<PAGE>

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

                                    FORM 20-F
                  ANNUAL REPORT FISCAL YEAR ENDED MAY 31, 2002

           [ ] REGISTRATION STATEMENT PURSUANT TO SECTION 12(b) OR (g)
               OF THE SECURITIES EXCHANGE ACT OF 1934

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

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

                         Commission file number: 0-30610
                                                 =======

                                SOFTCARE EC INC.
             ======================================================
             (Exact name of Registrant as specified in its charter)

                            British Columbia, Canada
                 -----------------------------------------------
                 (Jurisdiction of incorporation or organization)

     889 Harbourside Drive, #210, North Vancouver, British Columbia V7P 3S1
     ----------------------------------------------------------------------
                    (Address of principal executive offices)

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

        Securities to be registered pursuant to Section 12(g) of the Act:
        -----------------------------------------------------------------
                        Common Shares, without par value
                        --------------------------------
                                (Title of Class)

Securities for which there is a reporting obligation pursuant to Section 15(d)
of the Act:                                                                 None

Indicate the number of outstanding shares of each of the issuer's classes of
capital or common stock as of the close of the period covered by the annual
report.                                                               19,993,617

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

Indicate by check mark which financial statement item the registrant has elected
to follow:                                               Item 17 XXX Item 18 ___

                                  Page 1 of 134
                          Index to Exhibits on Page 91

<PAGE>

                                SOFTCARE EC INC.

                                    FORM 20-F
                                  ANNUAL REPORT
                         FISCAL 2002 ENDED MAY 31, 2002

                                TABLE OF CONTENTS


                                     PART I

Item 1.  Identity of Directors, Senior Management and Advisors              4
Item 2.  Offer Statistics and Expected Timetable                            4
Item 3.  Key Information                                                    4
Item 4.  Information on the Company                                        24
Item 5.  Operating and Financial Review and Prospects                      47
Item 6.  Directors, Senior Management and Employees                        56
Item 7.  Major Shareholders and Related Party Transactions                 67
Item 8.  Financial Information                                             68
Item 9.  The Offer and Listing                                             69
Item 10. Additional Information                                            73
Item 11. Quantitative and Qualitative Disclosures About Market Risk        88
Item 12. Description of Securities Other Than Equity Securities            88


                                     PART II

Item 13. Default, Dividend Arrearages and Delinquencies                    88

Item 14. Material Modifications to the Rights of
         Security Holders and Use of Proceeds                              88

Item 15. Controls and Procedures                                           89

Item 16. Reserved                                                          89


                                    PART III

Item 17. Financial Statements                                              90
Item 18. Financial Statements                                              90
Item 19. Exhibits                                                          91

                                                                               2
<PAGE>

                                  INTRODUCTION

SoftCare EC Inc. was organized under the laws of British Columbia, Canada. In
this Annual Report, the "Company", "we", "our", and "us" refer to SoftCare EC
Inc. (unless the context otherwise requires). We have prepared this Annual
Report on the basis of information that we have or that we have obtained from
sources we believe to be reliable. Summary discussions of documents referred to
in this Annual Report may not be complete and we refer you to the actual
documents for more complete information. Our principal corporate offices are
located at 889 Harbourside Drive #210, North Vancouver, British Columbia, Canada
V7P 3S1; our telephone number is 604-983-8083.


                          BUSINESS OF SOFTCARE EC INC.

SoftCare EC Inc. develops business relationship management software allowing
companies to conduct business-to-business e-commerce and the creation of B2B
industry portals. Our e-business management software is open and scaleable
allowing for the integration with existing and future technologies, lowering
operating costs and streamlining the supply chain while delivering benefits to
all business e-trading relationships.


                         FINANCIAL AND OTHER INFORMATION

In this Annual Report, unless otherwise specified, all dollar amounts are
expressed in Canadian Dollars ("CDN$" or "$"). The Government of Canada permits
a floating exchange rate to determine the value of the Canadian Dollar against
the U.S. Dollar (US$).

The financial statements and exhibits listed and referred to herein are filed
with this Annual Report on Form 20-F in the United States. This Annual Report is
also filed in Canada as an Annual Information Form and the Canadian filing does
not include the consolidated financial statements and exhibits listed below.
Canadian investors should refer to the annual consolidated financial statements
of SoftCare EC Inc. (the "Company" or "SoftCare") at May 31, 2002 as filed with
the Canadian securities regulators.


                           FORWARD-LOOKING STATEMENTS

This Annual Report includes forward-looking statements, principally in ITEM #4,
"Information on the Company" and ITEM #5, "Operating and Financial Review and
Prospects". We have based these forward-looking statements largely on our
current expectations and projections about future events and financial trends
affecting our business. These forward-looking statements are subject to risks,
uncertainties and assumptions including, among other things, the factors
discussed in this Annual Report under ITEM #3, "Key Information, Risk Factors"
and factors described in documents that we may furnish from time to time to the
Securities and Exchange Commission.

The words "believe", "may", "will", "estimate", "continue", "anticipate",
"intend", "expect", and similar words are intended to identify forward-looking
statements. In light of these risks and uncertainties, the forward-looking
information, events and circumstances discussed in this Annual Report might not
occur. Our actual results and performance could differ substantially from those
anticipated in our forward-looking statements. We undertake no obligation to
update publicly or revise any forward-looking statements because of new
information, future events or otherwise.

                                                                               3
<PAGE>

                                INDUSTRY GLOSSARY

"ASP" (APPLICATION SERVICE PROVIDER) means an online service for applications,
providing users the ability to rent instead of buying applications and services.

"EC" (ELECTRONIC COMMERCE) means the direct electronic interaction between two
computer applications, where the interaction involves the completion of a
transaction or part of a transaction.

"EDI" (ELECTRONIC DATA INTERCHANGE) is a direct application-to-application
exchange of information, using well-defined, tightly specified message formats
and industry standards. Traditional business-to-business trans-actions such as
delivery of invoices, late payment notices and purchase orders are carried out
using EDI.

"EC" and "EDI" are important elements of corporate interaction and communication
in today's global electronic marketplace. Companies interact daily with
geographically diverse customers, suppliers, trading partners and divisions.
These organizations increasingly need to exchange information and require their
computer systems to effect the information exchange.

"IDE" (INTERNET DEVELOPMENT ENVIRONMENT) is a software tool that simplifies the
development and deployment of Internet based applications.

"LEGACY APPLICATIONS" means applications that are significant to the operation
of a business, but which lack the features or ability to take advantage of
current technologies.

                                     PART I

ITEM 1.  IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND ADVISORS
--------------------------------------------------------------
         Not Applicable

ITEM 2.  OFFER STATISTICS AND EXPECTED TIMETABLE.
-------------------------------------------------
         No Disclosure Necessary


ITEM 3.  KEY INFORMATION.
-------------------------

3.A.1.  SELECTED FINANCIAL DATA
-------------------------------
3.A.2.  SELECTED FINANCIAL DATA
-------------------------------

The selected financial data of the Company for Fiscal 2002, Fiscal 2001, and
Fiscal 2000 ended May 31st was derived from the financial statements of the
Company which have been audited by Ernst & Young LLP, independent Chartered
Accountants, as indicated in their audit report which is included elsewhere in
this Annual Report. The selected financial data of the Company for Fiscal 1999
ended May 31st and Fiscal 1998 ended December 31st was derived from the
financial statements of the Company that were audited by Ernst & Young LLP,
these financial statements are not included herein.

The selected financial data should be read in conjunction with the financial
statements and other financial information included elsewhere in the Annual
Report.

The Company has not declared any dividends since incorporation and does not
anticipate that it will do so in the foreseeable future. The present policy of
the Company is to retain all available funds for use in its operations and the
expansion of its business.

                                                                               4
<PAGE>

Table No. 1 is derived from the financial statements of the Company, which have
been prepared in accordance with Canadian Generally Accepted Accounting
Principles (GAAP), the application of which, in the case of the Company,
conforms in all material respects for the periods presented with US GAAP, except
as disclosed in footnotes to the financial statements.

                                   Table No. 1
                             Selected Financial Data
                      (CDN$ in 000, except per share data)

==============================================================================
                                                              Five
                             Year       Year       Year     Months       Year
                            Ended      Ended      Ended      Ended      Ended
                        5/31/2002  5/31/2001  5/31/2000  5/31/1999 12/31/1998
                        ---------  ---------  ---------  --------- ----------
Canadian GAAP
-------------
Sales Revenue                $575       $460       $547       $351       $849
(Loss) from Operations     ($3317)    ($5765)    ($4021)    ($1380)    ($1134)
Net Income (Loss)          ($3273)    ($5566)    ($3867)    ($1387)    ($1131)
Basic (Loss) per Share     ($0.20)    ($0.35)    ($0.41)    ($0.13)    ($0.13)
Dividends Per Share         $0.00      $0.00      $0.00      $0.00      $0.00

Wtg. Avg. Shares (000)      17556      16518      10441      10000      10000
Period-end Shares O/S       19994      16990      15356      10000      10000
------------------------------------------------------------------------------
Working Capital              $107      $2805      $7301      ($430)      $519
Long-Term Debt                $27        105        105        164        204
Capital Stock              $15884      15370      14352       2460       2012
Shareholders' Equity         $252       3011       7468        465        475
Total Assets                  969       3621       8179        584       1035
------------------------------------------------------------------------------
US GAAP
-------
Net Income (Loss)          ($3273)   ($5566)    ($3959)
(Loss) per Share           ($0.20)   ($0.35)    ($0.42)
Wtg Avg.# Shares (000)      16782     15743       9441
------------------------------------------------------------------------------
(1) US GAAP Cumulative Net Loss since incorporation has been ($15,723,724).
==============================================================================

                                                                               5
<PAGE>

3.A.3.  EXCHANGE RATES
----------------------

In this Annual Report, unless otherwise specified, all dollar amounts are
expressed in Canadian Dollars (CDN$). The Government of Canada permits a
floating exchange rate to determine the value of the Canadian Dollar against the
U.S. Dollar (US$).

Table No. 2 sets forth the exchange rates for the Canadian Dollar at the end of
Fiscal 2002/2001/2000/1999 ended May 31st, Fiscal 1998 ended 12/31/1998, the
average rates for the period, and the range of high and low rates for the
period. The data for each month during the most recent eleven months is
presented.

For purposes of this table, the rate of exchange means the noon buying rate in
New York City for cable transfers in foreign currencies as certified for customs
purposes by the Federal Reserve Bank of New York. The table sets forth the
number of Canadian Dollars required under that formula to buy one U.S. Dollar.
The average rate means the average of the exchange rates on the last day of each
month during the period.

                                   Table No. 2
                           U.S. Dollar/Canadian Dollar

==============================================================================
                                            Average     High     Low    Close
-----------------------------------------------------------------------------
November 2002                                           1.59     1.55    1.57
October 2002                                            1.59     1.56    1.56
September 2002                                          1.59     1.55    1.59
August 2002                                             1.60     1.55    1.56
July 2002                                               1.59     1.51    1.57
June 2002                                               1.55     1.51    1.52
May 2002                                                1.57     1.53    1.53
April 2002                                              1.60     1.56    1.57
March 2002                                              1.60     1.58    1.60
February 2002                                           1.61     1.59    1.60
January 2002                                            1.61     1.59    1.59
-----------------------------------------------------------------------------
Fiscal Year Ended  5/31/2002                   1.57     1.61     1.51    1.53
Fiscal Year Ended  5/31/2001                   1.52     1.58     1.49    1.55
Fiscal Year Ended  5/31/2000                   1.47     1.51     1.44    1.50
Fiscal Year Ended  5/31/1999                   1.49     1.58     1.41    1.43
Fiscal Year Ended 12/31/1998                   1.49     1.57     1.41    1.54
==============================================================================


3.B.  CAPITALIZATION AND INDEBTEDNESS
-------------------------------------
      Not Applicable

3.C.  REASONS FOR THE OFFER AND USE OF PROCEEDS
-----------------------------------------------
      Not Applicable

                                                                               6
<PAGE>

3.D.  RISK FACTORS
------------------

LONG SALES CYCLES
The Company's sales cycles are lengthy, which makes it difficult to predict
revenues and budget expenses. Sales cycles vary substantially from customer to
customer, but typically range from three to ten months.

The Company's software products are complex and perform or directly affect
mission-critical functions across many different functional and geographic areas
of the customer's enterprise. Potential customers tend to engage in extensive
internal reviews before making purchase decisions. In many cases, customers must
change established business practices when they install the Company's software.
The Company's sales staff or its Value Added Partners must dedicate significant
time consulting with a potential customer concerning the substantial technical
and business concerns associated with implementing the Company's products. The
purchase of the Company's products is often discretionary, and as such lengthy
sales efforts may not result in a sale.

RISK OF RELIANCE ON THIRD PARTY VENDORS
The Company incorporates into its products certain software licensed to it by
other software developers. In particular, the Company is dependent on suppliers
for the database software and the graphical user interface software used in its
EDI products. Any termination of, or significant disruption in, the Company's
ability to license these products would adversely affect the Company's products
and its revenues. The licenses for most of these products are non-exclusive. Any
technical problems or errors with current or future versions of these licensed
products could cause errors or technical problems in the Company's products,
which could result in loss of sales, delays in or elimination of market
acceptance of the Company's products, damage to the Company's brand and its
reputation, product returns, increased costs, and diversion of development
resources, product redesigns and increased warranty and servicing costs.

HIGHLY COMPETITIVE MARKET
The EDI/EC market is highly competitive and subject to rapid technological
change and evolving industry standards and customer demands. The Company's
competitors include large international companies with significantly greater
financial, management, manufacturing, technological, marketing and distribution
resources and customer bases than the Company, as well as, in some cases,
worldwide reputations and dominant market shares.

The existence of products of which the Company is not aware, or products that
may be developed in the future, may adversely affect the marketability of the
Company's products. There can be no assurance that existing and future
competitors will not offer products superior to or lower in price than those of
the Company, or that the Company's efforts to differentiate its products from
competing products will prove successful. Failure by the Company to keep pace in
its marketplace could lead to recurring financial losses, which could adversely
affect the value of shareholders' investments.

                                                                               7
<PAGE>

RISK OF INTERNET SECURITY BREACHES
A fundamental requirement to conduct Internet-based business-to-business
electronic commerce is the secure transmission of confidential information over
public networks.

Advances in computer capabilities, new discoveries in the field of cryptography,
the development of new computer viruses or other developments by partners to
protect content and transactions on online trading exchanges or proprietary
information in customers' and their business partners' databases will affect the
success of the Company's products. Anyone who is able to circumvent security
measures could misappropriate proprietary, confidential customer information or
cause interruptions in customers' and their business partners' operations that
will adversely affect the business of the Company. The Company's customers and
their business partners may be required to incur significant costs to protect
against security breaches, including computer viruses, or to alleviate problems
caused by security breaches, reducing their demand for the Company's software.
Further, a well-publicized compromise of security could deter businesses from
using the Internet to conduct transactions that involve transmitting
confidential information. The failure of the security features of the Company's
software to prevent security breaches, or well publicized security breaches
affecting the Internet in general, could significantly harm the Company's
business, operating results and financial condition, or may result in a
compromise or breach of the security features contained in the Company's
software or the algorithms used by customers and their business.

RISK OF PRODUCT LIABILITY CLAIMS
If the Company becomes subject to product liability claims, these could be time
consuming and costly to defend. Errors, defects or other performance problems in
the Company's software could result in financial or other damages to customers.
Customers could seek damages for losses that, if successful, could harm the
Company's business significantly. Although the Company's license agreements
typically contain provisions designed to limit exposure to product liability
claims, existing or future laws or unfavorable judicial decisions could negate
these limitations of liability provisions. The Company has not experienced any
product liability claims to date; however, a product liability claim brought
against the Company, even if not successful, could be time consuming and costly
to defend and could harm the Company's reputation.

RISK OF DEPENDENCE ON SENIOR MANAGEMENT
The Company's success is dependent on the services of a number of members of
senior management, particularly: Martyn Armstrong, the Company's founder,
President, CEO and Chairman and John Versfelt, Chief Financial Officer/Corporate
Secretary. The experience of these individuals will be a key-contributing factor
to the Company's success and growth. The loss of one or more of these
individuals could have a material adverse effect on the Company's operations and
business prospects. The Company presently carries key-man life insurance on the
life of Martyn Armstrong. This reliance on a few key people presents an inherent
risk to the value of the shares and the interests of the Company's shareholders.

                                                                               8
<PAGE>

RISK OF LACK OF TRADEMARK PROTECTION
The Company has not filed trademark applications in the United States or Canada
for the name "SoftCare". A competitor of the Company holds a registered
trademark for the name "SoftCare" in the United States. In July 1996, SECI (as
hereinafter defined) entered into a Cooperation Agreement with TRW Inc. ("TRW"),
an Ohio-based manufacturer of products and services for the automotive, space,
defense and information management markets. Pursuant to the Cooperation
Agreement, SECI developed and completed an Intranet and Internet electronic
commerce software product family for communications, message switching, e-mail,
fax, EDI, audit and service billing, known as OpenEC. The product was supplied
by TRW to ADFIAP Global Data Interchange Network ("ANET"), a Southeast Asian
communications network for approximately 78 banks and their customers. The
Cooperation Agreement terminated in May 1999. TRW retains rights to use the name
"OpenEC" in connection with products developed under the Cooperation Agreement.
The deliverable was presented to and accepted by TRW in February 1998. TRW
subsequently determined not to proceed with implementation of the Asian project.
That software has not been subsequently used or licensed by the Company or TRW.
The Company may be required to cease using one or both names if another user
enjoins the Company from using such name, or if the Company determines that it
cannot effectively differentiate its products using these names. Any litigation
involving these names would have all of the risks and costs associated with
proprietary rights litigation. In the event the Company is forced to cease using
either name, it will be required to select new names for either its products or
its business, or both. This could in turn lead to a loss of the Company's
goodwill attached to those names and additional expenses in re-labeling
products, changing business forms and promoting the new names.

RISK OF DEPENDENCE ON INTELLECTUAL PROPERTY
The Company's success is heavily dependent upon proprietary technology. To
protect its proprietary technology, the Company relies principally upon
copyright and trade secret protection and confidentiality agreements and
contractual provisions. There can be no assurance that the steps taken by the
Company in this regard will be adequate to prevent misappropriation or
independent third-party development of its technology. Further, the laws of
certain countries in which the Company sells or will sell its products do not
protect software and intellectual property rights to the same extent as the laws
of Canada or the United States. The Company does not include in its software any
mechanism to prevent or inhibit unauthorized use, but generally requires the
execution of an agreement that restricts copying and use of its products. If
unauthorized copying or misuse of the Company's products were to occur to any
substantial degree, the Company's business and results of operations could be
materially adversely affected.

RISK OF CONTROL BY MANAGEMENT
The Company's senior management and directors currently maintain substantial
voting control over the Company. The Company's senior management and directors
beneficially own, in the aggregate, approximately 25% of our outstanding common
shares, including shares currently held in trust for employees, for which
executive officers serve as trustees. As a result, these stockholders (or
subgroups of them) retain substantial control over matters requiring approval by
stockholders, such as the election of directors and approval of significant
corporate transactions. This concentration of ownership may also have the effect
of delaying or preventing a change in control.

