FORM 10-KSB

(Mark  One)

[X]  ANNUAL  REPORT  UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
     1934

     For  the  fiscal  year  ended  December  31,  2000
                                    -------------------

[ ]  TRANSITION  REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
     OF  1934

     For  the  transition  period  from          to
     Commission  file  number  000-27189

                MERLIN SOFTWARE TECHNOLOGIES INTERNATIONAL, INC.
                ------------------------------------------------
                 (Name of small business issuer in its charter)

NEVADA                                                                88-0398103
------                                                                ----------
(State or other jurisdiction of                                (I.R.S. Employer
incorporation or organization)                               Identification No.)

4199 LOUGHEED HIGHWAY, SUITE 200 AND 201
BURNABY, BRITISH COLUMBIA, CANADA                                        V5C 3Y6
---------------------------------                                        -------
(Address of principal executive offices)                              (Zip Code)

Issuer's  telephone  number  (604)  320-7227
                              ---   --------

Securities  registered  under  Section  12(b)  of  the  Exchange  Act:
Not  applicable.

Securities  registered  under  Section  12(g)  of  the  Exchange  Act:

                         COMMON STOCK, PAR VALUE $0.001
                         ------------------------------
                                (Title of class)

     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 is not contained in this form, and no disclosure will be
contained,  to  the  best  of  registrant's  knowledge,  in  definitive proxy or
information statements incorporated by reference in Part III of this Form 10-KSB
or  any  amendment  to  this  Form  10-KSB. [ ]

     State  issuer's  revenues  for  its  most  recent  fiscal  year.  $22,213

     State the aggregate market value of the voting and non-voting common equity
held  by  non-affiliates  computed by reference to the price at which the common
equity was sold, or the average bid and asked price of such common equity, as of

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a  specified date within the past 60 days.  (See definition of affiliate in Rule
12b-2  of  the  Exchange  Act.)

6,976,928  common  shares  @  $0.469(1)  =  $3,272,179
------------------------------------------------------
(1)  Average  of  bid  and  ask  closing  prices  on  March  1,  2001

Note:  If  determining  whether  a  person  is  an  affiliate  will  involve  an
unreasonable  effort  and expense, the issuer may calculate the aggregate market
value  of  the  common  equity held by non-affiliates on the basis of reasonable
assumptions,  if  the  assumptions  are  stated.

     (ISSUERS INVOLVED IN BANKRUPTCY PROCEEDINGS DURING THE PAST FIVE YEARS)

     Check whether the issuer has filed all documents and reports required to be
filed  by  Section 12, 13 or 15(d) of the Exchange Act after the distribution of
securities  under  a  plan  confirmed  by  a  court.     Yes [ ]     No  [ ]

                   (APPLICABLE ONLY TO CORPORATE REGISTRANTS)

     State  the  number of shares outstanding of each of the issuer's classes of
common  equity,  as  of  the  latest  practicable  date.

12,986,928  common  shares,  without  par  value outstanding as of March 1, 2001
--------------------------------------------------------------------------------

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

<PAGE>

PART  I

ITEM  1.     DESCRIPTION  OF  BUSINESS.

                           FORWARD-LOOKING STATEMENTS

     This  annual  report  contains  forward-looking  statements as that term is
defined  in  the  Private  Securities  Litigation  Reform  Act  of  1995.  These
statements relate to future events or our future financial performance.  In some
cases, you can identify forward-looking statements by terminology such as "may",
"will",  "should",  "expects",  "plans", "anticipates", "believes", "estimates",
"predicts",  "potential"  or  "continue" or the negative of these terms or other
comparable terminology.  These statements are only predictions and involve known
and  unknown  risks, uncertainties and other factors, including the risks in the
section  entitled  "Risk  Factors",  that may cause our or our industry's actual
results,  levels  of  activity,  performance  or  achievements  to be materially
different  from  any  future  results,  levels  of  activity,  performance  or
achievements  expressed  or  implied  by  these  forward-looking  statements.

     Although  we believe that the expectations reflected in the forward-looking
statements  are  reasonable,  we  cannot  guarantee  future  results,  levels of
activity,  performance  or  achievements.  Except as required by applicable law,
including  the  securities laws of the United States, we do not intend to update
any  of  the  forward-looking  statements  to conform these statements to actual
results.

     As  used  in  this annual report, the terms "we", "us", "our", and "Merlin"
mean Merlin Software Technologies International, Inc. and its subsidiary, unless
otherwise  indicated.

     All  dollar  amounts  refer  to  US  dollars  unless  otherwise  indicated.

Business  of  the  Company

     Merlin  is  a  developer  and  producer  of  utility  software programs for
personal computers with a Linux or Unix operating system.  Currently, Merlin has
two  software  programs:  a  computer  backup  and  restore  program  called
PerfectBACKUP+  and a multi-line fax program called Communicado Fax.  The backup
and restore program is a utility software program that allows a computer user to
create  a  backup copy of the electronic computer files stored in a computer and
to  use  this  backup  copy  to recover these files should the user accidentally
delete  such  files,  wish to recover an earlier version of such files or if the
user's  computer crashes and some or all of such files are lost.  The multi-line
fax  program  allows  a  computer  user  to  perform  a number of facsimile type
functions using a modem on a personal computer, including receiving and printing
documents  sent  by facsimile from another location and creating and sending new
documents  by  facsimile.  Both of these products are marketed to both small and
medium-sized  businesses  and  are  or  will  be  distributed by way of bundling
agreements  with  original  equipment  manufacturers,  reseller  and distributor
agreements  with  independent  resellers  and  distributors, and by ordering and
downloading  either  of  the  programs  from  our  website.  Version  7.0  of
PerfectBACKUP+  has  been  released and is available for sale on our website and
through  our  distributors  and resellers.  New versions of PerfectBACKUP+ which
incorporate  new  features  and  enhancements  will  be  periodically  released.
Version  4.0  of  Communicado  Fax,  our  multi-line fax program was released on
January  15,  2001  and  is  also  available  for  sale  from  our  website.

     Merlin  is a Nevada corporation with its business offices located at Suites
200  and  201,  4199  Lougheed  Highway, Burnaby, British Columbia V5G 3Y6.  Our
telephone  number  is  (604)  320-7227.  We  carry  on  business  through  our
wholly-owned subsidiary, Merlin Software Technologies Inc., a Nevada corporation
which  maintains  its  business  office  at  the  same  location.

Corporate  History

     Merlin  Software  Technologies  International  Inc. is a Nevada corporation
formed  on  August  30,  1995 under the name Austin Land & Development, Inc.  On
January  7,  2000,  we  changed  our  name  to  Merlin  Software  Technologies
International,  Inc.  Our subsidiary, Merlin Software Technology Inc., is also a
Nevada  corporation  which  was  formed  on  June  25,  1999.

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     On  January  14,  2000,  we  entered  into  a  letter agreement with Merlin
Software  Technologies  Inc. and its principal shareholders whereby we agreed to
acquire all of the issued and outstanding shares, options and warrants of Merlin
Software  Technologies  Inc.  in  exchange  for  issuing  an equal number of our
shares,  options  and  warrants.  We  agreed  to issue these shares, options and
warrants  on  the  same terms as had been issued by Merlin Software Technologies
Inc.  On April 26, 2000, as a result of a share exchange agreement, we agreed to
issue  7,986,665  shares  of our common stock, warrants to purchase up to 86,665
shares  of  our common stock and options to purchase up to 781,000 shares of our
common stock in exchange for all the issued and outstanding shares, warrants and
options  of Merlin Software Technologies Inc.  Merlin Software Technologies Inc.
had  designated  a  further  150,000  options  for  grant, which designation was
cancelled  and  not  included in the share exchange.  As of March 1, 2001, there
was  one  shareholder of Merlin Software Technologies Inc. who had yet to tender
an  aggregate  of  13,333  shares  for exchange.  The share exchange resulted in
Merlin  Software  Technologies Inc. becoming our wholly owned subsidiary.  Prior
to  the  share  exchange,  we  were  an  inactive  company  called Austin Land &
Development  Inc.  Austin  Land  & Development Inc. did not generate any revenue
but did incur administrative expenses.  Administration expenses were $14,210 for
the  year  ended  December  31,  1999.

     The  share  exchange  with the stockholders of Merlin Software Technologies
Inc.  was accounted for as a reverse acquisition, since at the completion of the
share  exchange  the  former  stockholders  of Merlin Software Technologies Inc.
controlled  our company.  Following the accounting for reverse acquisitions, the
financial  statements  subsequent to closing of the share exchange are presented
as  a  continuation  of  Merlin  Software  Technologies Inc. consistent with the
change  of  business  to  software development.  Accordingly, our operations are
consolidated  with  those of Merlin Software Technologies Inc. since the date of
acquisition.

Our  Software  Programs

     The  increased  use  of the Linux and Unix operating systems have created a
demand  for  packaged  software  applications  and  utility programs designed to
operate  on these operating systems.  This is because operating systems on their
own  only  allow  computers to be operated.  This means that the computer can be
switched  on  and  will  display  messages  on  the screen and accept input from
devices  such  as  keyboards.  Operating systems also allow other software to be
operated  on  the  computer,  like  word  processing  and  spreadsheet programs.
However,  operating  systems  do  not  usually  come  with  software  utility
applications  such  as  backup  or  faxing  programs that are needed by users to
perform  normal  day-to-day  tasks  with  their  computers.  Such  programs  are
typically supplied by third party software companies, like Merlin.  We expect to
meet  this  demand  for  software  utility  programs  by  further developing and
producing  our  two  utility  software programs:  PerfectBACKUP+ and Communicado
Fax.

     We  are  currently focussing on utility software programs developed for the
Linux and Unix operating systems.  The primary utility program is our backup and
restore  utility software program called PerfectBACKUP+, which allows a computer
user  to  create  a  backup  copy  of  the electronic computer files stored in a
computer  and  to  use  this  backup copy to recover these files should the user
accidentally  delete  such  files  or wish to recover an earlier version of such
files  or if the user's computer crashes and some or all of such files are lost.
The second utility software program is Communicado Fax which is a multi-line fax
program  which  allows  a  computer  user  to perform a number of facsimile type
functions using a modem on a personal computer, including receiving and printing
documents  sent  by facsimile from another location and creating and sending new
documents  by  facsimile  through  the  modem  on  a  personal  computer.

PerfectBACKUP+

     All  computer  operating  systems  are subject to loss of valuable data and
critical  information  through  hardware  failure  and  other  forms of computer
crashes.  For users, the loss of data from such crashes can be catastrophic.  As
a  result,  users  demand  software  that  can  back  up  and  restore  data and
information  contained  on  their  personal computers.  PerfectBACKUP+ is a high
performance  backup  and  restore  software  utility  program for use on systems
utilizing  Linux  and  Unix  operating  systems.  PerfectBACKUP+  was originally
developed  for  the  Unix operating system and was sold under the name "FastBACK
Plus Unix". All versions of FastBACK Plus sold over two million copies worldwide
before  the  rights  to  FastBACK  Plus  Unix were sold to Symantec.  Because of
Symantec's orientation towards the Microsoft operating system, it did not pursue
the  Unix market and the Linux operating system did not exist at that time.  The
exclusive rights to FastBACK Plus Unix were then re-acquired by Gary Heller, one
of  our  former  officers  and directors.  Between 1990 and 1995, PerfectBACKUP+
underwent  an

<PAGE>

extensive  re-write  to  convert  it  for  use  on  the  Linux operating system,
incorporate  the  various  utilities  that  had  been  developed  and to upgrade
PerfectBACKUP+  to  a complete back-up and emergency recovery tool.  We acquired
the  rights  to  PerfectBACKUP+  from Gary Heller on July 13, 1999.  Gary Heller
received  1,600,000  shares  of  common  stock  of our subsidiary for all of his
rights  to  PerfectBACKUP+  and  FleetPro  II,  which  shares were exchanged for
1,600,000  shares  of  our  common  stock  in connection with our acquisition of
Merlin  Software  Technologies  Inc.

     PerfectBACKUP+'s  (version  7.0)  features  include:

-     device  support - PerfectBACKUP+ supports all of the disk and tape devices
supported  by  a  user's  operating  system;

-     automated  backups  -  PerfectBACKUP+  allows  users  to  create and store
different  backup packages, then schedule their operation automatically, even if
the  user  is  present  during  the  operation;

-     easy  to  use  file selection methods - PerfectBACKUP+'s include files and
exclude  files  options to allow the user to quickly browse and select files for
backup  and  restore  operations using file names, wild cards and data criteria;

-     graphical user interface - allows a user to quickly and easily begin using
PerfectBACKUP+  using  a windows menu type environment, eliminating the learning
curve  and  user  error;  and

-     menu driven character interface - allows a user to operate  PerfectBACKUP+
from  a  dumb  terminal,  telenet  session  or  over  a  modem.

     PerfectBACKUP+  (version  7.0)  will  operate  on  Linux  operating systems
including  RedHat  6.0  and 6.1, Caldera Open Linux 2.3 and eServer 2.3 and 2.4,
S.U.S.E.  6.1,  6.2  and 6.3, Corel Linux 1.0, Turbo Linux 4.0 and 6.0, Mandrake
6.X  and  Debian.  Several companies including Caldera, IBM and Cable + Wireless
BET  Limited  have  purchased  earlier  versions  of the software.  We have also
provided  complimentary copies to several educational institutions including the
University of Minnesota, Stanford University, Awhus University (Denmark), Morgan
County  Board of Education (TN) and Whitefish Bay School (WI).  At this time, in
order  to  use PerfectBACKUP+ to backup Apple Macintosh computers, the user must
build a Linux backup server using one of the above-noted Linux distributions and
install  PerfectBACKUP+  onto  that  server.

     Users  with  questions  regarding  PerfectBACKUP+  can currently access our
technical  support where frequently encountered problems can be addressed by our
technical support staff and will be able to access our technical support through
our  website  where frequently encountered problems will be posted and addressed
by  our  technical  staff.

     A public test version of PerfectBACKUP+ version 7.0 was released on October
8, 2000, and continues to be available for download from our website.  Users who
download  this  public test version have access to the program on a time limited
basis,  usually 30 days, and agree to provide us with any comments or provide us
with  details of any bugs or errors they may encounter in use of the public test
version.  These  free  downloads of public test versions allow us to uncover and
verify  any errors or bugs in our programs before such programs are released for
retail  sales.  It  also  allows  us  to determine which features users may want
added to future versions of our software programs.  By minimizing the amounts of
potential  errors or bugs with our software programs before they are released to
the public for sale, we are attempting to increase the success and acceptance of
our software programs by the public.  A commercial version of PerfectBACKUP+ was
announced  and  released  on  November 15, 2000 at Comdex, a software conference
held  in  Las Vegas, Nevada.  It is available for purchase and download from our
website  at  a cost of $89 and the compact disk and program documentation can be
acquired  separately  for  an  additional  $20.

     The  release of PerfectBACKUP+ version 7.0 was a natural progression in the
development  of  the product. It provides additional features and addresses some
errors  found in earlier releases of PerfectBACKUP+.  The new features include a
full  system  backup  wizard  to make backing up a complete hard disk easier, an
online  manual,  a  backup  scheduling wizard to make scheduling regular backups
easier,  an  improved  file  selection  dialog  to  make  the

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inclusion and exclusion of files for a particular backup easier and a media copy
wizard  that made the duplicating of the data on a backup tape easy.  A 'wizard'
as  used above refers to a simple, straightforward set of questions presented in
a  logical  sequential  manner  that makes it easy for the user to establish the
parameters  for  the  use  of  the  program.

     Concurrent  with the completion of PerfectBACKUP+ version 7.0, we commenced
design  work  on  PerfectBACKUP+  version  8.  PerfectBACKUP+  version  8 is not
scheduled  for  release  until  September,  2001 and, due to the fact that it is
targeted  as  a  backup  program  for  large  networks,  will  not  be sold as a
replacement  for  PerfectBACKUP+ version 7.0 but as an additional product with a
different  focus  and  with  additional  features.  As  the  version  8  of
PerfectBACKUP+  is  still in the early stages it is not possible to say with any
certainty  that it will be released in  September, 2001, but we believe that the
release  of  version  8  will not have any impact on the sales of version 7.0 of
PerfectBACKUP+.

Communicado  Fax

     In today's electronic age many people send information to each other by way
of  facsimile transmission.  As a result, people have demanded software programs
which  will  allow  them  to  use  their  personal computers to send and receive
facsimile  transmissions and thereby eliminate the need to purchase and maintain
an  independent  fax  machine.  Communicado Fax is a multi-line fax program that
allows  a  computer user to perform a number of facsimile type functions using a
modem  on  a  personal  computer.  Communicado  Fax  is a desktop fax client and
server  application  for  Linux and Unix operating systems, originally developed
for  Unix  and  converted  for  use  on Linux operating systems in 1994.  It was
originally  distributed  under the name "HotWireFax" and Version 2 of HotWireFax
for  the  Linux  operating  system has been available free on the Internet since
1996.  We  acquired  the rights to HotWireFax from Robert Heller, a director and
officer  of  Merlin and our subsidiary, on July 13, 1999 for 1,600,000 shares of
common  stock  of Merlin Software Technologies Inc., which shares were exchanged
for  1,600,000  shares of our common stock in connection with our acquisition of
Merlin  Software Technologies Inc.  In late 1999, we had records from our server
that  approximately  22,000  copies  of  HotWireFax had been downloaded from the
Internet.  In  January,  2000,  HotWireFax  version  3.0  was announced and made
available for download.  Since we released the new version for download, we have
experienced  approximately 200 to 300 downloads per month.  We have assumed that
some  of  these  copies would be redistributed and accordingly, we estimate that
approximately  30,000  copies  of  the  various versions of HotWireFax have been
downloaded  from  the  Internet.

     The  use  of  free downloads provides us with an indication that there is a
demand  for  a  product  like HotWireFax and that we may be able to commercially
sell  an  improved  version  of  such product.  It also allows us to uncover and
rectify any errors or bugs in our programs before such programs are released for
retail  sales.  In  addition, it allows us to determine which features users may
want  added  to  future  versions  of  our software programs.  By minimizing the
amounts  of  potential errors or bugs with our software programs before they are
released  to  the public for sale, we are attempting to increase the success and
acceptance of our software programs by the public.  However, to date, these free
downloads  have  not  resulted  in  any revenues, primarily because we have only
recently  released  our  retail  commercial  version  of  the  product.

     HotWireFax  version  3.0  for  the  Linux operating system was subsequently
re-branded  as  Communicado Fax version 4.0 and was released for sale on January
15,  2001.  This  version  contains support for a much wider range of modems and
contains  a  new graphical user interface.  A public test version of Communicado
Fax  version 4.0 (personal version) was released on December 27, 2000.  A public
test  version  is  available  so that users have access to the program on a time
limited  basis,  usually  30  days, and can provide us with general comments and
details  of  any  bugs  or  errors  they may encounter in use of the public test
version.  A  commercial  version  of Communicado Fax version 4.0 was released on
January  15, 2001, and retails for $49 (the same price is applicable whether the
product  is  purchased  by  download  from our website or as a compact disk in a
retail  box  with  manual).  The  basic  features  of  Communicado  Fax include:

-     quick  fax  -  immediate  transmission  of  faxes;

-     packaged  faxes  -  create  standard  faxes  which  can be sent on demand;

<PAGE>

-     modem  support  -  ability to support almost any desktop personal computer
modem;

-     custom  coversheets  -  allows  a  user to create custom cover sheets with
graphics;

-     acceptance  of  user  input  in  ASCII  text;

-     view  faxes  -  view  faxes  on  screen  and  zoom  and  rotate  images;

-     attach  documents  -  allows  users to attach word processing, postscript,
ASCII  text  documents  and  inbound/outbound  faxes  to  any  fax;

-     ability  to  be  configured  to  work  as a printer driver to Star Office,
Applixware,  WordPerfect  and  others;

-     call  screening  -  allows  users  to  disconnect  unwanted  faxes;

-     online  "help"  -  allows  users  to  find  assistance  online;  and

-     automatic  retry  -  automatic  spooler  to  retry  faxes and to advise of
results  via  email.

     Communicado  Fax  version  4.0  will  operate  on  Linux  operating systems
including  RedHat  6.1,  6.2 and 7.0, Caldera Open Linux 2.3 and eServer 2.3 and
2.4, S.U.S.E. 6.3, 7.0 and 7.1, Corel Linux 1.0 and 1.2, TurboLinux 6.X and 7.0,
Mandrake  6.X  and  7.X,  the current releases of the Linux operating Debian and
Stormix.  Users  with questions regarding Communicado Fax will be able to access
our  technical support through our website where frequently encountered problems
will  be  posted  and  addressed  by  our  technical  staff.

     Concurrent with the completion of Communicado Fax version 4.0, we commenced
design  work  on  an enterprise version of Communicado Fax.  This version is not
scheduled  for  release  until  September  2001  and  due to the fact that it is
targeted  as a fax program for large networks, will not be sold as a replacement
for  Communicado  Fax  version 4.0 bus as an additional product with a different
focus  and  with  additional  features.  As  the Communicado Fax is still in the
early  stages  of development, it is not possible to say with any certainty that
it  will be released in September 2001, but we still believe that the release of
this  version  will  not have any impact on the sales of Communicado Fax version
4.0.

Arcana

     On  January  31,  2001, we announced that we intended on selling a combined
computer hardware and software product called Arcana.  Arcana will be a separate
computer  hardware  device  which  will  have  a  Linux  operating  system,
PerfectBACKUP+ and Communicado Fax pre-installed and pre-configured.  The Arcana
product  is  intended  to be easily installed onto a computer network to provide
the  functionality  provided  by  PerfectBACKUP+  and  Communicado  Fax.

     We  do not intend on producing the hardware portion of the product but will
acquire it from an original equipment manufacturer.  Although we have identified
several  original  equipment  manufacturers,  we  have  not  entered  into  any
agreements  to  acquire  the  hardware  portion  of  the  product.

     We  will  purchase the hardware portion of the Arcana product and then have
installed  a  Linux  operating  system along with PerfectBACKUP+ and Communicado
Fax.  We  will  brand  the  combined  device  as "Arcana" and intend to sell the
product  through our website and through our current network of distributors and
resellers.

     We  expect  that  the  product  will  be  ready  for  sale by June 1, 2001.

Brigade

     On  February  1,  2001,  we  announced  that we intended on selling another
combined computer hardware and software product called Brigade.  Brigade will be
a  separate  computer  hardware  device  which  will  have  an

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embedded  Linux  operating  system and pre-installed and pre-configured firewall
software.  Firewall  software  prevents  unauthorized  users (i.e. hackers) from
accessing  a  business's  computer network.  We intend to develop and install an
easy  to use software interface, which will form part of the Brigade product and
which  will  allow  the  Brigade  product  to  be easily installed onto computer
networks  used  by  small  businesses.

     We  intend  to purchase the hardware portion and the firewall software from
one  vendor  and  then we will brand the device as "Brigade".  We intend to sell
the  product  through  our  website  and our current network of distributors and
resellers.

     Although  we  have  identified  the  vendor  that manufactures the hardware
portion  and  the  firewall software, we have not entered into any agreements to
purchase  these  products  from that vendor.  We are currently in the process of
negotiating  an  agreement  with  that  vendor.

     We  expect  that  the  product  will  be  ready  for  sale  by May 1, 2001.

FleetPro  II

     On  July 13, 1999, we also acquired the rights to FleetPro II.  FleetPro II
is  a  software  program  which  provides  automated  management  functions  for
companies  which  use  fleets  of  vehicles  in  their business operations.  The
software  program  includes  modules  that  perform  various functions including
dispatching,  order  processing,  delivery route optimization, vehicle tracking,
vehicle  load  optimization,  vehicle  maintenance  scheduling,  tracking  and
analyzing  vehicle  fuel  consumption  and  general  accounting  functions.

     To  date,  we  have  focussed  on the development and commercial release of
PerfectBACKUP+  and  Communicado  Fax  and  have  not  expended  any significant
resources  on  the  development  of FleetPro II.  We do not expect to expend any
resources  on the development and release of FleetPro II until we have generated
significant  revenues  from  the  sales  of  our  other  software  programs.

BDI  Virage

     On  July  13,  1999,  we also acquired the rights to BDI Virage which is an
internet  based  business  directory  software  program.  The program provides a
business directory service over the Internet similar to that found in the yellow
pages  of  a  telephone  directory.

     To  date,  we  have  focussed  on the development and commercial release of
PerfectBACKUP+  and  Communicado  Fax  and  have  not  expended  any significant
resources  on  the  development  of  BDI Virage.  We do not expect to expend any
resources  on  the development of BDI Virage until we have generated significant
revenues  from  the  sale  of  our  other  software  programs.

Internet  Service  Provider  Software

     On  July  13,  1999,  we also acquired the rights to certain accounting and
management  software intended for use by internet service providers. The program
provides  accounting  and  customer  management  for  companies who are internet
service  providers.

     To  date,  we  have  focussed  on the development and commercial release of
PerfectBACKUP+  and  Communicado  Fax  and  have  not  expended  any significant
resources  on  the development of the Internet Service Provider Software.  We do
not  expect  to expend any resources on the development of this product until we
generate  significant  revenues  from  the sales of our other software programs.

Option  Source  Project

     We  have  also  implemented  a  concept of rewarding developers of software
programs for the Linux operating system by announcing the Option Source Project.
Through  the  Option Source Project, we plan upon taking advantage of a modified
form of the existing model of open source code development in Linux.  Currently,

<PAGE>

Linux  is  "open source" which means the rights are held by the developer of the
code  but  this code is also available to the public to be modified as needed so
long  as  any modifications are also published and made available to the public.
This  has  allowed  programmers  all  over  the world to collaborate in order to
develop  the  Linux  operating  system  and  the  applications  which run on it.
Through  this  method  Linux  has  evolved to become a highly reliable operating
system.

     We  plan  to expand and capitalize upon this open source method of software
development.  Through  the  Option  Source  Project we will be able to acquire a
nonexclusive  license  from  programmers of approved projects for their software
and  half  of  their  intellectual  property  rights  in  the software that they
develop.  We  expect  that  this  will  speed  the  development  of new software
programs  for  the  Linux operating system, provide us with direct access to the
new  software  programs  in  addition  to  experienced  developers  and software
programmers.  The  Option  Source  Project  is  a  natural evolution of the open
source  method  currently  in use. We expect this program to benefit programmers
who  have  developed proprietary software packages which have not realized their
commercial  potential.  By placing their software with us under this program, we
will  assist  them in establishing a market for their software programs once the
software  program  is  completed  and  we  will  assist them in distributing and
selling  the  new packaged software programs.  In return for providing us with a
non-exclusive  license  and  half  of  the intellectual property rights, we will
compensate  the  programmers with cash or issue them options, if allowable under
applicable  securities  laws.  Since  the  programmers  have  the possibility of
obtaining  options,  we  have  named  this  project  the  Option Source Project.

Overview  of  the  Industry  and  the  Market

     We operate in the software development industry with emphasis on the market
consisting  of networked computer systems comprised of servers and workstations.
Historically,  servers  have used the Unix operating system, and since 1993, the
Linux  operating  system.  Although  Microsoft's Windows NT operating system has
gained  some  significant  market share over the past few years, we believe that
the  Linux  operating  system  will  continue to be an important system for both
servers  and  desktop  computer  workstations  for  the  foreseeable  future.

     The  Linux operating system is an open source operating system meaning that
it  is  both  free  to  download  from the Internet and open to modification and
enhancement  by  users and software programmers/developers.  The Linux operating
system,  however,  still tends to be used by sophisticated technical users as it
lacks  sophisticated  tool  and  utility software programs with the same ease of
configuration  and  user friendliness as is found with the Microsoft Windows and
Apple  Macintosh  operating  systems.

     Commercial  adoption  of  the  Linux  operating system is being promoted by
companies  such  as  Red  Hat,  SuSE,  TurboLinux,  VA Linux, Linuxcare, Silicon
Graphics, IBM and others.  These commercial providers of Linux operating systems
take  the  freely  available  Linux  operating  system  and  package  it  with
enhancements  that  add commercial value and make the operating system easier to
install and use.  In addition they offer service and support contracts for their
Linux  operating  systems.

