient to pay the principal of, and
interest on, any such indebtedness.

     On October 23, 1997, TPI made an offering of 400,000 shares of Common 
Stock for $200,000 ($.50 a share); on October 31, 1997, an offering of 
100,000 Shares of Common Stock for $50,000 ($.50 a share); on December 10, 
1997, an offering of 977,778 shares of Common Stock for $225,000 ($.23 a 
share) and on January 26, 1998, an offering of 444,445 shares of Common Stock 
for $99,629 ($.22 a share). The offerings were made in Canada pursuant to the 
claim of exemption under Rule 504 under the Securities Act. These offerings 
appear to exceed the limitation of said Rule of a maximum of $1 million in 
any one year period. TPI intends to file a registration statement offering 
rescission to the purchasers of these offerings. The closing market for TPI 
Common Stock on November 11, 1998 was $.30.  The potential contingent 
liability for such sales is $574,629, however, to the extent that the sale 
price of the common Stock remains in excess of the offering prices set forth 
above, there is no ascertainable liability to the Company.

                                         -22-
<PAGE>

     The Company has no current arrangements with respect to, or sources of,
additional financing, and it is not contemplated that its existing stockholders
will provide any portion of the Company's future financing requirements. There
can be no assurance that any additional financing will be available to the
Company on acceptable terms, or at all. The inability of the Company to obtain
financing when needed will have a material adverse effect on the Company,
including possibly requiring the Company to significantly curtail or cease its
operations.

INFLATION

     The Company believes that the impact of inflation and changing prices on
its operations since commencement of operations has been negligible.  


SEASONALITY

     The Company does not deem its revenues to be seasonal.  Nevertheless
revenues may be affected by the budgeting practices of corporate end-users of
IT.  Such companies tend to make IT expenditures early in their fiscal year,
when new budgets have been approved, or late in their fiscal year, to protect
previously budgeted expenditures.  In addition, the performance of Year 2000
remediation services may reduce the amount of revenues the Company would
otherwise generate from the performance of client/server migration services and
affect the Company's ability to service such business.  The Company believes
that the potential reduction of client/server migration revenues will be more
than offset by revenues generated by the performance of Year 2000 remediation
services and the opportunity to cross-sell other services to consumers.


ITEM 7. FINANCIAL STATEMENTS

          The financial statements to be provided pursuant to this Item 7 begin
on page F-1 of this Report, following Part III hereof.

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

     None.


                                       PART III

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

          The names, ages and respective positions of the Executive Officers and
Directors of the Company are as follows:


                                         -23-
<PAGE>


Name                     Age       Position
----                     ---       --------

Paul G. Mighton          45        Chairman of the Board of Directors and Chief
                                   Executive Officer

Douglas Woolridge(1)     39        President and Chief Operating Officer

Gary G. McCann(2)        46        Executive President, Chief Financial
                                   Officer, Secretary and Director

Vladimir Stepanoff       56        Vice President - Technology and Director

John G. McGee(3)         47        Vice President - Finance, Chief Financial
                                   Officer and Director

---------------------

(1)  Resigned in October 1998 as the Company's President and Chief Operating
     Officer.
(2)  Assumed the position of Chief Financial Officer in October 1998.
(3)  Resigned in October 1998 as the Company's Vice President-Finance and Chief
     Financial Officer and Director.


DIRECTORS AND EXECUTIVE OFFICERS

     PAUL G. MIGHTON served as Chairman of the Board of Directors and Chief 
Executive Officer of TPI-Ontario from its date of incorporation in April 1996
until TPI-Ontario was merged into the Company in February 1998 and has served 
in the same positions with the Company since August 1996.  From February 1995 
to June 1996, Mr. Mighton served as Executive Vice President and Chief 
Operating Officer of Agensys Canada Limited ("ACL"), an information technology
("IT") company.  From  April 1993 to February 1995, he served as a Vice
President of Co-Operators  Data Services Canada Ltd., a provider of IT services,
in its Systems Services  Division.  From 1991 to April 1993, Mr. Mighton was
National Director of the Healthcare Systems Division of Information Systems
Management Corporation, a Canadian company and a provider of data processing
services to health care organizations.

     DOUGLAS WOOLRIDGE  served as President and Chief Operating Officer of the
Company from September 1997 to October 1998.  From July 1994 to July 1997, he
served as Chief Information Officer for The R-M Trust Company, a Canadian
financial services provider.  From August 1992 to June 1994, Mr. Woolridge
served as the director of IE Consulting Inc., an independent management
consulting firm ("IE").  From August 1989 to August 1992, he served as a
consulting manager for the IT consulting practice of IE.

     GARY G. MCCANN has Served as Executive Vice President of the Company since
September 1997, as Chief Financial Officer since October 1998 and as a director
since August 1996.  From August 1996  to September 1997, he served as President
and Chief Operating Officer of the  Company.  From February 1996 to August 1996,
Mr. McCann was involved in the  founding and


                                         -24-
<PAGE>

organization of TPI- Ontario.  From July 1995 to February 1996,  he served as
President and a director of the Canadian company Mantis Information Technology
Ltd.,  a privately held provider of IT consulting and support services.  From 
December, 1994 to April 1996, Mr. McCann Served as Vice President, Technology 
and Business Development of ACL.  From July 1991 to December 1994, Mr. McCann 
served as a general manager of Sykes Enterprises Inc. of Canada, the 
Toronto-based subsidiary of a United States company engaged in providing 
computing systems integration services ("SEIC")  and from July 1992 to December
1994, he also served as a Vice President of Sykes Enterprises, Inc., the parent
of SEIC. Mr. McCann holds a Bachelor of Commerce degree in finance and
accounting from the University of Windsor, Ontario, Canada.

     VLADIMIR STEPANOFF has served as Vice President-Technology and a director
of the Company since August 1996 and held the same positions with TPI-Ontario
from April 1996 until it was merged into the Company in February 1998.   From
April 1994 to August 1996, he served as President and director of Cyberplan
Inc., a Canadian-based company engaged in the development and licensing of
automatic transformation software.  Mr. Stepanoff was the founder of Cyberplan,
Inc., which was the successor to Cyberplan Enrg., a firm of which Mr. Stepanoff
was the sole proprietor from 1984 to April 1994.  Cyberplan Enrg. developed the
transformation software which Cyberplan Inc. continued to develop and license. 
Mr. Stepanoff has a Bachelor of Science Degree (with Honors) in mathematics and
physics from the University of British Columbia.

     JOHN G. MCGEE served as Vice President-Finance and Chief Financial Officer
of the Company from October 1996 until his resignation in  October 1998 and a
director from July 1, 1998 until his resignation in October 1998.  From May 1991
to October 1996, he served as President and Chief Executive officer and was the
principal stockholder of Equitable Lease Corporation, an Ontario, Canada
equipment leasing company.

SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE

     Pursuant to Section 16 of the Exchange Act, the Company's Directors and 
executive officers and beneficial owners of more than 10% of the Company's 
common stock, par value $.001 ("Common Stock"), are required to file certain 
reports, within specified time periods, indicating their holdings of and 
transactions in the Common Stock and derivative securities. Based solely on a 
review of such reports provided to the Company and written representations 
from such persons regarding the necessity to file such reports, the Company 
is not aware of any failures to file reports or report transactions in a 
timely manner during the Company's fiscal year ended July 31, 1998.

ITEM 10.                        EXECUTIVE COMPENSATION

SUMMARY COMPENSATION TABLE

     The following table sets forth the annual and long-term compensation for
the Company's Chief Executive Officer from August 7, 1996 (the date in which
TPI-Ontario merged into Samuel Hamann Graphix, Inc.) through the completion of
the fiscal year ended July 31, 1998.  No other


                                         -25-
<PAGE>

officer received reportable remuneration.
 