                                                                               9
<PAGE>

WE HAVE A RELATIVELY LIMITED OPERATING HISTORY AND HAVE OR MAY MAKE
ACQUISITIONS. THESE FACTS MAKE IT DIFFICULT TO EVALUATE OUR FUTURE PROSPECTS
BASED ON HISTORICAL OPERATING RESULTS.
We began in this business model in 1996 and have a relatively limited operating
history. Our limited operating history makes an evaluation of our future
prospects very difficult. We began shipping our first product, TradeLink EDI in
1993 and began to operate the SoftCare OpenEC product set in 1999. Our follow on
products in the OpenEC line only began to be installed during 1999-2000. We will
encounter risks and difficulties frequently encountered by companies in new and
rapidly evolving markets, including risks associated with our acquisition of
FMG. Many of these risks are described in more detail in this "Risk Factors"
section. We may not successfully address any of these risks. If we do not
successfully address these risks, our business would be seriously harmed.

THE MARKET FOR OUR PRODUCTS AND SERVICES IS AT AN EARLY STAGE. THEY MAY NOT
ACHIEVE WIDESPREAD MARKET ACCEPTANCE.
The market for Internet-based electronic commerce applications and services is
at an early stage of development. Our success depends on a significant number of
large buying organizations, marketplaces and exchanges implementing our products
and services. Our ability to attract additional customers for our products and
services will depend on using our existing customers as reference accounts. If
our products and services do not achieve market acceptance, our business will be
seriously harmed.

WE HAVE A HISTORY OF LOSSES AND EXPECT TO INCUR SIGNIFICANT ADDITIONAL LOSSES IN
THE FUTURE.
We had an accumulated deficit of approximately ($15.6 million) as of 5/31/2002.
We expect to incur significant losses for the foreseeable future for a number of
reasons, including the following: License revenues from products and services
declined in the quarter ended 5/31/2002 compared to the quarter ended 2/28/2002
and are not expected to grow and could decline further; transaction-based
revenues from network access, network services and independent Internet
marketplaces are based on unproven business models and may not grow; although we
have announced a program to significantly reduce expense levels, we may not
reduce expenses to anticipated levels and we may incur significant sales and
marketing, research and development and general and administrative expenses in
the future; if we reduce expenses beyond a certain point we may be unable to
support or attract customers; we will continue to incur substantial non-cash
expenses resulting from deferred compensation and potentially the issuance of or
reduction in price of warrants/options. We expect to incur losses at least
through the fiscal period ending 5/31/2003 and perhaps beyond.

OUR QUARTERLY OPERATING RESULTS ARE VOLATILE AND DIFFICULT TO PREDICT.
Our quarterly operating results have varied significantly in the past and will
likely vary significantly in the future. For example, our quarterly operating
results for the quarter ended 5/31/2001 were significantly lower than our
operating results for the same period ended 5/31/2000. We believe that
period-to-period comparisons of our results of operations are not meaningful and
should not be relied upon as indicators of future performance. Our quarterly
operating results may vary depending on a number of factors, including the
following:

                                                                              10
<PAGE>

RISKS RELATED TO REVENUES: fluctuations in demand for our products and services;
changes in the timing of sales of our products and services because our sales
cycle changes; we realize a significant portion of revenues at the end of each
fiscal quarter and we depend on a relatively small number of customers for
relatively large orders; changes in the percentage of bookings in a given
quarter that are recognized as revenues in that quarter; actions taken by our
competitors, including new product introductions and enhancements; and an
economic slowdown or recession affecting the economy generally or our industry
in particular.

RISKS RELATED TO EXPENSES: Payments of variable costs that are calculated as a
percentage of sales are difficult to predict. These variable costs increase the
risk of the Company achieving profits as a result of future increases in sales.
Examples of variable costs which the Company are or could be committed to are as
follows; payment of compensation to sales personnel based on achieving sales
targets and co-sale payments, referral fees and other commissions to our
strategic partners based on our sales; royalties paid to third parties for
technology incorporated into our products and services. These costs are incurred
as revenues increase but also limit our ability to control costs, including any
planned reduction in expense levels. As well, fluctuations in certain non-cash
expenses impact the future net income of the Company and are related to the
issuance of warrants/options to purchase common stock of which the related
non-cash expenses are calculated based on fluctuations in our stock price, which
are beyond the control of management.

RISKS RELATED TO OPERATIONS: our ability to scale our systems and operations to
support large numbers of customers, suppliers and transactions; our ability to
develop, introduce and market new products and enhancements to our existing
products on a timely basis; changes in our pricing policies and business model
or those of our competitors; and integration of our recent acquisitions and any
future acquisitions.

OUR REVENUES IN ANY QUARTER MAY DEPEND ON A RELATIVELY SMALL NUMBER OF
RELATIVELY LARGE ORDERS. WE HAVE RECENTLY EXPERIENCED LENGTHENING SALES CYCLES
AND DEFERRALS OF A NUMBER OF LARGE ANTICIPATED ORDERS.
Our quarterly revenues are especially subject to fluctuation because they depend
on the sale of relatively large orders for our products and related services.
Many of these orders are realized at the end of the fiscal quarter. As a result,
our quarterly operating results may fluctuate significantly if we are unable to
complete one or more substantial sales in any given quarter. We have recently
experienced lengthening sales cycles and deferrals of a number of large
anticipated orders that we believe have been affected by general economic
uncertainty.

REVENUES IN ANY FUTURE QUARTER MAY BE ADVERSELY AFFECTED TO THE EXTENT WE DEFER
RECOGNIZING REVENUE FROM CONTRACTS BOOKED IN THAT QUARTER.
We frequently enter into contracts where we recognize only a portion of the
potential revenue under the contract in the quarter in which we enter into the
contract. For example, we may recognize revenue on a ratable basis over the life
of the contract or enter into contracts where the recognition of revenue is
conditioned upon delivery of future software elements. As a result, revenues in
any given quarter may be adversely affected to the extent we enter into
contracts where revenue under those contracts is recognized in future periods.
If any contingencies arise in delivery that cause the customer to return the
software we may be affected negatively insofar as we are required to reimburse
the customer for payments made on account of such sale.

                                                                              11
<PAGE>

ANY FUTURE ACQUISITIONS MAY, REQUIRE US TO INCUR SIGNIFICANT CHARGES FOR
INTANGIBLE ASSETS.
Any future acquisitions may, require us to incur significant charges for
goodwill and other intangible assets, which will negatively affect our operating
income.

A DECLINE IN REVENUES MAY HAVE A DISPROPORTIONATE IMPACT ON OPERATING RESULTS.
Because our fixed cost levels are relatively stable in the near term for a given
quarter and are based in part on expectations of our future revenues and need to
support certain customer requirements, any decline in our revenues to a level
that is below our expectations would have a disproportionately adverse impact on
our operating results for that quarter.

IMPLEMENTATION OF OUR PRODUCTS BY LARGE CUSTOMERS IS COMPLEX, TIME CONSUMING AND
EXPENSIVE. WE FREQUENTLY EXPERIENCES LONG SALES AND IMPLEMENTATION CYCLES.
Enterprise-wide solutions that must be deployed with many users within a buying
organization consume resources. Implementation of these solutions by buying
organizations is complex, time consuming and expensive. In many cases, our
customers must change established business practices. In addition, they must
generally consider a wide range of other issues before committing to purchase
our products and services, including product benefits, ease of installation,
ability to work with existing computer systems, ability to support a larger user
base, functionality and reliability. Furthermore, many customers will be
addressing these issues for the first time in the context of implementing these
solutions. As a result, we must often educate potential customers on the use and
benefits of our products and services. In addition, we believe that the purchase
of our products is often discretionary and generally involves a significant
commitment of capital and other resources by a customer. It frequently takes
several months to finalize a sale and requires approval at a number of
management levels within the customer organization. The implementation and
deployment of our products requires a significant commitment of resources by our
customers and third party and/or professional services organizations. Because we
target different sized customers, our sales cycles typically average
approximately two to ten months for our different product offerings.

WE EXPECT TO DEPEND ON OPENEC AND TRADELINK FOR A SUBSTANTIAL PORTION OF OUR
BUSINESS FOR THE FORESEEABLE FUTURE. THIS BUSINESS COULD BE CONCENTRATED IN A
RELATIVELY SMALL NUMBER OF CUSTOMERS.
For the quarter ended August 31,2002 almost all revenues came from either sales
of Tradelink, OpenEC, and Trade Catalog licenses or related products, services
and annual maintenance. We anticipate that revenues from OpenEC and TradeLink
and related products and services will constitute a substantial portion of our
revenues in the foreseeable future. If anticipated revenues from OpenEC do not
materialize as anticipated then we will suffer significant shortfall in revenues
on investments made. If we experience a price decline or fail to achieve broad
market acceptance of these products our business would be seriously harmed. In
addition, for the quarter ended August 31, 2002, a relatively small number of
customers accounted for a substantial portion of revenues from sales. We may
continue to derive a significant portion of our revenues from a relatively small
number of customers.

                                                                              12
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BUSINESS-TO-BUSINESS ELECTRONIC COMMERCE PURCHASING NETWORKS ARE AT AN EARLY
STAGE OF DEVELOPMENT AND MARKET ACCEPTANCE.
Our business would be seriously harmed if electronic commerce purchasing and
collaborations between businesses does not achieve broad and timely market
acceptance. Market acceptance of this method of purchasing is subject to a
number of significant risks. These risks include: operating resource management
and procurement over the Internet is a new market; our software may not be able
to support large numbers of buyers and suppliers and cause slower response times
and other problems; our need to enhance the interfaces between our products; our
need to significantly enhance the features and services of our products to
achieve widespread commercial acceptance of our software; and our need to
significantly expand our internal resources to support planned growth. We depend
on suppliers joining the collaborations established by licensors of our OpenEC
and Private Label Home platforms. Any failure of suppliers to join in sufficient
and increasing numbers would make the network less attractive to buyers and
consequently other suppliers. In order to provide buyers with an organized
method for accessing goods and services, we rely on suppliers to maintain
Web-based catalogues (product catalogues maintained in electronic format),
indexing services (services that provide electronic product indices) and other
content aggregation tools (software tools that allow users to aggregate
information maintained in electronic format). Our inability to access and index
these catalogues and services would result in our customers having fewer
products and services available to them through our solution, which would
adversely affect the perceived usefulness of our products.

OUR BUSINESS WILL BE SERIOUSLY HARMED IF WE DO NOT DEVELOP A SUCCESSFUL REVENUE
MODEL.
We have not yet fully evolved our revenue model for services associated with our
software. The associated revenues may be a combination of license, maintenance,
transaction, and/or annual subscription fees. Examples of such services might
include electronic payment, bid/quote and sourcing, among others. However, we
cannot predict whether these services and other functionality will be
commercially successful or whether they will adversely impact revenues from our
products and services. We would be seriously harmed if the conduct of electronic
commerce purchasing or collaboration over the Internet are not commercially
successful.

WE RELY ON THIRD PARTIES TO EXPAND, MANAGE AND MAINTAIN THE COMPUTER AND
COMMUNICATIONS EQUIPMENT AND SOFTWARE NEEDED FOR THE DAY-TO-DAY OPERATIONS.
We rely on several third parties to provide hardware, software and services
required to expand, manage and maintain the computer and communications
equipment and software needed for the day-to-day operations. Services provided
by these parties include managing servers, maintaining communications lines and
managing network data centers. We may not successfully obtain these services on
a timely and cost effective basis. For example, many of these third parties
experienced significant outages in the past and could experience outages, delays
and other difficulties due to system failures unrelated to our systems. Any
problems caused by these third parties could cause users to perceive our
solutions as not functioning properly and to use other methods to buy goods and
services. It would take time to replace these third parties.

                                                                              13
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WE DEPEND ON STRATEGIC RELATIONSHIPS WITH OUR PARTNERS.
We have established strategic reselling, ASP and hosting relationships with some
outside companies. These companies are entitled to resell and/or host our
products to their customers. These relationships are new and this strategy is
unproven. We cannot be assured that any of these resellers, ASP partners or
hosts, or those we may contract with in the future, will be able to resell our
products to an adequate number of customers. If our current or future strategic
partners are not able to successfully resell our products, our business could be
seriously harmed. We plan to expand our strategic relationships both
domestically and internationally. As part of these agreements, we will be
deploying critical employee resources to help promote alliances. There is no
guarantee that alliances will be successful in creating a larger market for our
product offerings. If alliances are not successful, our business, operating
results and financial position could be seriously harmed.

OUR BUSINESS WILL BE SERIOUSLY HARMED IF WE FAIL TO ESTABLISH AND MAINTAIN
RELATIONSHIPS WITH THIRD PARTIES THAT WILL EFFECTIVELY IMPLEMENT OPENEC.
We rely, and expect to rely increasingly, on a number of third parties to
implement OpenEC and other products at customer sites. Where these products are
enterprise-wide solutions that must be deployed within the customer's
organization the implementation process is complex, time-consuming and
expensive. We rely on third parties to implement our products, because we lack
the internal resources to implement our products at current and potential
customer sites. If we are unable to establish effective, long-term relationships
with our implementation providers, or if they do not meet the needs or
expectations of their customers, our business would be seriously harmed. Our
current implementation partners are not contractually required to continue to
help implement our products. As a result, of the limited resources and
capacities of many third-party implementation providers, we may be unable to
establish or maintain relationships with third parties having sufficient
resources to provide the necessary implementation services to support our needs.
If these resources are unavailable, we will be required to provide these
services internally, which would significantly limit our ability to meet our
customers' implementation needs. A number of our competitors, including Sterling
Commerce, Innovis, and GEIS, have significantly more well-established
relationships with these third party system integrators and, as a result, these
third parties may be more likely to recommend competitors' products and services
rather than our own. In addition, we cannot control the level and quality of
service provided by our current and future implementation partners.

WE FACE INTENSE COMPETITION FROM MANY PARTICIPANTS IN THE BUSINESS-TO-BUSINESS
ELECTRONIC COMMERCE AND COLLABORATION INDUSTRY. IF WE ARE UNABLE TO COMPETE
SUCCESSFULLY, OUR BUSINESS WILL BE SERIOUSLY HARMED.
The market for our solutions is intensely competitive, evolving and subject to
rapid technological change. The intensity of competition has increased and is
expected to further increase in the future. This increased competition is likely
to result in price reductions, reduced gross margins and loss of market share,
any one of which could seriously harm our business. Competitors vary in size and
in the scope and breadth of the products and services offered.

We also increasingly encounter competition with respect to different aspects of
our solution from companies such as GEIS, Innovis, Sterling Commerce, Btrade,
Cyclone Commerce, iSoft, Hewlett Packard Company, InterTrade Systems
Corporation, TIBCO Software Inc., Vitria Technology, Inc., webMethods, Inc. We
also encounter significant competition from several major enterprise software
developers, such as Oracle, PeopleSoft and SAP.

                                                                              14
<PAGE>

In addition, because there are relatively low barriers to entry in the
business-to-business exchange market, we expect additional competition from
other established and emerging companies, particularly if they acquire one of
our competitors. For example, third parties that currently help implement OpenEC
and our other products could begin to market products and services that compete
with our products and services. We could also face competition from new
companies who introduce an Internet-based management solution. Many of our
current and potential competitors have longer operating histories, significantly
greater financial, technical, marketing and other resources, significantly
greater name recognition and a larger installed base of customers than us. In
addition, many of our competitors have well-established relationships with our
current and potential customers and have extensive knowledge of our industry. In
the past, we have lost potential customers to competitors for various reasons,
including lower prices and incentives not matched by us. In addition, current
and potential competitors have established or may establish cooperative
relationships among themselves or with third parties to increase the ability of
their products to address customer needs. Accordingly, it is possible that new
competitors or alliances among competitors may emerge and rapidly acquire
significant market share. We also expect that competition will increase as a
result of industry consolidations. We may not be able to compete successfully
against our current and future competitors.

IF WE FAIL TO DEVELOP OUR PRODUCTS AND SERVICES IN A TIMELY AND COST-EFFECTIVE
BASIS, OR IF OUR PRODUCTS AND SERVICES DO NOT ACHIEVE MARKET ACCEPTANCE, OUR
BUSINESS WILL BE SERIOUSLY HARMED.
We may fail to introduce or deliver new releases or new potential offerings on a
timely and cost-effective basis or at all. The life cycles of our products are
difficult to predict because the market for our products is new and emerging,
and is characterized by rapid technological change, changing customer needs and
evolving industry standards. The introduction of products employing new
technologies and emerging industry standards could render our existing products
or services obsolete and unmarketable. In addition, we have experienced delays
in the commencement of commercial shipments of our new releases of OpenEC and
Private Label Home [and other products] in the past. If new releases or
potential new products are delayed or do not achieve market acceptance, we could
experience a delay or loss of revenues and customer dissatisfaction. For us to
be successful, our products and services must keep pace with technological
developments and emerging industry standards, address the ever-changing and
increasingly sophisticated needs of our customers and achieve market acceptance.
In developing new products and services, we may fail to develop and market
products that respond to technological changes or evolving industry standards in
a timely or cost-effective manner; encounter products, capabilities or
technologies developed by others that render our products and services obsolete
or noncompetitive or that shorten the life cycles of our existing products and
services; experience difficulties that could delay or prevent the successful
development, introduction and marketing of these new products and services;
experience deferrals in orders in anticipation of new products or releases; or
fail to develop new products and services that adequately meet the requirements
of the marketplace or achieve market acceptance. As a result of the foregoing
factors, we could experience a delay or loss of revenues and customer
dissatisfaction when introducing new and enhanced products and services.

                                                                              15
<PAGE>

SOME OF OUR CUSTOMERS ARE SMALL EMERGING GROWTH COMPANIES OR LARGER FISCALLY
CHALLENGED COMPANIES THAT MAY REPRESENT CREDIT RISKS.
Some of our customers expanded to include small, emerging, growth companies.
Many of these companies have limited operating histories, are operating at a
loss and have limited access to capital. With the significant slowdown in U.S.
and Canadian economic growth in the past several months and uncertainty relating
to the prospects for near-term U.S. and Canadian economic growth, some of these
customers may represent a credit risk. If our customers experience financial
difficulties or fail to experience commercial success, we may have difficulty
collecting on our accounts.

NEW VERSIONS AND RELEASES OF OUR PRODUCTS MAY CONTAIN ERRORS OR DEFECTS.
Our products are complex. They may contain undetected errors or failures when
first introduced or as new versions are released. This may result in loss of, or
delay in, market acceptance of our products. We have in the past discovered
software errors in our new releases and new products after their introduction.
For example, in the past we discovered problems with respect to the ability of
software written in Java to scale to allow for large numbers of concurrent
users. We have experienced delays in release, lost revenues and customer
frustration during the periods required to correct these errors. We may in the
future discover errors and additional scalability limitations in new releases or
new products after the commencement of commercial shipments.