     There  is  another  group of vendors that provide Intel and Alpha processor
based servers and workstation with pre-installed Linux operating systems.  These
vendors  do  not  support  Microsoft  Windows  or  Apple  Macintosh  OS on their
hardware.  These  hardware  manufacturers  include VA Linux, Cobalt Networks and
Atipa.

     In  addition to the above, major Unix hardware and software vendors are now
pushing the commercialization of Linux with major investments and commitments in
various  forms  from  IBM, Dell, Gateway, Compaq, Hewlett-Packard and rebel.com.
Many  traditional  Unix software vendors are beginning support for the operating
system  including Oracle, Sybase, Informix, IBM, Lotus, Corel, Sun and Progress.
We  are  also  aware of an increase in the number of companies offering training
and  support services for the Linux operating system, with the premier suppliers
being  SCO  (Santa  Cruz  Operations)  and  Linuxcare.  Today  many colleges are
providing  Linux  courses.

     The  market  for  our  software products is widespread and consists of both
businesses  and  individuals  who  adopt the Linux operating system to run their
computer  systems,  or  who continue to utilize the Unix operating system to run
their  computer  systems.  With  each  new update release of the Linux operating
system,  approximately  two  updates  per  calendar  year,  the operating system
becomes  more  friendly  to  the  average  consumer.  We  expect

<PAGE>

that  this,  in turn, will help to facilitate growth and acceptance of the Linux
operating system.  With each new Linux installation we expect that there will be
a corresponding increase in the demand for mission critical applications for the
operating system.  Merlin intends to exploit this expected increase in demand by
providing  superior  software  utility programs for the Linux and Unix operating
system.

     Our  predictions  and  projections  regarding  the  continued  growth  and
increasing  demand  for  the  Linux  and Unix operating systems, and in turn the
expected  demand  for  our  software  products  are  based on, among others, the
following  assumptions:

-     Linux  and  Unix  operating  systems  will  continue to be accepted by the
computer  industry  and  computer  users  as  acceptable  operating  systems;

-     use  of the Linux operating system by computer users will continue to grow
in  the  future;

-     neither  the  Linux nor the Unix operating systems will be replaced by new
technologies  or  operating  systems;

-     use  of  the  Unix  operating system by users will continue in the future;

-     the  demand  for  packaged  software  applications  and  utility  programs
designed to operate on Linux and Unix operating systems will continue to grow in
the  future;  and

-     our  software  products, PerfectBACKUP+ and Communicado Fax, will continue
to  be  competitive  products  in  the  market  place.

     We  have not conducted any formal research or retained any professionals to
conduct  a  market research study or to confirm our management's predictions and
projections  regarding  the continued growth and increasing demand for the Linux
and  Unix operating systems and in turn for the expected demand for our software
products.  All  such  projections  and predictions have been based upon the past
experiences  and beliefs our management and publicly available information which
they  have reviewed.  Should our management's beliefs or any of this information
be  incorrect  or  inaccurate,  our  projections  and  predictions  may  also be
inaccurate  and  our  business  and  continued  operations  could  be  adversely
affected.

Our  Strategy

     Our objective is to be a leading provider of high quality and competitively
priced  utility  software programs.  To achieve our business objectives, we have
identified  the  following  key  components  to  our  business  strategy:

-     development  of  software  programs that are competitive in terms of price
and  features;

-     development  of  software  programs  that  can  be  used  on  a variety of
different  operating  systems;

-     development  of  software  programs  that  integrate  functionality  from
previously  separate  software  programs;

-     development  of  software  programs with superior technology and features;
and

-     development  and implementation of our sales marketing model which focuses
on  distributing  our  software  products  through  resellers,  distributors and
bundling  our  software  products  with  other  companies' software products and
original  equipment  manufacturers.

<PAGE>

Methods  of  Distribution  of  Our  Software  Products

     Our  current  sales  and  marketing  strategy  focuses  on distributing and
selling  our  products  through  resellers, distributors and other companies who
bundle  their software programs with our software programs.  These relationships
have allowed us to distribute and sell our software programs to a greater number
of  users  in  a  range  of  different markets.  We are currently investing, and
intend  to  continue  to  invest,  significant  resources  to  develop  these
distribution  channels.  Our  efforts  to  expand  our distribution channels are
intended to penetrate the market and achieve widespread commercial acceptance of
our  software  utility  programs.

     We will also attempt to capture  market  share for our products through the
distribution  of  evaluation  versions  of  our  software over the internet.  By
distributing  such  evaluation  versions  of our software programs, we intend to
attract future customers who will purchase our software programs after they have
actually  had  an  opportunity  to  use  and  evaluate a version of our software
programs.  A  number  of  companies,  like Netscape, Winzip, Eudora, Pegasus and
Microsoft,  have  achieved success in the sales and acceptance of their software
products  by  using  such  a  sales  and  marketing  strategy.

     We recently began a process to establish an original equipment manufacturer
sales  group.  The  focus  of  this  group  will  be  to  develop  partnership
opportunities  that will see our software programs bundled with manufacturers of
modems, backup and archive devices, and other computer equipment direct from the
factory.  We  see  this  as a key component in our business development strategy
for  our  software  programs.  To  date,  we  have  entered into OEM or bundling
agreements  with  Caldera Systems, Inc. and TurboLinux Inc.  Under both of these
OEM  agreements,  an  evaluation version of PerfectBACKUP+ version 6.2 was to be
included  in  retail  packages  marketed  and  distributed  by  these companies.
Caldera  included  the  evaluation  in  its eDesktop release 2.4 which commenced
distribution  in  May,  2000.  An  evaluation  version is also to be included in
TurboLinux's  release  7.0,  which  is  yet  to  be distributed.  TurboLinux has
announced  that they expect their version 7.0 to be released some time in March,
2001.

    We also sell and distribute our products through our website where users can
order  retail  box  versions  on  CD  (compact  disk)  or  download  a  digital
distribution  version  of  our  current  software  programs.

We  have  entered  into  distribution,  bundling or reseller agreements with the
following  companies:

-     Caldera  Systems,  Inc. - bundling PerfectBACKUP+ with Caldera's OpenLinux
line  of  software  products;

-     TurboLinux  Inc. - bundling PerfectBACKUP+ with TurboLinux's line of Linux
software  products;

-     Koch Media Ltd. - distribution and sale of PerfectBACKUP+ to Koch's retail
customers  in  the  United  Kingdom  and  Southern  Ireland;

-     LinuxLand  -  sale  of  PerfectBACKUP+  to its international customer base
through  its  online  retail  outlet  and bundling PerfectBACKUP+ with its Linux
product  Mandrake;

-     The  LinuxStore.com  - sale of PerfectBACKUP+ to its customer base through
its  online  retail  outlet  and  its  direct  sales  force;

-     G.T. Enterprises - distribution and sale of PerfectBACKUP+ to its chain of
distributors,  resellers  and  retailers  throughout  India;

-     LinuxMall.com  -  distribution  and  sale  of  PerfectBACKUP+  to  other
distributors,  resellers and end user customers worldwide, with the exception of
direct  sales  in  the  UK  and  Southern  Ireland;

-     Impera  Software  Corp. - distribution and sale of PerfectBACKUP+ to other
distributors,  resellers and end user customers worldwide, with the exception of
direct  sales  in  the  UK  and  Southern  Ireland;

<PAGE>

-     Beyond  2000  Solutions - distribution and sale of PerfectBACKUP+ to other
distributors,  resellers and end user customers worldwide, with the exception of
direct  sales  in  the  UK  and  Southern  Ireland;

-     LinuxPlaza  -  distribution  and  sale  of  PerfectBACKUP+  to  other
distributors,  resellers and end user customers worldwide, with the exception of
direct  sales  in  the  UK  and  Southern  Ireland;

-     IU  Software  -  distribution  and  sale  of  PerfectBACKUP+  to  other
distributors,  resellers and end user customers worldwide, with the exception of
direct  sales  in  the  UK  and  Southern  Ireland;

-     Circadian  Software  -  distribution  and  sale of PerfectBACKUP+ to other
distributors,  resellers and end user customers worldwide, with the exception of
direct  sales  in  the  UK  and  Southern  Ireland;

-     eLinux.com  (a  division  of  Creative  Computers  Inc.) - license for the
distribution  and  sale  of  all  our  current  products;

-     Hamni  Information  &  Communications  Co. Ltd. - distribution and sale of
PerfectBACKUP+  to  other  distributors,  resellers  and  end  user  customers
worldwide,  with  the  exception of direct sales in the UK and Southern Ireland;

-     Cosmos  Engineering  Co. Ltd. - distribution and sale of PerfectBACKUP+ to
its  chain of distributors, resellers and retailers throughout the United States
and  worldwide,  with  the  exception  of  direct  sales  in the UK and Southern
Ireland;

-     Italsel  SRL  -  distribution  and  sale of PerfectBACKUP+ to its chain of
distributors,  resellers  and retailers throughout Italy and worldwide, with the
exception  of  direct  sales  in  the  UK  and  Southern  Ireland;

-     Programmers Paradise Inc. - distribution and sale of PerfectBACKUP+ to its
chain  of  distributors,  resellers  and retailers throughout the United States;

     Each  of  resellers  has  agreed  to:

-     order  our  software  programs  from  us  or  from an authorized dealer as
necessary;

-     market,  demonstrate  and distribute our software products to customers in
their  territory;

-     advise  customers  and  potential  customers  of technical support options
provided  by  us;  and

-     provide  us  with  a  written quarterly report detailing information about
sales  of  our  products.

     To  date,  the  reseller  agreement  with  Frank  Kasper and Associates has
generated  revenue  of  $2,180,  the  reseller  agreement  with  Italsel SRL has
generated  $2,447  and  the  reseller agreement with LinuxMall.com has generated
$1,082.  Although  the  reseller  agreements  have  not  generated  significant
revenues  to date, we believe that such reseller agreements are a necessary part
in establishing a distribution network to have our products marketed locally and
internationally.

Competition

     We  face  competition  from  numerous  companies,  some  of  which are more
established,  have  greater  market  recognition,  and  have  greater financial,
production,  and  marketing resources than we do.  Our software programs compete
on  the  basis  of  certain  factors,  including:

-     product  features  and  performance;

<PAGE>

-     price;

-     ease  of  use;  and

-     compatibility.

     The  market  for  our  software  programs  is competitive, subject to rapid
change  and significantly affected by new product introductions and other market
activities  of  industry  participants.  Many  of  our  competitors  have longer
operating histories, an established base of customers, greater market experience
and  greater  financial, technical, name recognition and other resources than we
do.

PerfectBACKUP+

     Competition for PerfectBACKUP+ comes from two sources, other Linux software
vendors  that  provide  backup  utility  software  for  Linux systems and backup
software developers that provide backup software utilities on Microsoft Windows,
Windows  NT  and  Unix.

     As  a result of some in-house evaluation work that we have done on Enhanced
Software  Technologies'  Backup  and Recover (BRU) program, Lone Star Software's
Lone  Tar  and  Microlite's Backup Edge, we believe that they represent the main
competitors  for  PerfectBACKUP+  version  7.0  for  Linux.  Knox's Arkeia, CA's
Arcserve,  Legato's  Networker  and  Veritas'  BackupExec  also  provide  some
additional  competition, but, we believe, only indirectly, as they tend to offer
products which are much more comprehensive, complex and expensive that are aimed
at  higher-end  markets.

     We feel that the key competitive advantages that PerfectBACKUP+ version 7.0
enjoys  are  its overall feature set and a very competitive price.  In addition,
we  believe  that  the  user  interface provides ease of use without sacrificing
overall  performance,  and  that  the  manual  provided with the new version 7.0
release is the easiest to read, most complete manual of all the products that we
regard  as  the  key  competitors  to  PerfectBACKUP+.

     The  following are what we believe to be PerfectBACKUP+'s key features that
we  believe  are  attractive to users.  As indicated, some of these features are
also  found  on  some  of  our  key  competitors'  products:

-     Relatively  Fast  Data  Transfer  Speed.  In  non-technical terms, the two
fastest  products  that  we  have  identified  in raw data transfer are Enhanced
Software  Technologies'  BRU  program  and  our  own  PerfectBACKUP+.  These two
products  utilize  high-performance,  multi-buffering  engines to provide a high
rate  of  data  transfer,  whether  during  the  backup  or  restore  process.

-     Format  Flexibility.  Our  archive format is a Linux standard format which
provides  added  facility  for  data verification and portability, providing the
user with the ability to restore a PerfectBACKUP+ archive on a system which does
not  already  contain  a  version of PerfectBACKUP+.  Lone Tar also uses a Linux
standard  format  but one that does not readily provide data integrity, although
it  is  portable.  We  have  not  determined  the  format  of  Enhanced Software
Technologies'  BRU  program  and  Microlite's  BackupEdge  products.

-     Encryption  Ability.  PerfectBACKUP+  includes the ability to encrypt data
as  it  is  written to the backup media thus making it more secure than a normal
backup  performed  by  one  of  our  competitor's  utilities.

-     Built  In  Compression  Algorithm.  We also utilize a built in compression
algorithm that provides compression levels and speeds higher than those found in
the  other  key  competitor  products.

-     Full Featured Graphical User Interface.  PerfectBACKUP+ features a command
line,  menu-driven,  full-featured  graphical  user  interface.  Because  the
interface  is  written  in  the C++ programming language, it is fast, robust and
does  not  overutilize  central  processing  unit  resources  the way interfaces
written  in the Tcl/Tk programming language are prone to do.  It should be noted
that  PerfectBACKUP+  version  7.0

<PAGE>

utilizes  a  character  based  menuing  system  that  is being phased out in the
industry, but that we intend to replace it in the next version of PerfectBACKUP+
that  is  currently  in  development.

Enhanced  Software  Technologies'  BRU  program  features  a  command  line,
menu-driven,  and  X  window  interface.  The  graphic  interface  appears to be
written  in Tcl/Tk which, as noted above, demands significant central processing
unit  resources  when  running,  sometimes utilizing up to 90% and higher of the
central  processing  unit's  capability,  making  ordinary  use  of the computer
difficult  while  a  backup  is  in  progress.

Lone  Tar  provides  only a character-based, menu-driven interface.  We feel the
lack  of a graphical user based interface is a significant disadvantage for Lone
Tar.

Microlite's  BackupEdge provides a command line and menu-driven interface, and a
graphical  interface for fast file restore operations.  We feel that Microlite's
lack  of  a  full-featured  graphical  interface  will  become  a  disadvantage.

-     Autodetection.  PerfectBACKUP+,  Enhanced  Software  Technologies'  BRU
program release 16 and Microlite's BackupEdge automatically detect and configure
Linux  supported  disk  drives  and  tape  devices.  Lone Tar does not appear to
support  autodetection  of  such  disk  drives  and  tape  devices.

-     Autochanger.  PerfectBACKUP+  versions  6.2 and 7.0 include an autochanger
module  that  will  automatically  detect  Linux  supported  tape  libraries.
Microlite's  BackupEdge  also  includes  autochanger support while Lone Tar does
not.  It  is unknown at this time to what degree Enhanced Software Technologies'
BRU  program  supports  autochangers.

-     Network  Backup  Support.  Both our PerfectBACKUP+ and the products of our
key  competitors  provide  complete  support for network backup including Novell
servers,  Microsoft  Windows  and NT servers and workstations, Apple and network
file  system  attached  hard  drives.

-     Ease  of  Installation.  PerfectBACKUP+  is  delivered as an RPM automatic
installation  package  which  facilitates  easy  graphical  installation  of the
product,  while  the  competitive  products  feature  command  line installation
scripts  which  are  somewhat  more  cumbersome.

-     Price.  Enhanced  Software  Technologies'  BRU  program  retails for $299,
PerfectBACKUP+  version  7.0  for $129 and Microlite's BackupEdge for $300.  The
personal  version  of  Lone  Tar  retails for $89 and pricing for the commercial
version  of  Lone  Tar  is  not  currently  available.

     PerfectBACKUP+ does suffer a number of disadvantages when compared with our
key  competitors'  products.  These  include  the  lack  of  a fast file restore
function, inadequate CD-ROM and DVD support and the need to update the graphical
user  interface  to  a  more  modern  look  and  feel.

     Enhanced  Software  Technologies'  BRU  program and Lone Tar both come with
crash  recovery booting mechanisms, called CRU and Lone Tar, respectively, which
are  not  a part of the standard PerfectBACKUP+.  Microlite's product provides a
crash  recovery  utility called RecoverEdge which provides for making a bootable
floppy  disk,  CD  or  DAT  tape  for recovery purposes.  However, as most Linux
distributions now include the automatic creation of a bootable recovery disk, we
feel  a  crash  recovery  feature  is  almost  redundant at this time.  Lone Tar
provides  a fast recovery function that will "block-seek" through a tape at high
speed  to locate a particular file for restoring.  We regard this as a necessary
feature  for  any  future  version  of  PerfectBACKUP+.

     In the Unix operating system area, the main competitor is Legato, a company
that  focuses  on  enterprise  Unix server backup.  However, Legato's product is
extremely  expensive  to purchase and operate when compared with PerfectBACKUP+.
Other  competing  products  and services exist from Computer Associates and IBM.
However,  due  to  the  significantly  different  focus of their products, being
mainframe computers, and the pricing model they have implemented, we do not feel
that  we compete with them directly, nor do we anticipate competing with them in
the  near  future.

<PAGE>

     In  addition  to  commercial competition from the products mentioned above,
PerfectBACKUP+  must  also  compete  against  Amanda,  an  open  source  network
archiving  utility  developed  at  the  University  of Maryland and supported at
Source  Forge, an open source development.  At the present time, however, Amanda
does not support all of the different network protocols and devices supported by
most  commercial packages, including PerfectBACKUP+.  Furthermore, Amanda is not
supported and is provided to users on an as is basis.  Accordingly, we feel that
Amanda  is  not  currently  a  competitor  in  environments  where Linux is used
commercially,  due  to  its  lack  of  commercial  support.

     Finally,  there are a number of shareware backup products available for the
Microsoft  Windows operating system.  We feel that these products are not direct
competitors  as  they are not available for the Linux or Unix operating systems,
but  could provide us competition in the future should we release PerfectBACKUP+
for  use  on  the  Microsoft  Windows  operating  system.

Communicado  Fax

     Competition  for  Communicado  Fax  comes  primarily from Unix fax software
suppliers  and  the  new  software  technologies  including  electronic mail and
Internet  conferencing.  However,  there  are  also  fax  products  similar  to
Communicado  Fax  available  for  the Microsoft Windows and Windows NT operating
systems  and  there  are  a  couple  of open source fax products.  None of these
competing  products  provides  a complete end-to-end solution.  The Internet has
also  given  rise  to  e-mail  to  fax  gateways  and  fax  portals.

     As  a  result  of  an  in-house  evaluation,  we  have  identified the main
competitors of Communicado Fax from Linux based multi-line fax software programs
as  including:

-     VSI-Fax  distributed  by  VSystems  Inc.,  whose base product for Linux is
priced  at  $1,434  and  is  limited  to  5  users  and four fax ports or lines;

-     Faximum  Software  Inc. whose client server product sells for $495 or more
depending on configuration.  As of this date, Faximum does not appear to provide
fax  viewing  for  the  X-Window  environment  used  by  Linux  and  Unix;

-     LightningFAX,  distributed  by  Interstar  Technologies  Inc.;

-     fax2send,  distributed  by  Beacon  Computer  Services;

-     Sendfax, an open source product that does not provide many of the features
found  in  Communicado  Fax;  and

-     Hylafax,  another  open  source  product that does not provide many of the
features  found  in  Communicado  Fax and is not as user-friendly as Communicado
Fax.

     Sendfax  is  widely  used  and provides some voice facility but is not very
well  supported and is very difficult to configure.  It also does not include an
integrated  desktop environment and the user is left to their own devices to put
together  different programs to provide a desktop solution.  Hylafax, the latest
open source entry, is also a difficult product to configure and suffers problems
similar  to  Sendfax  for  desktop  use.

     We  used  to consider Faximum a competitive threat.  However, we have found
it  very  difficult  to  determine from Faximum's website and literature exactly
which  products  are  available  for  the Linux operating system.  Almost all of
Faximum's  products  appear  to  be available for traditional Unix platforms and
only  three  products,  Faximum  Messaging Server, Faximum Messaging Gateway and
Mfax  appear  to  be  available  for  the  Linux  operating  system.

     Of  the  above,  only  Mfax  can  be considered a competitive product as it
provides  the  fax  sending  and receiving functions that are part of the server
program  of  Communicado  Fax.  However,  it does not provide scheduling or user
interface  capabilities  that  are a part of Communicado Fax.  Mfax is priced at
$495  while  Communicado  Fax  is  priced  at  $49  including the user interface
features.

<PAGE>

     While  it  is  possible  Mfax  and  Faximum's  products  could compete with
Communicado  Fax  in  the  future,  we do not feel that Faximum's products are a
competitive  threat  at  this  time.

     VSI-FAX  and Fax2send, on the other hand, do provide features for the Linux
operating system that are a part of the Communicado Fax product.  These products
are  available  for  Linux  distributors  from  RedHat  and Caldera and provide:

-     multiple  modem/incoming  and  outgoing  line  capabilities;

-     customizable  cover  sheets;

-     integration  with  desktop office applications such as word processing and
spread  sheets;

-     fax  address  books;

-     broadcasting;

-     scheduling;

-     clients  and  printer  drivers  for  Unix,  Linux  and  Windows;

-     fax  viewing  within  a  graphical  environment;

-     fax  printing;  and

-     multiuser  capabilities

VSI-FAX  Advantages:

-     intelligent  fax  board  support;

-     least  cost  routing  (to  reduce  the  cost  of  sending  faxes);

-     close  integration  with  Microsoft  Outlook  and  Lotus  Notes;  and

-     web  client  (for  some  operating  systems).

VSI-FAX  Disadvantages:

-     this  product  has  a  significant  cost  disadvantage  when compared with
Communicado  Fax  due  to  the basic product pricing and the additional cost per
additional  supported  modem  line;

-     the  initial  5  client  licence  is  $1,495;

-     additional  line  support  is  charged  on a declining scale from $780 per
line;  and

-     per  user  costs  are  $50  which  is  competitive  with  Communicado Fax.

Fax2send  Advantages:

-     competitively  priced  with  Communicado  Fax  for  single  modem  line
configurations:  $25  for  a  single  user,  single line; $99 for 4 user, single
modem  line  and  $299  for  25  user,  single  line  configuration.

<PAGE>

Fax2send  Disadvantages:

-     produced  and  supported  from  the  United  Kingdom;

-     additional  modem  line  charges  start  at $500 and the client must first
purchase  the  Enterprise  version  for  $1,499.

Communicado  Fax  advantages:

-     completely  portable  between  operating  systems  with  Java  programming
language  interface;

-     fast fax creation reduces need to use work processing or other application
to  produce  fax  initially;

-     fax  filtering  to  limit  junk  fax  reception;

-     $49  for  single  user  version,  multiple  line  is very competitive with
VSI-FAX  but  not  quite  competitive  with  Fax2send;  and

-     $200  for the 5 user version, multi-line is very competitive with Fax2send
at  $1,499 + $500 per additional line and the VSI-FAX per additional port charge
of  $750.

Communicado  Fax  disadvantages:

-     no  least  cost  routing  (to  reduce  fax  costs);

-     limited  integration  with  Microsoft  Outlook  and  Lotus  Notes;

-     no  web/browser  interface;  and

-     no  intelligent  fax  board  support  at  this  time.

     Finally,  LightningFAX,  which  is  available  for  Linux,  appears to only
support  "intelligent"  fax boards and does not appear to support lower cost fax
modems.  We  do  not  consider LightningFAX a competitor at this time due to its
high  implementation  costs  of at least $1,500 per server, and the fact that it
does  not  support  desktop  fax  modems.

     In  summary, we feel that Fax2send is our major competitor in the Linux fax
marketplace.  However,  we  feel  we have an advantage in the North American and
Asia  Pacific  regions  due  to  our  proximity  to  those  markets.

     We do not feel that either of the open source options, Hylafax and Sendfax,
represent  competition  for  Communicado  Fax  largely  because  they  are  not
completely  integrated solutions, nor do they come with commercial support, even
though  they  are  distributed  free.  In  fact, both products are provided on a
strictly  as-is  basis  with  no  warranties  of  any  kind.

Software  Market  -  Competition  Generally

     The  market in which we compete is intensely competitive, highly fragmented
and rapidly changing.  In order to compete, we must enhance our current software
programs,  enhance  the  interoperability  of  our  software programs with other
programs  and  operating  systems,  develop new products in a timely fashion and
develop  key  strategic  partnerships  with other hardware and software vendors.
Many  of  our  competitors  are  larger  and  have greater financial, technical,
marketing  and  other  resources  than  us.  Because  there  are  relatively low
barriers  to entry in the software market, we expect additional competition from
other  established  and  emerging companies.  Increased competition is likely to
result  in  price  reductions, reduced gross margins and increased difficulty in
establishing

<PAGE>

market share, any of which could have a material adverse affect on our business,
operating  results  and  financial  condition.

Intellectual  Property,  Government  Approvals  and  Regulations

     We  have  applied  for  or  are  in  the  process of applying for trademark
protection  in  the  United  States  for  "Merlin  Software Technologies, Inc.",
"Software  That's  Pure  Magic",  "Linux for the Masses", "Communicado", "Merlin
Softech"  and  "Option  Source".  We  have  applied  for trademark protection in
Canada  for "Linux for the Masses".  We have also sought trademark protection in
the United States and Canada for our corporate symbol which is a penguin dressed
in a magicians cape and hat with wand in hand.  We have secured the registration
of  the  domain  name  "www.merlinsoftech.com",  among  others.

     Our  software programs are not protected by any patents nor do we intend to
seek any such protection although we have filed a provisional patent application
with  the United States Patent Office in connection with a specific component of
Communicado  Fax.  We  do  treat  our  software  programs  and  their associated
technology  as  proprietary  and  own  all copyrights in such programs.  We have
applied  for,  or are in the process of applying for, copyright registrations in
the  United  States  for  our  software  programs.

     We require all employees to sign confidentiality agreements regarding their
work  for us and all rights to technology created by such employees are retained
by  us.  We  distribute  our software programs under license agreements that are
signed  by  end-users.  Despite  our  precautions  taken to protect our software
programs,  unauthorized parties may attempt to reverse engineer, copy, or obtain
and  use information we regard as proprietary.  Policing unauthorized use of our
products  and infringement of our copyrights is difficult and software piracy is
expected  to  be  a  persistent problem.  Additionally, the laws of some foreign
countries  do  not  protect our proprietary rights, including our copyrights, to
the  same  extent  as  do  the  laws  of  the  United  States.

     We  have  also  filed  a  patent application in connection with the process
involved  in  our  Option  Source  Project.

     We are not aware that our products, trademarks, or other proprietary rights
infringe  the  proprietary rights of third parties.  However, from time to time,
we may receive notices from third parties asserting that we have infringed their
patents  or  other  intellectual  property rights.  In addition, we may initiate
claims  or  litigation against third parties for infringement of our proprietary
rights  or to establish the validity of our proprietary rights.  Any such claims
could  be  time-consuming,  result  in costly litigation, cause product shipment
delays  or  lead  us  to  enter into royalty or licensing agreements rather than
disputing  the merits of such claims.  As the number of software products in the
industry  increases  and  the functionality of such products further overlap, we
believe that software developers may become increasingly subject to infringement
claims.  Any  such  claims,  with  or  without  merit, can be time consuming and
expensive  to  defend.  An  adverse outcome in litigation or similar proceedings
could  subject  us  to  significant  liabilities  to  third  parties,  require
expenditure  of  significant  resources  to  develop  non-infringing technology,
require  disputed  rights to be licensed from others, or require us to cease the
marketing or use of certain products, any of which could have a material adverse
effect  on  our  business,  operating  results  and  financial  condition.

Suppliers

     All  supplies  used  in our business are readily available from a number of
sources.