<TABLE>
<CAPTION>
                                                                                   Long Term Compensation
                                                                           --------------------------------------
                                             Annual Compensation                     Awards              Payouts
                                      -----------------------------------  ---------------------------  ---------
                                                                                                        Long-Term
                                                               Other       Restricted     Securities    Incentive       All
Name of Individual           Fiscal                            Annual         Stock       Underlying       Plan        Other
and Principal Position        Year    Salary($)   Bonus($)  Compensation($)  Awards($)  Options/SARs(#)  Payouts($) Compensation($)
----------------------       ------   ---------   --------  --------------  ----------  --------------   ---------- ---------------
<S>                           <C>      <C>          <C>       <C>             <C>         <C>             <C>         <C>
Paul G. Mighton               1998     $110,000      -0-         -0-            -0-          -0-            -0-       $      -

Chairman of the Board         1997     $ 79,264      -0-         -0-            -0-          -0-            -0-       $      -
and Chief executive Officer
 

</TABLE>

     The cost to the Company of personal benefits, including premiums for life
insurance and any other perquisites, to such executive does not exceed 10% of
such executive's annual salary and bonus.

COMPENSATION OF DIRECTORS

     No compensation is paid by the Company to any of its directors for services
in such capacity.  Currently, all of the Company's directors are executive
officers of the Company.

EMPLOYMENT CONTRACTS

     On January 1, 1997, the Company entered into employment agreements with
each of Messrs. Paul G. Mighton, Gary G. McCann, Vladimir Stepanoff and John G.
McGee, the Company's executive officers.  Such agreements do not provide for a
fixed period of employment and provide that an employee's employment may be
terminated at any time, without notice, for "cause" (as defined in each
agreement), or at any time, upon at least 30 days prior notice, the Company or
the employee may terminate such employment, and, without notice upon payment of
six months base salary and certain other amounts to the employee, the Company
may terminate such employee's employment.  The agreements provide for
participation in employee benefit programs, vacation and reimbursement of
expenses, including for use of the employee's vehicle.  Each of the agreements
contains provisions prohibiting the employee from competing with the Company for
a period of six months following termination of employment and from disclosing
confidential information of the Company while employed by the Company and
thereafter.

     Mr. Mighton's employment agreement provides that he will be paid an annual
salary of approximately $110,000; Mr. McCann's employment agreement provides
that he will be paid in


                                         -26-
<PAGE>

annual salary of approximately $95,000; Mr. Stepanoff's employment agreement
provides that he will be paid an annual salary of approximately $66,000; and Mr.
McGee's employment agreement (prior to his resignation) that he will be paid an
annual salary of approximately $88,000. 

     Douglas Woolridge, the Company's President and Chief Operating Officer
(prior to his resignation), entered into an agreement with the Company pursuant
to which he received an annual salary of approximately $62,000. 

OPTION/SAR GRANTS IN LAST FISCAL YEAR

     Number of Percent of Total         
     Securities
Underlying     Options/SARs Granted     
Exercise  

Name of      Options/SARs     to Employees     or Base      Expiration
Individual     Granted       In Fiscal Year  Price($/Share)    Date
----------   ------------    --------------  -------------  ----------

NONE


AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR END
OPTION/SAR VALUES
 
<TABLE>
<CAPTION>

                                                     Number of Securities       Value of Unexercised
                                                    Underlying Unexercised          In-The-Money
                    Shares                              Options/SARs                Options/SARs
Name of           Acquired on        Value          at Fiscal Year End (#)     at Fiscal Year End ($)
Individual        Exercise (#)    Realized ($)    Exercisable/Unexercisable  Exercisable/Unexercisable
----------------  ------------    ------------    -------------------------  -------------------------
<S>              <C>              <C>             <C>                        <C>
NONE
 
</TABLE>


1998 STOCK OPTION PLAN

     The Company has established the 1998 Stock Option Plan (the "1998 Plan"). 
The 1998 Plan is intended to provide the employees and directors of the Company
with an added incentive to continue their services to the Company and to induce
them to exert their maximum efforts toward the Company's success.  The 1998 Plan
provides for the grant of options to directors and employees (including
officers) of the Company to purchase up to an aggregate of twenty percent (20%)
of the number of shares of Common Stock in the capital of the Company issued and
outstanding from time to time less any shares of Common Stock reserved, set
aside and made available pursuant to the terms of the Company's employee share
purchase plan (the "Share Purchase Plan") and pursuant to any options for
services rendered to the Company.  The number of shares of Common Stock subject
to options granted to any one person under the Plan, the Share Purchase Plan and
options for services rendered to the Company may not at any time exceed five
percent (5%) of the outstanding shares of Common Stock.  The 1998 Plan is
currently administered by the Board of Directors.  The Board determines, among
other things, the persons to be granted options under the


                                         -27-
<PAGE>

1998 Plan, the number of shares subject to each option and the option price. 

     The 1998 Plan allows the Company to grant Non-Qualified Stock Options
("NQSOs") not intended to qualify under Section 422(b) of the  Internal Revenue
Code of 1986, as amended (the "Code").  The exercise price of NQSO's may not be
less than the fair market value of the Common Stock on the date of grant. 
Options may not have a term exceeding ten years.  Options are not transferable,
except upon the death of the optionee.

     Since the 1998 Plan's adoption, NQSO's to purchase 2,800,000 shares of
Common Stock were  granted and 2,700,000 were canceled as of July 31, 1998.  

     On March 16, 1998, Paul G. Mighton was granted 900,000 options to purchase
900,000 shares of Common Stock exercisable at $.30 per share terminating on
March 15, 2008.  All 900,000 options were canceled as of July 31, 1998.

     On March 16, 1998, Gary McCann was granted 900,000 options to purchase
900,000 shares of Common Stock exercisable at $.30 per share terminating on
March 15, 2008.  All 900,000 options were canceled as of July 31, 1998.

     On March 16, 1998, John McGee was granted 900,000 options to purchase
900,000 shares of Common Stock exercisable at $.30 per share terminating on
March 15, 2008.  All 900,000 options were canceled as of July 31, 1998.


ITEM 11.  SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

     The following table sets forth, as of November 11, 1998, certain
information concerning those persons known to the Company, based on information
obtained from such persons, with respect to the beneficial ownership (as such
term is defined in Rule 13d-3 under the Securities Exchange Act of 1934) of
shares of Common Stock, $.001 par value, of the Company by (i) each person known
by the Company to be the owner of more than 5% of the outstanding shares of
Common Stock, (ii) each director and executive officer of the Company and its
subsidiaries, (iii) each executive officer named in the Summary Compensation
Table and (iv) all directors and officers as a group:


Name and Address of           Amount and Nature of 
Beneficial Owner(1)           Beneficial Ownership     Percentage of Class (2)

-------------------           --------------------     -----------------------

Joter Holdings                     4,841,455(3)                 26.7%

Diversified Technologies Ltd.        665,000(3)                  3.7%

Vladimir Stepanoff                 1,633,683(3)                  9.0%


                                         -28-
<PAGE>

Name and Address of           Amount and Nature of 
Beneficial Owner(1)           Beneficial Ownership     Percentage of Class (2)
-------------------           --------------------     -----------------------

Paul G. Mighton                    1,466,683(3)                  8.1%

Gary G. McCann                     1,526,684(3)                  8.4%

John G. McGee                        980,000(3)                  5.4%

All Directors and Officers
as a Group (4 persons)             5,607,050(3)                 31.0%

(1)  Unless otherwise noted, the Company believes that all persons named in 
the table have sole voting and investment power with respect to all shares of 
Common Stock beneficially owned by them.  Each such person is deemed to be 
the beneficial owner of shares of Common Stock held by such person (but not 
held by any other person) on November 11, 1998, and any shares of Common 
Stock which such person has the right to acquire pursuant to securities 
exercisable or exchangeable for, or convertible into, Common Stock, within 60 
days from such date. The address of each beneficial owner is in care of the 
Company, Suite 2000, 5500 Explorer Drive, Mississauga, Ontario, Canada.

(2)  Based on 18,100,915 shares of Common Stock outstanding at the close of 
business on November 11, 1998. The Company's records and the records of its 
transfer agent differ with respect to the number of outstanding shares of the 
Company's Common Stock. According to the transfer agent, the number of shares 
of Common Stock outstanding is approximately 603,000 shares greater than the 
18,100,915 indicated by the Company's records. The Company believes that its 
records are correct and is in the process of resolving this difference. The 
number of shares outstanding used to calculate the above percentages does not 
include these shares or any adjustment which might be necessary to resolve 
this difference.