WE COULD BE SUBJECT TO POTENTIAL PRODUCT LIABILITY CLAIMS AND THIRD PARTY
LIABILITY CLAIMS RELATED TO PRODUCTS AND SERVICES.
Our customers use our products and services to manage their goods and services
procurement and other business processes. Any errors, defects or other
performance problems could result in financial or other damages to our
customers. A product liability claim brought against us, even if not successful,
would likely be time consuming and costly and could seriously harm our business.
Although our customer license agreements typically contain provisions designed
to limit our exposure to product liability claims, existing or future laws or
unfavorable judicial decisions could negate these limitation of liability
provisions. The law relating to the liability of providers of listings of
products and services sold over the Internet for errors, defects or other
performance problems with respect to those products and services is currently
unsettled. We will not pre-screen the types of products and services that may be
purchased. Some of these products and services could contain performance or
other problems. Similar issues may arise for business-to-business marketplaces
and exchanges. We may not successfully avoid civil or criminal liability for
problems related to the products and services sold using our products. Any
claims or litigation could still require expenditures in terms of management
time and other resources to defend ourselves. Liability of this sort could
require us to implement measures to reduce our exposure to this liability, which
may require us, among other things, to expend substantial resources or to
discontinue certain product or service offerings or to take precautions to
ensure that certain products and services are not available.

IF THE PROTECTION OF OUR INTELLECTUAL PROPERTY IS INADEQUATE, OUR COMPETITORS
MAY GAIN ACCESS TO OUR TECHNOLOGY, AND WE MAY LOSE CUSTOMERS.
We depend on our ability to develop and maintain the proprietary rights of our
technology. To protect our proprietary technology, we rely primarily on a
combination of contractual provisions, including customer licenses that restrict
use of our products, confidentiality agreements and procedures, and patent,
copyright, trademark and trade secret laws. We may not develop proprietary
products that are patentable. Despite our efforts, we may not be able to
adequately protect our proprietary rights, and our competitors may independently

                                                                              16
<PAGE>

develop similar technology, duplicate our products or design around any patents
issued to us or our other intellectual property. This is particularly true
because some foreign laws do not protect proprietary rights to the same extent
as do Canadian and United States laws. The validity, enforceability and type of
protection of proprietary rights in Internet related industries is uncertain and
evolving. There has been a substantial amount of litigation in the software
industry and the Internet industry regarding intellectual property rights. We
expect that software product developers and providers of electronic commerce
solutions will increasingly be subject to infringement claims, and third parties
may claim that we or our current or potential future products infringe their
intellectual property. Any claims, with or without merit, could be time
consuming, result in costly litigation, cause product shipment delays or require
us to enter into royalty or licensing agreements. Royalty or licensing
agreements, if required, may not be available on terms acceptable to us or at
all, which could seriously harm our business. We must now, and may in the future
have to, license or otherwise obtain access to intellectual property of third
parties. For example, we are currently dependent on developers' licenses from
enterprise resource planning ("ERP"), database, human resource, project
management and other system software vendors in order to ensure compliance of
our products with their management systems. We may not be able to obtain any
required third party intellectual property in the future.

IF WE DO NOT EFFECTIVELY MANAGE OUR GROWTH AND EXPANSION, OUR BUSINESS WILL BE
HARMED.
If we are unable to manage our growth and expansion, our business will be
seriously harmed. Our ability to compete effectively and to manage future
expansion of our operations, if any, will require us to continue to improve our
financial and management controls, reporting systems and procedures on a timely
basis, and expand, train and manage our employee work force. We have implemented
new systems to manage our financial and human resources infrastructure. We may
find that these systems, our personnel, procedures and controls may be
inadequate to support our future operations.

AS WE EXPAND OUR INTERNATIONAL SALES AND MARKETING ACTIVITIES, OUR BUSINESS WILL
BE SUSCEPTIBLE TO NUMEROUS RISKS ASSOCIATED WITH INTERNATIONAL OPERATIONS.
To be successful, we believe we must continue to expand our international
operations and hire additional international personnel. Therefore, we have
committed and expect to continue to commit significant resources to expand our
international sales and marketing activities. If successful, we will be subject
to a number of risks associated with international business activities. These
risks generally include: currency exchange rate fluctuations; seasonal
fluctuations in purchasing patterns; unexpected changes in regulatory
requirements; tariffs, export controls and other trade barriers; longer accounts
receivable payment cycles and difficulties in collecting accounts receivable;
difficulties in managing and staffing international operations; potentially
adverse foreign tax consequences, including withholding in connection with the
repatriation of earnings; the burdens of complying with a wide variety of
foreign laws; the risks related to the recent global economic turbulence and
adverse economic circumstances in Asia; and political instability.

                                                                              17
<PAGE>

WE MAY BE UNABLE TO COMPLETE ANY FUTURE ACQUISITIONS. OUR BUSINESS COULD BE
ADVERSELY AFFECTED AS A RESULT.
We anticipate that it may be necessary or desirable to acquire additional
businesses, products or technologies. If we identify an appropriate acquisition
candidate, we may not be able to negotiate the terms of the acquisition
successfully, finance the acquisition or integrate the acquired business,
products or technologies into our existing business and operations. If our
efforts are not successful, our business could seriously be harmed.

ANY FUTURE ACQUISITIONS MAY DILUTE OUR EQUITY AND ADVERSELY EFFECT OUR FINANCIAL
POSITION.
Any future acquisition in which the consideration consists of stock or other
securities may significantly dilute our equity. Any future acquisition in which
the consideration consists of cash may require us to use a substantial portion
of our available cash. Financing for future acquisitions may not be available on
favorable terms, or at all.

ANY FUTURE ACQUISITIONS WILL BE SUBJECT TO A NUMBER OF RISKS.
Any future acquisitions will be subject to a number of risks including: the
diversion of management time and resources; the difficulty of assimilating the
operations and personnel of the acquired companies; the potential disruption of
the ongoing businesses; the difficulty of incorporating acquired technology and
rights into our products and services; unanticipated expenses related to
technology integration; difficulties in maintaining uniform standards, controls,
procedures and policies; the impairment of relationships with employees and
customers as a result of any integration of new management personnel; and
potential unknown liabilities associated with acquired businesses.

IN THE FUTURE, WE MAY NEED TO RAISE ADDITIONAL CAPITAL IN ORDER TO REMAIN
COMPETITIVE IN THE BUSINESS-TO-BUSINESS ELECTRONIC COMMERCE INDUSTRY. THIS
CAPITAL MAY NOT BE AVAILABLE ON ACCEPTABLE TERMS, IF AT ALL. We believe that our
existing cash, cash equivalents, funds from planned private placements, and our
anticipated cash flow from operations will be sufficient to meet our working
capital and operating resource expenditure requirements for at least the next
year. After that, we may need to raise additional funds and we cannot be certain
that we will be able to obtain additional financing on favorable terms, if at
all. If we cannot raise funds on acceptable terms, if and when needed, we may
not be able to develop or enhance our products and services, take advantage of
future opportunities, grow our business or respond to competitive pressures or
unanticipated requirements, which could seriously harm our business.

OUR STOCK PRICE IS HIGHLY VOLATILE.
Our stock price has fluctuated dramatically. There is a significant risk that
the market price of the common stock will decrease significantly in the future
in response to any of the following factors, some of which are beyond our
control: variations in our quarterly operating results; announcements that our
revenue or income are below analysts' expectations; changes in analysts'
estimates of our performance or industry performance; general economic
slowdowns; changes in market valuations of similar companies; sales of large
blocks of our common stock; announcements by us or our competitors of
significant contracts, acquisitions, strategic partnerships, joint ventures or
capital commitments; loss of a major customer or failure to complete significant
license transactions; additions or departures of key personnel; and fluctuations
in stock market price and volume, which are particularly common among highly
volatile securities of software and Internet-based companies.

                                                                              18
<PAGE>

WE ARE AT RISK OF SECURITIES LITIGATION DUE TO OUR STOCK PRICE VOLATILITY.
In the past, securities litigation has often been brought against a company
following periods of volatility in the market price of its securities. We have
recently experienced significant volatility in the price of our stock. We may in
the future be the target of similar litigation. Securities litigation could
result in substantial costs and divert management's attention and resources,
which could seriously harm our business.

WE DEPEND ON INCREASING USE OF THE INTERNET AND ON THE GROWTH OF ELECTRONIC
COMMERCE. IF THE USE OF THE INTERNET AND ELECTRONIC COMMERCE DO NOT GROW AS
ANTICIPATED, OUR BUSINESS WILL BE SERIOUSLY HARMED.
Our business depends on the increased acceptance and use of the Internet as a
medium of commerce. Rapid growth in the use of the Internet is a recent
phenomenon. As a result, acceptance and use may not continue to develop at
historical rates and a sufficiently broad base of business customers may not
adopt or continue to use the Internet as a medium of commerce. Demand and market
acceptance for recently introduced services and products over the Internet are
subject to a high level of uncertainty, and there exist few proven services and
products. Our business would be seriously harmed if: use of the Internet and
other online services does not continue to increase or increases more slowly
than expected; the technology underlying the Internet and other online services
does not effectively support any expansion that may occur; or the Internet and
other online services do not create a viable commercial marketplace, inhibiting
the development of electronic commerce and reducing the need for our products
and services.

WE DEPEND ON THE ACCEPTANCE OF THE INTERNET AS A COMMERCIAL MARKETPLACE, AND
THIS ACCEPTANCE MAY NOT OCCUR ON A TIMELY BASIS.
The Internet may not be accepted as a viable long-term commercial marketplace
for a number of reasons. These reasons include: potentially inadequate
development of the necessary communication and computer network technology,
particularly if rapid growth of the Internet continues; delayed development of
enabling technologies and performance improvements; delays in the development or
adoption of new standards and protocols; and increased governmental regulation.
Since our business depends on the increased acceptance and use of the Internet
as a medium of commerce, if the Internet is not accepted as a viable medium of
commerce or if that acceptance takes place at a rate that is slower than
anticipated, our business would be harmed.

SECURITY RISKS AND CONCERNS MAY DETER THE USE OF THE INTERNET FOR CONDUCTING
ELECTRONIC COMMERCE.
A significant barrier to electronic commerce and communications is the secure
transmission of confidential information over public networks. Advances in
computer capabilities, new discoveries in the field of cryptography or other
events or developments could result in compromises or breaches of our security
systems or those of other Internet/web sites to protect proprietary information.
If any well-publicized compromises of security were to occur, it could have the
effect of substantially reducing the use of the Internet for commerce and
communications. Anyone who circumvents our security measures could
misappropriate proprietary information or cause interruptions in our services or
operations. The Internet is a public network, and data is sent over this network
from many sources. In the past, computer viruses and software programs that
disable or impair computers, have been distributed and have rapidly spread over
the Internet. Computer viruses could be introduced into our systems or those of
our customers or suppliers, which could disrupt use of our products or make them
inaccessible to customers or suppliers. We may be required to expend significant
capital and other resources to protect against the threat of security breaches
or to alleviate problems caused by breaches. To the extent that our activities

                                       19
<PAGE>

may involve the storage and transmission of proprietary information, such as
credit card numbers, security breaches could expose us to a risk of loss or
litigation and possible liability. Our security measures may be inadequate to
prevent security breaches, and our business would be harmed if it does not
prevent them.

INCREASING GOVERNMENT REGULATION COULD LIMIT THE MARKET FOR, OR IMPOSE SALES AND
OTHER TAXES ON THE SALE OF, OUR PRODUCTS AND SERVICES OR ON PRODUCTS AND
SERVICES.
As Internet commerce evolves, we expect that federal, state or foreign agencies
will adopt regulations covering issues such as user privacy, pricing, content
and quality of products and services. It is possible that legislation could
expose companies involved in electronic commerce to liability, which could limit
the growth of electronic commerce generally. Legislation could dampen the growth
in Internet usage and decrease our acceptance as a communications and commercial
medium. If enacted, these laws, rules or regulations could limit the market for
our products and services. We do not collect sales or other similar taxes in
respect of goods and services purchased. However, one or more
governments/provinces/states may seek to impose sales tax collection obligations
on out-of-province/state/other jurisdiction companies like us that engage in or
facilitate electronic commerce. A number of proposals have been made at the
governmental/state and local level that would impose additional taxes on the
sale of goods and services over the Internet. These proposals, if adopted, could
substantially impair the growth of electronic commerce and could adversely
affect our opportunity to derive financial benefit from such activities.
Moreover, a successful assertion by one or more provinces/states or any foreign
country that we should collect sales or other taxes on the exchange of goods and
services could seriously harm our business.

BROKER-DEALERS MAY BE DISCOURAGED FROM EFFECTING TRANSACTIONS IN OUR COMMON
SHARES BECAUSE THEY ARE CONSIDERED PENNY STOCKS AND ARE SUBJECT TO THE PENNY
STOCK RULES.
Rules 15g-1 through 15g-9 promulgated under the Securities Exchange Act of 1934,
as amended, impose sales practice and disclosure requirements on NASD
broker-dealers who make a market in "a penny stock". A penny stock generally
includes any non-NASDAQ equity security that has a market price of less than
US$5.00 per share. Our shares are quoted on the TSX Venture Exchange, and the
price of our common shares ranged from CDN$0.01 (low) to CDN$0.53 (high) during
the period from 1/1/2001 to 11/30/2002. The closing price of our shares on the
TSX Venture Exchange on 11/30/2002 was CDN$0.02. The additional sales practice
and disclosure requirements imposed upon broker-dealers may discourage
broker-dealers from effecting transactions in our shares, which could severely
limit the market liquidity of the shares and impede the sale of our shares in
the secondary market.

Under the penny stock regulations, a broker-dealer selling penny stock to anyone
other than an established customer or "accredited investor" (generally, an
individual with net worth in excess of US$1,000,000 or an annual income
exceeding US$200,000, or US$300,000 together with his or her spouse) must make a
special suitability determination for the purchaser and must receive the
purchaser's written consent to the transaction prior to sale, unless the
broker-dealer or the transaction is otherwise exempt.

                                                                              20
<PAGE>

In addition, the penny stock regulations require the broker-dealer to deliver,
prior to any transaction involving a penny stock, a disclosure schedule prepared
by the US Securities and Exchange Commission relating to the penny stock market,
unless the broker-dealer or the transaction is otherwise exempt. A broker-dealer
is also required to disclose commissions payable to the broker-dealer and the
registered representative and current quotations for the securities. Finally, a
broker-dealer is required to send monthly statements disclosing recent price
information with respect to the penny stock held in a customer's account and
information with respect to the limited market in penny stocks.

U.S. INVESTORS MAY NOT BE ABLE TO ENFORCE THEIR CIVIL LIABILITIES AGAINST US OR
OUR DIRECTORS, CONTROLLING PERSONS AND OFFICERS.
It may be difficult to bring and enforce suits against the Company. The Company
is a corporation incorporated in the province of British Columbia under the
British Columbia Company Act. A majority of the Company's directors must be
residents of Canada, and all or a substantial portion of their assets are
located outside of the United States, predominately in Canada. As a result, it
may be difficult for U.S. holders of our common shares to effect service of
process on these persons within the United States or to realize in the United
States upon judgments rendered against them. In addition, a shareholder should
not assume that the courts of Canada (i) would enforce judgments of U.S. courts
obtained in actions against us or such persons predicated upon the civil
liability provisions of the U.S. federal securities laws or other laws of the
United States, or (ii) would enforce, in original actions, liabilities against
us or such persons predicated upon the U.S. federal securities laws or other
laws of the United States.

However, U.S. laws would generally be enforced by a Canadian court provided that
those laws are not contrary to Canadian public policy, are not foreign penal
laws or laws that deal with taxation or the taking of property by a foreign
government and provided that they are in compliance with applicable Canadian
legislation regarding the limitation of actions. Also, a judgment obtained in a
U.S. court would generally be recognized by a Canadian court except, for
example:
  a) where the U.S. court where the judgment was rendered had no jurisdiction
     according to applicable Canadian law;
  b) the judgment was subject to ordinary remedy (appeal, judicial review and
     any other judicial proceeding which renders the judgment not final,
     conclusive or enforceable under the laws of the applicable state) or not
     final, conclusive or enforceable under the laws of the applicable state;
  c) the judgment was obtained by fraud or in any manner contrary to natural
     justice or rendered in contravention of fundamental principles of
     procedure;
  d) a dispute between the same parties, based on the same subject matter has
     given rise to a judgment rendered in a Canadian court or has been decided
     in a third country and the judgment meets the necessary conditions for
     recognition in a Canadian court;
  e) the outcome of the judgment of the U.S. court was inconsistent with
     Canadian public policy;
  f) the judgment enforces obligations arising from foreign penal laws or laws
     that deal with taxation or the taking of property by a foreign government;
     or
  g) there has not been compliance with applicable Canadian law dealing with the
     limitation of actions.

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<PAGE>

CRITICAL ACCOUNTING POLICIES
The consolidated financial statements are prepared in conformity with accounting
principles generally accepted in Canada. There are two primary differences
between US GAAP and Canadian GAAP, as applied to the Company's financial
statements: recognition of stock-based compensation and the calculation of the
weighted average number of shares used to calculate Basic Loss Per Share.

For U.S. GAAP purposes, the Company has elected under Statement of Financial
Accounting Standards No. 123, "Accounting for Stock-Based Compensation" ("SFAS
123") to continue to apply the intrinsic value based method of accounting for
stock-based compensation under APB 25 "Accounting for Stock Issued to
Employees." Under the intrinsic value method, stock compensation is the excess,
if any, of the quoted market value of the stock at the measured date of the
grant over the amount an optionee must pay to acquire the stock. Under U.S.
GAAP, the issue of stock options to non-employees is accounted for under SFAS
123. The fair value of the stock options granted to non-employees during the
year ended 5/31/2002 was estimated using the Black-Scholes option pricing model
and the following weighted-average assumptions: dividend yield 0.0%, expected
volatility 1.25, risk-free interest rate 5.5% and expected average option life
of 3.5 years. The fair value of the options granted to non-employees was $1.17
per option. Accounting for the non-employee options, that have vested, on this
basis would result in the recognition of additional compensation expense of
$nil, $nil, and $91,975 for Fiscal 2002/Fiscal 2001/Fiscal 2000.

Under U.S. GAAP, the weighted average number of common shares used in the
calculation of basic and fully diluted income (loss) per share excludes
performance based common shares under the Company's Employee Stock Bonus Plan
[note 18]. The weighted average number of common shares used in the calculation
of diluted income (loss) per share would be calculated by the treasury stock
method whereby it is assumed that proceeds received from the Company from the
exercise of dilutive securities are used to repurchase outstanding shares in the
market. As the effect of options and common share purchase warrants are
anti-dilutive, diluted loss per share does not differ from basic loss per share.
Canadian GAAP requires debt-like preferred shares and their dividends to be
treated as long-term debt and interest expense respectively. Under Securities
and Exchange Commission (SEC) rules, these shares are to be recorded as
mezzanine debt and the dividend as a charge to retained earnings.

Management is required to make judgments, estimates and assumptions that affect
the reported amounts of assets and liabilities at the date of the consolidated
financial statements and the reported amounts of revenues and expenses during
the reporting period. On a regular basis, we evaluate our estimates and
assumptions. We base our estimates on historical experience and on various other
assumptions that are believed to be reasonable under the circumstances, the
results of which form the basis for making judgments about the carrying values
of assets and liabilities that are not readily apparent from other sources.
Actual results may differ from these estimates under different assumptions or
conditions. The significant accounting policies that are most critical to aid in
fully understanding and evaluating reported financial results include: revenue
recognition and the expensing of software development costs.