Customers

     We  believe that a majority of our future growth will be generated from new
customers.  This  expectation  is  the  reason  why  we  intend on developing an
in-house  sales  and  marketing  team.

<PAGE>

Employees

     As  of  March  1, 2001, we had 23 permanent employees with 4 in the area of
corporate  administration,  16  in  product  development  and  3  in  sales  and
marketing.  We  also  have  4  independent  contractors  providing  research and
strategic  planning  services,  management  consulting services, market research
services  and  capital  raising  services.

Research  and  Development

     To  December  31,  2000,  we  have expended an aggregate of $832,431 on the
development  of  PerfectBACKUP+,  Communicado  Fax  and other software.  We will
expend  a significant amount of time and money in the next 12 months on research
and  development activities.  These activities will focus on the following three
areas:  updating  the  design  and  adding  new  features  to  PerfectBACKUP+,
translating both PerfectBACKUP+ and Communicado Fax so that they will operate on
different  computer  operating  systems,  updating  both  PerfectBACKUP+  and
Communicado  Fax  so  that they can be purchased for several different languages
(ie.  German  and  Spanish) and developing new products that will compliment our
present  software  programs.  By  updating  the  design  of  PerfectBACKUP+,
PerfectBACKUP+  will  become  more functional and easier to use.  The benefit of
porting,  or  translating  our  software  programs  so  that they are capable of
running  on  other  operating  systems is that our products become saleable to a
greater  number  of  users.

                                  RISK FACTORS

     An  investment  in  our  common stock involves a number of very significant
risks.  You  should  carefully consider the following risks and uncertainties in
addition to other information in this annual report in evaluating Merlin and its
business  before  purchasing  shares  of  common stock.  Our business, operating
results  and  financial  condition  could  be seriously harmed due to any of the
following  risks.  The  trading  price  of  the shares of our common stock could
decline  due  to  any  of  these  risks,  and you could lose all or part of your
investment.

MERLIN  IS  A  DEVELOPMENT  STAGE  COMPANY  AND  HAS  NOT EARNED ANY SIGNIFICANT
REVENUES  SINCE  ITS  FORMATION  WHICH MAKES IT DIFFICULT TO EVALUATE WHETHER WE
WILL  OPERATE  PROFITABLY.

     We  are  a  development  stage  company  which is primarily involved in the
development,  manufacture  and  marketing  of  utility software programs for the
Linux  and  Unix  operating  systems.  As a relatively new company, we have just
started  selling  our  software  products,  and  as  a  result, we do not have a
historical  record  of  sales  and  revenues  nor  an established business track
record.  We  have  not  earned  any  significant  revenues  since our formation.

     Unanticipated  problems,  expenses and delays are frequently encountered in
ramping  up  sales  and  developing  new  products.  Our ability to successfully
develop,  produce  and  sell  our  software  programs and to eventually generate
operating  revenues  will  depend  on  our  ability  to,  among  other  things:

-     successfully  develop  and market our utility software products, including
PerfectBACKUP+  and  Communicado  Fax;

-     successfully  continue  to  enhance  our current software products to keep
pace  with  changes in technology and changes demanded by users of such software
products;  and

-     obtain  the  necessary  financing  to  implement  our  business  plan.

     Given  our  limited  operating history, minimal sales and operating losses,
there can be no assurance that we will be able to achieve any of these goals and
develop  a  sufficiently  large  customer  base  to  be  profitable.

<PAGE>

THE  FACT  THAT  WE  HAVE  A  HISTORY  OF  NET  LOSSES  AND  HAVE NOT EARNED ANY
SIGNIFICANT  REVENUES  SINCE  INCORPORATION  RAISE  SUBSTANTIAL  DOUBT ABOUT OUR
ABILITY  TO  CONTINUE  AS  A  GOING  CONCERN.

     Our  subsidiary did not generate any revenues from the sale of our software
products  and  incurred  a  loss  of  $616,628 for the period from June 25, 1999
(incorporation) to December 31, 1999 and a loss of $3,461,262 for the year ended
December  31,  2000.  We  have  generated  only $22,213 in revenues for the year
ended  December  31,  2000  and  $nil  for  the  period  from  June  25,  1999
(incorporation)  to  December  31,  1999.  Although  we  anticipate  revenues to
increase,  we  also  expect development costs and operating costs to increase as
well.  Consequently,  we expect to incur operating losses and negative cash flow
until  our  existing  software  products  gain  sufficient  market acceptance to
generate a commercially viable and sustainable level of sales, and/or additional
software  products  are  developed  and  commercially released and sales of such
products  made  so  that  we  are  operating  in  a  profitable  manner.  These
circumstances  raise  substantial doubt about our ability to continue as a going
concern  as  described  in an explanatory paragraph to our independent auditor's
opinion on the December 31, 2000 and 1999 consolidated financial statements.  To
the extent that such expenses are not timely followed by increased revenues, our
business,  results  of  operations,  financial  condition and prospects would be
materially  adversely  affected.

WE  ARE  UNCERTAIN THAT WE WILL BE ABLE TO OBTAIN ADDITIONAL CAPITAL THAT MAY BE
NECESSARY  TO  ESTABLISH  OUR  BUSINESS.

     Our  subsidiary  incurred  a  net  loss  for  the period from June 25, 1999
(incorporation)  to  December  31,  1999  of  $616,628.  We  incurred  a further
consolidated  loss  of  $3,461,262  for  the year ended December 31, 2000.  As a
result  of  these losses and negative cash flows from operations, our ability to
continue  operations  will  be  dependent  upon the availability of capital from
outside  sources  unless  and  until  we  achieve  profitability.

     Our future capital requirements will depend on many factors, including cash
flow  from  operations, progress in developing new products, competing knowledge
and market developments and an ability to successfully market our products.  Our
recurring  operating losses and growing working capital needs will require us to
obtain  additional  capital  to  operate our business before we have established
that  our  business  will  generate  significant  revenue.  With  the  sale  of
convertible  notes in August, 2000 and the expected proceeds of the remaining $1
million  of convertible notes due within seven days of a registration statement,
registering  the  common  shares issuable on conversion of the convertible notes
and  exercise  of  the warrants, being declared effective, we believe sufficient
funds  are available to pay for ongoing operating costs and capital expenditures
through  May,  2001.  We  have predicted that we will require approximately $5.0
million  over  the  period  ending  December 31, 2001 in order to accomplish our
goals.  However,  there  is  no assurance that actual cash requirements will not
exceed  our estimates.  In particular, additional capital may be required in the
event  that:

-     We  incur unexpected costs in completing the development of PerfectBACKUP+
or  Communicado Fax or encounter any unexpected technical or other difficulties;

-     We incur delays and additional expenses as a result of technology failure;

-     We are unable to create a substantial market for our software products; or

-     We  incur  any  significant  unanticipated  expenses.

     The  occurrence  of any of the aforementioned events could adversely affect
our  ability  to  meet  our  business  plans.

     We  will  depend  almost  exclusively  on  outside  capital  to pay for the
continued  development  of  PerfectBACKUP+  and  Communicado  Fax.  Such outside
capital  may  include  the sale of additional stock and/or commercial borrowing.
There  can  be  no  assurance  that  capital  will  continue  to be available if
necessary  to  meet  these  continuing  development  costs or, if the capital is
available,  it  will  be  on terms acceptable to us.  The issuance of additional
equity  securities  by  us  would result in a significant dilution in the equity
interests  of  our  current

<PAGE>

stockholders.   Obtaining  commercial  loans,  assuming  those  loans  would  be
available,  will  increase  our  liabilities  and  future  cash  commitments.

     If  we  were  unable to obtain financing in the amounts and on terms deemed
acceptable,  our  business  and  future  success  may  be  adversely  affected.

WE EXPECT TO EXPERIENCE SIGNIFICANT AND RAPID GROWTH IN THE SCOPE AND COMPLEXITY
OF  OUR  BUSINESS  AS  WE  PROCEED WITH THE DEVELOPMENT AND SALE OF OUR SOFTWARE
PRODUCTS.  IF  WE  ARE UNABLE TO HIRE STAFF TO HANDLE SALES AND MARKETING OF OUR
PRODUCTS  AND  MANAGE  OUR OPERATIONS, OUR GROWTH COULD HARM OUR FUTURE BUSINESS
RESULTS  AND  MAY  STRAIN  OUR  MANAGERIAL  AND  OPERATIONAL  RESOURCES.

     As  we  proceed  with the development and sale of our software products, we
expect to experience significant and rapid growth in the scope and complexity of
our  business.  We  will  need  to  add  staff  to  market  our products, manage
operations,  handle  sales  and  marketing  efforts  and  perform  finance  and
accounting  functions.  We will be required to  hire a broad range of additional
personnel  in  order  to  successfully  advance  our operations.  This growth is
likely  to  place  a  strain  on  our management and operational resources.  The
failure  to  develop  and  implement  effective  systems,  or to hire and retain
sufficient  personnel  for  the performance of all of the functions necessary to
effectively  service and manage our potential business, or the failure to manage
growth  effectively,  could  have  a material adverse effect on our business and
financial  condition.

SINCE THE NUMBER OF SHARES ISSUABLE ON THE CONVERSION OF THE NOTES IS BASED ON A
DISCOUNT TO THE MARKET PRICE, THE FOUR PURCHASERS OF THE NOTES WILL RECEIVE MORE
SHARES  IF  THE  SHARE  PRICE  DECREASES  AT  THE  TIME OF CONVERSION.  THE FOUR
PURCHASERS  ALSO  RECEIVED  WARRANTS  TO  ACQUIRE  UP TO 1,520,000 SHARES, AT AN
EXERCISE  PRICE  OF $1.75 PER SHARE, AND IF THE PURCHASERS CONVERT THE NOTES AND
EXERCISE  THE  WARRANTS,  THERE  COULD  BE  A  CHANGE  OF  CONTROL.

     On  August  18, 2000, we sold Series A 10% Senior Secured Convertible Notes
in  the  aggregate  principal amount of $2,100,000 to four accredited investors.
The  purchase  price of $2,100,000 is payable in two tranches.  We received $1.1
million  on  August  24,  2000  and will receive $1 million several days after a
registration  statement  is  declared effective with the Securities and Exchange
Commission.  As  part  of  the  sale  of the convertible notes, we sold Series A
warrants  which  entitle the four investors to acquire an aggregate of 1,520,000
shares  of  our  common  stock  at  an  exercise  price of $1.75 per share.  The
warrants  are  also  issuable  in two tranches and on August 24, 2000, we issued
warrants  to  acquire  up  to  770,000  shares.

     The  four  investors may convert their convertible notes into shares of our
common  stock  at  conversion prices equal to the lower of a fixed price and the
price  which is 95% of the average of the two lowest intra-day trading prices of
our  common stock for the 30 day period on the trading day immediately preceding
the  conversion  date.  In  addition,  these  holders  also acquired warrants to
purchase 1,520,000 shares of our common stock at an exercise price of $1.75.  If
the holders convert the notes and exercise the warrants, there could be a change
in  control.

     Since  the  number  of  our shares issuable upon conversion of the notes is
based  on a discount to the market price of our common stock, the holders of the
convertible  notes  will  receive more shares upon conversion if the share price
decreases  at  the  time of conversion.  The conversion of the convertible notes
and the exercise of warrants may result in substantial dilution to the interests
of  other  holders  of  common  stock since each holder of convertible notes and
warrants may ultimately convert the full amount of the notes, fully exercise the
warrants  and  sell  all  of  these  shares  into  the  public  market.

     Assuming  a  75% decline in the price of our common stock from the price on
March  1,  2001, we would be required to issue 18,853,102 shares upon conversion
of  all  the  convertible  notes  and  1,520,000 shares upon exercise of all the
warrants.  The  total  amount  of  shares  issued  would be 20,373,102 and would
represent  approximately  62% of our current issued and outstanding shares after
such  conversion  of  the  notes  and  the exercise of the warrants (assuming no
exercises  of  otherwise  outstanding  stock  options  and  warrants).

<PAGE>

     In  other  words,  the  lower  the  stock  price around the time the holder
converts, the more common shares each holder will receive upon conversion of the
notes.  To  the  extent  the  selling  shareholders  convert and then sell their
common  stock,  the common stock price may decrease due to the additional shares
in the market.  This decrease in the market price could allow the holders of the
notes to convert their notes into greater amounts of shares of our common stock.

SALES  OF  A  SUBSTANTIAL NUMBER OF SHARES INTO THE PUBLIC MARKET BY THE SELLING
SHAREHOLDERS  MAY  RESULT IN A SIGNIFICANT DOWNWARD PRESSURE ON THE PRICE OF OUR
COMMON  STOCK  AND  COULD  AFFECT THE ABILITY OF OUR STOCKHOLDERS TO REALIZE THE
CURRENT  TRADING  PRICE  OF  OUR  COMMON  STOCK.

     The  actual  daily  trading  volume  of our shares of common stock over the
three  months ended December 31, 2000 has averaged less than 29,319 shares which
indicates  the  ability of our stockholders to realize the current trading price
of  the shares they hold may fluctuate if a substantial number of shares were to
be  offered  for  resale.

     Sales  of  a substantial number of shares of our common stock in the public
market  could cause a reduction in the market price of our common stock.  We had
12,986,928  shares  of  common stock issued and outstanding as of March 1, 2001.
Through  the  registration  statement  that  we  have  filed,  but has yet to be
declared  effective,  the selling stockholders may be reselling up to 12,820,000
shares of our common stock, only 800,000 of which are included in the 12,986,928
issued  and  outstanding  common  shares.  As  a  result  of  such  registration
statment,  a  substantial  number  of  our  shares  of common stock are becoming
available  for  resale  which  could  have an adverse effect on the price of our
common  stock.

     To  the extent the selling shareholders convert their notes, exercise their
warrants  and  then  sell  their shares of common stock, the price of our common
stock  may  decrease due to the additional shares of common stock in the market.
This  could  allow  the  holders of the convertible notes to convert their notes
into  a  greater  amount  of  shares of our common stock, the sales of which may
further  depress  the  price  of  our  common  stock.

     Any  significant  downward pressure on the price of our common stock as the
selling  shareholders  convert  their  notes,  exercise  their warrants and sell
material  amounts  of  shares  could  encourage  short  sales  by  the  selling
shareholders  or  others.  Any  such  short sales could place a further downward
pressure  on  their  price  of  the  common  stock.

FUTURE SALES OF COMMON STOCK BY OUR EXISTING SHAREHOLDERS COULD REDUCE THE PRICE
OF  OUR  COMMON  STOCK.

     The  market price of our common stock could decline as a result of sales by
our  existing  stockholders  of shares of common stock in the market.  Likewise,
the  perception  that  these  sales could occur may result in the decline of the
market price of our common stock.  These sales also might make it more difficult
for  us to sell equity securities in the future at a time and at a price we deem
appropriate.

ALL  OF OUR ASSETS ARE SECURED AND CONSEQUENTLY IF WE DEFAULT ON THE CONVERTIBLE
NOTES,  OUR  CONTINUED  OPERATION  WILL  BE  ADVERSELY  AFFECTED.

     We  are  financing  our  operations  primarily  through the issuance of the
convertible  notes.  These  convertible notes have been secured primarily by all
of our assets.  If we default on any of these convertible notes, it would have a
material  adverse  effect  on  our  business.

UNLESS WE CAN ESTABLISH SIGNIFICANT SALES OF PERFECTBACKUP+ AND COMMUNICADO FAX,
OUR  ABILITY  TO  GENERATE  REVENUES  MAY  BE  SIGNIFICANTLY  REDUCED.

We  expect that a substantial portion, if not all, of our future revenue will be
derived  from  the  sale  of  our  two  software  programs:  PerfectBACKUP+  and
Communicado  Fax.  We  expect  that  these  products  and  their  extensions and
derivatives  will  account  for  a  majority, if not all, of our revenue for the
foreseeable  future.  Broad  market  acceptance  of  these software programs is,
therefore,  critical  to  our  future  success  and  our  ability  to  generate

<PAGE>

     revenues.  Failure  to  achieve  broad  market acceptance of these software
programs,  as a result of competition, technological change, or otherwise, would
significantly harm our business. Our future financial performance will depend in
significant  part  on the successful introduction and market acceptance of these
two  software  programs,  and  on  the  development,  introduction  and  market
acceptance  of their respective enhancements.  There can be no assurance that we
will  be  successful  in  marketing either of these software programs or any new
software  programs, applications or enhancements, and any failure to do so would
significantly  harm  our  business.

WE  HAVE  SOLD ONLY LIMITED QUANTITIES OF PERFECTBACKUP+ AND COMMUNICADO FAX AND
IF THE COMPUTER AND TECHNOLOGY INDUSTRY DOES NOT ACCEPT OUR PRODUCTS, WE WILL BE
UNABLE  TO  SUCCESSFULLY  BUILD  OUR  BUSINESS.

     We have sold only limited quantities of our software programs.  Our success
will  depend  on  the  acceptance of our products by the computer and technology
industry,  including  businesses  and  the  general  public.  Achieving  such
acceptance  will require significant marketing investment.  We cannot assure you
that our existing or proposed software programs will be accepted by the computer
and technology industry at sufficient levels to support our operations and build
our  business.

WE ARE DEPENDENT ON RESELLERS AND DISTRIBUTORS FOR THE SALES OF OUR PRODUCTS AND
IF  WE ARE NOT SUCCESSFUL IN EXPANDING OUR DISTRIBUTION CHANNELS, OUR ABILITY TO
GENERATE  REVENUES  WILL  BE  HARMED.

     We  have  entered  into  various  distribution  and  reseller agreements to
distribute  and/or  bundle  our  software programs.  While we believe that these
arrangements  will be beneficial, there can be no assurance that we will be able
to  deliver  our software programs to these companies in a timely manner or that
these  companies  will  be  able  to  sell  our  software  programs  in  volumes
anticipated  by  us.  Further,  these  agreements  are  the  only  significant
distribution agreements to date.  Our growth will be dependent on our ability to
expand  our third-party distribution channels to market, sell and distribute our
software  programs.  While  our  strategy is to enter into additional agreements
with  resellers  and  distributors,  we  may not be able to successfully attract
additional  vendors  to  distribute our software programs.  In addition, we have
only  limited experience in marketing our software programs through distributors
and  resellers  and  we  will  have little, if any, control over our third-party
distributors.  There  can  be  no  assurance  that  we will be successful in our
efforts  to  generate revenue from these distribution channels, nor can there be
any  assurance  that  we  will  be successful in recruiting new organizations to
represent  us  and  our  software programs.  Any such failure would result in us
having  expended  significant  resources  with  little  or  no  return  on  our
investment,  which  would  significantly  harm  our  business.

RAPID TECHNOLOGICAL CHANGES IN THE COMPUTER SOFTWARE AND HARDWARE INDUSTRY COULD
RENDER  OUR  PRODUCTS  NON-COMPETITIVE  OR  OBSOLETE AND CONSEQUENTLY AFFECT OUR
ABILITY  TO  GENERATE  REVENUES  AND  BECOME  OR  REMAIN  PROFITABLE.

     The  development  and  sales  of our software programs are exposed to risks
because of the rapidly changing technology in the computer software and hardware
industry.  Although  we  will engage software developers and programmers who are
experienced  in  the  utility  software  program  market,  we  only have limited
experience  in  developing  and  marketing  such  utility  software  programs.

     In addition, future advances in the computer software and hardware industry
could  lead  to  new  technologies  or  software  programs  competitive with the
software programs provided by us.  Those technological advances could also lower
the  costs  of  other  software programs that compete with our software programs
resulting  in  pricing  or  performance pressure on our software programs, which
could  adversely  affect  our  results  of  operations.

UNSCHEDULED DELAYS IN DEVELOPMENT OF OUR SOFTWARE PRODUCTS OR THE IMPLEMENTATION
OF  OUR  SALES  PROGRAM  COULD  RESULT  IN  LOST  OR  DELAYED  REVENUES.

     Delays  and  related  increases  in  costs  in  the  further development or
improvement  of  PerfectBACKUP+ and Communicado Fax or the implementation of our
sales  and  marketing  program could result from a variety of causes, including:

<PAGE>

-     delays  in the development, testing and commercial release of our software
programs;

-     delays  in  hiring  or  retaining  experienced  software  developers  and
programmers;

-     delays  in  locating  and  hiring  experienced  sales  and  marketing
professionals;  and

-     delays  caused  by  other  events  beyond  our  control.

     There  can  be  no  assurance  that  we  will  successfully develop further
enhancements  to PerfectBACKUP+ and Communicado Fax on a timely basis or that we
will  implement  our  sales  and  marketing  program  in  a  timely  manner.  A
significant  delay  in  the  development,  testing and commercial release of our
software  programs  or  a delay in the implementation of our sales and marketing
program could result in increased costs and could have a material adverse effect
on  our  financial  condition  and  results  in  operations.

EVEN  THOUGH  WE  TREAT  OUR  SOFTWARE  PROGRAMS  AS  PROPRIETARY,  NEITHER
PERFECTBACKUP+  OR  COMMUNICADO FAX ARE PROTECTED BY ANY PATENTS AND ACCORDINGLY
IF  WE  ARE  UNABLE  TO  PROTECT  OUR INTELLECTUAL PROPERTY RIGHTS, OUR BUSINESS
OPERATIONS  COULD  BE  ADVERSELY  AFFECTED.

     Although  we  have  applied  for  or  are  in  the  process of applying for
copyright  registration  in  the  United  States  for  both  PerfectBACKUP+  and
Communicado  Fax,  neither PerfectBACKUP+ or Communicado Fax is protected by any
patents.  We have however filed a provisional patent application with the United
States Patent Office in connection with a specific component of Communicado Fax.
We  do  treat  our  software  programs  and  their  associated  technology  as
proprietary.  Despite  our  precautions  taken to protect our software programs,
unauthorized parties may attempt to reverse engineer, copy or obtain and use our
software  programs,  which  could  adversely  effect  our results of operations.

THE  LOSS  OF  ROBERT  HELLER  OR  ANY  OF MERLIN'S KEY SOFTWARE PROGRAMMERS AND
DEVELOPERS  WOULD  HAVE AN ADVERSE IMPACT ON FUTURE DEVELOPMENT AND COULD IMPAIR
OUR  ABILITY  TO  SUCCEED.

     Our  performance  is  substantially dependent on the technical expertise of
Robert  Heller and other key software programmers and developers and our ability
to continue to hire and retain such personnel.  There is intense competition for
skilled  personnel, particularly in the field of software development.  The loss
of  Robert  Heller  or  any  of Merlin's key software programmers and developers
could  have  a  material  adverse effect on our business, development, financial
condition, and operating results. We do not maintain "key person" life insurance
on  any  of  our  directors  or  senior  executive  officers.

THE  SOFTWARE  INDUSTRY,  INCLUDING  THE  SOFTWARE  INDUSTRY  FOR LINUX AND UNIX
OPERATING  SYSTEMS  IS  IN  A  HIGHLY  COMPETITIVE  INDUSTRY  AND  SOME  OF  OUR
COMPETITORS  MAY  BE  MORE SUCCESSFUL IN ATTRACTING AND RETAINING CUSTOMERS.  WE
MAY  NOT  BE  ABLE  TO  COMPETE  EFFECTIVELY  BECAUSE  WE  ARE IN THE PROCESS OF
ESTABLISHING  OUR  NAME  RECOGNITION  AND  BECAUSE  OUR  COMPETITORS  ARE  MORE
ESTABLISHED  AND  HAVE  GREATER  RESOURCES  THAN  WE  DO.

     We  will  encounter  competition  from other software companies and from an
increasingly  competitive  computer  software  industry in general.  The growing
market  for  utility  software programs for the Linux and Unix operating systems
has  attracted  new  market  participants  as  well  as expansion by established
participants  resulting  in substantial and increasing competition.  Many of our
present  and  future  competitors  in  the  utility software program market have
substantially  greater:

-     financial,  marketing,  technical  and  development  resources;

-     name  recognition,  and

<PAGE>

-     experience

than  we  do.

     Our  competitors  may  be  able  to respond more quickly to new or emerging
advancements  in  the  utility  software  program  market  and to devote greater
resources to the development, promotion and sale of their software programs.  In
addition,  companies  that  develop  operating  systems  could  introduce new or
upgrade existing operating systems or environments that include similar software
programs  to  those  offered by us, which could render our products obsolete and
unmarketable.  We  may  not  be  able to successfully compete against current or
future  competitors  which  could  significantly  harm  our  business.

     While we believe that PerfectBACKUP+ and Communicado Fax are competitive in
the  utility  software  program  market,  no  assurances  can  be  given  that
competitors,  in  the  future,  will  not  succeed in developing better software
programs.

     In  addition,  current  and  potential  competitors  may  make  strategic
acquisitions  or  establish  cooperative  relationships among themselves or with
third  parties  that could increase their ability to capture a larger portion of
the  market  share for such software programs.  This type of existing and future
competition  could  affect  our ability to form and maintain agreements with our
distribution,  reseller,  bundling and marketing partners.  No assurances can be
given  that  we  will be able to compete successfully against current and future
competitors,  and  any  failure to do so would have a material adverse effect on
our  business.

SINCE  OUR SHARES ARE THINLY TRADED AND TRADING ON THE OTC BULLETIN BOARD MAY BE
SPORADIC  BECAUSE  IT  IS  NOT  AN  EXCHANGE,  STOCKHOLDERS  MAY HAVE DIFFICULTY
RESELLING  THEIR  SHARES.

     Our  common stock is quoted on the OTC Bulletin Board and is thinly traded.
In  the past, our trading price has fluctuated widely, depending on many factors
that  may  have  little  to  do  with our operations or business prospectus.  In
addition,  the OTC Bulletin Board is not an exchange and, because trading of the
securities  on the OTC Bulletin Board is often more sporadic than the trading of
securities  listed on an exchange of the Nasdaq Stock Market, Inc., you may have
difficulty  reselling  any  of  the  shares  you  purchase  from  the  selling
stockholders.

TRADING  OF  OUR  STOCK  MAY  BE RESTRICTED BY THE SEC'S PENNY STOCK REGULATIONS
WHICH  MAY  LIMIT  A  STOCKHOLDER'S  ABILITY  TO  BUY  AND  SELL  OUR  STOCK.

     The  U.S.  Securities and Exchange Commission has adopted regulations which
generally define "penny stock" to be any equity security that has a market price
(as  defined)  less than $5.00 per share or an exercise price of less than $5.00
per  share,  subject  to certain exceptions.  Merlin's securities are covered by
the  penny  stock  rules, which impose additional sales practice requirements on
broker-dealers  who  sell  to  persons  other  than  established  customers  and
"accredited  investors."  The  term  "accredited  investor"  refers generally to
institutions with assets in excess of $5,000,000 or individuals with a net worth
in  excess of $1,000,000 or annual income exceeding $200,000 or $300,000 jointly
with  their  spouse.  The  penny stock rules require a broker-dealer, prior to a
transaction  in  a penny stock not otherwise exempt from the rules, to deliver a
standarized  risk  disclosure  document  in  a  form  prepared  by the SEC which
provides information about penny stocks and the nature and level of risks in the
penny  stock  market.  The  broker-dealer  also  must  provide the customer with
current  bid  and  offer quotations for the penny stock, the compensation of the
broker-dealer  and  its  salesperson  in  the  transaction  and  monthly account
statements  showing  the market value of each penny stock held in the customer's
account.  The  bid  and  offer quotations, and the broker-dealer and salesperson
compensation  information,  must  be  given to the customer orally or in writing
prior  to effecting the transaction and must be given to the customer in writing
before  or with the customer's confirmation.  In addition, the penny stock rules
require  that  prior to a transaction in a penny stock not otherwise exempt from
these  rules,  the  broker-dealer must make a special written determination that
the  penny  stock  is  a  suitable  investment for the purchaser and receive the
purchaser's written agreement to the transaction.  These disclosure requirements
may  have  the effect of reducing the level of trading activity in the secondary
market  for the stock that is subject to these penny stock rules.  Consequently,
these  penny  stock  rules may affect the ability of broker-dealers to trade our
securities.  We  believe that the penny stock rules discourage investor interest
in  and  limit  the  marketability  of,  our  common  stock.