(3) Joter Holdings ("Joter") is a proprietorship, of which Gary G. McCann is 
the proprietor.  Joter holds the following shares of Common Stock as nominee 
for Paul G. Mighton, Gary G. McCann, and Vladimir Stepanoff, executive officers
and directors of the Company and John G. McGee, a former executive officer and
director of the Company: 1,325,433 shares, 1,385,434  shares, 1,392,433 shares,
and 738,155 shares, respectively. The shareholders  of Diversified Technologies
Ltd., a British Virgin Islands corporation  ("DTL"), are Paul G. Mighton, Gary
G. McCann, Vladimir Stepanoff and John G.  McGee.  DTL holds the following
shares of Common Stock as nominee for Messrs.  Mighton, McCann, Stepanoff and
McGee: 141,250 shares, 141,250 shares, 241,250  shares and 141,250 shares,
respectively. 


ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

     In consideration for the transfer to the Company of the ownership  
interest in certain technology and certain services provided to the Company,  
the Company issued 4,936,050 and 965,000 shares of Common Stock to Joter and  
DTL (Such shares were issued in exchange for shares of TPI-Ontario on August 
20, 1996), respectively, which hold such shares as nominees for the benefit 
of  the following executive officers and directors of the Company: Paul 
Mighton,  Gary G. McCann, Vladimir Stepanoff and John McGee. See "Security  
Ownership of Certain Beneficial Owners and Management."

                                         -29-
<PAGE>

     From August 1, 1996 through July 11, 1997, the Company made advances to 
Messrs. Paul G. Mighton, Gary G. McCann and Vladimir Stepanoff, executive 
officers, directors and principal stockholders of the Company aggregating 
$115,227. On July 31, 1997, Messrs. Mighton, McCann and Stepanoff executed 
demand promissory notes payable to the Company in the respective principal 
amounts of $61,452; $37,829 and $15,946, representing the aggregate amounts 
borrowed by such persons from the Company. The notes bear interest at the 
annual rate of 4%.  The advances made to Messrs. Mighton and McCann were
subsequently written off by the Company and were accounted for as income.

     The Company has paid for the account of Mantis Information Technology  Ltd
("Mantis"), a corporation of which Gary G. McCann is the sole  stockholder,
certain obligations for consulting services incurred by Mantis  and has rendered
invoices to Mantis in the aggregate amount of approximately  $12,000 for funds
advanced. As of the date hereof, such invoices remain  outstanding.

     Messrs. Mighton, McCann, Stepanoff and McGee have personally guaranteed 
the payment to a bank of certain purchase money equipment loans made to the 
Company by such bank. The outstanding principal balance of the loans is 
currently approximately $52,800.  The loans bear interest at 2.5% over the 
bank's prime rate in effect from time to time (currently 7.5% per annum).  See
"Management's Discussion and Analysis or Plan of Operations --  Liquidity and
Capital Resources."

     The officers of the Company have executed employment agreement with the 
Company.  See "Executive Compensation--Employment Contracts." 

ITEM 13. EXHIBITS, LIST AND REPORTS ON FORM 8-K

     (a)  Exhibits

Exhibit No.    Description
   
3.1            Articles of Incorporation of Samuel Hamann Graphix, Inc. (Nevada)
               as amended.(1)
3.2            Articles of Merger between Samuel Hamann Graphix, Inc. (Nevada)
               and Samuel Hamann Graphix, Inc. (California).(1)
3.3            By-laws of Transformation Processing Inc. (Nevada).(1)
3.4            Articles of Merger between of TPI (Ontario) and TPI (Nevada).(1)
10.1           Employment Agreement between TPI and Gary McCann dated January
               1,1997.(1)
10.2           Employment Agreement between TPI and John McGee dated January 1,
               1997.(1)
10.3           Employment Agreement between TPI and Paul G. Mighton dated
               January 1,1997.(1)


                                         -30-
<PAGE>

10.4           Employment Agreement between TPI and Vladimir Stepanoff dated
               January 1, 1997.(1)
10.5           Letter Agreement dated September 29, 1997 as amended January 6,
               1998 between Douglas Woolridge and TPI.(1)
10.6           Real Estate Lease Agreement dated October 1, 1996 between TPI and
               Royal Trust Corporation of Canada, and Landlord's release of
               Security Interest.(1)
10.7           Form of Software Conversion Agreement.(1)
10.8           Form of Professional Services Agreement.(1)
10.9           Form of Deployment Products License Agreement.(1)
10.10          Form of Software License Agreement.(1)
10.11          Business Development Agreement between Lotus Development
               Corporation and TPI.(1)
10.12          Bill of Sale and Assignment of Copyright, dated July 17, 1996
               between CyberPlan Enrg. and TPI as amended as of March 10,
               1998.(1)
10.13          Referral Program Agreement dated November 18, 1997 between Y2K
               Plus and TPI.(1)
10.14          Referral Program Agreement dated November 12, 1997 between MCW
               Business Systems Ltd. and TPI.(1)
10.15          Teaming Agreement dated April 21, 1997 between SHL Systemhouse
               Inc. and TPI.(1)
10.16          Software License Agreement, Value Added Reseller Agreement and
               addendum dated April 23, 1997 between IntellAgent Control
               Corporation and TPI.(1)
10.17          Professional Services Subcontract Agreement dated May 15, 1997
               between GE IT Solutions/Universal Data Consultants and TPI.(1)
10.18          Settlement Agreement and Release, among Ronald A. Content,
               Raconix Corporation, Raconix Europe Limited and TPI each dated
               June 16, 1997.(1)
10.19          Demand Promissory Notes dated July 31, 1997, payable to TPI made
               by Gary G. McCann, Paul Mighton and Vladimir Stepanoff.(1)
10.20          Customer Agreements and Small Business Loan Registrations,
               between  the Bank of Nova Scotia and TPI pertaining to purchase
               money bank loans.(1)
10.21          Guarantees of Bank loans, dated January 30, 1997 and November 27,
               1997 by Gary G. McCann, Paul Mighton, Vladimir Stepanoff and John
               McGee in favor of the Bank of Nova Scotia..(1)
10.22          Program Product License Agreement, dated October 21, 1997,
               between Allegient Legacy Solutions, Inc. and TPI.(1)
*10.23         The Company's 1998 Stock Option Plan.
*10.24         Real Estate Sublease Agreement dated June 29, 1998, between TPI
               and Origin Technology In Business Inc.
*21.1          Subsidiaries of the Registrant.
*27            Financial Data Schedule.

(1)  Incorporated by reference from the Form 10-SB filed by the company on March
     12, 1998


                                         -31-
<PAGE>


and amended on August 31, 1998 and October 22, 1998.

*     Filed herewith.

     (b)  Reports on Form 8-K.

     No Reports on Form 8-K were filed during the last quarter of the fiscal
     year ended July 31, 1998. 



















                                         -32-
<PAGE>










TRANSFORMATION PROCESSING INC.
(a development stage company)

FINANCIAL STATEMENTS

JULY 31, 1998


<PAGE>




                                                                                
                                                  TRANSFORMATION PROCESSING INC.
                                                   (a development stage company)


                                                                   July 31, 1998
--------------------------------------------------------------------------------





<TABLE>
<CAPTION>


<S>                                                        <C> 
Independent Auditor's Report                                   F - 2


Financial Statements:

   Balance Sheet                                               F - 3
   Statement of Operations                                     F - 4
   Statement of Stockholders' Equity (Deficiency)              F - 5
   Statement of Cash Flows                                     F - 6
   Notes to Financial Statements                           F - 7 - F-16


</TABLE>


                                                                             F-1
<PAGE>


INDEPENDENT AUDITOR'S REPORT




To the Board of Directors
Transformation Processing Inc.


We have audited the accompanying balance sheet of Transformation Processing Inc.
(a development stage company) as of July 31, 1998, and the related statements of
operations, stockholders' equity (deficiency), and cash flows for the period
from April 1, 1996 (date of incorporation) to July 31, 1997, the year ended July
31, 1998, and cumulative amounts from inception to July 31, 1998. These
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.