                                                                              22
<PAGE>

Revenue recognition. A software supply arrangement entered into by the Company
may encompass multiple elements, including software sales, consulting services,
training services and maintenance fees. The total fee for a multiple element
arrangement is allocated to each element based upon objective evidence of the
fair value of each element. Fair value is established through the Company's
policy to charge to customers the same price as when the element is sold
separately. Revenue from sales made to re-sellers is recognized after the
third-party sale occurs and the revenue is determinable. Consulting services
offered by the Company are not considered essential to the functionality of the
software arrangement. As a result, consulting and training services revenues are
recognized as the work is performed. Maintenance contract revenue is deferred
and recognized over the respective contract periods. Revenue from direct
software sales is recognized when the product has been delivered, as no
significant obligations remain, fees are fixed and determinable, collectibility
is probable, and persuasive evidence of an arrangement exists. If software sales
are contingent upon successful installation and subsequent customer acceptance,
the revenue and work in progress costs are deferred until customer acceptance is
achieved.

Software development costs are charged to expense as incurred unless the
development project meets the criteria under Canadian generally accepted
accounting principles for deferral and amortization. The Company has not
deferred any software development costs to date.

                                                                              23
<PAGE>

ITEM 4.  INFORMATION ON THE COMPANY
-----------------------------------

4.A. HISTORY AND DEVELOPMENT OF THE COMPANY
-------------------------------------------

Introduction
------------
SoftCare EC Inc. hereinafter also is referred to as the "Company". From the date
of incorporation to mid-1997, the Company was involved in the exploration and
development of natural resource properties. In mid-1997, the Company abandoned
its mineral properties and began seeking alternate business opportunities. The
write-off of the Company's six mineral properties in Indonesia and related
deferred exploration costs occurred in Fiscal 1998. In June 1999, the Company's
efforts focused on a shift in its business to electronic commerce ("EC"), when
the Company entered into a share purchase agreement (the "Share Purchase
Agreement") with SoftCare EC Solutions Inc. (formerly SoftCare Electronic
Commerce Inc.)("SECI"), a private electronic commerce software company. The
Company acquired of all of the issued and outstanding shares of SECI in June
1999.

The Company's executive office is located at:
  889 Harbourside Drive, #210
  North Vancouver, British Columbia, Canada  V7P 3S1
  Telephone: (888) 763-8227
  Telephone: (604) 983-8083
  Facsimile: (604) 983-8056.
  e-mail: info@softcare.com
  webpage: www.softcare.com

The Company's registered office is located at:
  1111 West Georgia Street, #2100
  Vancouver, British Columbia,  Canada  V6E 4M3

The contact person is:
  Martyn A. Armstrong, President/CEO/Director.

The Company's fiscal year ends May 31st.

The Company's common shares trade on the TSX Venture Exchange in Toronto under
the symbol "SCE" and on the NASD OTC Bulletin Board in the USA under the symbol
"SCFEF".

The Company has 100,000,000 common shares without par value authorized. At
5/31/2002, the end of the Company's most recent fiscal year, there were
19,993,617 common shares issued/outstanding. At 11/30/2002, there were
23,243,617 common shares issued/outstanding.

In this Annual Report, unless otherwise specified, all dollar amounts are
expressed in Canadian Dollars (CDN$).

                                                                              24
<PAGE>

Incorporation, Name Changes, and Stock Consolidations
-----------------------------------------------------
SoftCare EC Inc. (the "Company") was incorporated with the name Burmac Energy
Corporation under the Company Act (British Columbia) by memorandum and articles
of incorporation dated 3/30/1981. The memorandum of the Company was amended: on
12/16/1983 to increase authorized capital from 10,000,000 to 20,000,000 common
shares; on 2/2/1991 to change the Company's name to Bus Holding Corp and
consolidate the Company's share capital on a one-for seven basis to 2,857,142
common shares and increased concurrently to 20,000,000 common shares; on
11/17/1997 to change the name of the Company to Savannah Ventures Ltd. and
increase the authorized capital to 100,000,000 common shares; on 12/1/1998 to
change the Company's name to International Savannah Ventures Ltd. and effect a
consolidation of the Company's share capital on a one-for-six basis reducing
issued shares accordingly and concurrently increased the authorized capital to
100,000,000 common shares; on 6/10/1999 to change the Company's name to SoftCare
EC.com Inc.; and on 11/8/2001 to change the Company's name to SoftCare EC Inc.
On 11/17/1997, the Company's Articles of Incorporation were replaced in their
entirety.

Acquisition of SECI
-------------------
Under the terms of the Share Purchase Agreement, the SECI Shareholders agreed to
sell all of the issued and outstanding common shares in SECI to the Company in
exchange for 11,000,000 Special Warrants issued by the Company. Each Special
Warrant was exercisable, for no additional consideration, into one common share
in the share capital of the Company.

Of the 11,000,000 Special Warrants, 10,000,000 were issued to the SECI
Shareholders and 1,000,000 Special Warrants were issued, in trust, to Martyn
Armstrong, the President of SECI and Wayne Zielke, then the Chief Financial
Officer of SECI, as trustees (the "Trustees") for certain SECI employees
pursuant to a trust agreement. Under the rules and policies of the Canadian
Venture Exchange (the "CDNX") (formerly the Vancouver Stock Exchange), the
acquisition and the related transactions described in the Share Purchase
Agreement (the "Acquisition") constituted a "reverse takeover" and the
transactions were subject to CDNX approval.

The Company completed the Acquisition on June 18, 1999.

SECI was founded in 1989 by Martyn Armstrong, the Company's President, CEO and
Chairman, to provide EDI software and services to businesses of all sizes. SECI
grew from a small EDI consulting group to, in the early 1990s, an EDI software
vendor with approximately 150 customers across Canada, the United States and
Asia. The Company has adapted its experience and advanced software engineering
to focus on e-commerce. The Company continues to service its EDI customers. As
acceptance of web-based applications develop, these customers provide the
Company with a market for enhance products and services.

In May 2000, the Company and Global Network Privacy Inc. ("GNP") entered into a
business arrangement to develop e-business/industry portal solutions for GNP's
and the Company's customers. The Company's OpenEC platform combined with GNP's
hardware and operating systems will provide a technologically advanced, highly
secure business-to-business EC platform to the EDI marketplace. In February
2001, GNP ceased operations and was wound up due to lack of success in either
attracting adequate capital or sales to support operations. This failure
resulted in the Company not being able to collect on the receivable arising from
the license agreement with GNP.

                                                                              25
<PAGE>

On 4/10/2000, the Company executed a definitive purchase agreement (the "FMG
Agreement") to acquire, subject to regulatory approval, Financial Management
Group LLC ("FMG"), a California based company involved in the development of
PC-based software for the credit counseling industry. The Company purchased FMG
in order to facilitate development of a credit-counseling portal using its
OpenEC technology.

Under the terms of the FMG Agreement, the Company was to issue 100,000 common
shares (the "Purchase Shares") to the vendor, in consideration for the
acquisition of FMG and up to 200,000 additional common shares upon the
achievement of certain milestones related to the credit-counseling portal to be
developed by the Company in conjunction with FMG employees. Closing of the FMG
Agreement was conditioned upon approval from the Canadian Venture Exchange.

Prior to receiving the necessary approvals, the Company discovered undisclosed
pending legal claims and actions commenced by and against FMG relating to FMG's
ownership of its credit counseling software, which constituted material breaches
of the agreement. In October 2000, the Company terminated the acquisition of
FMG. The acquisition was originally accounted for using the purchase method of
accounting and the termination is recorded as a disposition of a subsidiary.

The results of operations of FMG are included in the consolidated statement of
operations from the date of acquisition, 4/10/2000 to 9/22/2000. Management
believes that these events will not result in any additional liability to the
Company.

In September 2000, the Company signed a letter of intent with SRI Strategic
Resources ("SRI") of Burnaby, British Columbia, Canada, a division of TELUS
Services Inc. ("Telus"), a telecommunications company providing a full range of
advanced communication services and products across Canada. SRI specializes in
custom e-business solutions for municipal governments, parks and recreation,
education, finance, wholesale distribution, and retail industries. Under the
initiative outlined by the letter of intent, the Company's OpenEC platform would
be combined with SRI's technology integration expertise to develop a
business-to-business e-commerce portal for forest industry procurements. The
portal will be provided to the British Columbia forestry sector as a tool for
electronic management of forest industry purchases of goods and services. While
initially targeting the British Columbia forestry industry, the portal will be
designed to meet the needs of forest companies throughout North America. The
letter of intent expired without the execution of a definitive agreement between
the parties, and the Company and SRI have not pursued an extension. Telus was
reorganized and the SRI group is under a different management structure. The
Company has discontinued its relationship with Telus; but, is considering Telus
as a partner for hosting our ASP applications. The Company has placed forestry
portal initiative on hold because of the softwood-trading dispute between the
Canadian lumber producers and the United States. The Company believes that once
the trade dispute is resolved the industry will be more receptive to the
SoftCare forestry portal.

                                                                              26
<PAGE>

Recent Alliances/Etc.
---------------------
SoftCare EC has entered into a strategic alliance with IPNet Solutions Inc., a
leader in flexible supply chain connectivity. This alliance will make SoftCare a
Reseller of IPNet's award-winning BizManager suite of products. The IPNet suite
of solutions has already experienced very strong demand in the US and has been
adopted by a wide range of businesses including Ace Hardware, Dole, GE Medical
Systems, Mark'sWork Wearhouse and Marconi. BizManager, an award-winning
software, is a comprehensive suite of software solutions that facilitates
business-to-business connectivity. BizManager leverages the Internet and
industry standards architecture to enable an entire community of supply chain
partners from Global 2000 organizations to one-man operations, to exchange
information electronically. OpenEC(R) is SoftCare's EDI and e-Business software
solution that has been installed at over 150 customers. The addition of IPNet
software to SoftCare EC solutions will strengthen the company's market position
and short- and long-term revenue generation. Initially, the goal of this
partnership is to target SoftCare's existing client base requiring an integrated
EDI/e-business solution for communicating over the Internet using the EDI INT
standards. This partnership combines the business strengths of two companies
highly adept at providing solutions for today's business environment.

Neither the Company nor any of its subsidiaries have been subject to any
bankruptcy, receivership or similar proceedings. Where the context requires, the
term "Company" includes the subsidiaries of the Company.

During the last three fiscal years, the Company spent approximately $409,456 on
capital expenditures related to its properties, plant and equipment including
$21,726 spent during Fiscal 2002. The following table sets forth a description,
including the amount invested, of the Company's capital expenditures and
(divestures), since 5/31/1999.

===============================================================================
                                                    Amount
                                  ============================================
Description                       Fiscal 2002     Fiscal 2001     Fiscal 2000
------------------------------------------------------------------------------
Computer and Test Equipment           $ 8,182         $82,073         $76,078
Computer Software                     $12,140         $36,042         $54,164
Office Equipment                         $nil        ($35,723)        $50,804
Office Furniture                         $nil         $84,649         $36,560
Display Booths                         $3,308            $nil         $10,301
Leasehold Improvements               ($45,356)        $32,234         $ 4,000
===============================================================================

Details of such expenditures and information concerning the capital expenditures
and divestures currently in progress are set forth under "Business Overview" and
"Property, Plants and Equipment".

There have been no indications of any public takeover offers by third parties in
respect to the Company's shares or by the Company in respect of other companies
shares which have occurred during the last and current financial year.

                                                                              27
<PAGE>

4.B.  BUSINESS OVERVIEW.
------------------------

The Company is a technology company, in the business of the developing,
manufacturing, and marketing of business-to-business e-commerce and electronic
data interchange of information programs and services.

The technologies deployed by the Company, such as Java(TM) XML, EDI and Oracle
all have widespread industry support. Java, XML and EDI are universal standards
that allow OpenEC(TM) to be interoperable with products from many different
technology vendors as these standards are vendor neutral. The manufacture and
delivery of the Company's products and services are not dependent on the supply
of any raw materials.

Industry Overview
-----------------
EC and EDI are important elements of corporate interaction and communication in
today's global electronic marketplace. Companies interact daily with
geographically diverse customers, suppliers, trading partners and divisions.
These organizations increasingly need to exchange information and require their
computer systems to effect the information exchange.

Facilitating the exchange of electronic information between diverse computer
systems is a highly complex process. Computers running different software
programs created by different vendors, at different times, for different
purposes, and in different languages, will not communicate unless specialized
software and systems are created that will allow seamless electronic interchange
to take place. This need to communicate between incompatible systems is being
answered through the implementation of new electronic commerce and electronic
data interchange standards, software and systems. Electronic commerce involves
conducting business transactions electronically using computers and
telecommunication networks. Electronic data interchange is an essential
component of electronic commerce that involves the electronic exchange of
information in structured formats that allows dissimilar systems to communicate
accurately.

EC and EDI are important to large companies and have resulted in tremendous cost
and time efficiencies. Proponents and users of EDI range from small domestic and
multinational businesses, to large banking and financial institutions, retail
chains and the United States government.

The traditional focus of EDI programs has been the replacement of paper business
forms, such as purchase orders and invoices, with similar electronic forms. More
recently, the focus of EDI programs has been evolving to include more strategic
uses among multiple companies such as supply chain management, just-in-time
manufacturing, efficient customer response and vendor managed inventory. EDI is
no longer merely a mechanism to transmit electronic documents. EDI can now move
information between computer systems allowing them to automatically perform core
business functions, both intra- and inter-company. The advantages of EDI
include:

a. one-time data entry;
b. reduced clerical workload and elimination of paper records;
c. rapid, accurate and secure exchange of business data; and
d. reduced operating and inventory carrying costs.

The EDI market predates the mass acceptance of the Internet, primarily in EDI
Value Added Networks ("VAN"). Over the last several years, the EDI software and
network industry has been going through gradual consolidation, primarily driven
by the need for the EDI VANs to increase network traffic. Many smaller EDI
companies are now resellers, consultants and integrators using EDI software from
the VANs.

                                                                              28
<PAGE>

THE EFFECT OF THE INTERNET ON THE EC AND EDI INDUSTRIES. More and more
businesses today are using the Internet as an electronic communication highway
for business-to-business and business-to-consumer transactions, and to access
industry data and research. Internet protocols are used in networks of all
sizes, from private intranets to shared extranets to the public Internet. The
Internet brings together customers, vendors, suppliers and employees in ways
never before possible. In short, the Internet efficiently connects valuable
information to the people who need it.

Electronic business offers the potential of increased profits by extending the
benefits of internal information technology processes, simplified sharing of
critical data and lower organizational barriers, beyond a company's walls and
into the operations of its customers, suppliers and business partners.
Electronic business involves reinventing business processes, redefining business
models, changing corporate cultures and establishing new levels of intimacy with
suppliers and customers. Electronic business success requires, and is causing,
fundamental changes in organizations, corporate behavior and business thinking,
both inside and outside the company.

Doing business on the Internet involves new challenges, including problems with
security, scalability and reliability. Opportunities exist for those companies
that can help businesses manage and surmount these problems.

The Internet is a major challenge for EDI VAN companies because most of their
revenue is based on transaction fees from their propriety networks. The open
protocols of the Internet are challenging this revenue model, as flat rate
pricing for software licenses becomes more common. Many VANs have addressed the
Internet by offering Internet gateways to their network service; however, the
transactions are still processed through the expensive propriety networks at
premium rates. The VANs have reduced fees in response to Internet competition,
but many have increased fees for related services and software to make up lost
revenues.

Many business-to-business EC solutions provide only a very basic framework built
on top of business to consumer electronic commerce technology. These solutions
are often unable to deal with the more complex requirements of business
processes in business-to-business commerce. End users must often spend
substantial amounts of money to further customize the offered solutions.

Industry Market Opportunities.
a.  Financial Services. Because money is not a physical good, money and all
    information regarding money can be moved around the Internet very
    efficiently.
b.  EC Software and Services. The Company perceives a strong demand for software
    and services that will enable businesses to take advantage of electronic
    commerce.
c.  Development of Electronic Commerce Infrastructures. Applications are needed
    which allow companies to rapidly implement and manage electronic commerce
    programs that connect customers, vendors, distribution channels and internal
    company resources. Key applications include order processing, purchasing,
    distribution, logistics and payments and cash management.
d.  Business-to-Business Electronic Commerce. The business-to-business sector of
    electronic commerce enables the building of electronic business
    relationships between companies. These include EDI, electronic funds
    transfer, online catalogues, order entry, order fulfillment and order
    management along with dissemination of a wide range of business information
    through the distribution channels.

                                                                              29
<PAGE>

e.  Retail Supply Chain Management. Many retailers have integrated elements of
    EDI programs for larger volume purchasing from their major suppliers.
    Combining existing EDI business processes with new Web technologies allows
    for cost effective expansion of EDI to all supplier relationships.

INDUSTRY IMPLEMENTATION. Most medium and smaller businesses have not
incorporated EDI systems into their operations because of the complexity and
high cost of setting up EDI systems. The EDI Group, Ltd. estimates that, of the
three million U.S. companies with five or more employees, approximately 120,000
are using EDI. In a 1997 publication, Forrester Research, Inc. reported that, of
two million companies with ten or more employees, 100,000 chose to implement
EDI, leaving the remaining 1.9 million companies as potential EDI participants.
To facilitate EDI use by these smaller companies, software systems are needed
which can automatically configure and deliver accurate communications with a
minimum of user attention. To date, these solutions have been available only to
large companies that can afford the costs associated with the custom design
requirements. Additionally, smaller companies need open systems standards, low
cost software solutions and service providers with the expertise to expand
market acceptance rapidly.

A research report (November 2001) from Forrester Research, entitled "eBusiness
Propels Productivity," assures readers that the best is yet to come: $7 trillion
worth of U.S. online business trade by 2006 and a 15 percent spike in the U.S.
economy's productivity over the course of the next decade.

Management believes that the markets for the Company's technology and services
are expected to grow substantially. Electronic commerce between companies in
Canada is set to surge to CDN$272 billion (US$181 billion) in 2005, according to
a report released in January 2001 by Forrester Research. The estimated figure
will amount to 18 percent of the CDN$1.54 trillion (US$1.03 trillion) in B2B
transactions expected that year.

AMR Research Inc.'s research indicates e-business application segments continue
to grow sequentially. In 2002, Customer Relationship Management software
applications ("CRM") is projected to grow at 21 percent, up from 15 percent in
2001. Supply-chain technology is estimated to grow by 13 percent in 2001, and
another 15 percent next year. Product lifecycle management ("PLM"), exchange
platforms, and procurement continue double-digit growth as well. ERP, while
exhibiting the smallest projected 2002 growth at 6 percent, still remains the
largest market of all e-business applications at approximately $16 billion in
2001.

                                                                              30
<PAGE>

Corporate Introduction
----------------------
Founded in 1989 and headquartered in British Columbia, SoftCare EC Inc.
("Softcare" and/or the "Company") develops e-business software. Our OpenEC(R)
product suite allows companies to conduct business-to-business e-commerce. Our
e-business software is open and scaleable allowing for integration with existing
and future technologies, lowering operating costs and streamlining the business
process while delivering benefits to all electronic trading relationships.

After demonstrating a successful track record of selling its Electronic Data
Interchange ("EDI") software and building a base of clients worldwide, SoftCare,
realizing the power of the internet, launched its OpenEC(R) e-commerce platform.
This platform was designed through knowledge gained from years of experience
delivering EDI based e-commerce solutions for supply chain management.