<PAGE>

SINCE  A  RELATIVELY  SMALL  GROUP  OF STOCKHOLDERS OWN APPROXIMATELY 45% OF OUR
OUTSTANDING  SHARES,  THEY ARE ABLE TO SIGNIFICANTLY INFLUENCE MATTERS REQUIRING
STOCKHOLDER  APPROVAL.

     Stockholders  owning  a  majority (i.e. 51%) of Merlin's outstanding voting
stock  represent the ultimate control over Merlin's affairs.  Three stockholders
currently control approximately 45% of the outstanding shares of Merlin's common
stock.  As a result of this ownership, these stockholders will likely be able to
approve  any  major transactions including the election of directors without the
approval  of  the  other  shareholders.

WE  DO  NOT  EXPECT  TO  DECLARE  OR  PAY  ANY  DIVIDENDS.

     We  have  not  declared or paid any dividends on our common stock since our
inception,  and  we  do  not  anticipate  paying  any  such  dividends  for  the
foreseeable  future.

ITEM  2.     DESCRIPTION  OF  PROPERTY.

     Merlin  leases  approximately  3,700 square feet of office space located at
4199 Lougheed Highway, Suites 200 and 201, Burnaby, British Columbia, Canada V5C
3Y6  under  a  lease  which  expires  on  August  30, 2002 for an annual rent of
approximately  CDN$51,800  (approximately  $35,000), including our proportionate
share  of  operating  expenses.

ITEM  3.     LEGAL  PROCEEDINGS.

     We know of no material, active or pending legal proceedings against us, nor
are  we  involved  as  a  plaintiff  in  any  material  proceedings  or  pending
litigation.  There are no proceedings in which any of our directors, officers or
affiliates, or any registered or beneficial shareholders are an adverse party or
has  a  material  interest  adverse  to  us.

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

None.

                                     PART II

ITEM  5.     MARKET  FOR  COMMON  EQUITY  AND  RELATED  STOCKHOLDER  MATTERS.

     Our common stock began quotation on the OTC Bulletin Board under the symbol
"MLSW"  on  January 13, 2000 but there was no trading activity until January 18,
2000.  Prior  to  January 13, 2000, there was no public market for our shares of
common  stock.  The  following  quotations reflect the high and low bids for our
common  stock based on inter-dealer prices, without retail mark-up, mark-down or
commission  and  may not represent actual transactions.  The high and low prices
of  our common stock (obtained from Canada Stockwatch) for the periods indicated
below  are  as  follows:

<TABLE>
<CAPTION>



QUARTER ENDED                        HIGH    LOW
<S>                                 <C>     <C>

January 18, 2000 to March 31, 2000  $10.00  $2.97
                                    ------  -----
June 30, 2000. . . . . . . . . . .  $ 4.50  $1.16
                                    ------  -----
September 30, 2000 . . . . . . . .  $ 2.94  $1.25
                                    ------  -----
December 31, 2000. . . . . . . . .  $ 1.34  $0.22
==================================  ======  =====
</TABLE>

     Our common shares are issued in registered form.  Alpha Tech Stock Transfer
(929  East  Spiers  Lane, Draper, UT 84020 (telephone: (801) 571-5118, facsimile
(801)  571-6112))  is  the  registrar  and transfer agent for our common shares.

<PAGE>

     As  of  March 1, 2001, we had 12,986,928 shares of common stock outstanding
and  approximately  89 stockholders of record.  This number of stockholders does
not  include  stockholders  who  hold  our  securities  in  street  name.

Dividend  Policy

     We have not declared or paid any cash dividends since inception.  We intend
to retain future earnings, if any, for use in the operation and expansion of our
business  and do not intend to pay any cash dividends in the foreseeable future.
Although  there  are  no restrictions that limit our ability to pay dividends on
our common shares, we intend to retain future earnings for use in our operations
and  the  expansion  of  our  business.

Recent  Sales  of  Unregistered  Securities

     On  April  24,  2000,  we  granted to one of our directors stock options to
purchase  an aggregate of 48,000 shares of our common stock at an exercise price
of $1.00 per share.  The options were granted to the director relying on Section
4(2) of the Securities Act of 1933 and/or in an offshore transaction pursuant to
Regulation  S  promulgated  under  the  Securities  Act  of  1933.

     On  October  4,  2000,  we granted to one of our directors stock options to
purchase  an aggregate of 36,000 shares of our common stock at an exercise price
of  $1.75  per  share.  The  options  were  granted  to the directors relying on
Section  4(2)  and/or  Rule 506 of Regulation D promulgated under the Securities
Act  of  1933.

     On  October  25,  2000, we granted to one of our directors stock options to
purchase  an aggregate of 36,000 shares of our common stock at an exercise price
of  $1.75  per  share.  The  options  were  granted  to the directors relying on
Section  4(2)  and/or  Rule 506 of Regulation D promulgated under the Securities
Act  of  1933.

     On  the dates indicated below, we granted to certain of our employees stock
options  to  purchase  shares  of  our  common  stock  in the amounts and at the
exercise  prices  set  forth  below.  We  granted  the  stock options relying on
Section  4(2)  of  the  Securities Act of 1933 and/or in an offshore transaction
pursuant  to  Regulation  S  promulgated  under  the  Securities  Act  of  1933.

<TABLE>
<CAPTION>



GRANT DATE          NUMBER OF OPTIONS  EXERCISE PRICE
------------------  -----------------  ---------------
<S>                 <C>                <C>

August 29, 2000. .             12,000  $          1.30
                    -----------------  ---------------
August 31, 2000. .             12,000  $          1.69
                    -----------------  ---------------
October 16, 2000 .             12,000  $          1.01
                    -----------------  ---------------
October 16, 2000 .             12,000  $          1.01
                    -----------------  ---------------
February 16, 2001.              4,000  $          0.35
                    -----------------  ---------------
October 16, 2000 .              6,000  $          1.01
                    -----------------  ---------------
December 11, 2000.             12,000  $          0.37
                    -----------------  ---------------
September 7, 2000.             12,000  $          1.80
                    -----------------  ---------------
September 28, 2000             12,000  $          1.13
                    -----------------  ---------------
January 29, 2001 .             12,000  $          0.35
                    -----------------  ---------------
August 31, 2000. .              8,000  $          1.69
                    -----------------  ---------------
October 15, 2000 .              7,000  $          0.99
                    -----------------  ---------------
October 5, 2000. .              6,000  $          1.07
------------------  -----------------  ---------------
</TABLE>

     On  September 23, 2000, we sold an aggregate of 100,000 units at a price of
$1.60  per  unit to one accredited individual investor for proceeds of $160,000.
Each  unit  consisted of one common shares and two share purchase warrants, with
each  share  purchase  warrant  entitling  the holder to purchase one additional
common  share  at  a  price  of $1.75 per share for a period of six months.  The
transaction  was  private  in  nature  and  we  had  reasonable  grounds
to believe that the individual was an accredited investor, capable of evaluating

<PAGE>

the  merits  and  risks  of his investment and bearing the economic risks of his
investment,  acquired the units for investment purposes.  Accordingly, we issued
the  units  relying  on Rule 506 and Section 4(6) of the Securities Act of 1933.

     On  June  28, 2000, we agreed to issue to E.B. Coxe & Co. L.L.C. a total of
300,000  shares of common stock upon execution of a Consulting Agreement between
us  and  E.B. Coxe & Co. L.L.C.  The shares are being issued in consideration of
services  to  be  provided  under the Consulting Agreement.  The transaction was
private  in nature and we had reasonable grounds to believe that E.B. Coxe & Co.
L.L.C. was an accredited investor, capable of evaluating the merits and risks of
its  investment,  bearing  the economic risks of its investment and acquired the
shares  for  investment  purposes.  On  January  10,  2001, we issued the shares
relying on Sections 4(2) and 4(6) and Rule 506 of Regulation D of the Securities
Act  of  1933.

     On April 11, 2000, we agreed to issue to the Nostas Group a total of 80,000
shares  of  common stock upon execution of a Consulting Agreement between us and
the  Nostas  Group.  The shares are being issued in consideration of services to
be  provided  under  the  Consulting  Agreement.  The transaction was private in
nature  and  we  had  reasonable grounds to believe that the Nostas Group was an
accredited  investor,  capable  of  evaluating  the  merits  and  risks  of  its
investment, bearing the economic risks of its investment and acquired the shares
for  investment  purposes.  On January 31, 2001, we issued the shares relying on
Sections  4(2)  and  4(6)  and Rule 506 of Regulation D of the Securities Act of
1933.

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

     The  following  discussion should be read in conjunction with our financial
statements  and  the  related notes that appear elsewhere in this annual report.
The  following  discussion  contains forward-looking statements that reflect our
plans,  estimates  and beliefs.  Our actual results could differ materially from
those  discussed in the forward looking statements.  Factors that could cause or
contribute  to such differences include, but are not limited to, those discussed
below  and elsewhere in this annual report, particularly in the section entitled
"Risk  Factors"  found  under  "Item  1.  Description  of  Business".

General

     We  were  formed  in Nevada on August 30, 1995 under the name Austin Land &
Development  Inc.  We  changed  our  name  to  Merlin  Software  Technologies
International,  Inc. on January 7, 2000.  We were inactive until the acquisition
of  100%  of  the  issued and outstanding shares of Merlin Software Technologies
Inc.  (a company incorporated in Nevada on June 25, 1999).  That acquisition was
completed  by  a share exchange reorganization with Merlin Software Technologies
Inc.  on April 26, 2000.  Since incorporation, Merlin Software Technologies Inc.
has  been  in the business of developing utility software programs for computers
using  a  Linux  or  Unix operating system.  Since April 26, 2000, our focus has
been  on  the  development and marketing of our two utility software programs: a
computer  backup  and restore program called PerfectBACKUP+ and a multi-line fax
program  called Communicado Fax.  Our principal executive offices are located in
Burnaby,  British  Columbia,  Canada.

Selected  Financial  Data

     Set  forth below is selected financial data as of December 31, 2000 and for
the  period  from  June  25, 1999 (incorporation of Merlin Software Technologies
Inc.)  to  December  31, 1999. The financial information as of December 31, 2000
and  1999  and  for  the  periods  then  ended are derived from the consolidated
financial  statements  audited by BDO Dunwoody LLP that appear elsewhere in this
annual  report.  As  a result of our acquisition of Merlin Software Technologies
Inc.  via  reverse  acquisition  on April 26, 2000, our financial statements are
presented  as  a continuation of Merlin Software Technologies Inc.  Accordingly,
financial  information  relating  to periods prior to the acquisition is that of
Merlin Software Technologies Inc. The information set forth below should be read
in  conjunction  with  our financial statements and "Management's Discussion and
Analysis"  included  in  this  annual  report.

<PAGE>

<TABLE>
<CAPTION>



<S>                            <C>              <C>
                                                      Period from
                                                          June 25
                                                             1999
                                 Year ended       (incorporation)
                                 December 31,         to December
                                     2000               31, 1999
                               ---------------          ---------

Sales . . . . . . . . . . . .          22,213                  -
Cost of Sales . . . . . . . .          15,678                  -
                               ---------------          ---------
                                        6,535                  -
                               ---------------          ---------

Expenses

   Depreciation . . . . . . .          52,219              7,964
   General and Administration       1,420,441            265,116
   Professional fees. . . . .         183,461             64,907
   Promotion and advertising.         988,726            180,312
   Research and Development .         734,102             98,329
                               ---------------          ---------
                                    3,378,949            616,628
                               ---------------          ---------

Loss from operations. . . . .      (3,372,414)          (616,628)

Interest and financing costs.         (88,848)                 -
                               ---------------          ---------
Net loss for the period . . .      (3,461,262)          (616,628)
                               ---------------          ---------


</TABLE>

<TABLE>
<CAPTION>




<PAGE>

<PAGE>

<PAGE>

<PAGE>
                                                   As at           As at
                                               December 31,    December 31,
                                                   2000            1999
                                               -------------  -------------
<S>                                            <C>            <C>
Working Capital (Deficit) . . . . . . . . . .      (111,977)       397,830
Total Assets. . . . . . . . . . . . . . . . .       493,762        831,374
Total Stockholders Equity (Deficit) . . . . .         4,123       (320,606)
Deficit Accumulated in the Development Stage.    (4,077,810)      (616,628)

</TABLE>

     We  are still in our infancy as a viable commercial entity and consequently
our  focus  over the past twenty months has been on the identification of market
needs,  development of our two software products, PerfectBACKUP+ and Communicado
Fax,  to meet these needs and the branding of our company and our products.  The
sales  figures  reported  to  date reflect sales of an older outdated version of
PerfectBACKUP+  to  a  limited  group

<PAGE>

of  individuals  seeking  an  inexpensive  solution  without  the added features
included  with  more  expensive  products.  We  believe  that  we  will generate
increased  revenue over the next three fiscal years due to the recent release of
PerfectBACKUP+  version  7.0, the recent release of Communicado Fax version 4.0,
and  the  anticipated  release  of updated versions of our two existing software
products  in  the  future.  In  addition, we have recently hired two experienced
sales  and  marketing individuals to develop and enhance our sales and marketing
program.  These  two individuals will focus on increasing sales volume by way of
OEM  (original equipment manufacturer) bundling and partnering arrangements with
large  corporate  organizations.  We  expect that initial revenue growth will be
reflected  in  the third and fourth quarter of fiscal 2001. We also anticipate a
further  increase  in  revenues  in  fiscal  2002 and 2003, which we expect will
result  from increased sales from our existing products combined with sales from
the  introduction  of  new products which we may release during that period.  We
anticipate  that  the  expected  growth  in  revenues  may  enable us to attract
additional financing to allow us to add the needed resources in order to further
support  the  growth  of  our operations.  Despite our expectations there are no
assurances  that  our  estimated  revenue  growth can be achieved.  Should we be
unable  to  achieve  the  anticipated  revenue  growth,  our business and future
success  may  be  adversely  affected.

Fiscal  Year  Ended  December  31,  2000  Compared  to Period from June 25, 1999
(incorporation)  to  December  31,  1999

Results  of  Operations

     The acquisition of Merlin Software Technologies Inc. was accounted for as a
reverse  acquisition, as the former stockholders of Merlin Software Technologies
Inc.  controlled  approximately  64%  of  our common stock immediately after the
acquisition.  Pursuant  to the accounting requirements for reverse acquisitions,
the  financial  statements  subsequent  to  the  acquisition  are presented as a
continuation  of  Merlin  Software  Technologies  Inc.  The operations of Merlin
Software  Technologies Inc. (incorporated in June 1999) prior to the acquisition
were  limited  to  product  development and corporate organizational activities.
The acquisition by us provided Merlin Software Technologies Inc. with the access
to capital markets necessary to expand development of our two software products.
As  a  result,  and  due  to  1999  being  our subsidiary's first fiscal period,
comparisons  of  results  of  operations  to the initial period in 1999 does not
provide  a  meaningful  analysis.  Our  subsidiary  did  not  actively  commence
operations  until  October 1999.  Consequently, the activity level in the fiscal
year  ended December 31, 2000 is significantly greater than the period from June
25,  1999  (incorporation)  to December 31, 1999 which is reflected in the total
costs  reported in each respective period.  Therefore, the management discussion
and  analysis  below  for  the  fiscal year ended December 31, 2000 focuses upon
expenditures  during  that period plus our plan of operation.  Comparison of the
fiscal  year  ended  December  31,  2000  and  the  period  from  June  25, 1999
(incorporation)  to  December  31,  1999  is  provided  below.

    We incurred a net loss of $3,461,262 for the fiscal year ended December 31,
2000,  including  $1,153,668 of compensation expense relating to the exchange of
outstanding stock options in Merlin Software Technologies Inc. for stock options
in  our  company and the granting of additional stock options during the year as
compensation  to  our  employees  and  independent contractors.  The exchange of
stock  options  resulted  in  an  increase  in  the intrinsic value of the stock
options,  which  was  charged  to  the  Statement  of  Operations  as additional
compensation  expense  in  2000.

Sales

     We  recognized  no sales in 1999.  In 2000, sales of $22,213 were generated
from  two  different  sources:  the  sales of PerfectBACKUP+ software by product
resellers  ($9,924)  and  orders  for PerfectBACKUP+ from our website ($12,289).
These  sales  represent  sales  of  an  outdated,  yet  functional  version  of
PerfectBACKUP+.  Total sales were minimal due to a lack of market recognition of
the  product  and the lack of additional product features to make it competitive
with similar products.  Unforeseen delays in consolidating our operations into a
single  office in Burnaby, British Columbia resulted in the delay of the release
of  updated  versions of our software products, originally scheduled for release
in  July and August 2000.  The fact that we did not commercially release our two
software  products  primarily  contributed  to our lack of sales. PerfectBACKUP+
version  7.0  was  released on November 15, 2000 and Communicado Fax version 4.0
was  released  on  January  15,  2001.

<PAGE>

Cost  of  Sales

     The  principal  components  of  cost  of sales for 2000 are direct printing
charges  for  the  retail boxes used to distribute our software products and the
protective  covers  for  the compact disc shipped in each retail box.  We do not
include  overhead  charges  to our cost of sales.  There was no cost of sales in
1999.

General  and  Administration

     General  and  administration  expenses  increased  in the fiscal year ended
December  31,  2000  by  $1,155,325  to $1,420,441 due to the increased level of
activity  in  our  company. Included in this amount is an increase in consulting
fees  of  approximately  $710,000  paid  to  various  individuals  for  general
management, corporate finance and fund raising services.  Charges related to the
operation  of  two  offices  (British  Columbia and Florida) during this period,
including  rent,  telecommunication  charges,  insurance  and  the  salaries and
benefits  for two administrative and telemarketing personnel, were also incurred
in  2000.  The  Florida  office  was  closed  in  July  2000 and operations were
consolidated  in  Burnaby,  British  Columbia.

     Included  in  the  fiscal  year  ended  December  31,  2000 is stock option
compensation in the amount of $524,015 relating to the granting of stock options
(primarily to consultants) who have provided management and advisory services to
our  company.  Stock  Option  Compensation  for  1999  was  $12,022.

Professional  Fees

     Professional  fees  increased in the fiscal year ended December 31, 2000 by
$118,554  to  $183,461  due  to the additional legal services required to secure
additional  financing  during the period and prepare a registration statement in
connection  with  such  additional  financing.  Additionally, ongoing assistance
with  regulatory  filings  since  the  reverse  acquisition  in  April 2000 have
significantly  impacted  the  fees  incurred  between  2000  and  1999.

Promotion  and  Advertising

     Promotion  and  advertising  expenses  increased  in  the fiscal year ended
December 31, 2000 by $808,414 to $988,726 during the period due to the increased
marketing and promotional activities, including investor relation activities and
attendance  at industrial trade shows, during the period.  Also included in this
amount  is  stock  option compensation in the amount of $358,855 relating to the
granting  of  stock  options  (primarily  to  consultants)  that  have  provided
marketing  and  promotional  services to our company.  Promotion and advertising
expense for 2000 represents costs incurred in the following areas:  marketing of
our  products  -  $650,597,  public  relations  fees  - $124,000 and charges for
investor  relation  activities - $77,000.  Marketing activities in 2000 included
attendance  at  industry  tradeshows,  costs for the development and printing of
sales  literature,  and  advertising  in  industry  journals  and on a strategic
partners'  website.  Public relation fees included the cost of retaining outside
consultants  to  assist  us  in  drafting  and distributing our news releases to
various  media groups.  Costs incurred for investor relations activities include
amounts  paid  to  external organizations for the distribution of press releases
and  various listings and advertising in strategic investor publications.  While
we  spent $988,726 in raising awareness of our company in the investor community
along  with  branding  our  company's  products and image in the marketplace, we
lacked  the  capital  resources  required  to implement and support an effective
sales  and  marketing  program  (i.e.  we  lacked  experienced personnel and the
financial  resources  for  marketing  and  advertising).  This lack of resources
combined  with  the  delay  of  release of updated software products limited our
ability  to  generate  any  significant  revenues.

Research  and  Development

     Research  and  development  charges  increased  in  the  fiscal  year ended
December  31, 2000 by $635,773 to $734,102 during the period due to the salaries
and  benefits  incurred  relating  to  the  addition of ten software development
personnel.  Also  included  in  this  amount is stock option compensation in the
amount  of $270,798 relating to the granting of stock options to consultants and
employees who provided research and development services to our company in 2000.

<PAGE>

Interest  and  financing  costs

     Interest  and  financing  costs increased in the fiscal year ended December
31,  2000  by  $88,848  to  $88,848  primarily due to the recognition of $53,000
related to the beneficial conversion feature associated with the issuance of the
convertible  notes  during the period and $21,239, being the amortization of the
discount  on  the  convertible notes to December 31, 2000.  The discount results
from  the Black Scholes value of $1,047,000 attributable to the detachable share
purchase  warrants  issued  in  connection  with  the  convertible  notes.

Summary

     Presently,  we  have  no  significant  source  of revenue. We have incurred
operating  losses since inception. The continuation of our business is dependent
upon  the  continuing  financial  support  of  our  creditors  and stockholders,
obtaining  further  financing,  successful  and  sufficient market acceptance of
updated  versions  of  our  existing  software  products  and  the  successful
development  of  our  software  products  and  achieving  a  profitable level of
operations.  There  are,  however,  no  assurances  we  will be able to generate
further  funds  required  for  our  continued  operations.  Accordingly,  our
consolidated  financial  statements  contain  note  disclosures  describing  the
circumstances  that  lead  there  to  be doubt over our ability to continue as a
going  concern.  In  their  report on the consolidated financial statements, our
independent  auditors included an explanatory paragraph regarding our ability to
continue  as  a  going  concern.

Liquidity  and  Capital  Resources

     Our  principal  capital  requirements  to  date  have been to fund: (1) the
development  of  PerfectBACKUP+  and  Communicado  Fax;  (2)  the  marketing and
advertising  activities  undertaken  to  raise  awareness of our company and our
software products; and (3) the promotion and investor relation programs in place
to  disseminate  information  about  our  company  and our products.  During the
fiscal year ended December 31, 2000, we incurred a loss of $3,461,262, including
non-cash  stock  compensation  expense  of  $1,153,668.  Stock options are a key
compensation  element  to  reward our consultants and employees while preserving
cash  flow  during our development stage.  Net cash used in operating activities
for  the  fiscal year ended December 31, 2000 was $1,986,572.  Lack of operating
cash flow to date requires us to carefully manage funds generated from financing
activities.  Accounts  payable  and accrued liabilities are watched particularly
closely.  Accounts  payable  increased  by  $289,639  in  the  fiscal year ended
December  31,  2000  primarily due to significant expenditures being incurred in
the  fourth quarter of 2000 subsequent to receipt of proceeds of the convertible
notes  and  incurred  in  connection  with this registration statement.  We also
entered  into  three  agreements for corporate finance and marketing services in
2000  for  which we subsequently issued an aggregate of 463,571 shares of common
stock  in  January,  2001.  An  accrual  of  approximately  $50,000  was made at
December  31,  2000 for unpaid services rendered to December 31, 2000 in respect
of these agreements.  The accrual was based upon the trading price of our common
stock  on  December  31, 2000.  Net cash used in investing activities during the
fiscal  year ended December 31, 2000 was $96,868 which was directly spent in the
acquisition  of  fixed  assets, primarily computer equipment.  Net cash provided
from  financing  activities  for  the  fiscal  year  ended December 31, 2000 was
$1,582,959.  Our  primary  financing  activity  during  the  fiscal  year  ended
December  31,  2000  of  $1,921,472  consisted  of  proceeds on short-term loans
totalling  $128,513, proceeds received on the issuance of common stock totalling
$760,000  (including  $600,000  raised  by  the  public  company  prior  to  the
acquisition  of  our  subsidiary)  and  net proceeds received on the issuance of
convertible  notes  totalling  $1,032,959  (net  of financing costs of $67,041).
Substantially  all  of  the  value  attributable  to  the  convertible notes was
assigned to the detachable share purchase warrants accompanying the notes.  Such
amount  was calculated using the Black Scholes option pricing model, and will be
amortized  to  operations  as  additional  interest expense over the life of the
convertible  notes.  Net  cash provided from financing activities was reduced by
$338,513  due  to  the  repayment  of  demand  loans  during  the  fiscal  year.

     The net decrease in cash during the fiscal year ended December 31, 2000 was
$500,481,  leaving  us  with  a  cash  balance at December 31, 2000 of $216,714.

     We  believe,  based on currently proposed plans and assumptions relating to
our  operations, that the existing cash and remaining proceeds from the issuance
of  the  additional  $1 million convertible notes will be sufficient to fund our
operations  and  working capital requirements until May 31, 2001.  We anticipate
that  projected  increases in revenue in the third quarter of fiscal 2001 and/or
the  generation  of  significant  OEM  bunding  or  partnering

<PAGE>

agreements will enable us to raise the necessary funding required to finance our
operations  and  working capital for at least twelve months.  During this period
we  also  anticipate  an increase in revenues that, in addition to any financing
raised,  will  fund  operations  and  working  capital  requirements.

     In  the event that our plans or assumptions change or prove inaccurate (due
to  delays  in  product development, the inability to sign any significant sales
agreements  or  generate  revenues,  unfavourable  economic conditions, or other
unforeseen  circumstances),  there  can  be  no  assurance  that such additional
financing  would  be  available  to  us, or if available, that the terms of such
additional  financing  will  be  acceptable  to  us.

Future  Cash  Requirements

     We  expect that our recent addition of senior sales and marketing personnel
and  the  commercial release of PerfectBACKUP+ version 7.0 and the first version
of  the  Communicado  Fax  4.0  product  will lead to an increase in revenues in
fiscal  2001.  We  expect  that  further development and marketing of both these
products  combined  with  the  planned  introduction  of new products or updated
versions  of  our existing products in late 2001 will lead to increased revenues
in fiscal years 2002 and 2003. Although we expect to see an increase in revenues
in  2001,  we  do  not anticipate this to materialize until the third and fourth
quarter  of  fiscal  2001.  Consequently,  we  will  require  a  minimum  of
approximately  $5.0 million over the period ending December 31, 2001 in order to
accomplish  our  goals.  The  cash requirements of $5.0 million are based on our
estimates  for  operational  costs  for the period ending December 31, 2001.  We
estimate  that  approximately  $675,000  is  required  to  hire further software
developers  and  programmers, $2,955,000 is required to hire marketing and sales
persons  and  to  implement our planned sales and marketing program and $200,000
will  be  required  to  support  an  investor relations program.  The balance of
$1,170,000  will  be  required  to support general corporate expenses, including
expenses  in  connection  with  the  engaging  of  both  senior and intermediate
management  personnel and other general operating expenses.  We received initial
proceeds  of  $1.1  million  in  convertible notes in August, 2000 and expect to
receive  the  balance  of $1 million of convertible notes within seven days of a
registration  statement, registering the common shares issuable on conversion of
the  convertible  notes  and exercise of the warrants, being declared effective,
which  we  believe  will  be  sufficient  to pay for ongoing operating costs and
capital  expenditures  through  May 31, 2001. We intend to obtain the balance of
the  cash  requirements  through  the  sale  of  our equity securities, proceeds
received  from  the  exercise  of  outstanding  warrants and stock options or by
obtaining  further  debt  financing.  Additionally,  we  are actively soliciting
various  Canadian  government  agencies  who  provide funds by way of government
grants  made  available  to  high-technology  companies  operating  in  Canada.

Plan  of  Operation

     Our  primary  objective  in  the  next  12  months  will be to implement an
aggressive  sales  and marketing program in connection with the sale of both our
PerfectBACKUP+  and  Communicado  Fax utility software programs.  Version 7.0 of
PerfectBACKUP+  was released on November 15, 2000 for purchase and download from
our  website  and  we  have commenced design work on PerfectBACKUP+ version 8.0,
which  is  intended  as  a  backup  program  for  large  networks  and  not as a
replacement  for  version  7.0.  Development  and testing on our Communicado Fax
version  4.0 product has been completed and was commercially released on January
15,  2001.  We  have  also  commenced  design  work  on an enterprise version of
Communicado  Fax,  which is intended as a fax program for large networks and not
as a replacement for the present version 4.0 of Communicado Fax.  In addition to
the  design,  development  and  testing  work  that  has  to  be  performed  on
PerfectBACKUP+  version  8.0  and  the enterprise version of Communicado Fax, an
aggressive  sales  and  marketing  campaign  must  be  implemented.