We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audits to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our 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 Transformation Processing Inc.
as of July 31, 1998, and the results of its operations and its cash flows for
the period from April 1, 1996 (date of incorporation) to July 31, 1997, the year
ended July 31, 1998, and cumulative amounts from inception to July 31, 1998, in
conformity with generally accepted accounting principles.

The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. As discussed in Note 11 to the
financial statements, the Company has had limited operations and has a deficit
accumulated during the development stage that raise substantial doubt about its
ability to continue as a going concern. Management's plans in regard to these
matters are also described in Note 11. The financial statements do not include
any adjustments that might result from the outcome of this uncertainty.



GOLDSTEIN GOLUB KESSLER LLP
New York, New York

September 18, 1998, except for the last paragraph of Note 8, 
as to which the date is October 31, 1998


                                                                             F-2

<PAGE>

                                                  TRANSFORMATION PROCESSING INC.
                                                   (a development stage company)



                                                                   BALANCE SHEET
--------------------------------------------------------------------------------

July 31, 1998
--------------------------------------------------------------------------------

<TABLE>
<CAPTION>

ASSETS

<S>                                                                                                          <C>      
Current Assets:
  Cash                                                                                                       $ 150,687
  Accounts receivable, net of allowance for doubtful accounts of $33,000                                       419,933
  Due from related parties                                                                                      14,595
  Prepaid expenses and other current assets                                                                      4,715

----------------------------------------------------------------------------------------------------------------------
      Total current assets                                                                                     589,930

Property and Equipment, net                                                                                    182,894

Deferred Debt Cost, net                                                                                         57,022

Other Assets                                                                                                    33,769

----------------------------------------------------------------------------------------------------------------------
      Total Assets                                                                                           $ 863,615
----------------------------------------------------------------------------------------------------------------------
----------------------------------------------------------------------------------------------------------------------


LIABILITIES AND STOCKHOLDERS' DEFICIENCY

Current Liabilities:
  Accounts payable                                                                                           $ 350,890
  Accrued expenses and other current liabilities                                                               230,201
  Current maturities of long-term debt                                                                          43,165
  Note payable - stockholder                                                                                    25,803

----------------------------------------------------------------------------------------------------------------------
      Total current liabilities                                                                                650,059

Long-term Debt, net of current maturities                                                                    1,049,590

----------------------------------------------------------------------------------------------------------------------
      Total liabilities                                                                                      1,699,649
----------------------------------------------------------------------------------------------------------------------

Commitments and Contingencies

Stockholders' Deficiency:
  Preferred stock - $.001 par value; authorized 5,000,000 shares, none issued                                   -
  Common stock - $.001 par value; authorized 50,000,000 shares, issued
   and outstanding 16,186,628 shares                                                                            16,187
  Additional paid-in capital                                                                                 6,266,719
  Deficit accumulated during the development stage                                                          (7,085,089)
  Cumulative foreign currency translation adjustments                                                          (33,851)
----------------------------------------------------------------------------------------------------------------------

      Stockholders' deficiency                                                                                (836,034)
----------------------------------------------------------------------------------------------------------------------

      Total Liabilities and Stockholders' Deficiency                                                         $ 863,615
----------------------------------------------------------------------------------------------------------------------
----------------------------------------------------------------------------------------------------------------------


</TABLE>


                         The accompanying notes and independent auditor's report
                     should be read in conjunction with the financial statements


                                                                             F-3

<PAGE>



--------------------------------------------------------------------------------


                                                  TRANSFORMATION PROCESSING INC.
                                                   (a development stage company)

                                                         STATEMENT OF OPERATIONS
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>


                                                             Period from
                                                             April 1, 1996                                            Cumulative
                                                        (date of incorporation)            Year ended                    amounts
                                                           to July 31, 1997               July 31, 1998           from inception
--------------------------------------------------------------------------------------------------------------------------------

<S>                                                           <C>                          <C>                       <C>        
Revenue - consulting services                                  $    47,317                  $   877,198              $   924,515
--------------------------------------------------------------------------------------------------------------------------------

Costs and expenses:
  Cost of consulting services                                       11,271                    1,314,356                1,325,627
  Cost of software transformation services                         192,729                    1,107,208                1,299,937
  Software development                                             218,212                       35,197                  253,409
  General and administrative                                       874,425                    1,871,105                2,745,530
  Noncash consulting costs                                       1,536,341                          -                  1,536,341
--------------------------------------------------------------------------------------------------------------------------------
                                                                 2,832,978                    4,327,866                7,160,844
--------------------------------------------------------------------------------------------------------------------------------

Loss from operations                                            (2,785,661)                  (3,450,668)              (6,236,329)

Interest income (expense), net of interest income
 of $9,749 in 1998                                                   1,125                     (849,885)                (848,760)
--------------------------------------------------------------------------------------------------------------------------------
Net loss                                                       $(2,784,536)                 $(4,300,553)             $(7,085,089)
--------------------------------------------------------------------------------------------------------------------------------
--------------------------------------------------------------------------------------------------------------------------------

Basic net loss per common share                                $   (.27)                    $  (.30)                      -
--------------------------------------------------------------------------------------------------------------------------------
--------------------------------------------------------------------------------------------------------------------------------

Weighted-average number of common shares
 outstanding                                                    10,161,665                   14,542,313                -
--------------------------------------------------------------------------------------------------------------------------------
--------------------------------------------------------------------------------------------------------------------------------
</TABLE>


                         The accompanying notes and independent auditor's report
                     should be read in conjunction with the financial statements


                                                                             F-4

<PAGE>

                                                  TRANSFORMATION PROCESSING INC.
                                                   (a development stage company)


                                  STATEMENT OF STOCKHOLDERS' EQUITY (DEFICIENCY)
--------------------------------------------------------------------------------

Period from April 1, 1996 (date of incorporation) to July 31, 1998
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>

                                                                             Deficit
                                                                           Accumulated        Foreign        Stock-
                                                          Additional       During the        Currency       holders'
                                      Common Stock          Paid-in        Development      Translation      Equity
                                   Shares       Amount      Capital           Stage         Adjustments   (Deficiency)
----------------------------------------------------------------------------------------------------------------------

<S>                             <C>            <C>         <C>            <C>               <C>           <C>          
Issuance of common stock to
 founders                        5,901,050     $ 5,901     $   (5,901)             -              -                 -

Issuance of common
 stock for cash                  1,469,363       1,469      1,215,657              -              -        $ 1,217,126

Options to purchase
 common stock issued
 for services                         -             -          27,362              -              -             27,362

Issuance of common
 stock in reverse acquisition    2,205,869       2,206         13,484              -              -             15,690

Issuance of common
 stock for services in
 reverse acquisition             1,888,000       1,888      1,534,453              -              -          1,536,341

Issuance of common
 stock for intangible asset        705,000         705        572,965              -              -            573,670

Net loss                              -             -              -      $(2,784,536)            -         (2,784,536)

Cumulative foreign currency
 translation adjustments              -             -              -               -        $ 22,855            22,855
----------------------------------------------------------------------------------------------------------------------

Balance at July 31, 1997        12,169,282      12,169      3,358,020      (2,784,536)        22,855           608,508

Issuance of common stock
 for cash                        3,109,223       3,110      1,003,336              -              -          1,006,446

Issuance of common stock
 upon conversion of convertible
 debentures                        908,123         908        706,387              -              -            707,295

Recognition of beneficial
 conversion feature of
 convertible debentures               -             -         650,026              -              -            650,026

Warrants to purchase common
 stock issued with convertible
 debentures                           -             -         527,000              -              -            527,000

Net loss                              -             -              -       (4,300,553)            -         (4,300,553)

Cumulative foreign currency
 translation adjustments              -             -              -               -         (56,706)          (56,706)

Options to purchase common
 stock issued for services            -             -          21,950              -              -             21,950