EDI has been the primary method used by Fortune 2000 companies for sending and
receiving business documents electronically. Typically these documents have been
transmitted using a proprietary, fixed-line based Value Added Network (VAN).
Industry analysts estimate that 86% of the U.S. Gross National Product is
touched by EDI, approximately of which 70% is conducted over VANs.

With the advent of the Internet, SoftCare saw the opportunity to reduce the
costs by transmitting business documents via the Internet. Use of the Internet
to transmit EDI documents has begun to gain momentum in 2002, as major retailers
including Ace Hardware, Dollar General, Lowe's, Meijer, and Wal-Mart have
publicly announced their intentions to reduce costly VAN fees by recommending
EDI over the Internet as the preferred method of electronic communication with
their respective trading partners. IDC estimates that the worldwide value of
goods purchased through EDI over the Internet will grow to more than $1.3
trillion by 2006.

SoftCare recognized the need to provide its customers and the Canadian market a
premiere solution for EDI over the Internet. After a detailed review of the
certified EDI/INT vendors, SoftCare chose to partner with IPNet Solutions Inc.
IPNet has a proven track record in working with industry-leading organizations
to help improve their business partner communication, reduce operational costs
and increase revenues. IPNet's customers include Ace Hardware, Dollar General,
Hanover Direct, Kohl's, Lowe's, Medibuy, Meijer, Northrop Grumman, Owens
Corning, Remington Products, Sherwin-Williams, Springs Industries, Texas-New
Mexico Power Co., and U.S. Foodservice

SoftCare crafted its vision of "e-business for all business" into OpenEC. OpenEC
is a unique e-business software suite flexible enough for companies just
venturing into e-business or looking to expand. It has a powerful portfolio of
business process integration (BPI) and e-business tools to streamline complex
business processes and increase e-business capabilities.
The web-based integration platform is ideal for businesses wanting to enlarge
their markets, automate their supply chain, simplify payment settlement,
strengthen customer relations or simply add efficiencies. What's more, the
OpenEC architecture delivers its sophisticated integration without sacrificing a
company's legacy IT investments. Its technology accommodates existing solutions
such as EDI, B2Bi, and EAI.

                                                                              31
<PAGE>

Products
--------
SoftCare has helped over 150 companies since 1989 with electronically
integrating their workflow processes. That extensive BPI knowledge forms the
basis of OpenEC's superior BPI technology.

Lower business costs, increased efficiency, greater dependability, and enhanced
competitiveness are only a few of its advantages. Using the intrinsic BPI of
OpenEC, companies can expedite their business dealings faster and vastly
increase their adaptability to changing business conditions.

OpenEC provides the capacity to conduct parallel, multi-layered, interactive
business transactions in real-time with customers, suppliers, partners,
divisions, and employees. As the business grows, the software suite has built-in
scalability to accommodate a larger trading community. Indeed, SoftCare's
business process integration expertise is fundamental to OpenEC's capacity to
securely implement e-business transactions through a variety of system
configurations and technology including traditional EDI, Internet, Extranet,
Intranet, email and fax.

The software uses Java-based technology and is ingenuously structured around a
Hub known as the OpenEC Intelligence Agency (OIA). Individual Agents have the
ability to seamlessly link data servers, web based forms, and Enterprise
Application Integration (EAI) servers.

The OIA consists of the Hub and web based applications. The OpenEC applications
can be specifically designed to accommodate Internet-based business
applications, e-business process management, application integration, real time
data communications, data transformation/mapping and Internet security. The Hub
is also a central web portal server capable of facilitating the backend
management of Internet user profiles, user interaction and access security
through the simplicity of an industry standard web browser. Corporations can
brand the browser window by adding their own look, feel, logos and slogans to
it.

Moreover, the Hub's technology maps and manages the process for the execution of
business activity. OpenEC's Java-based applications can accurately track the
movement of all business processes and information among communities of trading
partners ensuring that no business information gets lost

For each installation, the customer's available applications, services,
interfaces, trading partners, access rights and associated scenarios are defined
and configured within OpenEC as applications. Once set up, the applications are
selected as needed to accomplish the business process.

OpenEC offers some standard applications and provides development tools for
application customization. The software also has a library of applications for
common supply chain functions such as catalogues, buying, selling, shipping and
payments. Furthermore, OpenEC can place strategically distributed applications
management servers throughout the trading community so that you never lose touch
with your business world.

In the end, when companies choose SoftCare's OpenEC software suite they protect
their key assets, limit disturbances to workflow, and free up employees to
concentrate on value added activities.

                                                                              32
<PAGE>

OPENEC OVERVIEW. SoftCare crafted its vision of "e-business for all business"
into OpenEC. OpenEC is a unique e-business software suite flexible enough for
companies just venturing into e-business or looking to expand. It has a powerful
portfolio of business process integration (BPI) and e-business tools to
streamline complex business processes and increase e-business capabilities.

The web-based integration platform is ideal for businesses wanting to enlarge
their markets, automate their supply chain, simplify payment settlement,
strengthen customer relations or simply add efficiencies. What's more, the
OpenEC architecture delivers its sophisticated integration without sacrificing a
company's legacy IT investments. Its Java-based technology accommodates existing
solutions such as EDI, B2Bi, and EAI.

SoftCare has helped over 150 companies since 1989 with electronically
integrating their workflow processes. That extensive BPI knowledge forms the
basis of OpenEC's superior BPI technology.

Lower business costs, increased efficiency, greater dependability, and enhanced
competitiveness are only a few of its advantages. Using the intrinsic BPI of
OpenEC, companies can expedite their business dealings faster and vastly
increase their adaptability to changing business conditions.

SoftCare Products
-----------------

OpenEC(R) TradeLink EDI Management Center. OpenEC(R) TradeLink EDI Management
Center is a full featured EDI management system to translate and exchange
business documents with your trading partner in an EDI format. One of the key
differences between TradeLink's EDI Management System and others on the market
is that TradeLink is Network- Independent. It will support any public Value
Added Network (VAN), private Network or the Internet. It is the next evolution
of the EDI Translator. Some of the key features are:
a.  Support for EDI over the Internet using our AS1 or AS2 compliant EDI
    communications module. This allows for communications using secure email
   (S/MIME), secure HTTP (HTTPS) or secure FTP (FTPS);
b.  Graphical front end for Daily Processing, Auditing and Reporting;
c.  Event Driven notification (either via printer or email) of EDI processes
    to allow the end user to identify and action "problems" in real-time;
d.  Excellent reporting of all EDI processing in one concise report.  The
    audit report generator allows the user to generate reports on all EDI
    activity in whatever time frame necessary;
e.  Support for standard and non-standard repetition identifiers. In ANSI X12
    version 004030 a repetition identifier was introduced. TradeLink now
    supports retailers such as Wal-Mart who send a repetition identifier that
    does not meet the standard;
f.  Secure routing of all data types, including any XML, EDI, TXT, ASCII and
    binary;
g.  Risk-free migration from VAN, direct-connect and paper communication
    methods;
h.  Standards-based, interoperable solution with support for AS1 or AS2
    certified solutions;
i.  Ease of legacy system and ERP integration with support for Java Message
    Service (JMS) and IBM Websphere(R) MQ (formerly MQ Series); and
j.  Built-in transaction tracking, reporting and data retention with actionable
    audit trails and persistent queuing.

                                                                              33
<PAGE>

OPENEC(R) TRADE CATALOG. Businesses are looking for a powerful cost-effective
catalog management product, which maximizes the ROI of their e-business
initiatives. The answer is the OpenEC(R) Trade Catalog which is a easily
configurable web-based B2B Product Catalogue which puts you in complete control
of your entire product content management process at a fraction of the cost of
alternative products. Its unique use of Application Program Interfaces (API)
allows information to be pulled from a company's back-end systems for
presentation to their trading partners online. For example, the OpenEC(R) Trade
Catalog allows a company to publish in real-time their product information,
specifications, product availability and customer-specific pricing based on
their back-end systems using a graphical user-interface. As OpenEC(R) Trade
Catalog is fully configurable, the look and feel of the catalogue can be
customized to meet your company's own unique requirements. With OpenEC(R) Trade
Catalog, a company can also provide an electronic link to your trading partners'
requisitioning and purchasing systems. Implementation of the OpenEC(R) Trade
Catalog provides the ability to:
a.  Significantly reduce customer service costs by publishing up-to-date product
    pricing and availability online;
b.  Improve customer service by providing 24 X 7 online access to critical
    business information;
c.  Improve immediacy of information by allowing real time up-to-date
    information to be shown to the customer;
d.  Provide integration with back office systems (e.g. stock levels, expediting,
    accounting, etc.) using the OpenEC(R) Trade Catalog APIs; and
e.  Reduce data entry cost as all information is passed in electronically from
    the customer.

The OpenEC(R)Trade Catalog is quickly configurable to provide:
a.  Facility to have variable pricing & terms by trading partner;
b.  Electronic ordering & payment using a "Shopping Cart" or a true Business
    -to-Business model;
c.  Provide online multi-media presentation of a company's product;
e.  Enable Promotions Management by providing a range of functions to
    facilitate managing promotions which allow products to be "advertised" using
    time-dated or user specific promotions;
f.  Allow a company's business information to be available to its trusted
    partners via the web;
g.  Allow suppliers to maintain and update catalogues electronically or to have
    the update and maintenance of the catalogue controlled centrally;
h.  Provide the ability to create product comparison tables which compares
    product features and price; and
i.  Provides the ability to maintain and publish valuable information for each
    distributor/store including distributor/store name, description, toll-free
    phone number, phone number, fax, address, email address, contact name, map
    URL, hours of operations.

OPENEC(R) TRADE MANAGER. OpenEC(R) Trade Manager is a configurable standards and
web based document manager that manages the movement of information between
trading partners. Transmission of business documents into and from OpenEC(R)
Trade Manager can be via many different file types such as EDI, XML, comma
separated, etc. OpenEC(R) Trade Manager provides the ability for exchange of
business information between buyers and sellers via the web (using the EDI over
the Internet (EDIINT) standards), through traditional EDI Value Added Networks
or through back-end data transfers which enable the seamless trading of business
documents between small-medium enterprises with large enterprises regardless of
their differences in technological abilities. Its centralized audit tracks the
movement of all information.

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<PAGE>

For a businesses trading community, Trade Manager provides multiple approaches
for receiving business documents. For the most technologically trading partners,
business documents can be transmitted using EDI, XML or CSV formats through
traditional EDI VANs or via the net using the EDIINT standards. As all
transactions are sent/received via Trade Manager, all trading partners can
easily audit and view all transactions online if disputes occur.

For trading partners who have not created interfaces to integrate electronic
business documents, Trade Manager provides them the ability to trade
electronically with their business partner. Trade Manager will send an email to
them when a business document is received. The trading partner can sign onto the
web to download/print the business document. If required, Trade Manager allows
this class of trading partner to use web forms to create/send business documents
to their trading partner.

For very unsophisticated trading partners, Trade Manager provides them the
ability to receive business documents via fax and to send business documents
electronically with their more sophisticated trading partner.

Product Highlights:
a.  Standards based integration to back-end ERP systems;
b.  Tiered solution to allow 100% business partner participation no matter
    what their technical sophistication;
c.  Secure routing of all data types, including any XML, EDI, TXT, ASCII and
    binary using the Internet (EDINT) or EDI Value Added Networks;
d.  Trading community management for simplified administration of large,
    technologically disparate trading partner communities;
e.  Complete audit, tracking, document retention and document status of the
    movement of all business information;
f.  Ability to easily create "turnaround" documents based on original business
    documents; and
g.  Provides the ability to simplify document reconciliation.

Softcare Solutions
------------------
OpenEC takes a company's business process, whether it is business documents or
real-time transactions, and connects it to the company and its business-trading
partners. OpenEC defines trading partners, access rights and their scenarios as
well as the definition of a company's business applications and e-business
modules.

Scenarios define what a business process does. For example, one customer might
interact as follows:
a.  receive a customer order via fax,
b.  convert it to a XML document,
c.  forward one copy to the company's ERP system,
d.  and one copy to the sales person to be viewed on a wireless web device,
e.  when the order is confirmed advise the transportation company there is a
    pickup,
f.  reduce the available product on the Web Catalogue,
g.  receive order delivery schedule from transportation company, and
h.  confirming the order and the delivery time.

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<PAGE>

A company can have endless variations to each business process to accommodate
any particular need.

Within each customer installation the available applications, services and
interfaces are defined and configured within OpenEC. OpenEC includes functions
for data communications, translation formatting, application integration,
security, and user access. It also provides a library of common supply chain
functions such as catalogues, buying, selling, shipping and payments.

Companies can start by creating one business process, and then continue to
leverage the OpenEC system to solve additional business processes as they are
defined. This allows companies to work toward total demand/supply chain
efficiency in their business by taking a series of low-risk, lower-cost steps
within a short-term return on investment.

Vertical solutions can be quickly built by configuring the common business
process used within an industry between trading partners. For example, SoftCare
is currently packaging the system for Retail Food and Drug supply chain to
enable purchasing, order processing, shipping and invoicing of goods in this
industry. Vertical Software Companies and Systems Integrators can gain market
advantage by extending their solutions to support their customer's demand/supply
chain integration.

OpenEC facilitates the end-to-end communication of business information between
a sender and receiver such as buyer and seller. OpenEC, when extracting a
document to send, or importing a document, will typically do so from a company's
application such as an accounting system or ERP System. OpenEC enables
inter-enterprise computing, whereas conventional ERP systems are used to run
only the internal business of an enterprise.

OpenEC Retail Supply Chain Automation. THE PROBLEM. Retailers have spent
countless hours and dollars trying to convince their suppliers to send Invoices
electronically to them. Retailers first step in the process was to force "EDI"
on to their suppliers. For the largest suppliers, who had the resources to
implement an EDI solution, the request to EDI was grudgingly accepted. For many
small suppliers (some estimates are 80% of all suppliers), the cost of
implementing EDI was just too high for them. These suppliers are comfortable
using fax to receive PO's but they want a first step to easily create Invoices
electronically to mollify their important retail client. Additionally they want
to have the ability to track the status of their Invoices sent to their retail
client. For the retailer, the ROI savings that they estimated when they
implemented EDI were all based on 100% compliance of their suppliers to EDI.
With only a small portion of their clients sending documents electronically,
little or no direct savings have been achieved. Additionally they want to
consolidate the sending of Purchase Orders through one process and reduce the
constant calls from suppliers inquiring about when they will be paid for their
goods.

                                                                              36
<PAGE>

THE SOLUTION = OPENEC(R) RETAIL TRADE. OpenEC(R) Retail Trade is a fully
configurable trading partner business document management solution which allows
a retailer to communicate to their suppliers electronically no matter what their
technical sophistication. It moves business documents (such as Purchase Orders)
from a company's back-end ERP system and transmits them to their trading
partners in the format that they can utilize them. It also receives business
documents (such as Invoices) from their trading partners and integrates them
into their back-end ERP system. The following is a typical example of how
OpenEC(R) Retail*Trade could be configured:
a.  For the most technologically sophisticated suppliers, Purchase Orders are
    sent and Invoices received using EDI, XML or CSV formats through traditional
    EDI Van's or via the web using secure reliable protocols including the EDI
    over the Internet (EDIINT) standards. As all transactions are sent/received
    via Retail*Trade, this class of supplier can use Retail*Trade to obtain
    Purchase Order/Invoice status and to audit and easily reconcile Purchase
    Order and Invoices via the web.
b.  For suppliers who have not created interfaces to integrate electronic
    business documents, Retail Trade provides them the ability to trade
    electronically with their retail client. The system will send an email to
    them when a Purchase Order is received. The supplier will sign onto the web
    to download/print the Purchase Order. Once they want to Invoice the order,
    Retail*Trade will allow them to "turnaround" the Purchase Order into an
    electronic Invoice. Retail*Trade records all transactions and modifications
    which allows this class of supplier to audit/track "order/invoice" status of
    business documents to their retail client. If there is a reconciliation
    problem, Retail Trade allows suppliers to quickly track and identify
    problems.
c.  For very unsophisticated suppliers, Retail Trade provides them the ability
    to receive Purchase Orders in the way that they want them and to trade
    electronically with their retail client. Retail*Trade will fax the Purchase
    Order to this supplier. The supplier will sign onto the web to "Invoice" the
    retail using the simple to use "turnaround" document to create the Invoice
    based on the original Purchase Order and send it to their retail client.
    Retail Trade records all transactions and modifications which allows this
    class of supplier to audit/track "order/invoice" status of business
    documents to their retail client. If there is a reconciliation problem,
    Retail Trade allows suppliers to quickly track and identify problems. As the
    system is a fully functional document management system it is able to
    calculate back order quantities and allow for multiple invoices for each
    purchase order.

For the retailer, all documents are now sent and received to/from Retail Trade.
If there are any disputes on transactions, Retail Trade maintains a full audit
system that provides order status on all transactions. It also provides all
parties in the transaction the ability to reconcile their Purchase Order and
Invoices online. If there are unreconciled items, Retail Trade provides a simple
method to identify the problem and to allow the retailer to action an item if
necessary.

The ability for OpenEC(R) Retail Trade to exchange information between buyers
and sellers via the web or through back-end data transfers enables the seamless
trading of business documents between small to medium businesses with large
enterprises regardless of their differences in technological abilities.

                                                                              37
<PAGE>

THE BENEFITS.  Implementation of the OpenEC(R)Retail*Trade provides the ability
to:
a.  Present a solution for all of your 100% of the supply chain no matter
    what their technical sophistication;
b.  Significantly reduce accounts payable data entry costs by electronically
    receiving Invoices;
c.  Improve vendor service by providing 24 X 7 online access to critical
    business information;
d.  Reduce Purchase Order/Invoice reconciliation time and costs; e. Improved
    audit of all business document transfers; and f. Leverage existing
    electronic interfaces for communicating with all
    suppliers.


OpenEC Contractor Order Cycle Automation. THE PROBLEM. Retailers have spent
countless hours and dollars trying to use the web to promote and sell their
products to their business customers. The first approach was to utilize "web
designers" to design a system that would allow their business customers to
review and order product online. The problem with this approach is that web
designers didn't understand the business process they were automating so they
designed static "consumer" oriented sites that did not reflect what the business
customer required. When this approach failed, the next step was to purchase off
the shelf web catalogues to service their business customers. Again this
approach failed as off the shelf web catalogues were designed with the consumer
in mind and did not take into account business customers' issues. These issues
included the need for detailed technical product information, "customer"
specific pricing, multi-level promotions, real-time product availability, order
status, order history, etc.