Research  and  Development

     The  computer  software  industry  is  characterized by rapid technological
change  and  is  highly  competitive  in  regard  to  timely product innovation.
Accordingly,  we  believe  that  our  future  success  depends on our ability to
enhance our current software programs to meet a wide range of customer needs and
to  develop  new  software programs rapidly to attract new customers and provide
additional  solutions  to  existing  customers.

     Our  strategy  is  to  continue to enhance PerfectBACKUP+'s and Communicado
Fax's  functionality  through  new  feature  development to meet the continually
advancing  requirements  of  its  customers.  At  the  same time, we may seek to
acquire  and  develop new software programs to meet the needs of a broader group
of  users.

<PAGE>

     To  December  31,  2000,  we  have  expended $832,431 on the development of
PerfectBACKUP+,  Communicado  Fax  and  other  software.  We  will  expend  a
significant  amount  of  time  in the next 12 months on research and development
activities.  These activities will focus on the following three areas:  updating
the  design  and  adding  new  features  to  PerfectBACKUP+,  translating  both
PerfectBACKUP+  and  Communicado  Fax  so  that  they  will operate on different
computer  operating systems, updating both PerfectBACKUP+ and Communicado Fax so
that  they  can  be  purchased for several different languages (i.e., German and
Spanish),  and developing new products that will compliment our present software
programs.  By  updating the design of PerfectBACKUP+, PerfectBACKUP+ will become
more functional and easier to use.  Although we believe that the current release
of  PerfectBACKUP+  is competitive, we will continue to update the design of and
add  new features to PerfectBACKUP+ in order to ensure that that product remains
competitive  in  the  marketplace.  We  do  not  anticipate  encountering  any
uncertainties  in  updating  the design or adding new features and will add such
features  as  are demanded or requested by users of PerfectBACKUP+.  The benefit
of  porting,  or  translating  our software programs so that they are capable of
running  on  other  operating  systems is that our products become saleable to a
greater  number  of  users.

Marketing

     In  order to generate any significant sales volume, we predict that we must
recruit  three senior sales people, including a Business Development Manager, an
Original  Equipment  Manufacturer Sales Manager and a Value-Added Reseller Sales
Manager.  We  have recently hired a Vice-President of Sales and a Vice-President
of  Marketing.  The  addition  of  these  personnel will ensure that the overall
strategy for sales of our products is developed and maintained for each of these
key  marketing  channels.  It  is  expected that these three individuals will be
supported  by  up  to five additional individuals whose function will range from
telemarketing  to customer support.  In order to compete in the existing markets
for  our  products  and  generate  consumer  awareness,  we  will be required to
undertake  a  very  aggressive  advertising  and  marketing campaign.  This will
require us to place advertisements in several key trade magazine and publication
as  well  as  exhibiting  our  software  products  at  the major tradeshows held
throughout  the  year.

Personnel

     As  of  March 1, 2001, we have 23 permanent employees with 4 in the area of
corporate  administration,  13  in  product  development  and  3  in  sales  and
marketing.  We  also  have  4  independent  contractors  providing  research and
strategic  planning  services,  management  consulting services, market research
services  and capital raising services.  In the next 12 months we plan to expand
our  total  number  of  permanent  employees  in  these  same  departments  to
approximately  36  with 4 additional part-time employees in product development.

Purchase  or  Sale  of  Equipment

     We  do  not  anticipate  that  we  will  expend  any  significant amount on
equipment  for  our  present or future operations.  However, we will continue to
purchase  computer  hardware  and  software  for  our  ongoing  operations.

ITEM  7.     FINANCIAL  STATEMENTS.

     Our  financial statements are stated in United States Dollars (US$) and are
prepared  in  accordance  with  United  States  Generally  Accepted  Accounting
Principles.

     The  following Financial Statements pertaining to Merlin and its subsidiary
are  filed  as  part  of  this  annual  report:

<PAGE>

<TABLE>
<CAPTION>

NAME                                                                                                           PAGES
<S>                                                                                                            <C>

Merlin Software Technologies International, Inc. (audited)

Independent Auditors' Report, dated March 2, 2001                                                              F-2

Consolidated Balance Sheets as at December 31, 2000 and 1999                                                   F-3

Consolidated Statements of Changes in Stockholders' Equity (Deficit)
  for the period from June 25, 1999 (incorporation) to December 31, 2000                                       F-4

Consolidated Statements of Operations for the year ended December 31, 2000
  and for the period from June 25, 1999 (incorporation) to December 31, 2000                                   F-5

Consolidated Statements of Cash Flows for the year ended December 31, 2000
  and for the period from June 25, 1999 (incorporation) to December 31, 2000                                   F-6

Summary of Significant Accounting Policies                                                                     F-7

Notes to the Consolidated Financial Statements                                                                 F-13
</TABLE>

Prior  to  the  acquisition  of  Merlin  Software Technologies Inc., Merlin (the
inactive  public  company) was not operating, and had earned no revenue from its
inception  in  1995 through 1999 and during that period incurred only $21,000 of
cumulative  general  and  administrative  expenses.  Due  to  the  fact that the
predecessor business is that of Merlin Software Technologies Inc. and the public
company  was  inactive,  separate  financial  statements of the inactive, public
company  have  been  excluded  from  this  annual  report.


<PAGE>

PAGE F-1

     MERLIN  SOFTWARE  TECHNOLOGIES  INTERNATIONAL,  INC.
     (A  DEVELOPMENT  STAGE  COMPANY)
     CONSOLIDATED  FINANCIAL  STATEMENTS
     FOR  THE  YEAR  ENDED  DECEMBER  31,  2000

                                                                        CONTENTS
                                                                        --------

INDEPENDENT  AUDITORS'  REPORT

CONSOLIDATED  FINANCIAL  STATEMENTS

     Balance  Sheets

     Statements  of  Changes  in  Stockholders'  Equity  (Deficit)

     Statements  of  Operations

     Statements  of  Cash  Flows

     Summary  of  Significant  Accounting  Policies

     Notes  to  the  Financial  Statements

<PAGE>

PAGE F-2

                                                    INDEPENDENT AUDITORS' REPORT

TO  THE  DIRECTORS  AND  STOCKHOLDERS  OF
MERLIN  SOFTWARE  TECHNOLOGIES  INTERNATIONAL,  INC.
(A  DEVELOPMENT  STAGE  COMPANY)

We  have audited the Consolidated Balance Sheets of Merlin Software Technologies
International,  Inc.  (a  development stage company) as at December 31, 2000 and
1999, the Consolidated Statements of Operations, Changes in Stockholders' Equity
(Deficit),  and  Cash Flows for the year ended December 31, 2000, for the period
from  June  25, 1999 (incorporation) to December 31, 1999 and for the cumulative
period from June 25, 1999 (incorporation) to December 31, 2000.  These financial
statements  are  the  responsibility  of  the  Company's  management.  Our
responsibility  is  to express an opinion on these financial statements based on
our  audits.

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

In  our  opinion, these consolidated financial statements present fairly, in all
material  respects,  the  financial  position  of  Merlin  Software Technologies
International,  Inc.  (a development stage company)  as at December 31, 2000 and
1999  and  the related statements of Operations, Changes in Stockholders' Equity
and  Cash  Flows  for the year ended December 31, 2000, for the period from June
25, 1999 (incorporation) to December 31, 1999 and for the cumulative period from
June 25, 1999 (incorporation) to December 31, 2000 in conformity with accounting
principles  generally  accepted  in  the  United  States.

The  accompanying  financial  statements have been prepared assuming the Company
will  continue  as  a  going  concern.  As  discussed in Note 1 to the financial
statements,  the  Company  has no established source of revenue and has suffered
recurring  losses  from  operations.  This  raises  substantial  doubt about its
ability  to  continue as a going concern.  Management's plans in regard to these
matters  are described in Note 1.  These financial statements do not include any
adjustments  that  might  result  from  the  outcome  of  this  uncertainty.

/s/  BDO  Dunwoody  LLP

Chartered  Accountants

Vancouver,  Canada
March  2,  2001

<PAGE>

PAGE F-3

<TABLE>
<CAPTION>

                                                MERLIN  SOFTWARE  TECHNOLOGIES  INTERNATIONAL,  INC.
                                                                       (A DEVELOPMENT STAGE COMPANY)
                                                                         CONSOLIDATED BALANCE SHEETS

DECEMBER  31                                                                    2000     1999(a)

<S>          <C>                                                            <C>           <C>
ASSETS

CURRENT
             Cash                                                           $   216,714   $  17,195
             Sales taxes recoverable                                             55,018      18,667
             Prepaid expenses and supplies                                       31,691       8,948
                                                                           -------------------------
                                                                                303,423     744,810

             DEFERRED FINANCING COSTS (Note 7)                                   59,126           -
             PROPERTY AND EQUIPMENT (Note 3)                                    131,213      86,564
                                                                           -------------------------
                                                                             $  493,762   $ 831,374
                                                                           ------------------------=

             LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)

             LIABILITIES

             CURRENT
             Accounts payable                                               $   341,568   $  19,252
             Accrued liabilities                                                 73,832     117,728
             Demand loans payable (Note 4)                                            -     210,000
                                                                            ------------------------
                                                                                415,400     346,980

             LOANS PAYABLE (Note 5)                                                   -     805,000
             CONVERTIBLE NOTES PAYABLE, (net of
             an unamortized discount of $1,025,761 and
             $ Nil, Note 7)                                                      74,239           -
                                                                            ------------------------
                                                                                489,639   1,151,980
                                                                            ------------------------

             STOCKHOLDERS' EQUITY (DEFICIT)
             Share capital
             Authorized
              50,000,000.  Common shares, par value $0.001

             Issued
              12,536,690.  (1999 - 7,900,000) Common shares                      12,537       7,900

             Additional paid-in capital                                       4,073,476     292,122
             Deficit accumulated during the development stage                (4,077,890)   (616,628)
             Reduction for initial contribution of intellectual property         (4,000)     (4,000)
                                                                           -------------------------
                                                                                  4,123    (320,606)
                                                                           -------------------------
                                                                            $   493,762  $  831,374
                                                                           =========================

(a) Represents the financial position of Merlin Software Technologies Inc.

</TABLE>

The accompanying summary of significant accounting policies and notes are an
integral part of these consolidated financial statements.

<PAGE>

PAGE F-4

<TABLE>
<CAPTION>

                                                                            MERLIN  SOFTWARE  TECHNOLOGIES  INTERNATIONAL,  INC.
                                                                                                   (A DEVELOPMENT STAGE COMPANY)
                                                             CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY (DEFICIT)


                                                                                                       Deficit      Reduction
                                                                                                     Accumulated    for Initial
                                                                                    Additional        During the    Contribution
                                                             Common Stock            Paid-in          Development   Intellectual
                                                       Shares        Amount          Capital            Stage         Property
<S>                                                 <C>           <C>           <C>                <C>              <C>

MERLIN SOFTWARE TECHNOLOGIES INC.
--------------------------------------------------
Initial contribution of
intellectual property
in July 1999 . . . . . . . . . . . . . . . . . . .     4,000,000  $    4,000  $              -   $            -   $      (4,000)

Private placement for
cash in July 1999 at
0.01 per share. . . . . . . . . . . . . . . . . .     3,400,000        3,400            30,600                -               -

Private placement for
cash in August 1999 at
0.50 per share. . . . . . . . . . . . . . . . . .       500,000          500            249,500                -              -

Stock option
compensation (Note 6). . . . . . . . . . . . . . .             -           -             12,022                -             -

Net loss for the
period . . . . . . . . . . . . . . . . . . . . . .             -            -                  -         (616,628)            -
---------------------------------------------------------------------------------------------------------------------------------
BALANCE, December 31, 1999                            7,900,000         7,900             292,122        (616,628)       (4,000)

Private placement
of common stock
on April 3, 2000
at a price of $1.50
per unit (Note 5). . . . . . . . . . . . . . . . .        86,665          87             129,913                -             -

MERLIN SOFTWARE TECHNOLOGIES INTERNATIONAL, INC.
--------------------------------------------------
Settlement of loans
payable on acquisition
(Note 5) . . . . . . . . . . . . . . . . . . . . .             -           -           1,275,000                -             -

Adjustment for the
stockholders' deficit
of the Company at
the acquisition date . . . . . . . . . . . . . . .     4,450,025       4,450             (37,127)               -             -

Stock option
compensation (Note 6). . . . . . . . . . . . . . .             -           -           1,153,668                -             -

Value of warrants and
beneficial conversion
feature on convertible
notes (Note 7) . . . . . . . . . . . . . . . . . .             -           -           1,100,000                -             -

Cash received on
private placement
in September 2000
at $1.60 per unit
(Note 8) . . . . . . . . . . . . . . . . . . . . .       100,000         100             159,900                -             -

Net loss for the
period . . . . . . . . . . . . . . . . . . . . . .             -           -                   -       (3,461,262)            -
---------------------------------------------------------------------------------------------------------------------------------
BALANCE, December 31, 2000                            12,536,690  $   12,537      $    4,073,476      $(4,077,890)       (4,000)
================================================================================================================================



                                                     TOTAL
                                                     STOCKHOLDERS
                                                     EQUITY (DEFICIT)
<S>                                                 <C>           <C>
MERLIN SOFTWARE TECHNOLOGIES INC.
--------------------------------------------------
Initial contribution of
intellectual property
in July 1999 . . . . . . . . . . . . . . . . . . .  $         -

Private placement for
cash in July 1999 at
0.01 per share. . . . . . . . . . . . . . . . . .        34,000

Private placement for
cash in August 1999 at
0.50 per share. . . . . . . . . . . . . . . . . .       250,000

Stock option
compensation (Note 6). . . . . . . . . . . . . . .       12,022

Net loss for the
period . . . . . . . . . . . . . . . . . . . . . .     (616,628)
----------------------------------------------------------------
BALANCE, December 31,
                                                       (320,606)

Private placement
of common stock
on April 3, 2000
at a price of $1.50
per unit (Note 5). . . . . . . . . . . . . . . . .      130,000

MERLIN SOFTWARE TECHNOLOGIES INTERNATIONAL, INC.
--------------------------------------------------
Settlement of loans
payable on acquisition
(Note 5) . . . . . . . . . . . . . . . . . . . . .    1,275,000

Adjustment for the
stockholders' deficit
of the Company at
the acquisition date . . . . . . . . . . . . . . .      (32,677)

Stock option
compensation (Note 6). . . . . . . . . . . . . . .    1,153,668

Value of warrants and
beneficial conversion
feature on convertible
notes (Note 7) . . . . . . . . . . . . . . . . . .    1,100,000

Cash received on
private placement
in September 2000
at $1.60 per unit
(Note 8) . . . . . . . . . . . . . . . . . . . . .      160,000

Net loss for the
period . . . . . . . . . . . . . . . . . . . . . .   (3,461,262)
----------------------------------------------------------------
BALANCE, December 31,
                                                      $   4,123
================================================================
</TABLE>

The accompanying summary of significant accounting policies and notes are an
integral part of these consolidated financial statements.

<PAGE>

PAGE F-5

<TABLE>
<CAPTION>

                                                 MERLIN  SOFTWARE  TECHNOLOGIES  INTERNATIONAL,  INC.
                                                                        (A DEVELOPMENT STAGE COMPANY)
                                                                CONSOLIDATED STATEMENTS OF OPERATIONS


                                                                                         PERIOD  FROM
                                                                   Period  from              JUNE  25
                                                                    June  25                     1999
                                                                      1999            (INCORPORATION)
                                              YEAR  ENDED        (incorporation)     TO  DECEMBER  31
                                             DECEMBER  31       to  December  31                 2000
                                                 2000                 1999(a)            (cumulative)

<S>                                   <C>                        <C>          <C>           <C>
SALES. . . . . . . . . . . . . . . .  $          22,213           $        -             $    22,213

COST OF SALES (excluding depreciation)           15,678                    -                  15,678
                                      ---------------------------------------------------------------
                                                  6,535                    -                    6,535
                                      ---------------------------------------------------------------

EXPENSES (Note 6)
General and administration . . . . .          1,420,441              265,116               1,685,557
Professional fees. . . . . . . . . .            183,461               64,907                 248,368
Promotion and advertising. . . . . .            988,726              180,312               1,169,038
Research and development . . . . . .            734,102               98,329                 832,431
Depreciation . . . . . . . . . . . .             52,219                7,964                  60,183
                                     ----------------------------------------------------------------
                                              3,378,949              616,628               3,995,577
                                     ----------------------------------------------------------------

LOSS FROM OPERATIONS . . . . . . . .         (3,372,414)            (616,628)             (3,989,042)

INTEREST AND FINANCING COSTS
(Note 7) . . . . . . . . . . . . . .            (88,848)                   -                 (88,848)
                                      ---------------------------------------------------------------

NET LOSS FOR THE PERIOD. . . . . . .  $      (3,461,262)          $ (616,628)            $(4,077,890)
                                      ===============================================================

LOSS PER SHARE - basic and  diluted.  $           (0.31)         $    (0.09)
                                      ======================================

WEIGHTED AVERAGE SHARES OUTSTANDING.         11,018,112           7,166,666
                                      ======================================
<FN>

(a)  Represents  the  results  of  operations  of  Merlin  Software  Technologies  Inc.

</TABLE>

The accompanying summary of significant accounting policies and notes are an
integral part of these consolidated financial statements.

<PAGE>

PAGE F-6

<TABLE>
<CAPTION>

                                                                      MERLIN SOFTWARE TECHNOLOGIES INTERNATIONAL, INC.
                                                                                         (A DEVELOPMENT STAGE COMPANY)
                                                                                 CONSOLIDATED STATEMENTS OF CASH FLOWS


                                                                                                           PERIOD FROM
                                                                                         Period from           JUNE 25
                                                                                           June 25                1999
                                                                                             1999      (INCORPORATION)
                                                                         YEAR ENDED    (incorporation)  TO DECEMBER 31
                                                                         DECEMBER 31     to December 31           2000
                                                                           2000            1999(a)       (CUMULATIVE)
<S>                                                                  <C>               <C>               <C>
CASH PROVIDED BY (USED IN)

OPERATING ACTIVITIES
Net loss for the period . . . . . . . . . . . . . . . . . . . . . .  $    (3,461,262)  $      (616,628)  $ (4,077,890)
Adjustments to reconcile net loss to net
  cash used in operating activities
  Amortization of deferred financing costs. . . . . . . . . . . . .            7,915                 -          7,915
  Depreciation. . . . . . . . . . . . . . . . . . . . . . . . . . .           52,219             7,964         60,183
  Stock option compensation . . . . . . . . . . . . . . . . . . . .        1,153,668            12,022      1,165,690
  Beneficial conversion feature on
    convertible notes and amortization
    of discount . . . . . . . . . . . . . . . . . . . . . . . . . .           74,239                 -         74,239
Increase in assets
  Sales taxes recoverable . . . . . . . . . . . . . . . . . . . . .          (36,351)          (18,667)       (55,018)
Prepaid expenses and supplies . . . . . . . . . . . . . . . . . . .          (22,743)           (8,948)       (31,691)
Increase (decrease) in liabilities
Accounts payable. . . . . . . . . . . . . . . . . . . . . . . . . .          289,639            19,252        308,891
Accrued liabilities . . . . . . . . . . . . . . . . . . . . . . . .          (43,896)          117,728         73,832
                                                                     ----------------  ----------------  -------------
                                                                          (1,986,572)         (487,277)    (2,473,849)
                                                                     ----------------  ----------------  -------------

FINANCING ACTIVITIES
Repayment of demand loans . . . . . . . . . . . . . . . . . . . . .         (338,513)                -       (338,513)
Proceeds on demand loans. . . . . . . . . . . . . . . . . . . . . .          128,513           210,000        338,513
Proceeds of loan payable. . . . . . . . . . . . . . . . . . . . . .          600,000           805,000      1,405,000
Proceeds on issuance of common stock. . . . . . . . . . . . . . . .          160,000           284,000        444,000
Proceeds on issuance of convertible
  notes, net of financing costs . . . . . . . . . . . . . . . . . .        1,032,959                 -      1,032,959
                                                                     ----------------  ----------------  -------------
                                                                           1,582,959         1,299,000      2,881,959
                                                                     ----------------  ----------------  -------------

INVESTING ACTIVITY
Purchase of property and equipment. . . . . . . . . . . . . . . . .          (96,868)          (94,528)      (191,396)
                                                                     ----------------  ----------------  -------------

INCREASE (DECREASE) IN CASH . . . . . . . . . . . . . . . . . . . .         (500,481)          717,195        216,714
CASH, beginning of period . . . . . . . . . . . . . . . . . . . . .          717,195                 -              -
                                                                     ----------------  ----------------  -------------

CASH, end of period . . . . . . . . . . . . . . . . . . . . . . . .  $       216,714   $       717,195   $    216,714
                                                                     =================================================

SUPPLEMENTARY INFORMATION:

Non-cash investing and financing activities:
Acquisition of business and settlement of debt
in exchange for common stock in reverse
acquisition (Note 2). . . . . . . . . . . . . . . . . . . . . . . .  $     1,242,323   $             -
                                                                     ==================================
Issuance of common stock for proceeds
advanced in 1999. . . . . . . . . . . . . . . . . . . . . . . . . .  $       130,000   $             -
                                                                     ==================================

(a) Represents the cash flows of Merlin Software Technologies Inc.
</TABLE>

The accompanying summary of significant accounting policies and notes are an
integral part of these consolidated financial statements.

<PAGE>

PAGE F-7

                                MERLIN SOFTWARE TECHNOLOGIES INTERNATIONAL, INC.
                                                   (A DEVELOPMENT STAGE COMPANY)
                                      SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

DECEMBER  31,  2000  AND  1999


BASIS  OF PRESENTATION     These consolidated financial statements are expressed
in  US  dollars  and have been prepared in accordance with accounting principles
generally  accepted  in the United States.  Included in the financial statements
are the accounts of the Company and its wholly-owned subsidiary, Merlin Software
Technologies  Inc.

     In  accordance  with  provisions  governing  the  accounting  for  reverse
acquisitions,  the  figures  presented  for  the  period  from  June  25,  1999
(incorporation)  to  December 31, 1999 are those of Merlin Software Technologies
Inc.

     All  significant  intercompany  transactions  have  been  eliminated  on
consolidation.  All  per share information for 1999 has been restated to reflect
the  recapitalization.

PROPERTY  AND  EQUIPMENT     Property  and  equipment  is  recorded  at  cost.
Depreciation  is  provided  over  the estimated useful lives of the property and
equipment  on  the  straight-line  basis  at  the  rates  set  out  below:

     Computer  hardware           -       33%
     Furniture  and  fixtures     -       20%
     Computer  software           -      100%
     Trademarks                   -       20%

     Leasehold  improvements  are  depreciated on a straight-line basis over the
terms  of  the  underlying  lease,  not  to  exceed  their  useful  lives.

     One half period's depreciation is taken  in  the  period  of  acquisition.

IMPAIRMENT  OF  LONG-LIVED ASSETS     The  Company  evaluates the recoverability
of  its  fixed  assets  in  accordance  with  Statement  of Financial Accounting
Standards  No. 121, "Accounting for  the  Impairment  of Long-Lived Assets to be
Disposed  of"  ("SFAS  121").  SFAS  121  requires  recognition of impairment of
long-lived  assets  in the event the net book  value  of such assets exceeds the
estimated future undiscounted cash flows attributable  to  such  assets  or  the
business  to  which  such  assets  relate.  No impairment  was  required  to  be
recognized  during  1999  and  2000.

FINANCIAL  INSTRUMENTS     The  Company's financial instruments consist of cash,
receivables,  accounts  payable,  accrued liabilities, short and long-term loans
payable  and  convertible  notes  payable.  Unless  otherwise  noted,  it  is
management's  opinion  that  the Company is not exposed to significant interest,
currency  or  credit  risks  arising from these financial instruments.  The fair
value  of  cash,  receivables,  accounts  payable,  accrued  liabilities,  and
short-term  demand  loans  approximates  their

<PAGE>

                                MERLIN SOFTWARE TECHNOLOGIES INTERNATIONAL, INC.
                                                   (A DEVELOPMENT STAGE COMPANY)
                                      SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

DECEMBER 31, 2000 AND 1999

PAGE F-8

FINANCIAL  INSTRUMENTS
CONTINUED     carrying  value,  due  to  the immediate or short-term maturity of
these  financial  instruments.  The  carrying  amount  for  convertible  notes
approximates  fair  value  because  in  general terms are comparable to those on
convertible  debentures received by other development stage companies not having
revolving  credit  facilities  for  comparable  amounts  borrowed.

     It  was  not  practicable  to  determine  the fair value of pre-acquisition
amounts  advanced  by the Company to Merlin Software Technologies Inc. and other
long-term  loans.

INCOME  TAXES     The  Company  follows the provisions of Statement of Financial
Accounting  Standards  ("SFAS")  No.  109,  "Accounting for Income Taxes", which
requires  the  Company  to recognize deferred tax liabilities and assets for the
expected  future  tax  consequences  of  events that have been recognized in the
Company's financial statements or tax returns using the liability method.  Under
this  method,  deferred  tax  liabilities and assets are determined based on the
temporary  differences  between the financial statement carrying amounts and tax
bases  of  assets  and liabilities using enacted rates in effect in the years in
which  the  differences  are  expected  to  reverse.

FOREIGN  CURRENCY  TRANSACTIONS     Transactions  undertaken in currencies other
than  the  US  dollar  are  translated  to US dollars using the exchange rate in
effect  as of the transaction date.  Monetary assets and liabilities denominated
in  foreign  currencies  are  then translated to US dollars using the period end
rate.  Any  exchange  gains  and  losses  are  included  in  the  Statement  of
Operations.

LOSS  PER  SHARE     Loss per share is computed in accordance with SFAS No. 128,
"Earnings  Per  Share".  Basic  loss per share is calculated by dividing the net
loss  available  to common stockholders by the weighted average number of common
shares  outstanding  for  the  period.  Diluted  earnings per share reflects the
potential  dilution of securities that could share in earnings of an entity.  In
loss periods, dilutive common equivalent shares are excluded as the effect would
be  anti-dilutive.  Basic  and  diluted  earnings per share are the same for the
periods  presented.

     Common  equivalent  shares  (consisting  of  shares issuable on exercise of
stock  options,  warrants  and  on  conversion  of  convertible notes) totalling
8,009,688  (1999  -  761,000)  were  not  included in the computation of diluted
earnings  per  share  because  the  effect  was  anti-dilutive.

STOCK  BASED  COMPENSATION     The  Company follows the provisions of Accounting
Principles  Board  ("APB") Opinion No. 25, including interpretations provided in
Interpretation  No.  44,  "Accounting for Certain Transactions  Involving  Stock
Compensation",  in  recognizing

<PAGE>

PAGE F-9

                                MERLIN SOFTWARE TECHNOLOGIES INTERNATIONAL, INC.
                                                   (A DEVELOPMENT STAGE COMPANY)
                                      SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

DECEMBER 31, 2000 AND 1999


STOCK  BASED  COMPENSATION  - CONTINUED     and measuring  compensation  expense
for  options  granted to employees.  Generally, compensation expense is recorded
for the difference between  the  market price of the underlying common stock and
the  exercise  price  of  the  stock  options.  Effective  from  the date of the
modification,  the  Company  regularly  re-measures  compensation  expense  for
options where there has been a substantive  change or modification to such stock
options.

     SFAS  No.  123,  "Accounting  for  Stock-Based  Compensation", requires the
Company to provide pro-forma information regarding net income as if compensation
cost  for the Company's stock option plan had been determined in accordance with
the  fair  value  based  method  prescribed  in SFAS No. 123. The value of stock
options  granted  to  consultants is recognized in these financial statements as
compensation  expense  using  the  Black-Scholes  option  pricing  model.