----------------------------------------------------------------------------------------------------------------------
Balance at July 31, 1998        16,186,628     $16,187     $6,266,719     $(7,085,089)      $(33,851)     $   (836,034)
----------------------------------------------------------------------------------------------------------------------
----------------------------------------------------------------------------------------------------------------------
</TABLE>

                         The accompanying notes and independent auditor's report
                     should be read in conjunction with the financial statements


                                                                             F-5
<PAGE>

                                                  TRANSFORMATION PROCESSING INC.
                                                   (a development stage company)


                                                         STATEMENT OF CASH FLOWS
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>

                                                             Period from
                                                             April 1, 1996                                              Cumulative
                                                        (date of incorporation)             Year ended                    amounts
                                                           to July 31, 1997                 July 31, 1998             from inception
------------------------------------------------------------------------------------------------------------------------------------

<S>                                                            <C>                          <C>                         <C>         
Cash flows from operating activities:
  Net loss from development stage operations                   $(2,784,536)                 $(4,300,553)                $(7,085,089)
  Adjustments to reconcile net loss from development
   stage operations to net cash used in operating activities:
    Depreciation and amortization                                  197,483                      617,451                     814,934
    Issuance of options and warrants to purchase common
     stock for services                                             27,588                      181,317                     208,905
    Issuance of common stock for services in reverse
     acquisition                                                 1,549,056                     -                          1,549,056
    Recognition of beneficial conversion feature                  -                             631,281                     631,281
    Provision for doubtful accounts                               -                              34,325                      34,325
    Write-off of amounts due from related parties                 -                              96,020                      96,020
    Amortization of discounts                                     -                             187,793                     187,793
    Interest expense converted to stock                           -                               7,085                       7,085
    Changes in operating assets and liabilities:
      Increase in accounts receivable                               (3,705)                    (462,787)                   (466,492)
      Increase (decrease) in time deposits                         (23,561)                      22,600                        (961)
      Increase in prepaid expenses and other current assets         (3,426)                      (4,639)                     (8,065)
      Increase in deferred debt costs                             -                             (60,263)                    (60,263)
      Increase in other assets                                      (4,723)                     (26,411)                    (31,134)
      Increase in accounts payable                                  26,116                      347,053                     373,169
      Increase in accrued expenses and other current 
        liabilities                                                 89,317                      159,228                     248,545
------------------------------------------------------------------------------------------------------------------------------------
          Net cash used in operating activities                   (930,391)                  (2,570,500)                 (3,500,891)
------------------------------------------------------------------------------------------------------------------------------------

Cash flows from investing activities:
  Purchase of property and equipment                              (124,733)                    (122,601)                   (247,334)
  Purchase of intangible assets                                    (24,156)                    -                            (24,156)
  Advances to related parties                                     (129,621)                    -                           (129,621)
------------------------------------------------------------------------------------------------------------------------------------
          Cash used in investing activities                       (278,510)                    (122,601)                   (401,111)
------------------------------------------------------------------------------------------------------------------------------------

Cash flows from financing activities:
  Proceeds from loan payable - bank                                 73,158                       50,160                     123,318
  Repayments of loan payable - bank                                (15,054)                     (49,312)                    (64,366)
  Repayment of note payable - stockholder                          (74,924)                     (83,300)                   (158,224)
  Net proceeds from issuance of common stock                     1,240,109                      987,484                   2,227,593
  Net proceeds from issuance of convertible debentures            -                           1,903,688                   1,903,688
------------------------------------------------------------------------------------------------------------------------------------
          Net cash provided by financing activities              1,223,289                    2,808,720                   4,032,009
------------------------------------------------------------------------------------------------------------------------------------

Effect of exchange rate changes on cash                              2,043                       18,637                      20,680
------------------------------------------------------------------------------------------------------------------------------------

Net increase in cash                                                16,431                      134,256                     150,687

Cash at beginning of period                                       -                              16,431                     -

------------------------------------------------------------------------------------------------------------------------------------
Cash at end of period                                          $    16,431                  $   150,687                 $   150,687
------------------------------------------------------------------------------------------------------------------------------------
------------------------------------------------------------------------------------------------------------------------------------


Supplemental disclosure of cash flow information:

  Cash paid during the period for interest                     $     2,419                  $    58,264                 $    60,683
------------------------------------------------------------------------------------------------------------------------------------
------------------------------------------------------------------------------------------------------------------------------------


Supplemental schedule of noncash financing activity:

  Conversion of long-term debt to common stock                    -                         $   707,295                     -   
------------------------------------------------------------------------------------------------------------------------------------
------------------------------------------------------------------------------------------------------------------------------------
</TABLE>



                         The accompanying notes and independent auditor's report
                     should be read in conjunction with the financial statements


                                                                             F-6
<PAGE>





                                                  TRANSFORMATION PROCESSING INC.
                                                   (a development stage company)

                                                   NOTES TO FINANCIAL STATEMENTS
--------------------------------------------------------------------------------

                                                                                
  1.  PRINCIPAL BUSINESS      On August 20, 1996, Samuel Hamann Graphix, Inc. 
      ACTIVITY AND            acquired all of the outstanding common stock of 
      SIGNIFICANT             Transformation Processing Inc. ("Ontario"), a 
      ACCOUNTING              Canadian corporation.  For accounting purposes the
      POLICIES:               acquisition has been treated as a recapitalization
                              of Ontario with Ontario as the acquirer (reverse 
                              acquisition). Samuel Hamann Graphix, Inc. changed 
                              its name to Transformation Processing Inc. (the 
                              "Company"). On February 19, 1998, Ontario merged 
                              into the Company. The accompanying financial 
                              statements reflect this merger as if it had 
                              occurred on July 31, 1997.

                              The Company is an information technology company
                              that develops and markets software and services
                              that enable companies worldwide to automatically
                              migrate their application programs and data from
                              legacy systems to open systems and client/server
                              environments. The Company has expanded its
                              operations from providing legacy code migration
                              services to three lines of business; client/server
                              migration, year 2000 and groupware services. The
                              Company is targeting customers located throughout
                              Canada and the United States. For the periods
                              ended July 31, 1997 and 1998, all operations of
                              the Company were conducted in Canada. At July 31,
                              1998, all of the Company's assets are located in
                              Canada.

                              The statement of operations includes the results
                              of operations of the Company for the 16-month
                              period from April 1, 1996 to July 31, 1997. The
                              results of operations for the period from April 1,
                              1996 to July 31, 1996 were not material.

                              Revenue from fixed-price contracts is recognized
                              ratably over the period of performance in
                              accordance with the American Institute of
                              Certified Public Accountants' Statement of
                              Position 91-1, Software Revenue Recognition.
                              Revenue from customer training, technical support
                              and other services is recognized as the service is
                              performed. The Company provides technical support
                              at no charge for the first 90 days and, under
                              certain circumstances, at no charge if certain
                              other fees are current. Revenue from the sale of
                              deployment product licenses is recognized after
                              installation of the product.

                              Property and equipment is recorded at cost.
                              Depreciation is provided for by the straight-line
                              method over the estimated useful lives of the
                              related assets.

                              The cost of software marketing rights of
                              approximately $780,000 (which includes
                              approximately $207,000 of notes payable plus
                              approximately $573,000 in common stock issued) was
                              being amortized by the straight-line method over
                              four years. Amortization expense charged to
                              operations in the period ended July 31, 1997 and
                              included in cost of software transformation
                              services in the accompanying statement of
                              operations was approximately $180,000. At each
                              balance sheet date, the Company evaluates the
                              period of amortization of intangible assets. The
                              factors used in evaluating the period of
                              amortization include: (i) current operating
                              results; (ii) projected future operating results;
                              and (iii) any other material factors that affect
                              the continuity of the business. The Company has
                              elected to write off the unamortized balance of
                              the intangible asset (software marketing rights)
                              because future cash flows generated from this
                              asset cannot be determined at this time. The
                              impairment loss of approximately $372,000 is
                              included in the cost of transformation services in
                              the accompanying statement of operations for the
                              year ended July 31, 1998.