THE SOLUTION = OPENEC(R) CONTRACTOR*TRADE. OpenEC(R) Contractor*Trade is a fully
configurable business customer communications solution which allows a retailer
to communicate electronically to their business customers' detailed product
information, order status, promotions, order history, contractor specific
pricing and real-time product availability. Using API's, it moves business
information from a company's back-end ERP system and displays it on the web so
their business customers can utilize the information to make an informed
purchase of products. It also provides the business customer up to date order
status and order history for tracking purchases. The following is a typical
example of how OpenEC(R) Contractor*Trade could be configured:
a.  Retailers export item information from their back-end ERP system to
    Contractor*Trade using EDI, XML, CSV or proprietary file formats. The item
    information is categorized based on how the retailer would like to present
    the product information to their business customers. It may be that the
    retailer wishes to use their internal department/class structures or they
    may wish to use Contractor*Trade to categorize their product differently for
    their contractors. Contractor*Trade uses a simple, easy to use method to
    configure the structure of the presentment of the products. Additional
    information (product images, product specifications, retail pricing,
    promotions, etc.) can be uploaded to Contractor*Trade which will associate
    these files with the product when presenting it to the contractor.
b.  Contractors are signed up to the retailer's site. The sign-up includes
    customer preferences, contact information, etc. The sign-up may be done via
    a web form by the retailer, the contractor or preferably by importing the
    information of the contractor from the retailers back-end ERP system. A user
    name and password is generated for each contractor

                                                                              38
<PAGE>

c.  Upon first signing on to the site, the contractor is prompted to confirm
    their information and to modify any preferences (for example, a plumbing
    contractor may only wish to see plumbing products and promotions).
d.  The contractor reviews product, specifications, product image and select the
    goods for purchase. Upon selecting an item, the request is sent to the
    retailers back-end ERP to review the contractor's specific pricing and
    product availability. The result is that the contractor will see the cost
    and availability of their merchandise. Once all of the items are selected,
    the order will be completed and the contractor will be prompted for
    purchasing and delivery instructions. Once completed, the order is sent to
    Contractor*Trade which provides an entry into the contractor's order status.
e.  The completed order will be passed to the retailer's back-end system, which
    will pass it on to the store for pickup. The store selects the merchandise,
    processes the sale and it is held until the contractor comes in the store to
    pick up the merchandise.

For the retailer, the web is now used as a marketing and sales tool that
compliments their existing sales channel to their important business customers.
Information is provided to their business customers to allow them to make
informed decisions on what product to purchase based on solid information,
correct pricing and current availability. This enhances the relationship between
the retailer and their business customers.

THE BENEFITS. Implementation of the OpenEC(R)Contractor*Trade provides the
ability to:
a.  Significantly improve contractor service by providing 24 x 7 online
    access to critical business information such as price and availability of
    product;
b.  Reduce costs to integrate a retailers back-end information systems with a
    web presence for their business contractors;
c.  Provide online multi-media presentation of a company's product; d. Advertise
    time-dated or contractor specific promotions; e. Reduce effort to service
    important business contractors; and f. Improve information on previous
    purchasing for contractors.


OpenEC Distributor Order Cycle Automation. THE PROBLEM. Manufacturers spend
countless hours and dollars receiving, validating, entering Purchase Orders from
their buying clients communicating/solving problem orders and sending Invoices
back to them. At present, orders can be received in multiple formats (via fax,
email, EDI etc.) from multiple retailers. Once an order is received, it must be
"validated" by a customer service rep to ensure that the retailer is credit
worthy, that the product is in stock, that it has not already been allocated,
that the Purchase Order has correct item numbers, price, terms, and a myriad of
other details prior to being entered into their sales order application. If
there are problems with an order, the process to rectify the problem is entirely
manual. Service reps must also deal with phone calls from buyers and internal
sales personnel on the status of when orders will arrive.

                                                                              39
<PAGE>

THE SOLUTION = OPENEC(R) DISTRIBUTOR*TRADE. OpenEC(R) Distributor is a fully
configurable trading partner business document management solution which allows
a manufacturer or distributor to communicate to their buying clients
electronically no matter what the retail client's technical sophistication. It
moves business documents (such as Invoices) from a company's back-end ERP system
and transmits them to their trading partners in the format that they can
utilize. It also receives business documents (such as Purchase Orders) from
their trading partners and integrates them into their back-end ERP system. The
following is a typical example of how OpenEC(R) Distributor*Trade could be
configured:
a.  For the most technologically sophisticated buyers, Purchase Orders are
    received and Invoices sent using EDI, XML or CSV formats through traditional
    EDI Van's or via the web using secure reliable protocols including the EDI
    over the Internet (EDIINT standards). As all transactions are sent/received
    via Distributor*Trade, this class of supplier can use Distributor*Trade to
    obtain Purchase Order/Invoice status and to audit and easily reconcile
    Purchase Order and Invoices via the web.
b.  For their smaller, less sophisticated customers, the manufacturer/
    distributor uses Distributor*Trade (OpenEC Trade Catalog) to provide their
    buyers a simple and effective method to order product and review the status
    of the order and reconcile Purchase Orders to Invoices. The process is:
    1)  The manufacturer/distributor exports item information from their
        back-end ERP system to Manufacturer/Distributor*Trade using EDI, XML,
        CSV or proprietary file formats. The item information is categorized
        based on how the manufacturer/distributor would like to present the
        product information to their business customers. It may be that they
        wish to use their internal department/class structures or they may wish
        to use Distributor*Trade to categorize their product differently for
        their buyers. Distributor*Trade uses a simple, easy to use method to
        configure the structure of the presentment of the products. Additional
        information (product images, product specifications, retail pricing,
        promotions, etc.) can be uploaded to Distributor*Trade which will
        associate these files with the product when presenting it to the buyer.
    2)  Buyers are signed up to the manufacturer/distributor's site. The sign-up
        includes customer preferences, contact information communications method
        (EMAIL, FAX), etc. The sign-up may be done via a web form by the
        manufacturer / distributor, the customer or preferably by importing the
        information of the buyers from the manufacturer/distributor's back-end
        ERP system. A user name and password is generated for each buyer. Upon
        first signing on to the site, the buyer is prompted to confirm their
        information and to modify any preferences (for example, a plumbing
        contractor may only wish to see plumbing products and promotions).
    3)  The buyer reviews product, specifications, and product image and select
        the goods for purchase. Upon selecting an item, the request is sent to
        the manufacturer/distributor's back-end ERP to review the contractor's
        specific pricing and product availability. The result is that the buyer
        will see the cost and availability of their merchandise. Once all of the
        items are selected, the order will be completed and the buyer will be
        prompted for purchasing and delivery instructions. Once completed, the
        order is sent to Distributor *Trade which provides an entry into the
        buyer's order status.

                                                                              40
<PAGE>

    4)  The completed order will be passed to the manufacturer/distributor's
        back-end system, which will pass it on to their warehouse for picking.
        The product is picked and the sale processed and delivered (or held) to
        the location the buyer wishes. The back-end system will pass a status
        (completed, partially filled etc.) to Distributor*Trade, which will
        update the order status on the buyer's mailbox, held on the web site (or
        alternatively, send an email of the status to the buyer).

For the manufacturer/distributor, all documents are now sent and received
to/from Distributor*Trade. If there are any disputes on transactions,
Distributor*Trade maintains a full audit system which provides order status on
all transactions. It also provides all parties in the transaction the ability to
reconcile their Purchase Order and Invoices online. If there are unreconciled
items, Distributor*Trade provides a simple method to identify the problem and to
allow the retailer to action an item if necessary.

The ability for OpenEC(R) Distributor*Trade to exchange information between
buyers and sellers via the web or through back-end data transfers enables the
seamless trading of business documents between small to medium businesses with
large enterprises regardless of their differences in technological abilities.

THE BENEFITS. Implementation of the OpenEC(R)Distributor*Trade provides the
ability to:
a.  Present a solution for all of your 100% of your customers no matter what
    their technical sophistication;
b.  Significantly reduce sales order data entry costs by electronically
    receiving Purchase Orders;
c.  Improve customer service by providing 24 x 7 online access to critical
    business information;
d.  Reduce Purchase Order/Invoice reconciliation time and costs; e. Improved
    audit of all business document transfers; and f. Leverage existing
    electronic interfaces for communicating with all
    customers.

OpenEC Supply Chain Automation. THE PROBLEM. Large corporations have spent
countless hours and dollars trying to convince their suppliers to send Invoices
electronically to them. Their first step in the process was to convince their
suppliers to trade using "EDI" standards and EDI Value Added Networks (VAN). For
the largest suppliers, who had the resources to implement an EDI solution, the
request to EDI was grudgingly accepted. For many small suppliers (some estimates
are 80% of all suppliers), the cost of implementing EDI was just too high for
them. These suppliers are comfortable using fax to receive PO's but they want a
first step to easily create Invoices electronically to mollify their important
client. Additionally they want to have the ability to track the status of their
Invoices sent to their retail client. For the large corporation, the ROI savings
that they estimated when they implemented EDI were all based on 100% compliance
of their suppliers to EDI. With only a small portion of their clients sending
documents electronically, little or no direct savings have been achieved.
Additionally they want to consolidate the sending of Purchase Orders through one
process and reduce the constant calls from suppliers inquiring about when they
will be paid for their goods.

                                                                              41
<PAGE>

THE SOLUTION - OPENEC(R) SUPPLY CHAIN*TRADE. OpenEC(R) Supply Chain*Trade is a
fully configurable trading partner business document management solution which
allows a large corporation to communicate to their suppliers electronically no
matter what their technical sophistication. It moves business documents (such as
Purchase Orders) from a corporation's back-end ERP system and transmits them to
their trading partners in the format that they can utilize them. It also
receives business documents (such as Invoices) from their trading partners and
integrates them into their back-end ERP system. The following is a typical
example of how OpenEC(R) Supply Chain*Trade could be configured:
a.  For the most technologically sophisticated suppliers, Purchase Orders are
    sent and Invoices received using EDI, XML or CSV formats through traditional
    EDI Van's or via the web using secure reliable protocols including the EDI
    over the Internet (EDIINT) standards. As all trans- actions are
    sent/received via Supply Chain*Trade, this class of supplier can use Supply
    Chain*Trade to obtain Purchase Order/Invoice status and to audit and easily
    reconcile Purchase Order and Invoices via the web.
b.  For suppliers who have not created interfaces to integrate electronic
    business documents, Supply Chain*Trade provides them the ability to trade
    electronically with their large trading partner. The system will send an
    email to them when a purchase order is received. The supplier will sign onto
    the web to download/print the purchase order. Once they want to invoice the
    order, Supply Chain*Trade will allow them to "turnaround" the purchase order
    into an electronic invoice. Supply Chain*Trade records all transactions and
    modifications which allows this class of supplier to audit/track
    "order/invoice" status of business documents to their large trading partner.
    If there is a reconciliation problem, Retail*Trade allows suppliers to
    quickly track and identify problems.
c.  For very unsophisticated suppliers, Supply Chain*Trade provides them the
    ability to receive purchase orders in the way that they want them and to
    trade electronically with their large trading partner. Supply Chain*Trade
    will fax the Purchase Order to this supplier. The supplier will sign onto
    the web to "Invoice" their large trading partner by using the simple to use
    "turnaround" document to create the Invoice based on the original purchase
    order and send it to their trading partner. Supply Chain*Trade records all
    transactions and modifications which allows this class of supplier to
    audit/track "order/invoice" status of business documents to their large
    trading partner. If there is a reconciliation problem, Supply Chain*Trade
    allows suppliers to quickly track and identify problems. As the system is a
    fully functional document management system it is able to calculate back
    order quantities and allow for multiple invoices for each purchase order.
d.  For the large corporation, all documents are now sent and received to/from
    Supply Chain*Trade. If there are any disputes on transactions, Supply
    Chain*Trade maintains a full audit system which provides order status on all
    transactions. It also provides all parties in the transaction the ability to
    reconcile their Purchase Order and Invoices online. If there are
    un-reconciled items, Supply Chain*Trade provides a simple method to identify
    the problem and to allow the large corporations to action an item if
    necessary. The ability for OpenEC(R) Supply Chain*Trade to exchange
    information between buyers and sellers via the web or through back-end data
    transfers enables the seamless trading of business documents between small
    to medium businesses with large enterprises regardless of their differences
    in technological abilities.

                                                                              42
<PAGE>

THE BENEFITS. Implementation of the OpenEC(R)Supply Chain*Trade provides the
ability to:
a.  Present a solution for all of your 100% of the supply chain no matter
    what their technical sophistication;
b.  Significantly reduce accounts payable data entry costs by electronically
    receiving invoices;
c.  Improve vendor service by providing 24 x 7 online access to critical
    business information;
d.  Reduce purchase order/invoice reconciliation time and costs; e. Improved
    audit of all business document transfers; and f. Leverage existing
    electronic interfaces for communicating with suppliers.

Softcare Services
-----------------
SoftCare works in close collaboration with its customers to ensure every
implementation performs flawlessly and generates the maximum Return on
Investment (ROI). By developing a close partnership with the customer right from
the beginning, SoftCare identifies the Business "high pain points". The real
value of OpenEC is in reconciling these problem areas. The beneficial results
demonstrated by deploying OpenEC can build credibility and acceptance for any
change the project may bring to the customer's organization.

Softcare's Solutions Group acknowledges that your staff knows your business and
its issues better than anyone else. Indeed, you and your members understand how
to create or modify the business processes that drive your company
competitively. SoftCare's goal is to work with you to find the best solution.
Our experts are ready to meet the explicit needs of your organization to ensure
your projects succeed--locally, nationally, and globally.

SOFTCARE'S SOLUTIONS GROUP ACCELERATES TRADING PARTNER CONNECTIVITY. For EDI
Hubs companies with hundred or even thousands of trading partners, managing the
connectivity of each and every partner can be a heavy burden for
resource-constrained IT staffs. That's why SoftCare established its Solutions
Group team with the specific task of working with your partners to get them
connected as smoothly and efficiently as possible. SoftCare understands that
partners may be reluctant to change. With a strong history of successfully
connecting the trading partners of many leading companies, SoftCare knows what
it takes to overcome this resistance. SoftCare can contact each of your trading
partners, explain the business value of making the change, determine with
product offering best fits their needs and manage the entire process of
connecting your supply chain. Our Services include:
a.  Project Planning/Internal Implementation
    We analyze your business requirements to help you define and develop your
    e-business. We consider all factors: platform, operating system, network
    environment, integration with ERP and mission-critical applications and
    more. Your SoftCare Project Manager works with you to develop a timeline
    that ensures schedules and milestones are met. The project plan ensures that
    your data and mapping requirements are met. Upon acceptance of the plan we
    manage the installation of your system, integrate your enterprise and
    connect your operations to your chosen communications platform.
b.  Trading Partner Rollout/Migration Services
    We efficiently manage the migration of an entire trading community. We will
    smoothly direct the migration of your partners from a paper-based or VAN
    system to the Internet, with no disruption to your current EDI environment.
    We'll develop a strategy to meet your trading partner connectivity
    objectives, taking into account the number and size of your trading
    partners, transaction sets, and the level of involvement required from your
    internal company resources.

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<PAGE>

c.  Trading Community Management
    Once your partners are connected, we'll assist you with the management of
    your trading community. Our team works with you to manage partner
    relationships, add new vendors, customers and certify them.
d.  Training
    To take full advantage of the flexibility, ease and power of our suite of
    products, you need effective, results-oriented training programs that will
    get your team up to speed. SoftCare training is the answer. SoftCare
    training is a comprehensive training program that gets your people up and
    running and your partners quickly connected.

THE TEAM APPROACH. SoftCare recommends using teams of experts who work closely
in consultation to create/design/develop and implement an effective solution.
Softcare's suggested teams include:
a.  SoftCare Implementation Team
    Softcare's highly qualified Solutions Group team consists of a Project
    Manager, Business Analysts and Developers. They work closely with the
    customer to determine the best approach for the company to implement OpenEC.
    SoftCare's Implementation Team is responsible for delivering a high quality
    product on time and on budget.
b.  Customer Led Team
    The customer will select an internal project champion plus the appropriate
    internal staff. SoftCare will work with this team to transfer as much
    knowledge to them about the company-specific implementation of OpenEC, how
    to use it, and how to support it internally.

IMPLEMENTATION METHODOLOGY. SoftCare's variety of services makes it easy for you
to achieve your objectives through an evolutionary, low-risk approach.
Therefore, the implementation methodology is divided into four separate phases.
a.  Existing Process Mapping
    The first step is to map out your company's business processes identifying
    high "pain points". The mapping allows organizations to explore the next
    level of operational effectiveness and how to reach it. SoftCare Solutions
    Group personnel meet with your staff to examine your system and its current
    problems Universal Modeling Language (UML) methodology is used to review and
    graphically explain your business processes. In this phase, business
    requirements for the solution are clearly defined, measures of effectiveness
    are determined and key objectives are identified that meet the immediate and
    long-term needs.
b.  System Design Phase
    The design phase consists of developing a blueprint for a solution that
    meets all the business issues identified in the Existing Process Mapping
    phase. The deliverables of this phase are a UML diagram of the proposed
    solution, a description of the process and an analysis of the savings to be
    derived from the implementation of the solution.
c.  Development Phase
    Using the deliverables from the design phase, SoftCare's Solutions Group
    creates a company specific solution. SoftCare may use a combination of
    OpenEC software and customer specific software to satisfy the business
    requirements. The development phase concludes with comprehensive user
    testing and evaluation to ensure the solution meets the end users' need.
d.  Implementation Phase
    Implementation phase moves the solution from testing into production,
    ensuring that all training, implementation and necessary support is
    provided.

                                                                              44
<PAGE>

Licences and Strategic Relationships
------------------------------------
The Company licenses and integrates technology from third parties in certain of
its software products. For example, the Company licenses Oracle. These
third-party licenses generally require the Company to pay royalties and fulfill
confidentiality obligations. Any termination of, or significant disruption in,
the Company's ability to license these products could cause delays in the
releases of software until equivalent technology can be obtained and integrated
into the software products. These delays, if they occur, could have a material
adverse effect on the Company's business, operating results and financial
condition.

Competition
-----------
The Company competes with firms that improve existing business processes by
combining technological expertise with business process expertise. The market
for EC and EDI solutions is complex and rapidly changing. The current market is
intensely competitive and is likely to become more competitive as the number of
entrants and new technologies increase. The Company is subject to current or
potential competition from large software vendors, online trading exchanges that
develop their own business-to-business solutions, and other EDI vendors. The
Company's primary competitors in the EDI market are GE Information Services,
Inc., Sterling Inc., Harbinger Corp. and St. Paul Software Inc. The Company's
primary competitors in the EC market are IBM, Microsoft, iplanet, Ariba Inc.,
SoftShare, Atlas Commerce, EB2B and Ironside Technologies Inc., along with many
smaller alternative technology companies and system integrators. In addition,
the Company's customers and strategic partners may also become competitors in
the future.

Most of the Company's competitors have larger customer bases, greater brand
recognition, and significantly greater financial, marketing and other resources
than the Company. Some of the Company's competitors have longer operating
histories than the Company. The Company's competitors may enter into strategic
or commercial relationships with larger, more established and well-financed
companies, and may be able to secure alliances with customers and affiliates on
more favorable terms, devote greater resources to marketing and promotional
campaigns and devote substantially more resources to systems development than
the Company can. In addition, new technologies and the expansion of existing
technologies may increase competitive pressures on the Company. Competitive
pressures could harm the Company's business, operating results and financial
condition.

Many of the Company's existing and potential customers evaluate on an on-going
basis whether to develop their own electronic commerce software solution or to
purchase it from outside suppliers. As a result, the Company must, on an
on-going basis, educate existing and potential customers on the advantages of
the Company's solutions over internally developed software as well as
competitors' products. The Company believes that the principal competitive
factors affecting its market include breadth and depth of solutions, price,
speed and ease of deployment, interoperability with existing applications, core
technology, product quality and performance, product features (including
security), and customer service. The Company believes its solutions currently
compete favorably with respect to these factors in its target markets.