     Compensation  expense  is remeasured on a quarterly basis for options still
unvested.  Compensation  expense  is  amortized  over the length of the contract
period  (if  one  exists)  or  the  period  to  which  the  options  vest.

DEFERRED  FINANCING  COSTS     Costs  directly  associated  with the convertible
notes  issued  during  the year are capitalized and amortized on a straight-line
basis  (not  materially  different from the effective interest rate method) over
the  term  of  the  convertible  notes.

SOFTWARE  DEVELOPMENT COSTS    In  accordance  with SFAS No. 86, "Accounting for
the  Cost  of  Computer  Software  to  be  Sold, Leased, or Otherwise Marketed",
development costs incurred in  the  research  and  development  of  new software
products are expensed as incurred until technological feasibility in the form of
a  working  model  has  been  established.  To  December  31, 2000 and 1999, the
Company's software development is  in  progress  and  commercial feasibility had
not  yet  been established.  Accordingly,  all  software  development  costs
(consisting  of amounts paid or payable  to  consultants)  have  been charged to
the accompanying statement of operations.

REVENUE RECOGNITION     The Company has recognized minimal revenues to date from
the sale of software products.  Revenue is derived from software sold indirectly
through distributors and solution providers and directly to end-users.  To date,
substantially  all  revenue has been derived from sales of software to end-users
without  right  of  return  privileges.   The  Company  follows  the

<PAGE>

PAGE F-10

                                MERLIN SOFTWARE TECHNOLOGIES INTERNATIONAL, INC.
                                                   (A DEVELOPMENT STAGE COMPANY)
                                      SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

DECEMBER 31, 2000 AND 1999


REVENUE  RECOGNITION  -
CONTINUED     provisions  of  Statement  of  Position  ("SOP")  97-2,  "Software
Revenue  Recognition",  which  has been amended by SOP 98-4 and SOP 98-9.  These
statements  set  forth  generally  accepted  accounting  principles  for revenue
recognized  under  software  license  and  service  arrangements.

Revenue  from  the  sale  of software is recognized upon delivery of the product
when  persuasive  evidence  of  an  arrangement  exists,  the  price is fixed or
determinable and collection is probable. Direct sales to end-users are evidenced
by  concurrent  payment  for  the  product via credit card and are governed by a
license  agreement.  For  licensing  of the Company's software to OEMs and other
resellers,  revenue  is  not  recognized  until the OEM sells the software to an
end-user  customer.  For  licensing of software through indirect sales channels,
revenue  is  recognized  when  the reseller, value-added reseller or distributor
sells  the  software  to  an  end-user  customer.  The  Company  considers  all
arrangements  with  payment  terms  extending  beyond  twelve  months  and other
arrangements with payment terms longer than normal not to be considered fixed or
determinable.  If  collectibility  is  not  considered  probable,  revenue  is
recognized  when  the  fee  is  collected.   Product returns are reserved for in
accordance  with SFAS 48.  Until the Company can establish a history of returns,
recognition  of  revenue  is  deferred  on sales to distributors having right of
return  privileges  until  the  return  period  expires.  Once a reliable return
history  is  created,  such  returns  will  be estimated using historical return
rates.

In  the  future,  the  Company  expects  to  offer  software arrangements to its
customers  whereby  the  software  license  would  include the rights to related
products  such  as  upgrades  and  technical support.  In such arrangements, the
Company  will  allocate the total cost of the arrangement among each deliverable
based upon the relative fair value of each of the deliverables, determined based
on  vendor-specific  objective  evidence  of  fair  value.

Freight  charges  billed to customers are included in sales while the associated
freight  costs  are  included  in  cost  of  sales.

CASH  AND  EQUIVALENTS     The  Company  considers all highly liquid investments
with  an  original  maturity  of  three  months  or less to be cash equivalents.

DETACHABLE  STOCK  PURCHASE
WARRANTS     Proceeds  from  debt issued with detachable stock purchase warrants
are  allocated  between  the  debt and the warrants based on their relative fair
values.  The  value  ascribed to the warrants is recorded as a debt discount and
is  amortized  to  interest  expense over the term of the related debt using the
effective  interest  rate  method.

<PAGE>

PAGE F-11

                                MERLIN SOFTWARE TECHNOLOGIES INTERNATIONAL, INC.
                                                   (A DEVELOPMENT STAGE COMPANY)
                                      SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

DECEMBER 31, 2000 AND 1999


USE  OF ESTIMATES     The preparation of financial statements in conformity with
generally  accepted  accounting principles requires management to make estimates
and  assumptions  that affect the reported amounts of assets and liabilities and
disclosure  of  contingent  assets  and liabilities at the date of the financial
statements  and the reported amounts of revenues and expenses during the period.
Actual  results  could  differ  from  those  estimates.

ADVERTISING     The Company follows the provisions of Statement of Position 93-7
in  accounting  for  the costs of advertising.  Advertising costs are charged to
expense  in  the  period  incurred.

COMPREHENSIVE  INCOME     SFAS  No.  130,  "Reporting  Comprehensive  Income",
establishes  standards  for  reporting  and presentation of comprehensive income
(loss).   This standard defines comprehensive income as the changes in equity of
an  enterprise  except  those  resulting  from  stockholder  transactions.
Comprehensive loss for the period from June 25, 1999 (incorporation) to December
31,  1999  and for the year ended December 31, 2000 equaled the net loss for the
periods.

NEW  ACCOUNTING
PRONOUNCEMENTS     In  March  2000,  the  Financial  Accounting  Standards Board
issued  FASB  Interpretation  No.  44,  "Accounting  for  Certain  Transactions
Involving  Stock Compensation", an interpretation of Accounting Principles Board
Opinion  No.  25.  The  Interpretation requires, among other matters, that stock
options that have been modified to reduce the exercise price be accounted for as
variable.  This standard was adopted during the year ended December 31, 2000 but
did  not  have  a  material  effect on the Company's financial statements as the
majority  of  options  granted  to  date  were  to  consultants.

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

<PAGE>

PAGE F-13

                                MERLIN SOFTWARE TECHNOLOGIES INTERNATIONAL, INC.
                                                   (A DEVELOPMENT STAGE COMPANY)
                                  NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER  31,  2000  AND  1999

1.     NATURE  OF  BUSINESS  AND  ABILITY  TO  CONTINUE  OPERATIONS

The Company was organized August 30, 1995, under the laws of the State of Nevada
as  Austin Land & Development, Inc.  On January 7, 2000, the Company changed its
legal  name to Merlin Software Technologies International, Inc. in contemplation
of  closing a share exchange agreement with the principal stockholders of Merlin
Software  Technologies Inc., ("Merlin PrivateCo.") Merlin PrivateCo. is a Nevada
company developing utility software programs for personal computers with a Linux
or  Unix  operating  system.  The acquisition closed on April 26, 2000 (Note 2).
At  December  31,  2000  and 1999, the Company is considered a development stage
company  in accordance with Statement of Financial Accounting Standards ("SFAS")
No.  7.

These  accompanying  financial  statements have been prepared on a going concern
basis,  which  contemplates  the  realization  of assets and the satisfaction of
liabilities  and  commitments  in the normal course of business.  As at December
31,  2000,  the  Company  has  recognized  minimal  revenue  and has accumulated
operating  losses  of  approximately  $4.1  million  since  its  inception.  The
continuation  of  the Company is dependent upon the continuing financial support
of  creditors and stockholders and obtaining long-term financing, the completion
of product development and achieving profitability.  Management has entered into
an  agreement  to  issue  $1  million  in  convertible notes upon a registration
statement  being  declared  effective  by the Securities and Exchange Commission
(Note  7).  Such  amounts  will be used for short-term working capital purposes.
Management  also  plans to raise additional equity capital to provide additional
short-term and long-term financing for operating and capital requirements of the
Company.  Management  plans  to  raise  new equity financing of approximately $5
million  within  the  upcoming  year.  Amounts  raised  will be used for further
development  of  the  Company's products, to provide financing for the marketing
and  promotion  of  the  Company's  products,  an investor relations program, to
secure  products  and  for other working capital purposes.  While the Company is
expending  its  best  efforts  to achieve the above plans, there is no assurance
that  any  such  activity  will  generate  funds  that  will  be  available  for
operations.

These conditions raise substantial doubt about the Company's ability to continue
as  a  going concern.  These financial statements do not include any adjustments
that  might  arise  from  this  uncertainty.

2.     REVERSE  ACQUISITION

Effective April 26, 2000, the Company (then an inactive publicly-traded company)
closed  a  share exchange agreement to acquire all of the issued and outstanding
shares  of software developer Merlin Software Technologies Inc. ("Merlin Private
Co.")  in  exchange  for 7,986,665 shares of the Company's common stock.  Merlin
Private Co. is a Nevada company incorporated on June 25, 1999 for the purpose of
the  development of Linux-based software utilities and other business management
software.  At December 31, 2000, 7,973,332, Merlin Private Co. common shares had
been  exchanged  leaving  13,333  still  to  be  exchanged.

The  transaction  was  accounted  for  as  a  recapitalization  using accounting
principles  applicable  to  reverse acquisitions.  Following reverse acquisition
accounting, financial statements subsequent to the closing date are presented as
a  continuation of Merlin Private Co.  The value assigned to common stock of the
Company  on  acquisition  based  on  the  fair  value  of

<PAGE>

PAGE F-14

                                MERLIN SOFTWARE TECHNOLOGIES INTERNATIONAL, INC.
                                                   (A DEVELOPMENT STAGE COMPANY)
                                  NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER  31,  2000  AND  1999


2.     REVERSE  ACQUISITION  -  CONTINUED

the net assets of the  Company at the date of acquisition was $ 1,242,323.   Net
assets  at  the acquisition date included $1,275,000 raised by the Company in an
equity  private  placement  and  loaned  to  Merlin  Private  Co. and settled in
contemplation  of  closing  the  acquisition  and  accounts  payable of $32,677.

Pro-forma  information  assuming  the  acquisition  occurred  on  June  25, 1999
(incorporation  of  Merlin  PrivateCo.)  is  as  follows:

                                                                    Period  from
                                                                 June  25,  1999
                                           YEAR  ENDED       (incorporation)  to
                                          DECEMBER  31              December  31
                                              2000                          1999
                                             ----                           ----

     Revenue                            $       37,515     $                  -
     Loss  for  the  period             $   (3,478,939)    $           (630,838)
     Loss  per  share                   $          (0.28)  $              (0.04)

Also,  in  connection  with  the  acquisition, the Company was required to issue
86,665  share  purchase  warrants (Note 8) and 781,000 stock options (Note 6) to
previous  holders  of  warrants  and  options in Merlin Private Co.  Options and
warrants were to be exchanged on a 1:1 basis under the same terms and conditions
as  existed  in  Merlin  Private  Co.  As a consequence of the exchange of stock
options,  additional  compensation  expense  was  booked at the date of exchange
representing  the  difference  in  value  of  stock  options between the date of
exchange  and  the  grant  date  (Note  6).


3.     PROPERTY  AND  EQUIPMENT

                                                         2000               1999
                                                         ----               ----
Computer  hardware                                $    100,389     $      46,567
Furniture  and  fixtures                                51,936            36,516
Computer  software                                      28,237             8,428
Trademarks                                               3,017             3,017
Leasehold  improvements                                  7,817                 -
                                                         -----            ------
                                                       191,396            94,528

Accumulated  depreciation                               60,183             7,964
                                                        ------             -----
Net  Book  Value                                   $   131,213       $    86,564
                                                   =============================


<PAGE>

PAGE F-15

                                MERLIN SOFTWARE TECHNOLOGIES INTERNATIONAL, INC.
                                                   (A DEVELOPMENT STAGE COMPANY)
                                  NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER  31,  2000  AND  1999

4.     DEMAND  LOANS  PAYABLE

In  1999,  Merlin  PrivateCo.  received  unsecured,  non-interest bearing demand
bridge  loans  totalling $210,000 from subscribers to a private placement in the
Company.  On  January  5, 2000, a further $80,000 was advanced to the Company by
these  subscribers.  The  demand  loans  were  repaid later in January 2000.  In
2000,  the  Company  received  additional  non-interest  bearing demand loans of
$48,513  which  were  repaid  during  the  year.

5.     LOANS  PAYABLE

a)     Private  placement  proceeds  in  Merlin  Private  Co.  in  1999 totaling
$130,000  did  not  bear  interest.  On April 3, 2000, Merlin Private Co. issued
86,665  units  of Merlin Private Co. whereby each unit consisted of one share of
common stock of Merlin Private Co. and a warrant to purchase one share of Merlin
Private  Co.  common  stock at a price of $2 per share until expiry on March 31,
2002.  Under  the  terms of the share exchange agreement, the common shares were
exchanged  for  common  shares  of  the  Company.  Warrants  were  exchanged for
warrants  of  the  Company  on  a  1:1  basis under similar terms as existed for
warrants  in  Merlin  Private  Co.

b)     In  contemplation  of  closing  the  reverse  acquisition  with  Merlin
PrivateCo., the Company previously advanced $1,275,000 to Merlin Private Co. out
of  the  proceeds  of  a  $1,275,000 private placement received in December 1999
($675,000)  and  January  2000  ($600,000).  The  amounts  were  advanced  on an
unsecured,  non-interest bearing basis with no specific terms of repayment.  The
private  placement  resulted  in the issuance of 850,000 units of the Company at
$1.50  per  unit  with each unit consisting of one share of common stock and one
warrant  to  purchase  common  stock  until  February  11, 2002 at $2 per share.

     On  consolidation,  the  intercompany  loan was settled and reclassified as
additional  paid-in  capital.

6.     STOCK  OPTIONS

On  May  1,  2000,  the Company's Board of Directors approved the Company's 2000
Stock  Option Plan.  The Plan provides for the granting of up to 3,000,000 stock
options  to  key  employees  and  consultants,  of common shares of the Company.
Under  the  Plan,  the  granting  of  incentive and non-qualified stock options,
exercise  prices  and  terms are determined by the Company's Board of Directors.
For incentive options, the exercise price shall not be less than the fair market
value  of  the Company's common stock on the grant date. (In the case of options
issued  to  an  employee  who  owns stock possessing more than 10% of the voting
power  of  all  classes  of the Company's stock on the date of grant, the option
price must not be less than 110% of the fair market value of common stock on the
grant date.).  Options granted are not to exceed terms beyond ten years (5 years
in  the  case  of an incentive stock option granted to a holder of 10 percent of
the  Company's  common  stock).  Options granted in substitution for outstanding
options of an acquired company may be issued with an exercise price equal to the
exercise  price  of  the  substituted  option  in  the acquired company.  Unless
otherwise  specified  by the Board of Directors, stock options shall vest at the
rate  of  25%  per  year  starting  one  year following the granting of options.

<PAGE>

PAGE F-16

                                MERLIN SOFTWARE TECHNOLOGIES INTERNATIONAL, INC.
                                                   (A DEVELOPMENT STAGE COMPANY)
                                  NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER  31,  2000  AND  1999


6.     STOCK  OPTIONS  -  CONTINUED

Details of options granted and cancelled during the year ended December 31, 2000
are  as  follows:

<TABLE>
<CAPTION>



                                                                                    Weighted         Weighted
                                                                                     Average          Average
                                                              Number             Exercise Price    Fair Value
                                                   ----------------------------  ---------------  -----------
<S>                                                <C>                           <C>              <C>
Merlin PrivateCo.
  Options granted during 1999
  and balance, December 31, 1999. . . . . . . . .                      781,000   $          1.00  $      0.08
  Options exchanged (Note 2). . . . . . . . . . .                     (781,000)             1.00

Merlin Software Technologies International, Inc.
  Options granted . . . . . . . . . . . . . . . .                    1,012,000   $          1.08  $      2.26
  Options cancelled . . . . . . . . . . . . . . .                     (201,000)  $          1.00
                                                   ----------------------------  ---------------
  Options outstanding at
   December 31, 2000. . . . . . . . . . . . . . .                      811,000   $          1.09
                                                   =============================================
  Options exercisable at
   December 31, 2000. . . . . . . . . . . . . . .                      458,000
                                                   ============================
  Options exercisable at
   December 31, 1999. . . . . . . . . . . . . . .                      387,800
                                                   ============================
</TABLE>

Compensation expense of $1,153,668 during the year ended December 31, 2000 (1999
-  $12,022) was recorded for options granted during the year including an amount
representing  the difference in value of options exchanged for options in Merlin
Private  Co.  Compensation  expense  for the periods ended December 31, 2000 and
1999,  was  allocated  as  follows:


                                                                    Period  from
                                                                 June  25,  1999
                                          YEAR  ENDED        (incorporation)  to
                                          DECEMBER  31              December  31
Expense                                       2000                          1999
-------                                       ----                          ----

General  and  administration             $     524,015                 $  12,022
Promotion  and  advertising                    358,855                         -
Research  and  development                     270,798                         -
                                               -------                    ------
                                        $    1,153,668                 $  12,022
                                        ========================================


<PAGE>

PAGE F-17

                                MERLIN SOFTWARE TECHNOLOGIES INTERNATIONAL, INC.
                                                   (A DEVELOPMENT STAGE COMPANY)
                                  NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER  31,  2000  AND  1999

6.     STOCK  OPTIONS  -  CONTINUED

Stock  options  outstanding  at  December  31,  2000  were  as  follows


<TABLE>
<CAPTION>



                                   Outstanding

                                 Weighted                                Exercisable
                                  Average      Weighted                                    Weighted
Range of                       Remaining Life   Average                                     Average
Exercise Prices      Number       (months)   Exercise Price           Number         Exercise Price
---------------------------------------------------------------------------------------------------
<S>                 <C>           <C>          <C>                    <C>            <C>

0.37 . . . .           12,000         119      $     0.37                 -          $     -
0.99 - $1.30          695,000          78      $     1.01           440,000          $  1.00
1.65 - $1.80          104,000         117      $     1.74            18,000          $  1.75
               ---------------                                 --------------
                      811,000                                       458,000

</TABLE>

Subsequent  to  December  31,  2000:

-     358,000  stock options were granted to employees with an exercise price of
$0.35  per option expiring in ten years, with 90,000 vesting immediately and the
balance  vesting  in  January  2002  and  March  2002

-     173,000  stock  options with an exercise price of $1.00 per option expired
upon  termination  of  the  optionees'  services  to  the  Company.

On  March  1, 2001, the Board of Directors approved a repricing of 562,000 stock
options  to  reduce  the  exercise  price to $0.35 per option.  The terms of the
options  and  the  vesting  periods  were  unchanged.  The  trading value of the
Company's  common  stock  on  the  date  of  repricing  was  $0.4688  per share.
Repricing  of  the  options  is  expected  to  result in additional compensation
expense  in 2001 for the incremental increase in value due to the repricing.  As
well,  variable  accounting  will  apply pursuant to FASB Interpretation No. 44.

Pro-forma  information  concerning Net Loss and Loss per Share is required under
SFAS  No. 123 and has been determined as if the Company had accounted for all of
its  stock  options  under  the fair value method of SFAS No. 123.  Net Loss and
Loss  per Share on a pro-forma basis would be approximately $3,550,000 and $0.32
for  the  year  ended  December  31,  2000.  Net  loss  and  Loss per Share on a
pro-forma  basis  for  the period from June 25, 1999 (incorporation) to December
31,  1999  would  be  approximately $659,000 and $0.09.  The fair value of stock
options  granted  during  2000  was  estimated  at  the  date  of grant with the
following weighted average assumptions: no dividends, risk-free interest rate of
6.2%,  volatility  factor  of  the expected market price of the Company's common
stock  of  184%  and  an  expected  life  of  the  options  of  24  months.

<PAGE>

PAGE F-18

                                MERLIN SOFTWARE TECHNOLOGIES INTERNATIONAL, INC.
                                                   (A DEVELOPMENT STAGE COMPANY)
                                  NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER  31,  2000  AND  1999

7.     CONVERTIBLE  NOTES  PAYABLE

On  August 18, 2000, the Company entered into an agreement to issue $2.1 million
of  Series A Senior Secured Convertible Notes due on August 18, 2003 and bearing
interest  at  10%  per  annum  due  semi-annually.  The  convertible  notes  are
collateralized  by  all  of  the  Company's  assets  and  intellectual property.

The Company issued $1.1 million of convertible notes on August 24, 2000 with the
remaining  $1.0  million  balance  to  be  issued within seven days of a related
registration  statement  being  declared  effective  by  the SEC.  The notes are
immediately convertible at the option of the holders into shares of common stock
of the Company at the lesser of $1.60 or the price which is 95% of the lowest of
the  two  lowest  intra-day  trading  prices  of the common stock for the 30 day
period ending on the trading date immediately preceding the conversion date.  As
a  result,  a  beneficial conversion feature of $53,000 (based on 95% of the two
lowest  intra-day  trading  prices  of the common stock of $1.64) related to the
issuance  of  $1.1 million of convertible notes payable was recorded as interest
expense  on  the date of issuance.  The beneficial conversion feature associated
with  additional  convertible  notes payable not yet issued will be recorded and
measured on the date additional notes payable are issued.  At December 31, 2000,
none  of  the  convertible  notes  payable  have  been  converted.

The  $1.1  million  of convertible notes payable also contain 770,000 detachable
warrants  exercisable  to  purchase  shares of the Company's common stock at any
time  after August 24, 2001 to expiry on August 18, 2007 at a price of $1.75 per
share.  An  additional  750,000  detachable warrants with the same terms will be
issued in connection with the unissued balance of the convertible notes payable.
The  value of the 770,000 warrants based on a Black-Scholes option pricing model
was  $1,047,000  using  the  following  assumptions:

-     No  dividends;
-     Risk-free  interest  of  6.2%
-     Volatility  of expected market price of the Company's common stock of 182%
-     Expected  life  of  the  warrants  of  36  months

The discount was recorded as additional paid-in capital during the period and is
being  amortized  as  interest  expense using the effective interest rate method
over  the  term  of the convertible notes payable.  $21,239 was amortized during
the  year  ended  December  31,  2000.

The  convertible  notes  contain  provisions to adjust the conversion price for,
among  other  matters, changes in the capital structure and situations where the
Company  issues  common  stock  at  a price of less than $1.60 per share.  Among
other  matters,  damages  are  payable  to the noteholders at the rate of 2% per
thirty  day  period  following  January  24,  2001  as a result of the Company's
registration  statement  not being declared effective by the SEC within 150 days
of  issuance  of  the  notes.

By virtue of the sale of 500,000 shares of the Company's common stock at a price
of  $0.50  per share (Note 11), certain adjustment provisions to the convertible
note  agreements  have  been  triggered.  The  possible effect of the adjustment
provisions  would  be  to  require  a  reduction  in  the  fixed  element of the
conversion  price  of the notes payable from $1.60 to $0.50 per share and reduce
the  exercise price of the warrants from $1.75 to $0.50.  All other terms of the
convertible  notes and warrants would remain unchanged.  Pursuant to discussions
with  the  noteholders,  management does not feel this adjustment clause will be
triggered.

<PAGE>

PAGE F-19

                                MERLIN SOFTWARE TECHNOLOGIES INTERNATIONAL, INC.
                                                   (A DEVELOPMENT STAGE COMPANY)
                                  NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER  31,  2000  AND  1999


7.     CONVERTIBLE  NOTES  PAYABLE  -  CONTINUED

The  Company  incurred  direct  costs  in  connection with the convertible notes
payable  of $67,041 which is being amortized to the Statement of Operations over
the  term of the notes payable.  To December 31, 2000, $7,915 has been amortized
leaving  a  net  book  value  of  the  deferred  asset  of  $59,126.


8.     SHARE  PURCHASE  WARRANTS

     Details of share purchase warrants outstanding at December 31, 2000 were as
follows:

<TABLE>
<CAPTION>



                                                                            Exercisable on
                                                 Exercise                      December 31
                                  Number          Price         Expiry                2000
------------------------------------------------------------------------------------------
<S>                              <C>            <C>           <C>           <C>
Issued:
On private placement (*)          200,000         $1.75       March 2001           200,000
On private placement (Note 5)     850,000         $2.00      February 2002         850,000
On share exchange (Note 2)         86,665         $2.00       March 2002            86,665
On convertible notes (Note 7)     770,000         $1.75       August 2007                -
                               --------------                                      -------
                                 1,906,665                                       1,136,665
<FN>

(*)     In  September  2000,  the  Company completed a private placement of 100,000
units  at  a  price  of  $1.60  per unit for total proceeds of $160,000.  Each unit
comprised  of one share of the Company's common stock plus two warrants exercisable
at  $1.75  each  until  expiry  in  March  2001.
</TABLE>

9.     COMMITMENTS  AND  STOCK  COMPENSATION

a)     On  June  28,  2000,  the Company entered into a consulting agreement for
financial  services.  The  contract  expires  on  June 30, 2002 and provides for
compensation  should  the Company receive financing from any investor introduced
by  the  consultant.  Compensation  includes:

i)     payment  of  $100,000 and 300,000 shares of the Company's common stock in
2000;
ii)     payment  of  $230,000  in  2001;
iii)     payment  of  100,000  shares  of  the Company's common stock should the
Company  achieve  a  NASDAQ  listing;  and
iv)     right  of  first  refusal on additional financing in consideration for a
commission  of  5%  of  such  capital  in  cash  and  5%  in  stock.

Payments  under  (i)  and  (ii) are due to the consultant regardless of contract
termination.  The  total  committed  cost  of  the  contract  of  approximately
$400,000,  including  $70,000  being  the value attributable to the common stock
using  the  trading  price  of  the  common stock at the year end date, is being
recognized  on  a  straight-line  basis over the term of the contract.  The cost
associated  with  the  stock  component  of  the  contract  will  ultimately  be
determined on the date the stock is issued since negotiations over consideration
with  the consultant continued in the months subsequent to the performance date.
During  the

<PAGE>

PAGE F-20

                                MERLIN SOFTWARE TECHNOLOGIES INTERNATIONAL, INC.
                                                   (A DEVELOPMENT STAGE COMPANY)
                                  NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER  31,  2000  AND  1999


9.     COMMITMENTS  AND  STOCK  COMPENSATION  -  CONTINUED

year  ended  December  31,  2000,  the  Company recorded an expense of $100,000.
300,000  shares  of  common  stock issuable under the terms of the contract ((i)
above)  were  issued  in  January  2001,  when  the  trading  price was $0.7344.

b)     On April 11, 2000 the Company entered into an agreement with a consultant
whereby  the  Company  would issue 80,000 shares of common stock in exchange for
corporate  finance services.  The shares were issued in January 2001, at a value
of  $0.7344 per share.  The cost of services based upon the trading price of the
underlying  common  stock  on  the  year  end  date of approximately $20,000 was
recognized  in  the Statement of Operations for the year ended December 31, 2000
since  the  consultant no longer provides services to the Company.  The ultimate
cost  associated  with  the  stock  to  be  issued  is determined on the date of
issuance  of the stock since negotiations over consideration with the consultant
continued  in  the  months  subsequent  to  the  performance  date.

c)     Pursuant  to  an  agreement  dated  October  7,  2000,  a  further 83,571
shares  of  common  stock  were issued in January 2001 at a value of $0.7344 per
share  to  a  consultant  as  consideration  for  employee  recruitment services
performed  in  2000.  The  cost  of  services  of approximately $30,000 has been
accrued  in  these  financial  statements  based  upon  the trading price of the
underlying  common  stock  on  the  year-end  date.

d)     On  October  1,  2000, the Company entered into a lease agreement for its
new  premises  in  Burnaby, British Columbia for a term expiring in August 2002.
Minimum  annual  lease  payments  under  the  premises  lease  are  as  follows:

2001     -     $   35,000
2002     -     $   23,000

     Rent  expense  for  the  year  ended  December 31, 2000 was $27,175 (1999 -
$6,018)

e)     In  March  2000,  the Company entered into management agreements with its
three founders.  In July 2000, one of the founders resigned and another resigned
in  January  2001.   No  compensation was payable on termination.  Amongst other
matters,  terms  of the remaining founder agreement require that the Company pay
the founder a total of $240,000 plus 700,000 shares of common stock in the event
of  a  change  of  control  of  the  Company.  The  Company also entered into an
agreement  with  an officer for services in April 2000 which provides for, among
other  matters,  a payment of approximately $46,000 and 100,000 shares of common
stock  should  a  change  of  control  occur.