                                                                             F-7
<PAGE>
                                                  TRANSFORMATION PROCESSING INC.
                                                   (a development stage company)

                                                   NOTES TO FINANCIAL STATEMENTS
--------------------------------------------------------------------------------

                              Costs associated with the issuance of the 6%
                              convertible debentures are being amortized on the
                              straight-line method over the term of the
                              debentures. Upon conversion, debt issue costs will
                              be charged to operations. For the year ended July
                              31, 1998, debt issue costs of $61,396 have been
                              charged to operations and included in interest
                              expense in the accompanying statement of
                              operations.

                              The preparation of financial statements in
                              conformity with generally accepted accounting
                              principles requires the use of estimates by
                              management affecting reported amounts of assets
                              and liabilities and revenue and expenses and the
                              disclosure of contingent assets and liabilities.
                              Actual results could differ from these estimates.

                              Basic loss per share is based on the
                              weighted-average number of shares of common stock
                              outstanding during the periods. Fully diluted per
                              share amounts are not presented because the effect
                              would be antidilutive. The prior-year loss per
                              share was unaffected by the adoption of Statement
                              of Financial Accounting Standards ("SFAS") No.
                              128, Earnings Per Share.

                              Management does not believe that any recently
                              issued, but not yet effective, accounting
                              standards if currently adopted would have a
                              material effect on the accompanying financial
                              statements.

                              The Company's functional currency is the Canadian
                              dollar. Balance sheet accounts are translated into
                              U.S. dollars using current exchange rates in
                              effect at the balance sheet date and revenue and
                              expense accounts are translated using an average
                              exchange rate for the period. The gains and losses
                              resulting from translation are included in
                              stockholders' deficiency.

                              Due to the nature of the Company, the
                              convertibility feature, interest rates and
                              repayment terms, the estimated fair value of the
                              Company's long-term debt approximates its carrying
                              amount.


2. PROPERTY AND               Property and equipment, at cost, consists of the
   EQUIPMENT:                 following:

<TABLE>
<CAPTION>
                                                                   
                                                                                            Estimated
                                                                                           Useful Life
------------------------------------------------------------------------------------------------------
<S>                                                                     <C>                    <C>    
                              Machinery and equipment                   $  21,267              5 years
                              Computer equipment                          154,435              5 years
                              Furniture and fixtures                       55,735              7 years
------------------------------------------------------------------------------------------------------

                                                                          231,437
                              Less accumulated depreciation                48,543
------------------------------------------------------------------------------------------------------
                                                                         $182,894
</TABLE>
                                                                             F-8
<PAGE>

                                                  TRANSFORMATION PROCESSING INC.
                                                   (a development stage company)

                                                   NOTES TO FINANCIAL STATEMENTS
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>

  <S>                         <C>                                                                            <C>
  3.  ACCRUED                 Accrued expenses and other current liabilities 
      EXPENSES AND             consist of the following:
      OTHER CURRENT           Accrued professional fees                                                      $  85,793
      LIABILITIES:            Settlement liability                                                              33,082
                              Other (all amounts are less than 5% of current liabilities)                      111,326

----------------------------------------------------------------------------------------------------------------------
                                                                                                              $230,201
----------------------------------------------------------------------------------------------------------------------
----------------------------------------------------------------------------------------------------------------------



   4.  LONG-TERM   DEBT:      Long-term debt consists of the following:
                              Installment loans                                                           $     53,086
                              6% convertible debentures                                                      1,039,669
----------------------------------------------------------------------------------------------------------------------

                                                                                                             1,092,755
                              Less current portion                                                              43,165

----------------------------------------------------------------------------------------------------------------------

                                      Long-term portion                                                     $1,049,590
----------------------------------------------------------------------------------------------------------------------
----------------------------------------------------------------------------------------------------------------------

</TABLE>

                              The effect of foreign currency translation
                              adjustments on the Company's long-term debt is
                              included in cumulative foreign currency
                              translation adjustments in stockholders' equity
                              (deficiency) in the accompanying financial
                              statements.

                              The Company is obligated under two installment
                              loans with a bank payable in monthly installments
                              aggregating $4,750 plus interest through February
                              1, 1999 and December 31, 1999. The loans bear
                              interest at the bank's prime rate (7.25% at July
                              31, 1998) plus 2.5%. The loans are collateralized
                              by substantially all of the Company's assets.

                              On April 14, 1998, the Company issued two $500,000
                              6% convertible debentures totaling $1,000,000 for
                              cash, due April 14, 2000. Of the $1,000,000
                              convertible debentures, $550,000 are convertible
                              into common stock at 70% of the five-day average
                              closing bid price immediately preceding the date
                              of conversion and $450,000 of the debentures are
                              convertible into common stock at 80% of the
                              five-day average closing ask price immediately
                              preceding the date of conversion. In May 1998,
                              $300,000 of 6% convertible debentures were
                              converted into 266,092 shares of common stock and
                              in July 1998 $400,000 of 6% convertible debentures
                              were converted into 642,031 shares of common
                              stock. In connection with the issuance of
                              debentures, the Company issued warrants to
                              purchase 301,228 shares of common stock. The fair
                              value of $251,000 allocated to the warrants is
                              being amortized over the term of the debentures.
                              For the year ended July 31, 1998, amortization of
                              $181,297 has been charged to operations and
                              included in interest expense in the accompanying
                              statement of operations. The unamortized portion
                              is shown as a reduction in the carrying value of
                              the debentures as of July 31, 1998.


                                                                             F-9
<PAGE>

                                                  TRANSFORMATION PROCESSING INC.
                                                   (a development stage company)

                                                   NOTES TO FINANCIAL STATEMENTS
--------------------------------------------------------------------------------


                              On May 21, 1998, the Company issued two $250,000
                              6% convertible debentures totaling $500,000 for
                              cash, due May 21, 2000. These debentures are
                              convertible into common stock at 80% of the
                              five-day average closing ask price immediately
                              preceding the date of conversion. In connection
                              with the issuance of debentures, the Company
                              issued warrants to purchase 50,200 shares of
                              common stock. The fair value of $52,500
                              allocated to the warrants is being amortized
                              over the term of the debentures. For the year
                              ended July 31, 1998, amortization of $5,311
                              has been charged to operations and included in
                              interest expense in the accompanying statement
                              of operations. The unamortized portion is
                              shown as a reduction in the carrying value of
                              the debentures as of July 31, 1998.

                              On July 10, 1998, the Company issued two 
                              $250,000 6% convertible debentures totaling 
                              $500,000 for cash, due July 10, 2000. These 
                              debentures are convertible into common stock at 
                              80% of the five-day average closing ask price 
                              immediately preceding the date of conversion. 
                              In connection with the issuance of debentures, 
                              the Company issued warrants to purchase 68,306 
                              shares of common stock. The fair value of 
                              $58,500 allocated to the warrants is being 
                              amortized over the term of the debentures. For 
                              the year ended July 31, 1998, amortization of 
                              $1,183 has been charged to operations and 
                              included in interest expense in the 
                              accompanying statement of operations. The 
                              unamortized portion is shown as a reduction in 
                              the carrying value of the debentures as of July 
                              31, 1998.

                              On the date of issuance of each convertible 
                              debenture, including the convertible debenture 
                              issued and converted in August 1997, the 
                              Company allocated a portion of the proceeds to 
                              the beneficial conversion feature of the 
                              debenture which represented the intrinsic value 
                              of that feature. That amount is calculated as 
                              the difference between the conversion price and 
                              the fair value of the common stock into which 
                              the debentures are convertible, multiplied by 
                              the number of shares into which the debentures 
                              are convertible. The amount attributable to the 
                              beneficial conversion feature, aggregating 
                              $650,026, is included in interest expense in 
                              the accompanying statement of operations as the 
                              debentures became convertible into common stock 
                              on issuance.

                              Each debenture provides the holder with certain
                              registration rights that require the Company to
                              register the common shares underlying each
                              convertible debenture within 90 days following the
                              closing date of the issuance. As of July 31, 1998,
                              the Company was not in compliance with this
                              requirement. If the common shares are not
                              registered, the Company shall pay the debenture
                              holders damages in the amount of 2% of the amount
                              of outstanding debentures every 30 days. The
                              amount of damages accrued and charged to
                              operations at July 31, 1998 was estimated to be
                              $6,000.