                                                                              45
<PAGE>

The Company's competitive advantage is in its ability to offer to customers
cost-effective solutions for small and medium-sized businesses that are not
currently well served by the costly and complex products offered by many of the
Company's competitors. As well, the Company's ability to design, develop and
implement sophisticated vertical portal for specific industries in a focused
manner is a distinct advantage to certain customer groups. Some of the Company's
competitors are in or are entering this market, and the Company believes its
advantages over these competitors and potential competitors are the
functionality and scalability of its products, and their ability to operate on a
broad range of hardware and software platforms. However, the market is
relatively new and evolving rapidly. The Company may not be able to maintain its
competitive position against current and potential competitors, especially those
with significantly greater financial, marketing, service, support, technical and
other resources.

United States vs. Foreign Sales/Assets
--------------------------------------
During Fiscal 2002, 89% of sales revenue was generated in Canada with the rest
in the United States. During Fiscal 2001, 37% was generated in Canada, 61% in
the United States, and 2% elsewhere. During Fiscal 2000, 34% was generated in
Canada, 60% in the United States, and 6% elsewhere. At 5/31/2002 and 5/31/2001,
all assets were located in Canada.

Reliance Upon Suppliers/Customers
---------------------------------
During Fiscal 2002, Fiscal 2001, and Fiscal 2000, respectively, the Company
generated 51%, 24%, and 19% from two customers.

4.C.  ORGANIZATIONAL STRUCTURE.
-------------------------------
The Company carries on its business primarily through direct and indirect
subsidiaries. The following table sets forth the name of each material
subsidiary of the Company, the jurisdiction of its incorporation, and the direct
or indirect percentage ownership by the Company in such subsidiary:

==============================================================================
                                            Jurisdiction of        Percentage
Name of Subsidiary                          Incorporation           Ownership
------------------------------------------------------------------------------
SoftCare EC Solutions Inc.(1)               British Columbia, Canada     100%
SCEC Holdings Inc.                          British Columbia, Canada     100%
SCC Holdings Ltd.                           British Columbia, Canada     100%
SoftCare Electronic Commerce (U.S.A.) Inc.  Washington State, USA        100%
------------------------------------------------------------------------------
(1) This Company was originally incorporated under the name SoftCare Electronic
Commerce Inc. and changed it name to SoftCare EC Inc. in December 2000, and
subsequently changed it name to the current form in October, 2001._
==============================================================================


4.D.  PROPERTY, PLANTS AND EQUIPMENT.
-------------------------------------
The Company occupies approximately 7,000 square feet of leased space in its
current headquarters at Suite 210, 889 Harbourside Drive, North Vancouver,
British Columbia V7P 3S1. The Company began occupation on 7/1/2002. The lease is
held in the name of the Company. This lease expires on 6/30/2008. A total of
nine employees operate out of this office as of 11/30/2002. The Company
currently has adequate space to accommodate future growth at its current
location. The Company is committed to lease payments under the term of its North
Vancouver premises lease and auto lease for a total of approximately $1,106,700
from July 2002 to June 2008.

                                                                              46
<PAGE>

ITEM 5.  OPERATING AND FINANCIAL REVIEW AND PROSPECTS
-----------------------------------------------------

The following discussion for the fiscal years ended 5/31/2002, 5/31/2001 and
5/31/2000 should be read in conjunction with the audited consolidated financial
statements of the Company and the notes thereto.

The Company has experienced operating losses and negative cash flows from
operations and has had to rely primarily on debt and equity financing for cash
required for operations. The Company's ability to achieve profitability and
positive cash flows from operations will depend upon numerous factors. These
factors include its ability to attract strategic corporate partners for the
development, marketing, distribution, and sale of its software products, the
progress of its research and development programs and its ability to protect its
proprietary rights over product names and trademarks. The Company's primary
source of financing to date has been through the offering of equity securities.

Management notes that its ability to obtain additional finances is contingent on
the capital markets, factors that are beyond the Company's control. There can be
no assurance that the Company will be able to continue to raise funds in which
case the Company may be unable to meet its obligations. Should the Company be
unable to realize on its assets and discharge its liabilities in the normal
course of business, the net realizable value of its assets may be materially
less than the amounts recorded on the Company's balance sheets, insolvency and
liquidation of the Company may result in a total loss to shareholders.

The following discussion relates to the financial condition, changes in
financial condition, and results of operations of the Company, and its
subsidiaries SoftCare EC Solutions Inc. (formerly SoftCare EC Inc. and
previously SoftCare Electronic Commerce Inc.), SCEC Holdings Ltd., SCC Holdings
Ltd. and SoftCare Electronic Commerce (U.S.A.) Inc. for Fiscal 2000, 2001, and
2002. The Company, its wholly owned subsidiary SoftCare EC Solutions Inc., and
its wholly owned subsidiaries SCC Holdings Ltd., SCEC Holdings Ltd. and SoftCare
Electronic Commerce (U.S.A.) Inc. are collectively referred to as the "Company".

At the Annual General Meeting held 11/5/2002, shareholders approved resolutions
to change the Company's name to SoftCare EC International Inc. and to
consolidate the Company's share capital on a one-for-ten basis.

Overview
--------
SoftCare is poised to be a significant business-to-business electronic commerce
platform provider. SoftCare has a strong history in the provision of software,
which enables business-to-business electronic commerce. The operating company,
SoftCare EC Solutions Inc. (formerly SoftCare Electronic Commerce Inc.) was
founded in 1989 and developed software to facilitate business-to-business
electronic exchange of documents. SoftCare's first product, Tradelink, has been
recognized as a leader in the electronic data interchange ("EDI") market. In the
late 1990's, management recognized the potential for the expansion of
business-to-business transactions through the use of the Internet.

As a result, the Company embarked on the development of an Internet based
business-to-business electronic commerce platform in 1997. Since that time the
Company's OpenEC business-to-business electronic commerce platform has been
under continuous development, this involves conducting research and developing
the initial and subsequent versions of the OpenEC platform. In June 1999, the
first version of OpenEC was installed and we began selling the OpenEC platform
and related services. We currently market both OpenEC and Tradelink primarily in

                                                                              47
<PAGE>

the United States and Canada through our direct sales force and to a lesser
extent through indirect sales channels.

SoftCare's primary focus remains the business-to-business electronic exchange of
documents. In this respect, Tradelink remains as an important component of the
Company's sales and has been enhanced through a relationship with IPNet.

SoftCare continues to enhance Tradelink in order to drive its acceptance in the
EDI market place. The OpenEC product also continues to be a focus of the
Company. SoftCare has developed and continues to develop certain applications to
support its OpenEC platform. While SoftCare may develop these applications,
there can be no assurance that such products, once completed, will meet customer
requirements, overall market requirements, or that the products will perform in
a satisfactory manner.

Fiscal 2002 was a year in which the Company continued developing OpenEC and
Tradelink as well as establishing new partnerships and positioning the Company's
software in the market place.


OPERATING RESULTS.
------------------

FISCAL 2002 ENDED 5/31/2002 COMPARED TO FISCAL 2001
Revenue for Fiscal 2002 was $575,002, compared with $460,297 for Fiscal 2001.
The increase in revenue was primarily due a significant sale of the OpenEC
product to a new customer during the year.

SoftCare has found that the North American Market for business-to-business
electronic commerce platforms and services has changed rapidly but that
significant real opportunities, which could produce significant revenues, are
still at an early stage of development. SoftCare's ultimate success depends upon
substantial organizations buying and implementing the Company's software
products and related services. The implementation of these software products by
these organizations is complex, time consuming and expensive. It also requires
that these organizations change established business practices and conduct
business in new ways. SoftCare's ability to attract customers for OpenEC
requires a significant amount of consultation and collaboration with the
potential customers during the sales process. These factors lead to long sales
cycles but also result in stable long-term relationships, which produce stable
revenue streams for the Company.

Salaries and wages for Fiscal 2002 were $1,658,651 compared with $2,830,657 for
Fiscal 2001. The decrease was due to SoftCare reviewing the effectiveness of the
sales team and adopting a new approach to sales, which is expected to be more
cost effective. Also, subsequent to changing economic conditions in North
America, the Company has undertaken a reduction and streamlining of the
engineering operations.

Other compensation in the amount of $71,200, relates to the estimated change in
fair value of existing options granted to consultants that were repriced on
5/24/2001 and of options granted to consultants of SoftCare as consideration for
services rendered during Fiscal 2002. For Fiscal 2001, other compensation in the
amount of $839,073 related to the estimated fair value of deferred stock
compensation and options granted to employees and consultants of SoftCare as
consideration for services rendered during Fiscal 2001.

                                                                              48
<PAGE>

Selling expenses for Fiscal 2002 were $71,614 compared with $110,694 for Fiscal
2001, demonstrating an overall reduction in SoftCare's selling expenses. The
decrease reflects SoftCare's reduced sales efforts for its older TradeLink EDI
product set, as it focused on completing the development of the OpenEC product
set.

General and administrative expenses for Fiscal 2002 were $1,942,704 compared
with $2,318,516 for Fiscal 2001. The reduction was primarily due to reduced
expenditures on travel, investor relations, consulting services, and
professional fees.

Amortization and writedown expense for Fiscal 2002 was $147,346 compared with
$126,577 for Fiscal 2001. The increase is primarily a result of increased
amortization being charged of $30,000 [2001 = $nil] to more realistically
reflect the net recoverable amounts of capital assets.


FISCAL 2001 ENDED 5/31/2001 COMPARED TO FISCAL 2000
The Company generated revenue through software sales, consulting services,
training services, and maintenance fees. Product sales were derived through two
alternative fee structures: licensing fees and software royalties. Service and
maintenance contracts are generally entered into at the time a product sale is
completed.

Revenue for Fiscal 2001 was $460,297, compared with $547,317 for Fiscal 2000.
The decrease in revenue is primarily due to a change in its sales efforts from
the Company's existing products towards its new OpenEC product, which commenced
in June 1999.

Salaries and wages for Fiscal 2001 were $2,830,657 compared with $1,821,014 for
Fiscal 2000. The increase was due to the Company's increased research and
development efforts to complete the initial OpenEC platform and due to expanded
marketing and sales efforts.

Other compensation in the amount of $839,073, relates to the estimated fair
value of deferred stock compensation and options granted to employees and
consultants of the Company as consideration for services rendered during Fiscal
2001. For Fiscal 2000, other compensation in the amount of $861,533 relates to
the estimated fair value of options granted to employees prior to and in
anticipation of the reverse take-over transaction in which options to acquire
1,000,006 common shares of the Company, valued at $1,280,000, were granted to
employees. These options were exercised on the reverse take-over date for cash
proceeds of $247. This resulted in a charge to income equal to the excess value
of Common shares over cash received of $1,279,753 that was recorded in Fiscal
2000 ($861,533) and Fiscal 1999 ($418,220).

Selling expenses for Fiscal 2001 were $110,694 compared with $112,396 for Fiscal
2000, demonstrating an overall reduction in the Company's selling expenses. The
decrease reflects the Company's reduced sales efforts for its older TradeLink
EDI product set, as it focused on completing the development of its initial
OpenEC product set.

General and administrative expenses for Fiscal 2001 were $2,318,516 compared
with $1,659,791 for Fiscal 2000. The increase was primarily due to the increased
cost of travel, sales consulting services, and premises costs incurred as a
result of the expansion of operations subsequent to the closing of the Company's
financing late in Fiscal 2000.

                                                                              49
<PAGE>

Depreciation and amortization expenses for Fiscal 2001 were $126,577 compared
with $113,089 for Fiscal 2000. The increase reflects the Company's continuous
upgrading of its computer hardware, software, related equipment and leasehold
improvements.

Loss on disposal of subsidiary for Fiscal 2001 amounting to $89,672 represents a
write-off of the net book value of FMG's net assets. On 9/22/2000, management
with board approval, approved a formal plan to commence termination of the FMG
acquisition as a result of material inconsistencies and omissions in claims and
disclosures made by the sellers of FMG and two principals of FMG (see footnotes
to the consolidated financial statements).

The Company also terminated its employment of the two principals of FMG in July
2000. The principals of FMG allege breach of its employment agreements
threatening legal action and have made other claims against the Company. The
Company believes the claims are without merit and intends to defend such claims
vigorously.


FISCAL 2000 ENDED 5/31/2000 COMPARED TO FISCAL 1999
The Company generated revenue through software sales, consulting services,
training services and maintenance fees. The total fee for a multiple element
arrangement is allocated to each element based upon objective evidence of the
fair value of each element. Fair value is established through the Company's
policy to charge to customers the same price as when the element is sold
separately. Revenue from sales made to re-sellers is recognized after the
third-party sale occurs and the revenue is determinable. Consulting services
offered by the Company are not considered essential to the functionality of the
software arrangement. As a result, consulting and training services revenues are
recognized as the work is performed. Maintenance contract revenue is deferred
and recognized over the respective contract periods. Revenue from direct
software sales is recognized when the product has been delivered, as no
significant obligations remain, fees are fixed and determinable, collectability
is probable, and persuasive evidence of an arrangement exists. If software sales
are contingent upon successful installation and subsequent customer acceptance,
the revenue and work in progress costs are deferred until customer acceptance is
achieved.

Revenue for Fiscal 2000 was $547,317, compared with $350,774 for the five months
ended 5/31/1999 and $849,433 for the year ended 12/31/1998. The decrease in
revenue is primarily due to a change in its sales efforts from the Company's
existing products towards its new OpenEC product which commenced in June 1999.

                                                                              50
<PAGE>

Late in the fiscal 2000, the Company sold a license for the OpenEC platform to a
new ASP based in the U.S. The installation was successfully completed on
5/31/2000. This contract calls for extended payment terms of 36 to 48 monthly
payments under a software license agreement that total approximately $1,600,000,
plus other future transaction fees. In Fiscal 2001, this contract was terminated
because the customer's business terminated.

Salaries and wages for Fiscal 2000 were $1,821,014 compared with $816,204 for
the five months ended 5/31/1999 and $1,209,298 for the year ended 12/31/1998.
The increase was due to the Company's increased research and development efforts
to complete the initial OpenEC platform and to expand its marketing and sales
efforts.

Other compensation relates to the estimated fair value of options granted to
employees of the Company as consideration for services rendered during the
period from April 1999 to September 1999. Prior to and in anticipation of the
reverse takeover transaction, options to acquire 246,946 common shares of
SoftCare Electronic Commerce Inc., valued at $1,280,000, were granted to
employees. These options were exercised on the reverse takeover date for cash
proceeds of $247 resulting in a charge to income equal to the excess value of
common shares over cash received of $1,279,753. During the period ended
3/31/1999, the Company recorded $418,220 of this charge, and $861,533 during the
year ended 5/31/2000. The 246,946 common shares SoftCare EC Solutions Inc. were
converted to 1,000,006 common shares of the Company upon the reverse takeover
transaction.

Selling expenses for Fiscal 2000 were $112,396 compared with $56,219 for the
five months ended 5/31/1999 and $160,476 for the year ended 12/31/1998,
demonstrating an overall reduction in the Company's selling expenses. The
decrease reflects the Company's reduced sales efforts for its older TradeLink
EDI product set, as it focused on completing the development of its initial
OpenEC product set.

General and administrative expenses for Fiscal 2000 were $1,659,791 compared
with $408,323 for the five months ended 5/31/1999 and $537,211 for the year
ended 12/31/1998. The increase was primarily due to the cost of increased
administration and professional fees required to investigate possible financing
arrangements.

Depreciation and amortization expense for Fiscal 2000 were $113,089 compared
with $31,716 for the five months ended 5/31/1999 and $76,887 for the year ended
12/31/1998. The increase reflects the Company's continuous upgrading of its
computer hardware, software and related equipment.

                                                                              51
<PAGE>

LIQUIDITY AND CAPITAL RESOURCES
-------------------------------
Because the Company has experienced negative cash flow from operations it has
had to rely on debt and equity financing for cash required for operations. The
Company's ability to achieve profitability and positive cash flow from
operations has been dependent upon numerous factors. These factors include its
ability to attract strategic corporate partners for the development, marketing,
distribution, and sale of its software products, the progress of its research
and development programs and its ability to protect its proprietary rights over
product names and trademarks. To date the Company has been able to achieve
certain milestones in its efforts to combat these dependant factors including
the registration of its trademark OpenEC, continued innovation from research,
development, building contacts and alliances with potential strategic corporate
partners.

As of 5/31/2002, the Company had $14,663 in cash and cash equivalents. This,
including short-term investments of $535,075 and other current assets, brought
the Company's total working capital to $107,204. The Company believes that
existing cash and other working capital along with sales revenue and additional
private placements of approximately $725,000 should be sufficient to carry out
operations at least during the next twelve months. The Company has a $250,000
operating line of credit with Scotia Bank, which was fully drawn upon at
5/31/2002 compared with advances of $nil at 5/31/2001. The line of credit was
repaid and retired in November 2002.

The Company's ability to achieve profitability and positive cash flows from
operations will depend upon numerous factors. These factors include its ability
to attract strategic, corporate partners for the development, marketing,
distribution, and sale of its software products, the progress of its research
and development programs and its ability to protect its proprietary rights over
the product names and trademarks.

Fiscal 2001 and Fiscal 2002 were positive years in the Company's history in
terms of developing OpenEC, establishing partnerships and positioning the
Company's software in the market place. This, coupled with the completion of the
financings, resulted in the Company ending each year in a positive cash
position.

During Fiscal 2001:
a.  On 3/29/2000 (Fiscal 2000), the Company issued 1,495,000 Special Warrants
    for net proceeds of $5,087,468 pursuant to a broker-assisted private
    placement. Each Special Warrant was exercisable into one common share and
    one share purchase warrant, with each share purchase warrant entitling the
    holder to purchase one common share at $4.25 until 3/30/2001. On 8/4/2000
    (Fiscal 2001), the Special Warrants were exchanged for 1,495,000 common
    shares and 1,495,000 share purchase warrants; the share purchase warrants
    expired unexercised. Pursuant to this offering, the Company issued 174,500
    Agents' Special Warrants, 25,000 of these Agents' Special Warrants were
    exercised on 8/18/2000 for $nil and the rest expired unexercised.
b.  196,300 Agents' Warrants were issued during the June 1999 offering.
    On.1/19/2000 138,600 were exercised for proceeds of $170,400 with the
    remainder expiring unexercised
c.  No Stock Options were exercised during the year.