<PAGE>

PAGE F-21

                                MERLIN SOFTWARE TECHNOLOGIES INTERNATIONAL, INC.
                                                   (A DEVELOPMENT STAGE COMPANY)
                                  NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER  31,  2000  AND  1999

10.     INCOME  TAXES

The  tax  effects  of  temporary  differences  that  give  rise to the Company's
deferred  tax  asset  are  as  follows:

                                                  2000                      1999

Tax  loss  carryforwards                     $  1,230,000          $    280,000
Property  and  equipment                           22,000                     -
Deferred  financing  charges  and  interest        17,500                     -
Valuation  allowance                           (1,234,500)             (280,000)
                                             -----------------------------------
                                             $          -          $           -
                                             ===================================

The  provision  for  income  taxes  differs  from the amount estimated using the
federal  statutory  income  tax  rate  as  follows:

                                                                    Period  from
                                                                 June  25,  1999
                                             YEAR  ENDED     (incorporation)  to
                                            DECEMBER  31            December  31
                                                2000                        1999

Provision  (benefit)  at  federal
  statutory  rate                         $    (1,177,000)     $       (210,000)
Effect  of  taxation  in  Canada                 (335,000)              (70,000)
Stock option compensation and
  other permanent differences                     557,500                     -
Increase  in  valuation  allowance                954,500                280,000
                                          --------------------------------------
                                          $             -      $              -
                                          ======================================

     The  Company  evaluates  its  valuation  allowance  requirements  based  on
projected future operations.  When circumstances change and this causes a change
in  management's  judgement about the recoverability of deferred tax assets, the
impact  of the change on the valuation allowance is reflected in current income.

At  December  31,  2000,  the  Company  had  estimated losses carried forward of
approximately  $2.8  million  available  to  reduce future taxable income. These
losses  will  expire  as  follows:

2005     -     $     560,000
2006     -     $   1,820,000
2019     -     $      60,000
2020     -     $     360,000


<PAGE>

PAGE F-22

                                MERLIN SOFTWARE TECHNOLOGIES INTERNATIONAL, INC.
                                                   (A DEVELOPMENT STAGE COMPANY)
                                  NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER  31,  2000  AND  1999


11.     SUBSEQUENT  EVENTS

Subsequent  events  not disclosed elsewhere in these financial statements are as
follows:

a)     The  Company issued a further 500,000 shares of common stock to a company
in  exchange  for  a  non-interest  bearing  promissory  note  in  the amount of
$250,000.  The  note is repayable on March 5, 2002 and may be paid in cash or in
exchange  for  services provided to assist the Company in developing an investor
relations  program

b)     The  Company  obtained  a  demand  operating  loan from the Royal Bank of
Canada  totaling CDN $150,000 (approximately $100,000) bearing interest at Prime
plus  2%  per  annum  and  repayable  before  March  31,  2001.

<PAGE>

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

     On  March  20, 2000, we engaged BDO Dunwoody LLP, Chartered Accountants, to
audit  our financial statements for the fiscal years ended December 31, 1999 and
1998.  During  our  two  most  recent  fiscal  years, and any subsequent interim
periods  preceding  the  change in accountants, there were no disagreements with
Barry  Friedman  P.C.,  CPA on any matter of accounting principles or practices,
financial  statement  disclosure,  or  auditing  scope  procedure.  Mr. Friedman
provided  us  with a letter, dated April 4, 2000, confirming that he agreed with
our  disclosure  on  Form 8-K in connection with the change of accountants.  The
decision  to change accountants was based on the appointment of new directors to
our  board  of  directors.

     We  did  not consult BDO Dunwoody LLP, Chartered Accountants, regarding the
application  of  accounting principles to any specific completed or contemplated
transaction or the type of audit opinion that might be rendered on the Company's
financial  statements.

                                    PART III

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

Directors  and  Executive  Officers  of  Merlin

     All  directors  of our company hold office until the next annual meeting of
the shareholders or until their successors have been elected and qualified.  The
officers  of our company are appointed by our board of directors and hold office
until  their  death,  resignation  or  removal  from  office.

Our  directors  and executive officers, their ages, positions held, and duration
as  such,  are  as  follows:

<TABLE>
<CAPTION>



                                                                                                              DATE FIRST
NAME                                     POSITION HELD WITH THE COMPANY            AGE              ELECTED OR APPOINTED
---------------------------------------  ------------------------------  -----------------------    --------------------
<S>                                      <C>                             <C>                      <C>

                                                                                                     Director, President
                                                                                                     and Chief Executive
Robert Heller . . . . . . . . . . . . .  Director, President and Chief                                     Officer since
                                         Executive Officer                           45                 January 19, 2000


                                                                                                   Director since May 22
                                                                                                2000 and Chief Financial
Trevor McConnell. . . . . . . . . . . .  Director, Chief Financial Officer                         Officer and Treasurer
                                         and Treasurer                               36               since May 10, 2000


                                                                                                  Director since October
Webb Green. . . . . . . . . . . . . . .  Director                                    58                         4,  2000


                                                                                                  Director since October
Hank Barber . . . . . . . . . . . . . .  Director                                    57                         25, 2000


                                                                                                    Vice President since
Kevin O'Reilly. . . . . . . . . . . . .  Vice President of Marketing                 34                  January 4, 2001


                                                                                                    Vice President since
James Baglot. . . . . . . . . . . . . .  Vice President of Sales                     44                  January 4, 2001
=======================================  ==============================  =======================    ====================
</TABLE>

<PAGE>

Business  Experience

     The  following  is a brief account of the education and business experience
during  at least the past five years of each director, executive officer and key
employee,  indicating  the principal occupation during that period, and the name
and  principal  business  of  the  organization  in  which  such  occupation and
employment  were  carried  out.

Robert  Heller,  Director,  President  and  Chief  Executive  Officer

     Robert  Heller  has  been  involved in the computer and software industries
since  1978  and  in  the  Internet  business  since 1990.  He has owned his own
software consulting business for over 17 years, providing design development and
management  to  key  corporate accounts throughout Canada and the United States.
He  is  also  the President of B.O.S.S. Systems Inc., a software development and
consulting  firm,  having  served  in  that  capacity  since  1986.  He  was the
President  of  Express  Lane  Communications  Corporation,  an  Internet service
provider,  for two years from 1995 until 1997.  For the six years prior to 1986,
Mr.  Heller  held various managerial positions at Radio Shack, Canada, and Tandy
Corporation,  U.K.  where  he  spent  six  years.

     Mr.  Heller  was  educated  in  South  Africa  and England, graduating from
Cauldon  College  of  Further  Education  in  the  UK  in  1976.  Mr. Heller has
completed  a  number  of  post  secondary  education courses through private and
professional  institutions.  Mr.  Heller  has  over eighteen years of experience
with  UNIX  based  software  application  and  development.  He  has  designed,
developed  and  implemented  systems  including  health care management systems,
financial  management  software  for automotive dealerships and UNIX based voice
and  faxmail  server  systems  for  InstaFax.  Mr.  Heller  has  also  provided
consulting  services  to  N.C.R.  Corporation,  Xerox,  Data Processing Managers
Association  and  Unisys,  and specializes in the analysis of business needs and
procedures.

Trevor  McConnell,  Director,  Chief  Financial  Officer  and  Treasurer

     Trevor  McConnell  is  a  member  of  the  Certified  General  Accountants
Association  of  British  Columbia.  He  was  been  involved  in  accounting and
financial  management  since 1982. From April 1992 to September 1996, he was the
Vice  President  of  Finance  for  Glas-Aire  Industries  Ltd., a public company
involved in the manufacture of automotive accessories, whose common shares trade
on  the  Nasdaq  SmallCap Market.  From September 1996 to September 1999, he was
the  Director  of  Finance and Administration for Seacor Environmental Inc., the
Canadian  subsidiary  of  Secor  Inc.,  an  environmental  engineering  company.

     From  March  1988  to  April 1992, he was employed with a firm of Chartered
Accountants, as an accountant and performed a wide range of services for public,
private  and  non-profit organizations.  From October 1999 to April 2000, he was
an  independent  consultant  to  a  legal  practice  specializing in real estate
transactions  and  has  provided  consulting  services  to various businesses on
Canadian  commodity  tax  matters.

Webb  Green,  Director

     Webb Green has been involved in providing market research services for over
twenty  years.  Since  1986,  Mr.  Green  has been the CEO of TRD Frameworks who
provided  market research services for a number of regional and national clients
like  Airborne  Express,  Alaska  Airlines,  DuPont, Microsoft Corporation among
others.  Mr.  Green  obtained  his  Masters  of  Business  Administration  from
California State University.  Since then he has taken some post-graduate courses
at  Harvard  University, University of California at Berkeley and the University
of  Washington.

Hank  Barber,  Director

     Hank  Barber  is  the founder and President of Hank Inc., a consulting firm
that  specializes  in  brand audits and strategic growth planning for developing
brands  and  companies.  Hank Inc. was founded in 1997.  Prior to that from 1983
to 1997, Mr. Barber was the Managing Director of the Seattle office of McCann, a
multinational  advertising  agency.

<PAGE>

     Mr.  Barber  is  a  graduate  of the University of Washington in Journalism
where  he served as an extension program advisor and instructor for three years.
He  also  completed  the University of Chicago Graduate School executive program
and  has  served  as  Chairman  of  the Washington State Council of the American
Association  of  Advertising  Agencies.

Kevin  O'Reilly,  Vice  President  of  Marketing

     Kevin  O'Reilly  has  been involved in marketing or market analysis for the
last  seven  years.  Since  August,  2000,  he  was the Vice President of Market
Development  for  Ezula  Inc.,  where  he  was  a  member  of  an executive team
responsible  for  revenue generation and technology distribution.  From January,
2000  to  August,  2000, he was the Senior Director of Strategic Development for
1stUp.com  Corporation  responsible  for  developing  revenue  streams  for  new
advertising  technology.  From  July, 1999 to January, 2000, he was the Director
of  Business  Development  for Evesta.com and was responsible for development of
distribution channels for free and filtered internet access.  From January, 1999
to  June,  1999,  Mr.  O'Reilly  was  an  Executive  Analyst  with  George S May
International  Company,  a  management  consulting  firm,  during  which time he
performed  business analysis of small and medium sized companies.  From January,
1998 to November, 1998, he was a Sales Executive with Silicon Graphics, Inc. and
was  responsible  for  sales  of  software to internet service providers and web
hosting  companies.  From January, 1997 to January, 1998, he was the Director of
Marketing  for  Lantech,  Inc.  and developed an internet strategy for companies
using  local  and  wide area computer networks.  From November, 1993 to January,
1997,  he was the Director of Market Analysis at Intelligent Electronics and was
responsible  for  developing  business  plans  and  market  analyses for various
companies.

     Mr.  O'Reilly  obtained  a  Master's  Degree  in Cognitive Science from the
University of Essex and a Bachelor's Degree in Psychology from the University of
Warwick.

James  Baglot,  Vice  President  of  Sales

     James  Baglot  has been involved in sales and marketing in the computer and
software  industries  for  over  ten  years.  Mr.  Baglot is a founder of Rocket
Builders,  a  company  which  provides  management  consulting services.  Rocket
Builders  was  founded  in  November,  1999.  He  has  been providing management
consulting  services,  primarily  focusing  on  sales  and marketing, to various
companies  from  November,  1999  to the present.  From April, 1999 to December,
1999, he was the Director of Sales for Onvia.com, Inc. and from January, 1998 to
February,  1999,  he  was  the  Director  of Sales and Marketing for Multiactive
Technologies Inc.  In both of these positions he was responsible for all aspects
of the sales, marketing and management of these companies products and services.
From  April,  1997 to December 1997, he was the General Manger (British Columbia
region)  for  Gandalf Canada Ltd., a company which provides hardware, consulting
and  associated  computer  network  services.  At  Gandalf,  Mr.  Baglot  was
responsible  for  the sales and operations in British Columbia of Gandalf.  From
January, 1994 to February, 1997, Mr. Baglot was the Multivendor Customer Service
Sales  Manager  for British Columbia responsible for sales of Digital's computer
equipment  and  services  in  British  Columbia.  Mr.  Baglot has taken numerous
industry  courses  related to technology and computers during the last 18 years.

Committees  of  the  Board

     We  do  not  have  an  audit  or  compensation  committee  at  this  time.

Family  Relationships

     There  are  no  family  relationships  between  any  director  or executive
officer.

None  of  our  directors,  executive officers, promoters or control persons have
been  involved  in  any  of  the  following  events  during the past five years:

1.     any  bankruptcy  petition  filed by or against any business of which such
person  was  a  general  partner  or executive officer either at the time of the
bankruptcy  or  within  two  years  prior  to  that  time;

<PAGE>

2.     any  conviction  in  a  criminal proceeding or being subject to a pending
criminal  proceeding  (excluding  traffic  violations and other minor offenses);

3.     being  subject  to  any  order,  judgment,  or  decree,  not subsequently
reversed,  suspended  or  vacated,  of  any  court  of  competent  jurisdiction,
permanently  or temporarily enjoining, barring, suspending or otherwise limiting
his  involvement  in  any type of business, securities or banking activities; or

4.     being found by a court of competent jurisdiction (in a civil action), the
Commission  or  the  Commodity  Futures  Trading  Commission  to have violated a
federal  or  state  securities or commodities law, and the judgment has not been
reversed,  suspended,  or  vacated.

Section  16(a)  Beneficial  Ownership  Compliance

     Section  16(a) of the Securities Exchange Act of 1934, as amended, requires
our  executive  officers  and  directors  and persons who own more than 10% of a
registered  class  of  our  equity  securities  to  file with the Securities and
Exchange  Commission  initial  statements  of  beneficial  ownership, reports of
changes in ownership and annual reports concerning their ownership of our common
stock  and other equity securities, on Forms 3, 4 and 5 respectively.  Executive
officers,  directors  and  greater  than  10%  shareholders  are required by the
Securities  and  Exchange  Commission  regulations  to  furnish our Company with
copies  of  all  Section  16(a)  reports  they  file.

     To the best of our knowledge, all executive officers, directors and greater
than  10%  shareholders  filed the required reports in a timely manner, with the
exception  of  the  following:

<TABLE>
<CAPTION>


                      NUMBER OF    NUMBER OF TRANSACTIONS NOT   FAILURE TO FILE
NAME                LATE REPORTS   REPORTED ON A TIMELY BASIS   REQUESTED FORMS
------------------  -------------  ---------------------------  ---------------
<S>                 <C>            <C>                          <C>
Webb Green              1(1)                  1(1)                    Nil
------------------  -------------  ---------------------------  ---------------
Hank Barber             1(1)                  1(1)                    Nil
                    -------------  ---------------------------  ---------------
Trevor McConnell       2(1)(2)               2(1)(2)                  Nil
                    -------------  ---------------------------  ---------------
Robert Heller           1(2)                  3(2)                    Nil
                    -------------  ---------------------------  ---------------
Shelley Montgomery      1(2)                  3(2)                    Nil
------------------  -------------  ---------------------------  ---------------
<FN>

(1)     The  named  officer,  director  or  greater  than  10%  shareholder,  as
applicable,  filed  a  late  Form 3 - Initial Statement of Beneficial Ownership.
(2)     The  named  officer,  director  or  greater  than  10%  shareholder,  as
</TABLE>

ITEM  10.          EXECUTIVE  COMPENSATION.

     The  following table summarizes the compensation of our President and Chief
Executive  Officer  and  other  officers  and  directors  who  received  annual
compensation  in excess of $100,000 during the last three complete fiscal years.
No  other  officers  or  directors  received  annual  compensation  in excess of
$100,000  during  the  last  three  complete  fiscal  years.

<PAGE>


<TABLE>
<CAPTION>




                                                                                            LONG TERM              PAY-
                                               ANNUAL COMPENSATION                        COMPENSATION(1)          OUTS

                                                                                     SECURITIES
                                                                            OTHER       UNDER       RESTRICTED
                                                                            ANNUAL     OPTIONS/      SHARES OR     LTIP
NAME AND PRINCIPAL                                                          COMPEN-     SAR'S       RESTRICTED     PAY-
POSITION                         YEAR              SALARY         BONUS     SATION(2)  GRANTED      SHARE UNITS    OUTS
------------------------  -------------------  ---------------  ----------  ---------  -------      -----------  ------
<S>                       <C>                  <C>              <C>         <C>        <C>          <C>          <C>

Robert Heller (1). . . .        2000             $120,000          Nil        Nil      150,000           Nil       Nil
President & C.E.O

Martin Holt (2)
Prior President. . . . .        2000                  Nil          Nil        Nil        Nil             Nil      Nil

Eugene F. Koppenhaver(3)        2000                  Nil          Nil        Nil        Nil             Nil       Nil
Prior President. . . . .        1999                  Nil          Nil        Nil        Nil             Nil       Nil

Andrew W. Berney . . . .        1999                  Nil          Nil        Nil        Nil             Nil       Nil
Prior President. . . . .        1998                  Nil          Nil        Nil        Nil             Nil       Nil

Gary Heller(4)
Former Secretary and
Chief Information. . . .        2000             $ 68,076          Nil        Nil      150,000           Nil       Nil

Shelley Montgomery(5)
Former Treasury and VP
Sales. . . . . . . . . .        2000             $ 96,000          Nil        Nil      150,000           Nil       Nil

<FN>


(1)     On  January  19,  2000,  Robert Heller replaced Martin Holt as the President and Chief Executive Officer of Merlin.  We
entered  into  an  agreement with Robert Heller in connection with his positions as President and Chief Executive Officer.  Mr.
Heller's  annual  salary  is  $120,000,  together  with any annual bonuses as may be determined by our board of directors.  Mr.
Heller's  agreement  was  effective  January 19, 2000 and continues until terminated in accordance with its provisions.  We are
entitled  to terminate Mr. Heller's agreement at any time for cause and without cause on three months written notice (or twelve
months salary in lieu of such written notice).  Mr. Heller also received stock options to purchase 150,000 shares of our common
stock  which  are  exercisable  at  $1.00  per  share.

(2)     On January 12, 2000, Martin Holt replaced Eugene Koppenhaver as the President of Merlin.  Captain Consulting Corp., the
principal  of  which  is  Martin  Holt,  received  a  consulting  fee  of  $40,000  from  us  for  consulting  services.

(3)     On  August  12,  1999,  Eugene  Koppenhaver  replaced  Andrew  Berney  as  the  President  of  Merlin.

(4)     On  January  19,  2000, Gary Heller was appointed as our Chief Information Officer and Secretary.  Gary Heller's annual
salary  was  $120,000  and  was  granted  stock options to purchase 150,000 shares of our common stock exercisable at $1.00 per
share.  Gary  Heller  resigned  on  July  7,  2000  at which time 75,000 options had vested and 75,000 unvested options expired
immediately.

(5)     On January  19,  2000,  Shelley  Montgomery  was appointed as our Treasurer and Vice-President Sales.  Ms. Montgomery's
annual salary was $96,000 and was granted stock options to purchase 150,000 shares of our common stock at $1.00 per share.  Ms.
Montgomery  resigned  on  January  18,  2001,  at  which  time  100,000  options had vested and 50,000 unvested options expired
immediately.
</TABLE>

Employment/Consulting  Agreements

     On  March  8,  2000,  we  entered  into  an agreement with Robert Heller in
connection  with  his  positions  as President and Chief Executive Officer.  Mr.
Heller's  annual  salary is $120,000, together with any annual bonuses as may be
determined  by  our  board  of  directors.  Mr. Heller's agreement was effective
January  19,  2000  and  continues  until  terminated  in  accordance  with  its
provisions.  The  Company is entitled to terminate Mr. Heller's agreement at any
time  for  cause  and  without  cause  on three months written notice (or twelve
months  salary  in  lieu  of such written notice).  Pursuant to the terms of the
agreement,  Mr.  Heller  is  entitled  to a severance payment of $240,000 or two
years  salary,  whichever is greater, plus 700,000 shares of common stock should
there  be  a  change  of  control  of  Merlin.

<PAGE>

     On  May  1,  2000,  we  entered  into an agreement with Trevor McConnell in
connection  with  his  position  as  Chief Financial Officer and Treasurer.  Mr.
McConnell's  annual  salary  is CDN$66,000 (approximately $44,000) together with
any  annual  bonuses  as  may  be  determined  by  our  board of directors.  Mr.
McConnell's  agreement  was  effective  April  24,  2000  and  continues  until
terminated  in  accordance  with  its  provisions.  The  Company  is entitled to
terminate  Mr.  McConnell's agreement at any time for cause and without cause on
three  months  written  notice  (or twelve months salary in lieu of such written
notice).  Pursuant to the terms of the agreement, Mr. McConnell is entitled to a
severance payment of CDN$69,000 (approximately $46,000) or twelve months salary,
which ever is greater, plus 100,000 shares of our common stock should there be a
change  of  control  of  Merlin.  We  also  granted  to Mr. McConnell options to
acquire  48,000  shares  of  our common stock at $1.00 per share.  Those options
vest  as  to  2,000  options  per  month  commencing  on  April  24,  2000.

     On  October 5, 2000, we entered into a consulting agreement with Webb Green
whereby  Webb Green will provide market research services.  Webb Green is one of
our  directors.  The  consulting agreement is for a one year term and we granted
to  Webb Green options to acquire 36,000 shares of our common stock at $1.75 per
share.  Those  options  vest as to 3,000 options per month commencing on October
5,  2000.  We  may terminate the consulting agreement on 30 days written notice.

     On  October  25,  2000,  we  entered  into a consulting agreement with Hank
Barber  whereby  Hank  Barber  will  provide  strategic management and marketing
services.  Hank Barber is one of our directors.  The consulting agreement is for
a  one  year term and we granted to Hank Barber options to acquire 36,000 shares
of  our common stock at $1.75 per share.  Those options vest as to 3,000 options
per  month  commencing  on  October  25,  2000.  We may terminate the consulting
agreement  on  30  days  written  notice.

     On  January  4,  2001,  we entered into an agreement with Kevin O'Reilly in
connection  with  his  position  as Vice President of Marketing.  Mr. O'Reilly's
annual  salary  is  $120,000,  together  with a performance bonus related to the
level  of sales of our products.  Mr. O'Reilly's agreement was effective January
4,  2001  and  continues until terminated in accordance with its provisions.  We
are  entitled  to  terminate  Mr. O'Reilly's agreement at any time for cause and
without  cause  if  we pay Mr. O'Reilly a severance payment of $30,000.  We also
granted to Mr. O'Reilly options to acquire 120,000 shares of our common stock at
$0.21 per share (as to 20,000 options) and $0.35 (as to 100,000 options).  Those
options  vest  as to 20,000 options on January 4, 2001 and as to 100,000 options
on  January  4,  2002.

     On  January  4,  2001,  we  entered  into  an  agreement with Jim Baglot in
connection  with  his  position as Vice President of Sales.  Mr. Baglot's annual
salary  is  $90,000,  together  with a signing bonus of CDN$5,000 (approximately
$3300)  and  a  performance bonus related to the level of sales of our products.
Mr.  Baglot's  agreement  was  effective  January  4,  2001  and continues until
terminated  in accordance with its provisions.  We are entitled to terminate Mr.
Baglot's  agreement at any time for cause and without cause if we pay Mr. Baglot
a  severance  payment  of  $22,500.  We  also  granted  to Mr. Baglot options to
acquire  100,000  shares  of our common stock at $0.35 per share.  Those options
vest as to 20,000 options on January 4, 2001 and as to 80,000 options on January
4,  2002.

     There  are no arrangements or plans in which we provide pension, retirement
or  similar  benefits  for  directors  or  executive  officers,  except that our
directors  and executive officers may receive stock options at the discretion of
our  board  of directors.  Other than the management agreements discussed above,
we do not have any material bonus or profit sharing plans pursuant to which cash
or  non-cash  compensation  is  or  may  be  paid  to our directors or executive
officers,  except  that  stock  options  may be granted at the discretion of our
board  of  directors.

Stock  Option  Plan

     On  May  1,  2000,  our  board  of  directors  approved a Stock Option Plan
referred  to  as  the  "2000  Stock  Option  Plan".

     We  established the 2000 Stock Option Plan to serve as a vehicle to attract
and  retain  the  services  of  key  employees and to help them realize a direct
proprietary  interest  in  us.  The  2000  Plan  provides for the grant of up to
3,000,000 non-qualified or incentive stock options.  Under the 2000 Stock Option
Plan,  officers,  directors,  consultants  and  employees  are  eligible  to
participate.  The  exercise  price  of  any incentive stock option granted under

<PAGE>

the 2000 Stock Option Plan may not be less than 100% of the fair market value of
our common stock on the date of grant.  The exercise price of options granted to
an  individual  whose  holdings exceeding 10% of voting power must be at 110% of
the  fair  market  value  on the date of grant.  The aggregate fair market value
(determined  as  of  the  grant  date)  of  the shares of common stock for which
incentive  stock  options may first become exercisable by an optionee during any
calendar  year,  together  with  shares subject to incentive stock options first
exercisable  by  the  optionee  under  any  of  our  other  plans, cannot exceed
$100,000.  Shares  subject  to  options  under the 2000 Stock Option Plan may be
purchased  for  cash.  Unless otherwise provided by the board, an option granted
under  the 2000 Stock Option Plan is exercisable for a term of ten years (or for
a  shorter  period  up  to ten years).  An option granted to an individual whose
holdings  exceed  10%  of the voting power is exercisable for a term of 5 years.
The  2000 Stock Option Plan is administered by the board of directors, which has
discretion  to  determine  optionees, the number of shares to be covered by each
option,  the  vesting and exercise schedule, and any other terms of the options.
The  purchase  price  and  number  of  shares  of each option may be adjusted in
certain  cases,  including  stock splits, recapitalizations and reorganizations.
The  2000 Stock Option Plan may be amended, suspended or terminated by our board
of directors, but no action may impair rights under a previously granted option.
Options  under the 2000 Stock Option Plan can not be assigned except in the case
of  death  and  may be exercised only while an optionee is employed by us, or in
certain  cases, within a specified period after employment ends.  As of December
31,  2000,  stock  options to acquire an aggregate of 1,012,000 shares of common
stock  were  granted  under  the  2000  Plan, 201,000 of which had expired on or
before  December  31,  2000.

     There  were  no  grants  of stock options or stock appreciation rights made
during  the fiscal year ended December 31, 1999 to Merlin's (the inactive public
company)  executive  officers  and directors, prior to the acquisition of Merlin
Software  Technologies  Inc.  Prior  to  the  share  exchange,  Merlin  Software
Technologies  Inc.  granted  an  aggregate  of  781,000  stock  options  to  its
employees, consultants, officers and directors.  On January 14, 2000, we entered
into a letter agreement with Merlin Software Technologies Inc. whereby we agreed
to  grant  an equal number of stock options in exchange for these existing stock
options.  The  options were actually exchanged on April 26, 2000.  The grants of
stock  options  are  described  below.

<TABLE>
<CAPTION>




                         NUMBER OF SHARES                                       MARKET
                         OF COMMON STOCK       % OF TOTAL        EXERCISE        PRICE
                       UNDERLYING OPTIONS   OPTIONS GRANTED    OR BASE PRICE    ON DATE   EXPIRATION
NAME                         GRANTED        TO EMPLOYEES (1)     ($/SHARE)     OF GRANT      DATE
---------------------  -------------------  ----------------  ---------------  ---------  -----------
<S>                    <C>                  <C>               <C>              <C>        <C>

Robert Heller(3). . .           150,000(2)             14.8%  $          1.00  $    2.50  May 1, 2005
                       -------------------  ----------------  ---------------  ---------  -----------
Shelley Montgomery(4)           150,000(2)             14.8%  $          1.00  $    2.50  May 1, 2005
                       -------------------  ----------------  ---------------  ---------  -----------
Gary Heller(5). . . .        150,000(2)(4)             14.8%  $          1.00  $    2.50  May 1, 2005
---------------------  -------------------  ----------------  ---------------  ---------  -----------
<FN>

(1)     The  total  number  of  options to purchase common shares granted to employees/consultants to
December  31,  2000  is  1,012,000.