                              The fair value of each warrant is estimated on the
                              date of issuance using the Black-Scholes
                              option-pricing model with the following
                              weighted-average assumptions used for the year
                              ended July 31, 1998: expected volatility of 
                              1.93%; risk-free interest rate of 5.6%; and
                              expected lives of two years.


                                                                            F-10
<PAGE>

                                                  TRANSFORMATION PROCESSING INC.
                                                   (a development stage company)

                                                   NOTES TO FINANCIAL STATEMENTS
--------------------------------------------------------------------------------


                              Aggregate maturities of long-term debt are as
                              follows:
<TABLE>
<CAPTION>

                              Year ending July 31,

<S>                                    <C>                          <C>         
                                       1999                           $   43,165
                                       2000                            1,049,590

--------------------------------------------------------------------------------
                                                                      $1,092,755
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------

</TABLE>


  5.  RELATED PARTY           Amounts due from related parties represent 
      TRANSACTIONS:           advances made to an officer. This loan was  
                              noninterest-bearing through July 31, 1997 but 
                              bears interest at 4% per annum subsequent to July 
                              31, 1997.

                              The Company acquired the software marketing rights
                              in exchange for 705,000 shares of common stock and
                              notes payable. The rights were valued at the fair
                              value of the shares of common stock ($.81 per
                              common share) and notes payable at the date of
                              issue. See Note 1 of notes to the financial
                              statements for impairment loss.


   6.  NOTE PAYABLE -         Note payable - stockholder consists of a
       STOCKHOLDER:           noninterest-bearing note payable in monthly  
                              installments of $5,639 through December 1, 1998.


   7.  COMMITMENTS            The Company is obligated under noncancelable 
       AND                    operating leases for office space expiring 
       CONTINGENCIES:         at various times through September 30, 2001. 
                              Approximate minimum future payments under
                              these leases are payable as follows:

<TABLE>
<CAPTION>

                              Year ending July 31,

<S>                                    <C>                              <C>     
                                       1999                             $166,000
                                       2000                              166,000
                                       2001                               57,000
                                       2002                                3,000

--------------------------------------------------------------------------------

                                                                        $392,000
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------

</TABLE>


                              The leases are subject to escalation for the
                              Company's proportionate share of increases in real
                              estate taxes and other operating expenses. Rent
                              expense for the period ended July 31, 1997 and the
                              year ended July 31, 1998 amounted to $37,522 and
                              $33,378, respectively.

                              The Company entered into an agreement with an
                              entity whereby the entity will provide the Company
                              with public and investor relations services. Under
                              the terms of the agreement, the Company will issue
                              150,000 shares of common stock of the Company as
                              compensation for services. At July 31, 1998, those
                              services had not yet been provided.


                                                                            F-11
<PAGE>

                                                  TRANSFORMATION PROCESSING INC.
                                                   (a development stage company)

                                                   NOTES TO FINANCIAL STATEMENTS
--------------------------------------------------------------------------------


8. STOCKHOLDERS'              The Company is authorized to issue 5,000,000
   EQUITY                     shares of preferred stock with rights and
   (DEFICIENCY):              preferences to be determined by the Company's
                              board of directors. As of July 31, 1998, no shares
                              of preferred stock have been issued.


                              The Company issued shares of common stock for 
                              cash as follows:

<TABLE>
<CAPTION>
                                                                Additional
                                          Common Stock           Paid-in      Stockholders'
                                      Shares        Amount       Capital         Equity
-----------------------------------------------------------------------------------------

<S>                                    <C>         <C>         <C>            <C>        
 April 20, 1996                        160,000     $   160     $   136,196     $  136,356
 August 23, 1996                       500,000         500         493,155        493,655
 January 27, 1997                      208,333         208         147,998        148,206
 March 6, 1997                         219,780         220         123,039        123,259
 March 6, 1997                         281,250         281         246,237        246,518
 June 27, 1997                         100,000         100          69,032         69,132

-----------------------------------------------------------------------------------------
       Period ended
        July 31, 1997                1,469,363       1,469       1,215,657      1,217,126
-----------------------------------------------------------------------------------------
 August 28, 1997                       198,000         198         108,105        108,303
 September 4, 1997                     589,000         589         123,481        124,070
 September 26, 1997                    400,000         400         199,044        199,444
 October 23, 1997                      400,000         400         199,600        200,000
 October 31, 1997                      100,000         100          49,900         50,000
 December 10, 1997                     977,778         978         224,022        225,000
 January 26, 1998                      444,445         445          99,184         99,629

-----------------------------------------------------------------------------------------
      Year ended
       July 31, 1998                 3,109,223       3,110       1,003,336      1,006,446
-----------------------------------------------------------------------------------------

                                     4,578,586      $4,579      $2,218,993     $2,223,572
=========================================================================================
</TABLE>


                                                                                
                              On April 1, 1996, the Company issued
                              5,901,050 shares of common stock to its
                              founders for certain technology and
                              services, which were valued at a nominal
                              amount.

                              On August 20, 1996, the Company issued
                              2,205,869 shares of common stock to the
                              stockholders of Samuel Hamann Graphix,
                              Inc. in a transaction accounted for as a
                              reverse acquisition.

                              As part of the reverse acquisition the
                              Company issued 1,888,000 shares of
                              common stock to certain consultants for
                              services. These shares have been valued
                              at the fair value at the date of
                              issuance ($.81 per common share).
                              Accordingly, the Company recorded a
                              charge to operations at the time of
                              issuance of $1,536,341. Certain share
                              issuances prior to the reverse
                              acquisition were made by Samuel Hamann
                              Graphix, Inc. and the details of
                              consideration for the issuances were not
                              known by the Company. The Company has
                              addressed the situation by conducting an
                              audit of issued and outstanding shares
                              of common stock. The Company is auditing
                              records received from prior management


                                                                            F-12
<PAGE>


                                                  TRANSFORMATION PROCESSING INC.
                                                   (a development stage company)

                                                   NOTES TO FINANCIAL STATEMENTS
--------------------------------------------------------------------------------


                              reflecting shares issued, transferred or sold,
                              apparently without fair consideration to the
                              Company.

                              The Company issued stop transfer instructions as
                              of November 18, 1997 concerning approximately
                              1,844,000 shares of common stock and had
                              outstanding stop transfer instructions as of
                              October 31, 1998 concerning approximately
                              1,055,000 shares of common stock. These shares are
                              part of the 1,888,000 shares of common stock
                              issued to the consultants discussed in the
                              preceding paragraph. The stop order transfers
                              remain in effect until the holders of the shares
                              of common stock are able to satisfy the Company's
                              concerns and/or demonstrate that the current
                              holders are holders in due course at which time
                              the stop orders are lifted on an individual basis.





                                                                                
 9.  STOCK OPTIONS AND        The Company has outstanding warrants
     STOCK WARRANTS:          permitting the holders to purchase
                              shares of its common stock at prices
                              ranging from $.46 to $1.99 per share.
                              The warrants have varying expiration
                              dates to July 10, 2000. Warrants to
                              purchase 1,019,734 common shares were
                              outstanding at July 31, 1998. During the
                              year ended July 31, 1998, warrants to
                              purchase 419,734 common shares were
                              issued at prices ranging from $.46 to
                              $1.99 per share. In addition, during the
                              year ended July 31, 1998, warrants to
                              purchase 500,000 shares of common stock,
                              which were to expire, were extended. The
                              extended warrants provide for exercise
                              prices ranging from $.50 to $.80 per
                              share. The warrants were determined to
                              have a fair market value of
                              approximately $165,000, which was
                              charged to operations during the year
                              ended July 31, 1998.

                              During the year ended July 31, 1998, the Company
                              adopted an incentive stock option plan under which
                              options to purchase shares of common stock may be
                              granted to certain key employees. The exercise
                              price is based on the fair market value of such
                              shares as determined by the board of directors at
                              the date of the grant of such options. At July 31,
                              1998, options to purchase 100,000 shares of common
                              stock at an exercise price of $.50 per share are
                              outstanding and are exercisable through March 25,
                              2008.