(2)     The options were granted as part of the share exchange with Merlin Software Technologies Inc.
when  we granted options in exchange for all outstanding options in Merlin Software Technologies Inc.
We  granted  these  options  on  the  same  terms  and  conditions as were granted by Merlin Software
Technologies  Inc.

(3)     Robert  Heller was granted stock options to purchase 150,000 shares of our common stock which
are  exercisable  at  $1.00  per  share.  Options  to purchase 75,000 shares vested on March 8, 2000,
options  to  purchase 50,000 shares vested on March 8, 2001 and options to 25,000 shares will vest on
the  relocation  of  our  head  office  (which  relocation  is  no  longer  being  contemplated).

(4)     Shelley  Montgomery resigned as of January 18, 2001, at which time 100,000 options had vested
and  50,000  unvested options immediately expired.  Options to purchase 75,000 shares vested on March
8,  2000,  options  to  purchase  25,000 shares vested on May 15, 2000 and options to purchase 50,000
shares  would  have  vested on March 31, 2001.  All vested options will expire three months after Ms.
Montgomery  resigned.

<PAGE>

(5)     Gary  Heller  resigned  as  a director and officer of Merlin and our subsidiary as of July 7,
2000,  at  which  time  75,000  options  had  vested and 75,000 unvested options expired immediately.
Options  to  purchase  75,000 shares vested on March 8, 2000, options to purchase 50,000 shares would
have  vested  on  March  8,  2001  and  options  to  purchase  25,000 shares would have vested on the
relocation  of  our head office (which relocation is no longer being contemplated).  He has indicated
an interest to exercise all of the vested options but has yet to provide us with the necessary option
exercise form.
</TABLE>

<TABLE>
<CAPTION>
                     VALUE OF THE OPTIONS GRANTED IN THE YEAR ENDED DECEMBER 31, 2000

                                                             NUMBER OF SHARES
                                                             OF COMMON STOCK                  VALUE OF
                                                                UNDERLYING                  UNEXERCISED
                                                          UNEXERCISED OPTIONS               IN-THE-MONEY
                              SHARES             VALUE      AT DECEMBER 31, 2000             OPTIONS AT
                           ACQUIRED ON         REALIZED         EXERCISABLE/       DECEMBER 31, 2000 EXERCISABLE/
NAME                       EXERCISE (#)           ($)          UNEXERCISABLE              UNEXERCISABLE(1)
---------------------  --------------------  -------------  --------------------  --------------------------------
<S>                    <C>                   <C>            <C>                   <C>

Robert Heller(2). . .  nil                   nil                 75,000 / 75,000  $                         0 / $0
                       --------------------  -------------  --------------------  --------------------------------
Shelley Montgomery(3)  nil                   nil                100,000 / 50,000  $                         0 / $0
                       --------------------  -------------  --------------------  --------------------------------
Gary Heller(4). . . .  nil                   nil                      75,000 / 0  $                         0 / $0
---------------------  --------------------  -------------  --------------------  --------------------------------
<FN>

(1)     The closing bid price on December 29, 2000 (the last trading day for the year ended December 31, 2000) was
$0.23  and  accordingly  the  unexercised  options  as  at  December  31,  2000  had  Nil  value.

(2)     Robert  Heller  was  granted  stock  options  to  purchase  150,000  shares  of our common stock which are
exercisable  at  $1.00  per share.  Options to purchase 75,000 shares vested on March 8, 2000, options to purchase
50,000  shares vested on March 8, 2001 and options to 25,000 shares will vest on the relocation of our head office
(which  relocation  is  no  longer  being  contemplated  by  the  Company).

(3)     Shelley  Montgomery  resigned  as of January 18, 2001, at which time 100,000 options had vested and 50,000
unvested  options  immediately  expired.  Options  to  purchase  75,000 shares vested on March 8, 2000, options to
purchase 25,000 shares vested on May 15, 2000 and options to purchase 50,000 shares would have vested on March 31,
2001.  All  vested  options  will  expire  three  months  after  Ms.  Montgomery  resigned.

(4)     Gary  Heller  resigned  as  of July 7, 2000, at which time 75,000 options had vested.  Options to purchase
75,000  shares  vested  on March 8, 2000, options to purchase 50,000 shares would have vested on March 8, 2001 and
options  to  purchase  25,000  shares  would  have vested on relocation of our head office (which relocation is no
longer  being  contemplated).  He  has  indicated an interest to exercise all of the vested options but has yet to
provide us with the necessary option exercise form.
</TABLE>

Directors  Compensation

     Merlin  reimburses  its  directors for expenses incurred in connection with
attending  board  meetings  but  did  not  pay  director's  fees  or  other cash
compensation  for services rendered as a director in the year ended December 31,
2000.

     We  have no formal plan for compensating our directors for their service in
their  capacity  as directors although such directors are expected to receive in
the future options to purchase shares of common stock as awarded by our board of
directors  or  (as  to  future  options)  a  compensation committee which may be
established  in  the  future.  Directors  are  entitled  to  reimbursement  for
reasonable  travel  and other out-of-pocket expenses incurred in connection with
attendance  at  meetings  of our board of directors.  The board of directors may
award  special  remuneration to any director undertaking any special services on
behalf  of  Merlin other than services ordinarily required of a director.  Other
than  indicated  in  this annual report, no director received and/or accrued any
compensation  for  his  or  her  services  as  a  director,  including committee
participation  and/or  special  assignments.

<PAGE>

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

Principal  Stockholders

     The  following  table  sets forth, as of March 1, 2001, certain information
with respect to the beneficial ownership of our common stock by each stockholder
known  by  us to be the beneficial owner of more than 5% of our common stock and
by  each  of our current directors and executive officers.  Each person has sole
voting  and  investment power with respect to the shares of common stock, except
as  otherwise  indicated.  Beneficial ownership consists of a direct interest in
the  shares  of  common  stock,  except  as  otherwise  indicated.

<TABLE>
<CAPTION>



                                                 AMOUNT AND NATURE OF      PERCENTAGE
NAME AND ADDRESS OF BENEFICIAL OWNER         BENEFICIAL OWNERSHIP(1) (11)  OF CLASS(1)
-------------------------------------------  ----------------------------  -----------
<S>                                          <C>                           <C>

Gary Heller
1409 North Cove Blvd.
Longwood, Florida  32750. . . . . . . . . .  2,575,000 common shares(2)          19.7%
                                             ----------------------------  -----------
Robert Heller
1912 Ironwood Court
Port Moody, BC  V3H 4C3 . . . . . . . . . .  2,475,000 common shares(3)          19.0%
                                             ----------------------------  -----------
Shelley Montgomery
1302 - 9708 East Via Linda
Scottsdale, Arizona  85258. . . . . . . . .  1,140,000 common shares(4)           8.7%
                                             ----------------------------  -----------
Trevor McConnell
4636 - 220th Street
Langley, BC  V3A 8J3. . . . . . . . . . . .  26,000 common shares(5)              0.2%
                                             ----------------------------  -----------
Webb Green
5932 California Avenue S.W.
Seattle, WA  98163. . . . . . . . . . . . .  24,000 common shares(6)              0.2%
                                             ----------------------------  -----------
Hank Barber
9202 27th Avenue N.W.
Seatlle, WA 98117 . . . . . . . . . . . . .  41,000 common shares(7)              0.3%
                                             ----------------------------  -----------
Kevin O'Reilly
1212 - 10th Avenue, Suite 101
San Francisco, CA 94122 . . . . . . . . . .  20,000 common shares (8)             0.2%
                                             ----------------------------  -----------
James Baglot
1514 - 10th Avenue
New Westminster, BC . . . . . . . . . . . .  20,000 common shares (9)             0.2%
                                             ----------------------------  -----------
Directors and Executive Officers as a Group  2,606,000 common shares(10)         20.0%
===========================================  ============================  ===========
<FN>

(1)     Based  on 12,986,928 shares of common stock issued and outstanding as of March
1,  2001.  Except as otherwise indicated, we believe that the beneficial owners of the
common  stock  listed  above, based on information furnished by such owners, have sole
investment and voting power with respect to such shares, subject to community property
laws  where  applicable.  Beneficial  ownership  is  determined in accordance with the
rules  of  the  SEC  and generally includes voting or investment power with respect to
securities.  Shares  of  common  stock  subject  to  options  or  warrants  currently
exercisable,  or  exercisable  within  60 days, are deemed outstanding for purposes of
computing  the percentage ownership of the person holding such option or warrants, but
are  not  deemed outstanding for purposes of computing the percentage ownership of any
other  person.

<PAGE>

(2)     Includes  75,000  options  exercisable  within  sixty  days.

(3)     Includes  125,000  options  exercisable  within  sixty  days.

(4)     Includes  100,000  options  exercisable  within  sixty  days.

(5)     Includes  26,000  options  exercisable  within  sixty  days.

(6)     Webb  Green  was  appointed  to  our  Board  of  Directors on October 4, 2000.
Includes  24,000  options  exercisable  within  sixty  days.

(7)     Hank  Barber  was  appointed  to  our  Board of Directors on October 25, 2000.
Includes  21,000  options  exercisable  within  sixty  days.

(8)     Kevin  O'Reilly  was  appointed  as  an  officer on January 4, 2001.  Includes
20,000  options  exercisable  within  sixty  days.

(9)     James  Baglot was appointed as an officer on January 4, 2001.  Includes 20,000
options  exercisable  within  sixty  days.

(10)     Includes  236,000  options  exercisable  within  sixty  days.

(11)     Two  holders of the convertible notes, Narragansett Offshore, Ltd. and Pequot
Scout  Fund  L.P.,  may  become  beneficial owners of more than 5% of our common stock
depending  on  the  current conversion price upon which the convertible notes could be
converted  into  shares  of  our  common  stock.
</TABLE>

Changes  in  Control

     The  Company  is unaware of any contract or other arrangement the operation
of  which may at a subsequent date result in a change of control of the Company.

ITEM  12.          CERTAIN  RELATIONSHIPS  AND  RELATED  TRANSACTIONS.

     Except  as  otherwise  indicated  below,  we  have  not been a party to any
transaction, proposed transaction, or series of transactions in which the amount
involved  exceeds $60,000, and in which, to its knowledge, any of its directors,
officers,  five  percent  beneficial  security  holder,  or  any  member  of the
immediate  family  of  the  foregoing  persons  has had or will have a direct or
indirect  material  interest.

     On  January  14,  2000,  we  entered  into  a  letter agreement with Merlin
Software  Technologies  Inc. and its principal shareholders whereby we agreed to
acquire all of the issued and outstanding shares, options and warrants of Merlin
Software  Technologies  Inc.  in  exchange  for  issuing  an equal number of our
shares,  options  and  warrants.  We  agreed  to issue these shares, options and
warrants  on  the  same terms as had been issued by Merlin Software Technologies
Inc.  On  April  26,  2000, as a result of a share exchange agreement, we issued
7,986,665  shares  of our common stock, warrants to purchase up to 86,665 shares
of  our  common stock and options to purchase up to 781,000 shares of our common
stock  in  exchange  for  all  the  issued  and outstanding shares, warrants and
options  of  Merlin  Software  Technologies Inc.  The stock exchange resulted in
Merlin  Software  Technologies Inc. becoming our wholly owned subsidiary.  Prior
to  the  share  exchange,  we  were  an  inactive  shell  called  Austin  Land &
Development  Inc.  The  shell  corporation  did not generate any revenue but did
incur  administrative  expenses.  Administrative  expenses were $14,210 and $897
for the years ended December 31, 1999 and 1998 respectively.  Immediately before
the  share  exchange we had 4,450,025 shares of our common stock outstanding and
immediately  after  the  share  exchange  we had 12,436,690 shares of our common
stock  outstanding.

     At  the  time the transaction closed, Robert Heller, Shelley Montgomery and
Gary  Heller  were  officers  or  directors  of  both Merlin and Merlin Software
Technologies Inc.  As a result of the share exchange (i) the former shareholders
of  the  subsidiary  became  64%  shareholders  of  Merlin  and  Merlin Software
Technologies  Inc.  became  a

<PAGE>

wholly-owned  subsidiary  of  Merlin; and (ii) Robert Heller, Shelley Montgomery
and  Gary  Heller continued as the officers and directors of both Merlin and the
subsidiary.

     On  July  13,  1999, Robert Heller entered into a Letter Agreement with the
subsidiary  whereby  he  transferred  all  of  his  rights  to  HotWireFax  (now
Communicado Fax) and certain accounting and management software intended for use
by internet service providers to our subsidiary in exchange for 1,600,000 shares
of  common  stock  of  our subsidiary, which shares were exchanged for 1,600,000
shares of our common stock in connection with our acquisition of Merlin Software
Technologies  Inc.

     In  July,  1999,  our subsidiary applied for trademark protection for three
designs:  a  penguin  wizard  design, a penguin roman design and a penguin bogey
design,  which  applications  are  still  pending.  In May, 2000, our subsidiary
assigned  to  Merlinesque,  a  Nevada  corporation,  the rights in the trademark
applications  for  the  penguin  bogey  design  and  the penguin roman design in
consideration  of  $10.  At  the time of this assignment, Robert Heller, Shelley
Montgomery  and  Gary  Heller  were  directors  of Merlinesque.  We retained the
trademark  for  the  penguin  wizard design which we use in the promotion of our
software  programs  and  our  corporate  image.  We  assigned  the trademarks to
Merlinesque  because  we saw no value in those trademarks in connection with our
business of a software development company, as these trademarks were intended to
be  used  in  connection  with  the  manufacture  and  sale  of  stuffed  toys.

     Pursuant to a license agreement, dated August 8, 2000, we make use of these
three  graphical  designs  in  the promotion of our product and corporate image.
The  ownership  of  the copyrights for these three designs and trademarks of the
penguin  roman  design  and  penguin  bogey  design belongs to Merlinesque whose
current  directors  include  Robert Heller.  We license the three designs for an
annual  license  fee  of  $1.00  for  an  indefinite  term.

     Pursuant  to  a  license  agreement,  dated  August 8, 2000, our subsidiary
granted  to  Merlinesque  the  right to use the trademark for the penguin wizard
design  in  relation  to  Merlinesque's  business of the manufacture and sale of
children's  toys,  games,  clothing,  furniture, books, puzzles, computer games,
animation  film  or videos, television programs and radio programs.  The license
is  for  an  indefinite  term  for  a  fee  of  $1.00  per  year.

     Pursuant  to  a domain name assignment agreement, dated August 14, 2000, we
obtained  for no consideration the ownership rights to 13 domain names from Boss
Systems  Inc.,  a  British  Columbia corporation.  The directors of Boss Systems
Inc.  include  Robert  Heller and Susan Heller .  We use several of these domain
names  in  the  operation  of  our  business.

     On  July  13, 1999, Shelley Montgomery entered into a Letter Agreement with
the subsidiary whereby she transferred all her rights to BDI Virage (an internet
based  business  directory  software  program) to the subsidiary in exchange for
800,000 shares of common stock of the subsidiary which shares were exchanged for
800,000  shares of our common stock in connection with our acquisition of Merlin
Software  Technologies  Inc.

     On  July  13,  1999,  Gary  Heller entered into a Letter Agreement with the
subsidiary  whereby he transferred all his rights to PerfectBACKUP+ and FleetPro
II  to  the  subsidiary  in exchange for 1,600,000 shares of common stock of the
subsidiary  which shares were exchanged for 1,600,000 shares of our common stock
in  connection  with  our  acquisition  of  Merlin  Software  Technologies  Inc.

     On  October  16,  2000,  we entered into a consulting agreement with Rocket
Builders  LP  whereby we agreed to pay Rocket Builders CDN$75,000 (approximately
$50,000)  and  issue  75,000  shares  of  our common stock in return for certain
consulting  services to be provided by Rocket Builders.  On January 22, 2001, we
agreed to pay Rocket Builders $61,500 in lieu of issuing the 75,000 shares.  One
of  our new officers, James Baglot, was a partner of Rocket Builders, but ceased
that  relationship  on  January  4,  2001.

<PAGE>

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

Reports  of  Form  8-K

     We  filed  a  current report on Form 8-K on November 2, 2000 announcing the
appointment  of  Webb  Green  as  one  of  our  directors.

Financial  Statements  Filed  as  Part  of  the  Annual  Report:

     The  following Financial Statements pertaining to Merlin and its subsidiary
are  filed  as  part  of  this  annual  report:

<TABLE>
<CAPTION>

NAME                                                                                                           PAGES
<S>                                                                                                            <C>

Merlin Software Technologies International, Inc. (audited)

Independent Auditors' Report, dated March 2, 2001                                                              F-2

Consolidated Balance Sheets as at December 31, 2000 and 1999                                                   F-3

Consolidated Statements of Changes in Stockholders' Equity (Deficit)
  for the period from June 25, 1999 (incorporation) to December 31, 2000                                       F-4

Consolidated Statements of Operations for the year ended December 31, 2000
  and for the period from June 25, 1999 (incorporation) to December 31, 2000                                   F-5

Consolidated Statements of Cash Flows for the year ended December 31, 2000
  and for the period from June 25, 1999 (incorporation) to December 31, 2000                                   F-6

Summary of Significant Accounting Policies                                                                     F-7

Notes to the Consolidated Financial Statements                                                                 F-13
</TABLE>

Exhibits  Required  by  Item  601  of  Regulation  S-B

Exhibit

Number    Description

(2)       Plan  of  Acquisition,  Reorganization  etc.

2.1**     Letter  of  Intent  between Merlin, Merlin Software Technologies Inc.,
Robert  Heller,  Gary  Heller  and  Shelley  Montgomery,  dated January 14, 2000

2.2**     Share  Exchange Agreement between Merlin, Merlin Software Technologies
Inc.,  Robert  Heller,  Gary  Heller and Shelley Montgomery, dated April 3, 2000

(3)       Articles  of  Incorporation/Bylaws

3.1*      Articles  of  Incorporation

<PAGE>

3.2.*     Bylaws

3.3*     Certificate of Amendment to Articles of Incorporation, dated January 7,
2000

3.4*     Corporate  Charter

(5)      Opinion  (legality)

5.1      Opinion of Clark, Wilson regarding the legality of the securities being
registered  (To  be  filed)

(10)     Material  Contracts

10.1**   Management  Agreement  between  Merlin  and Shelley Montgomery, dated
March  6,  2000

10.2**   Management Agreement between Merlin and Robert Heller, dated March 8,
2000

10.3**   Management  Agreement  between Merlin and Trevor McConnell, dated May
1,  2000

10.4**   Consulting Agreement between Merlin and Hank, Inc., dated February 5,
2000

10.5**   Consulting  Agreement between Merlin and Douglas West, dated March 2,
2000

10.6**   Consulting  Agreement  between Merlin and William Heller, dated March
3,  2000

10.7**   Consulting  Agreement  between  Merlin and Negus Communications Inc.,
dated  March  5,  2000

10.8**   Stock  Option  Agreement  between  Merlin and Haide-Anne James, dated
November  1,  1999

10.9**   Stock  Option  Agreement  between  Merlin and Chang-Cheng Chao, dated
November  1,  1999

10.10**  Stock  Option Agreement between Merlin and Shelley Montgomery, dated
November  1,  1999

10.11**  Stock  Option  Agreement  between  Merlin  and  Robert Heller, dated
November  1,  1999

10.12**  Stock  Option  Agreement  between  Merlin  and  Douglas  West, dated
November  1,  1999

10.13**  Stock  Option  Agreement  between  Merlin  and Patricia Negus, dated
November  1,  1999

10.14**   Stock  Option  Agreement  between  Merlin  and  William Negus, dated
November  1,  1999

10.15**   Stock  Option Agreement between Merlin and Hank Inc., dated November
1,  1999

10.16**   Stock  Option  Agreement  between  Merlin  and Alireza Admadi, dated
November  1,  1999

10.17****  2000  Stock  Option  Plan,  effective  May  1,  2000

10.18******  Note  and  Warrant  Purchase  Agreement  between  Merlin, Merlin
Software  Technologies  Inc., Narrangansett I, L.P., Narragansett Offshore Ltd.,
Pequot  Scout  Fund,  L.P.  and  SDS  Merchant  Fund L.P., dated August 18, 2000

<PAGE>

10.19******   Registration  Rights  Agreement between Merlin, Narrangansett I,
L.P.,  Narragansett Offshore Ltd., Pequot Scout Fund, L.P. and SDS Merchant Fund
L.P.,  dated  August  18,  2000

10.20******   Security  Agreement  between  Merlin,  Narrangansett  I,  L.P.,
Narragansett  Offshore Ltd., Pequot Scout Fund, L.P. and SDS Merchant Fund L.P.,
dated  August  18,  2000

10.21******    Subsidiary  Security  Agreement  between  Merlin  Software
Technologies  Inc.,  Narrangansett  I,  L.P., Narragansett Offshore Ltd., Pequot
Scout  Fund,  L.P.  and  SDS  Merchant  Fund  L.P.,  dated  August  28,  2000

10.22******    Intellectual  Property  Security  Agreement  between  Merlin,
Narrangansett  I,  L.P., Narragansett Offshore Ltd., Pequot Scout Fund, L.P. and
SDS  Merchant  Fund  L.P.,  dated  August  18,  2000

10.23******    Subsidiary  Intellectual  Property  Security  Agreement  between
Merlin  Software Technologies Inc., Narrangansett I, L.P., Narragansett Offshore
Ltd.,  Pequot Scout Fund, L.P. and SDS Merchant Fund L.P., dated August 18, 2000

10.24******    Subsidiary  Guaranty  Agreement  between  Merlin  Software
Technologies  Inc.,  Narrangansett  I,  L.P., Narragansett Offshore Ltd., Pequot
Scout  Fund,  L.P.  and  SDS  Merchant  Fund  L.P.,  dated  August  18,  2000

10.25******    Pledge  Agreement  between  Merlin,  Narrangansett  I,  L.P.,
Narragansett  Offshore Ltd., Pequot Scout Fund, L.P. and SDS Merchant Fund L.P.,
dated  August  18,  2000

10.26******    Note  Agreement  between Merlin and Narrangansett I, L.P., dated
August  18,  2000.

10.27******    Note  Agreement  between Merlin and Narrangansett Offshore Ltd.,
dated  August  18,  2000

10.28******    Note Agreement between Merlin and Pequot Scout Fund, L.P., dated
august  18,  2000

10.29******    Note Agreement between Merlin and SDS Merchant Fund, L.P., dated
August  18,  2000

10.30******    Lock-up  letter  between  Robert  Heller, Narrangansett I, L.P.,
Narragansett  Offshore Ltd., Pequot Scout Fund, L.P. and SDS Merchant Fund L.P.,
dated  August  17,  2000

10.31******    Lock-up  letter  between  Shelley  Montgomery,  Narrangansett I,
L.P.,  Narragansett Offshore Ltd., Pequot Scout Fund, L.P. and SDS Merchant Fund
L.P.,  dated  August  17,  2000

10.32******    Lock-up  letter between Trevor McConnell, Narrangansett I, L.P.,
Narragansett  Offshore Ltd., Pequot Scout Fund, L.P. and SDS Merchant Fund L.P.,
dated  August  17,  2000

10.33******    Lock-up  letter  between  Brint  Coxe,  Narrangansett  I,  L.P.,
Narragansett  Offshore Ltd., Pequot Scout Fund, L.P. and SDS Merchant Fund L.P.,
dated  August  28,  2000

10.34******    Escrow  Agreement  between  Merlin,  Narrangansett  I,  L.P.,
Narragansett  Offshore  Ltd., Pequot Scout Fund, L.P. SDS Merchant Fund L.P. and
Kane  Kessler  P.C.,  dated  August  18,  2000

10.35******    OEM  Agreement  between  Merlin and Caldera Systems, Inc., dated
October  16,  2000

10.36******    Consulting  Agreement  between  Merlin  and E.B. Coxe & Co. LLC,
dated  June  28,  2000

<PAGE>

10.37******    Consulting Agreement between Merlin and Matt Daen, dated October
3,  2000

10.38******    Trademark  and  Copyright License between Merlinesque and Merlin
Software  Technologies  Inc.,  dated  August  8,  2000

10.39******    Trade-mark  License  (North  America)  between  Merlin  Software
Technologies  Inc.  and  Merlinesque,  dated  August  8,  2000

10.40******    Domain  Name  Assignment Agreement between Boss Systems Inc. and
Merlin  Software  Technologies  Inc.,  dated  August  14,  2000

10.41******    Offer  to  Sublease  between  Samsports.com  and Merlin Software
Technologies  Inc.,  dated  August  25,  2000

10.42******    Letter  of  Intent  between  Merlin  and Certain Shareholders of
Merlin  Software  Technologies  Inc.,  dated  January  14,  2000

10.43******    Consulting  Agreement  between  Merlin  and  Webb  Green,  dated
October  5,  2000

10.44******    Stock  Option  Agreement  between  Merlin  and Webb Green, dated
October  4,  2000

10.45******    Agreement  between  Merlin  and  Karen Thomas, dated May 3, 2000

10.46******    Consulting  Agreement  between  Merlin  and  Hank  Barber, dated
October  25,  2000

10.47******    Stock  Option  Agreement  between  Merlin and Hank Barber, dated
October  25,  2000

10.48******    Management  Agreement  between  Merlin and Kevin O'Reilly, dated
January  4,  2001

10.49******    Stock  Option Agreement between Merlin and Kevin O'Reilly, dated
January  4,  2001

10.50******    Management  Agreement  between  Merlin  and  James Baglot, dated
January  4,  2001

10.51******    Stock  Option  Agreement  between Merlin and James Baglot, dated
January  4,  2001

10.52******    Consulting  Agreement  between Merlin and Rocket Builders, dated
October  16,  2000

10.53******    Consulting  Agreement between Merlin and The Nostas Group, dated
April  11,  2000  (incorporated by reference from Merlin's Form 10-QSB Quarterly
Report,  filed  with  the  SEC  on  November  20,  2000)

10.54******    Consulting  Agreement  between  Merlin  and Terry Jeffrey, dated
October  1,  2000

(16)     Letter  (change  in  certifying  accountant)

16.1*****      Letter from  Barry  Friedman,  P.C., C.P.A., dated April 12, 2000

(21)     Subsidiary

21.1     Merlin  Software  Technologies  Inc.

*     Previously filed with Merlin's Registration Statement on Form 10-SB filed
on  August  31,  1999

**     Previously  filed  with  Merlin's  Annual  Report on Form 10-KSB filed on
April  14,  2000

***    Previously  filed with Merlin's Quarterly Report on Form 10-QSB filed on
May  11,  2000

<PAGE>

****   Previously filed with Merlin's Registration Statement on Form S-8 filed
on  June  5,  2000

*****  Previously  filed  with  Merlin's  Current Report on Form 8-K filed on
April  13,  2000.

****** Previously  filed  with  Merlin's Registration Statement on Form SB-2
filed  on  March  19,  2001

<PAGE>

                                   SIGNATURES

     In  accordance with Section 13 or 15(d) of the Exchange Act, the registrant
caused this report to be signed on its behalf by the undersigned, thereunto duly
authorized.

MERLIN  SOFTWARE  TECHNOLOGIES  INTERNATIONAL,  INC.
a  Nevada  corporation

/s/ Robert Heller
By:    Robert  Heller,  President
Date:  March 29,  2001

     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.

SIGNATURES                                                     DATE

/s/ Robert Heller
Robert  Heller,  President  and  Director                      March 29,  2001

/s/ Trevor McConnell
Trevor  McConnell,  Principal  Accounting  Officer,
CFO,  Treasurer  and  Director                                 March 29,  2001

/s/ Webb Green
Webb  Green,  Director                                         March 29,  2001

/s/ Hank Barber
Hank  Barber,  Director                                        March 29,  2001