                                                                            F-13
<PAGE>




                                                  TRANSFORMATION PROCESSING INC.
                                                   (a development stage company)

                                                   NOTES TO FINANCIAL STATEMENTS
--------------------------------------------------------------------------------





A summary of the status of the Company's options as of July 31, 1998 is 
presented below:

<TABLE>
<CAPTION>
                                                                                    Weighted-
                                                                                     Average
                                                             Number of              Exercise
                                                              Shares                  Price
--------------------------------------------------------------------------------------------

<S>                                                          <C>                     <C> 
    Granted                                                  100,000                 $.50
    Canceled                                                       -                    -
    Exercised                                                      -                    -

--------------------------------------------------------------------------------------------
           Outstanding at end of year                        100,000                 $.50
============================================================================================

    Options exercisable at year-end                          100,000                 $.50
============================================================================================

    Weighted-average fair value of options
     granted during the year                                    $.44                    -
============================================================================================
</TABLE>



                                                                                
                                                                                
                    The following table summarizes information about fixed stock
                    options outstanding at July 31, 1998:

<TABLE>
<CAPTION>

                                                          Options Outstanding                   Options Exercisable
                                                        -----------------------              -------------------------
                                                               Weighted-
                                                                Average        Weighted-                      Weighted-
                                                               Remaining        Average                        Average
                               Exercise          Number       Contractual      Exercise        Number         Exercise
                                 Price         Outstanding       Life            Price       Exercisable        Price
----------------------------------------------------------------------------------------------------------------------

<S>                                              <C>              <C>          <C>             <C>              <C> 
                                $.50             100,000          9.8           $.50           100,000          $.50
----------------------------------------------------------------------------------------------------------------------
</TABLE>



                              The Company has elected to apply
                              Accounting Principles Board Opinion No.
                              25 and related interpretations in
                              accounting for its stock options and has
                              adopted the disclosure-only provisions
                              of SFAS No. 123. Had the Company elected
                              to recognize compensation cost based on
                              the fair value of the options granted at
                              the grant date as prescribed by SFAS No.
                              123, the Company's net loss and loss per
                              common share would have been as follows:
<TABLE>
<CAPTION>

<S>                                                                                                        <C>         
                              Net loss - as reported                                                       $(4,300,553)
======================================================================================================================

                              Net loss - pro forma                                                         $(4,321,869)
======================================================================================================================

                              Loss per share - as reported                                                 $      (.30)
======================================================================================================================

                              Loss per share - pro forma                                                   $      (.30)
======================================================================================================================
</TABLE>


                                                                            F-14
<PAGE>

                                                  TRANSFORMATION PROCESSING INC.
                                                   (a development stage company)

                                                   NOTES TO FINANCIAL STATEMENTS
--------------------------------------------------------------------------------



                              In March 1998, the Company issued options to three
                              employees to purchase 2,700,000 shares of common
                              stock at an exercise price of $.30 per share.
                              Those options were canceled as of July 31, 1998
                              and their fair value is not included in the pro
                              forma net loss and net loss per share information
                              presented above.

                              The fair value of each option grant is estimated
                              on the date of grant using the Black-Scholes
                              option-pricing model with the following
                              weighted-average assumptions used for the year
                              ended July 31, 1998: expected volatility of 1.93%;
                              risk-free interest rate of 5.7%; expected lives of
                              10 years; and no payment of dividends expected.

 10.   INCOME TAXES:          The Company recorded a deferred income
                              tax asset for the tax effect of net
                              operating loss carryforwards and the
                              temporary difference between the
                              carrying amount and tax bases of certain
                              intangible assets, aggregating
                              approximately $2,000,000. In recognition
                              of the uncertainty regarding the
                              ultimate amount of income tax benefits
                              to be derived, the Company has recorded
                              a valuation allowance of $2,000,000 at
                              July 31, 1998.

                              The Company has a net operating loss carryforward
                              of approximately $4,000,000 available to offset
                              taxable income through the year 2013.


11. GOING CONCERN:            The Company is in the development
                              stage, has a limited operating history, has not
                              generated significant revenue from its planned
                              principal operations through July 31, 1998, has a
                              working capital deficiency and has a deficit
                              accumulated during the development stage at July
                              31, 1998.

                              The Company's financial statements have been
                              prepared on the assumption that the Company will
                              continue as a going concern. Management believes
                              that the development, marketing and initial sales
                              of certain of its technologies will occur before
                              July 31, 1999, thus generating working capital.
                              The Company is also considering other financing
                              alternatives which will allow the Company to
                              continue as a going concern. If there is no or
                              insufficient revenue from the commercial
                              applications of the Company's technologies during
                              the year ending July 31, 1999 or additional
                              financing cannot be obtained, there is substantial
                              doubt about the Company's ability to continue as a
                              going concern. The financial statements do not
                              include any adjustments that might result from the
                              outcome of this uncertainty.


12. SUBSEQUENT EVENTS:        In August 1998, $50,000 of 6%
                              convertible debentures, due April 14, 2000, were
                              converted into 108,898 shares of common stock.

                              In September 1998, $125,000 of 6% convertible
                              debentures, due April 14, 2000, were converted
                              into 324,148 shares of common stock.

                              On October 23, 1997, the Company made an offering
                              of 400,000 shares of common stock for $200,000; on
                              October 31, 1997, an offering of 100,000 shares of
                              common stock for $50,000; on December 10, 1997, an
                              offering of 977,778 shares of common stock for
                              $225,000; and on January 26, 1998, an offering of
                              444,445 shares of common stock for $99,629. These
                              offerings were made 


                                                                            F-15
<PAGE>



                                                  TRANSFORMATION PROCESSING INC.
                                                   (a development stage company)

                                                   NOTES TO FINANCIAL STATEMENTS
--------------------------------------------------------------------------------


                              pursuant to the claim of exemption under
                              rule 504 under the Securities Act of
                              1934. These offerings appear to exceed
                              the limitation of rule 504 of a maximum
                              of $1,000,000 in any one-year period.
                              The Company intends to file a
                              registration statement offering
                              rescission to the purchasers of these
                              offerings.


13. ADDITIONAL INFORMATION:   The Company's records and the records of its
                              transfer agent differ with respect to the
                              number of outstanding shares of the Company's
                              common stock. According to the transfer agent,
                              the number of shares of common stock
                              outstanding is approximately 603,000 shares
                              greater than the 16,186,628 indicated by the
                              Company's records. The Company believes that
                              its records are correct and is in the process
                              of resolving this difference. The number of
                              shares outstanding reflected in the Company's
                              financial statements does not include these
                              shares or any adjustment which might be
                              necessary to resolve this difference.

                                                                            F-16
<PAGE>

                                      SIGNATURES

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

Dated: November 12, 1998       TRANSFORMATION PROCESSING INC.


     By:  /s/Gary G. McCann             By:  /s/ Paul G. Mighton
          ----------------------             ----------------------
          Gary G. McCann                     Paul G. Mighton, 
          Chief Financial Officer and        Chief Executive Officer
          Accounting Officer

     In accordance with the Exchange Act, this Report has been signed below by
the following persons on behalf of the registrant and in the capacities and on
the dates indicated:

      SIGNATURE                      TITLE                           DATE

/s/ Paul G. Mighton      Chairman of the Board of Directors    November 12, 1998
- --------------------   and Chief Executive Officer 
Paul G. Mighton          (Principal Executive Officer)


/s/ Gary G. McCann       Executive President, Chief Financial  November 12, 1998
---------------------    Officer, Secretary And Director
Gary G. McCann          (Principal Financial Officer)


/s/ Vladimir Stepanoff   Vice President-Technology            November  12, 1998
----------------------   And Director
Vladimir Stepanoff



                                       
<PAGE>

                                     EXHIBIT INDEX


Exhibit No.    Name
-----------    ----

10.23          1998 Stock Option Plan.
10.24          Real Estate Sublease Agreement dated June 29, 1998,
               between TPI and Origin Technology In Business Inc.
21.1           Subsidiaries of the Registrant.
27             Financial Data Schedule