                                                                              52
<PAGE>

During Fiscal 2002:
a.  On 2/22/2001 (Fiscal 2001), the Company issued 138,889 Special Warrants for
    net proceeds of $100,000 pursuant to a non-broker-assisted private
    placement. Each Special Warrant was exercisable into one common share and on
    share purchase warrant, with each share purchase warrant entitling the
    holder to purchase one common share at $0.72 until 2/22/2003. On 6/5/2001
    (Fiscal 2002), the Special Warrants were exchanged for 138,889 common shares
    and 138,889 share purchase warrants.
b.  On 10/24/2001, the Company issued 1,000,000 Special Warrants for net
    proceeds of $120,000 pursuant to a private placement. Each Special Warrant
    was exercisable into one common share and on share purchase warrant, with
    each share purchase warrant entitling the holder to purchase one common
    share at $0.16 until 10/24/2002. On 4/1/2002, the Special Warrants were
    exchanged for 1,000,000 common shares and 1,000,000 share purchase warrants.
    On 4/9/2002, 15,000 of the share purchase warrants were exercised for $2,400
    and the remainder expired unexercised 10/24/20002 (during Fiscal 2003).
c.  On 12/18/2001, the Company issued 650,000 units for gross cash proceeds of
    $175,000 pursuant to a private placement. Each unit consisted of one common
    share and one share purchase warrant, with each share purchase warrant
    entitling the holder to purchase one common share at $0.35 until 1/7/2004.
d.  on 5/16/2002, the Company issued 1,200,000 units to the President/CEO of the
    Company, Martyn Armstrong, for gross cash proceeds of $132,000 pursuant to a
    private placement. Each unit consisted of one common share and one share
    purchase warrant, with each share purchase warrant entitling the holder to
    purchase one common share at $0.13 until 5/16/2004.
e.  No stock options were exercised during Fiscal 2002

During Fiscal 2003 to date:
a.  On 7/26/2002, the Company issued 3,250,000 units for gross cash proceeds of
    $325,000 pursuant to a private placement. Each unit consisted of one common
    share and one-half of a share purchase warrant, with each share purchase
    warrant entitling the holder to purchase one common share at $0.12 until
    7/26/2003.


FISCAL 2002 ENDED 5/31/2002
The Company had working capital of $107,204 as at 5/31/2002. Cash Used by Fiscal
2002 Operating Activities totaled ($3,088,657), including the ($3,273,477) Net
Loss. Significant adjustments included: $147,346 in amortization of capital
assets and ($41,295) in net changes in non-cash working capital items. Cash Used
in Fiscal 2002 Investing Activities was ($558,702), including the purchase of
short-term investments of ($535,075). Cash Used in Fiscal 2002 Financing
Activities was $562,222, including the financings discussed above. Management
believes that it will be necessary to raise additional working capital to
provide for all planned requirements and anticipates that such funds will be
provided through private sales of equity and loans from insiders, although all
current negotiations are preliminary.

                                                                              53
<PAGE>

FISCAL 2001 ENDED 5/31/2001
---------------------------
The company had working capital of $2,804,889 as at 5/31/2001. Cash Used by
Fiscal 2001 Operating Activities totaled ($4,428,606), including the
($5,566,451) Net Loss. Significant adjustments included: $126,577 in
amortization of capital assets, stock-based compensation of $839,073, and
($37,072) in net changes in non-cash working capital items. Cash Used in Fiscal
2001 Investing Activities was $2,741,255, including the sale of short-term
investments of $2,996,509. Cash Used in Fiscal 2001 Financing Activities was
$2,340,019, including the financings discussed above.


RESEARCH AND DEVELOPMENT, PATENTS AND LICENSES, ETC
---------------------------------------------------

RESEARCH AND DEVELOPMENT. The Company has made substantial investments in
research and development. The Company expects most enhancements to its software
will continue to be developed internally. The Company also intends to rely on
strategic partners to provide complementary technologies such as database
integration and multimedia tools for complete vertical market solutions to be
offered jointly by the Company and strategic partners. The Company anticipates
that the majority of its research and development activity will consist of
developing new applications and enhancements to its OpenEC platform. The Company
has several EC user applications planned or in development.

PROPRIETARY RIGHTS. The Company depends on proprietary rights and technology.
The Company's success and ability to compete depends in part on its ability to
develop and maintain the proprietary aspects of its technologies. The Company
relies on a combination of copyright, trade secret and trademark laws, and
nondisclosure and other contractual provisions, to protect its various
proprietary products and technologies. The Company seeks to protect its source
code, documentation and other written materials under copyright and trade secret
laws. The Company licenses its software under license agreements that impose
restrictions on the ability of the customer to use and copy the software. The
Company generally requires its employees to sign agreements that require them to
assign to the Company any proprietary information, inventions or other
intellectual property they generate while employed by the Company. The Company
implements other procedures designed to avoid the disclosure of its trade
secrets and technology, such as restricting access to its source code and
executing confidentiality agreements with consultants, customers and other
persons with access to the Company's proprietary information. These safeguards
may not prevent competitors from imitating the Company's products and services
or from independently developing competing products and services, especially in
foreign countries where legal protections of intellectual property may not be as
strong or consistent as in Canada and the United States.

                                                                              54
<PAGE>

The Company holds no patents. Consequently, others may develop, market and sell
products substantially equivalent to the Company's products, or utilize similar
technologies, so long as they do not directly copy the Company's products or
otherwise infringe its intellectual property rights.

The Company licenses and integrates technology from third parties in certain of
its software products. For example, the Company licenses Oracle. These
third-party licenses generally require the Company to pay royalties and fulfill
confidentiality obligations. Any termination of, or significant disruption in,
the Company's ability to license these products could cause delays in the
releases of software until equivalent technology can be obtained and integrated
into the software products. These delays, if they occur, could have a material
adverse effect on the Company's business, operating results and financial
condition.

In Canada, the Company has registered its business name "SoftCare". The Company
has also filed and received a trademark on the product name "OpenEC" in Canada
and the United States. TRW, Inc. had the right to use the "OpenEC" trademarks in
association with products developed under the Cooperation Agreements. The
Company has no reason to believe that TRW has any use for the trademark as
termination of the Co-operation Agreement ended TRW's pursuit of the projects.
Further, the software currently used by the Company is not the software that was
subject to the Co-operation Agreement. According to the best of the knowledge of
the Company, no development or marketing of any software under the OpenEC market
has been undertaken by TRW.

The Company has not filed a trademark application on the product name
"TradeLink" in Canada, the United States, or elsewhere and does not intend to do
so. The Company has not filed a trademark application in Canada or the United
States for its business name "SoftCare. A competitor of the Company has filed
for a trademark in the United States on the business name "SoftCare." The
Company believes that the competitor has never done business under the name
"SoftCare" and that the Company has a prior right to such name. However, the
Company may not be able to protect its business name through trademark
registrations in Canada and the United States, and until it files such
registrations, must resort to its common law rights from prior use of the name.

Consequently, the Company has not fully protected its rights to the "OpenEC"
product name, the "TradeLink" product name or the "SoftCare" business name. In
the event the Company is forced to cease using any of such names, it will be
required to select new names for either its products or its business, or both.
Likely material consequences of changing such names include loss of the
Company's goodwill attached to the names and additional expenses in re-labeling
products, changing business forms and costs and expenses incurred in disputes
with third parties over rights to the names.

Intellectual property rights are often the subject of large-scale litigation in
the software and Internet industries. The Company may find it necessary to bring
claims or litigation against third parties for infringement of the Company's
proprietary rights or to protect trade secrets. These actions would likely be
costly and divert management resources. These actions could also result in
counterclaims challenging the validity of the Company's proprietary rights or
alleging infringement by the Company. The Company cannot guarantee the success
of any litigation it might bring to protect its proprietary rights.

                                                                              55
<PAGE>

Although the Company believes that its products do not infringe on any
third-party's patents or proprietary rights, the Company cannot be certain that
it will not become involved in litigation involving proprietary rights.
Proprietary rights litigation entails substantial legal and other costs, and the
Company does not know if it will have the necessary financial resources to
defend or prosecute its rights in connection with any such litigation.
Responding to, defending or bringing claims related to intellectual property
rights may require management to redirect the Company's human and monetary
resources to address these claims. In addition, these actions could cause
product shipment delays or require the Company to enter into royalty or license
agreements. Royalty or license agreements, if required, may not be available on
terms acceptable to the Company, if they are available at all. Any or all of
these outcomes could have a material adverse effect on the Company's business,
operating results and financial condition.

TREND INFORMATION.
------------------
Not Applicable.


ITEM 6.  DIRECTORS, SENIOR MANAGEMENT, AND EMPLOYEES
----------------------------------------------------

6.A.  Directors and Senior Management
-------------------------------------

                                   Table No. 3
                         Directors and Senior Management
                                November 30, 2002

==============================================================================
                                                                      Date of
                                                                        First
                                                                  Election or
Name                          Position                  Age       Appointment
-----------------------------------------------------------------------------
Martyn A. Armstrong(1)(2)(3)  President/CEO/Director     46         June 1999
Randall M. Pierson (1)        Director                   56     February 2000
Roy Trivett (1)               Director                   55          May 2001
John Versfelt(4)              CFO/Secretary              53     November 2002
-----------------------------------------------------------------------------
(1) Member of Audit Committee.
(2) Trustees of SoftCare Employee Share Bonus Trust
(3) He spends full time on the affairs of the Company.
(4) He spends about 40% of his time on the affairs of the Company.
(5) All business addresses c/o SoftCare EC Inc.
                               889 Harbourside Drive, #210
                               North Vancouver, BC  Canada  V7P 3S1
==============================================================================

                                                                              56
<PAGE>

MARTYN A. ARMSTRONG, the founder of SECI, the Company's subsidiary, is the
Chairman, President CEO and a director of the Company and is employed by the
Company on a full time basis pursuant to a formal employment agreement. See
"Executive Compensation, Employment Agreements". Mr. Armstrong is responsible
for the Company's day-to-day operations as well as development of all parts of
the Company, from technology and financial management to business development
and public relations. Prior to founding SoftCare Consulting Inc., in 1989, Mr.
Armstrong was a senior member of a leading Canadian software developer, Maves
Corporation, where he was responsible for their EDI and Communications software
business unit. Mr. Armstrong has a degree in Business Management and Computer
Systems earned at Capilano College.

RANDY PIERSON is a director of the Company. Mr. Pierson is the President and CEO
of Nivo International, a developer of IT certification programs and services for
corporations and government agencies. Prior to 2000, Mr. Pierson was Vice
President for Global Field Marketing for Novell Inc., a software company. Prior
to 1998, Mr. Pierson was Vice President of Sales and Marketing and Vice
President, Engineering and Development at Soricon Corporation. Mr. Pierson holds
BBA degrees in Finance and Marketing from the University of Washington.

ROY TRIVETT is a director of the Company. Mr. Trivett is an entrepreneur and
businessman. He is co-founder, President and CEO of Silicon Slopes Capital
Corp., a venture capital pool company listed on the TSX Venture Exchange. He
owns and directs a variety of companies involved in property management, food
services, music production, and computer animation. Prior to March 2000, he was
co-founder and the president (until 1994) and a director of Architel Systems
Corporation, a software company in the telecommunications sector; and served in
several other functions since 1982. Mr. Trivett has Bachelor of Electrical
Engineering and Master of Systems Engineering degrees from Carleton University,
Ottawa, Ontario

JOHN VERSFELT is Chief Financial Officer and Corporate Secretary of the Company.
>From 1982 to 2002, he was President of American Resource Management Consultants
Inc. His past experience includes strategic management of small-cap
growth-oriented companies, corporate restructuring, organization and control of
public and private companies, senior administration, business system analysis
and design, project management and contract agreement negotiating. He has a
Bachelor of Arts (Commerce) degree from Simon Fraser University, Burnaby,
British Columbia.

                                                                              57
<PAGE>

The Directors have served in their respective capacities since their election
and/or appointment and will serve until the next Annual General Meeting or until
a successor is duly elected, unless the office is vacated in accordance with the
Articles/By-Laws of the Company.

The Senior Management serve at the pleasure of the Board of Directors.

Despite the Company's Senior Management spending material portions of their time
on businesses other than the Company, the Company believes that they devote
sufficient time to the Company to properly carry out their duties.

No Director and/or Senior Management has been the subject of any order,
judgment, or decree of any governmental agency or administrator or of any court
or competent jurisdiction, revoking or suspending for cause any license, permit
or other authority of such person or of any corporation of which he is a
Director and/or Senior Management, to engage in the securities business or in
the sale of a particular security or temporarily or permanently restraining or
enjoining any such person or any corporation of which he is an officer or
director from engaging in or continuing any conduct/practice/employment in
connection with the purchase or sale of securities, or convicting such person of
any felony or misdemeanor involving a security or any aspect of the securities
business or of theft or of any felony.

There are no family relationships between any two or more Directors or Senior
Management.

                                                                              58
<PAGE>

6.B.  Compensation
------------------

Table No. 4 details compensation paid/accrued for Fiscal 2002/2001/2000 ended
May 31st for the Company's chief executive officer, each of the Company's each
of the Company's four most highly compensated executive officers who were
serving as executive officers at the end of the most recently completed
financial year and whose total salary and bonus exceeds US$100,000 per year; and
any additional individuals for whom disclosure would have been provided under
but for the fact that the individual was not serving as an executive officer of
the Company at the end of the most recently completed fiscal year.

<TABLE>
                                     Table No. 4
                              Summary Compensation Table
                                  Senior Management
<CAPTION>
=====================================================================================
                                                  Long-Term Compensation
                                            ---------------------------------
                                                     Awards           Payouts
                                            ------------------------ --------
                       Annual Compensation
                       -------------------               Securities
Name and                             Other  Restricted   Underlying             All
Principal     Fiscal                Annual       Stock     Options/     LTIP   Other
Position        Year    Salary Bonus  Comp      Awards    SARS(#)(1) Payouts   Comp
-------------------------------------------------------------------------------------
<S>             <C>   <C>        <C>   <C>         <C>     <C>           <C>    <C>
Martyn Armstrong
President       2002  $210,000   ---   ---         ---      70,000       ---    ---
                2001  $210,000   ---   ---         ---     200,000       ---    ---
                2000  $210,000   ---   ---         ---         nil       ---    ---

Sted Chen (2)(3)
Former
Vice President
Engineering     2002  $120,000   ---   ---         ---         nil       ---    ---
                2001  $120,000   ---   ---         ---     259,875(4)    ---    ---
                2000  $120,000   ---   ---         ---         nil       ---    (5)

Wayne Zielke (6)
Former CFO      2002  $195,000   ---   ---         ---      70,000       ---    ---
                2001  $195,000   ---   ---         ---     200,000       ---    ---
                2000  $nil       ---   ---         ---         nil       ---    ---

(1) On 9/26/2001, the exercise stock price for all outstanding stock options
    were reduced from $1.50 to $0.40.
(2) Mr. Chen ceased to be an member of senior management on 5/25/2002. (3) These
    monies were paid to Mr. Chen pursuant to an employment contract. (4) These
    stock options expired unexercised.
(5) Distribution of 75,000 common shares from the SoftCare Employee Share Bonus
    Trust on 7/4/2000.
(6) Mr. Zielke ceased to be a member of senior management on 11/18/2002.
=====================================================================================

                                                                                   59
</TABLE>
<PAGE>

DIRECTOR COMPENSATION. The Company has no formal plan for compensating its
Directors for their service in their capacity as Directors. Directors are
entitled to reimbursement for reasonable travel and other out-of-pocket expenses
incurred in connection with attendance at meetings of the Board of Directors.
The Board of Directors may award special remuneration to any Director
undertaking any special services on behalf of the Company other than services
ordinarily required of a Director. Other than indicated below no Director
received any compensation for his services as a Director, including committee
participation and/or special assignments.

OTHER COMPENSATION. No Senior Management/Director received "other compensation"
in excess of the lesser of US$25,000 or 10% of such officer's cash compensation,
and all Senior Management/Directors as a group did not receive other
compensation which exceeded US$25,000 times the number of persons in the group
or 10% of the compensation.

BONUS/PROFIT SHARING/NON-CASH COMPENSATION. Except for the stock option program
discussed in ITEM #6.E., the Company has no material bonus or profit sharing
plans pursuant to which cash or non-cash compensation is or may be paid to the
Company's Directors or Senior Management.

PENSION/RETIREMENT BENEFITS. No funds were set aside or accrued by the Company
during Fiscal 2001 to provide pension, retirement or similar benefits for
Directors or Senior Management.

EMPLOYMENT TERMINATION/EMPLOYMENT CONTRACTS. Martyn Armstrong is employed by the
Company as the President and CEO. His salary under his employment agreement is
$210,000 per annum, subject to annual review by the Company. The employment
agreement dated 6/17/1999 was for a period of three years, with automatic
renewals for one-year terms on the expiration of the term, subject to notice
from either party of non-renewal on 30-days notice. The employment agreement
provides that if Mr. Armstrong's employment is terminated by the Company other
than for cause, the Company will provide Mr. Armstrong with 18 months notice of
his termination, or payment of an amount equal to the salary that Mr. Armstrong
would have been entitled to receive during that period.

Other than disclosed above, the Company has no plans or arrangements in respect
of remuneration received or that may be received by Senior Management of the
Company in Fiscal 2003 to compensate such senior management in the event of
termination of employment (as a result of resignation, retirement, change of
control) or a change of responsibilities following a change of control, where
the value of such compensation exceeds US$60,000 per Senior Manager.

LONG-TERM INCENTIVE PLANS: Awards in Most Recently Completed Fiscal Year. The
Company has an employee trust (the "SoftCare Employee Share Bonus Trust")
managed by Martyn Armstrong under the direction of the Board of Directors. It is
intended to provide stock based incentives to employees. During Fiscal 2002 no
distributions were made; during the Fiscal 2001, a distribution was made from
the trust to one executive officer (75,000 shares to Sted Chen). Other than the
Softcare Employee Share Bonus Trust, the Company has no long-term incentive
plans in place. Therefore, there were no awards made under any long-term
incentive plan to the Senior Management during Fiscal 2002. A "Long-Term
Incentive Plan" is a plan under which awards are made based on performance over
a period longer than one fiscal year, other than a plan for options, SARs (stock
appreciation rights) or restricted share compensation.

                                                                              60
<PAGE>

OPTIONS/SARS GRANTED DURING THE MOST RECENTLY COMPLETED FISCAL YEAR. During the
most recently completed fiscal year, the following incentive stock options were
granted to Senior Management, Directors and employees. No SARs (stock
appreciation rights) were granted during this period. In addition, the board of
directors resolved on 9/26/2002 to reduce the exercise price to $0.10 per share
for all stock options issued under the company stock option plan with the
exception of those granted to an employee. Disinterested shareholder approval of
such reduction for insiders was sought and obtained at the Company's annual
general meeting held on 11/5/2002.

                                   Table No. 5
               Stock Option Grants in Fiscal 2002 Ended 5/31/2002

================================================================================
                             Percentage              Market Value of Securities
                       Number        of   Exer.              Underlying Options
                           of     Total  Price                          on Date
                      Options   Options    Per      Grant      Exp'r   of Grant
Name                  Granted   Granted  Share       Date       Date  Per Share
--------------------------------------------------------------------------------
Martyn Armstrong       70,000      5.4%  $0.10  10/2/2001  10/5/2006      $0.12
Randall Pierson        70,000      5.4%  $0.10  10/5/2001  10/5/2006      $0.12
Douglas Sarkissian(2)  70,000      5.4%  $0.10  10/2/2001  10/5/2006      $0.12
Ray Trivett            70,000      5.4%  $0.10  10/2/2001  10/5/2006      $0.12
Wayne Zielke(3)        70,000      5.4%  $0.10  10/5/2001  10/5/2006      $0.12
                   -----------
Mgmt/Directors        350,000     27.2%
Employees/etc.        936,000     82.8%
                   -----------
Total               1,286,000    100.0%

(1) All options granted were vested upon granting.
(2) Former Corporate Secretary until November 2002.
(3) Former Chief Financial Officer and Director until November 2002.
================================================================================

The following table gives certain information concerning stock option exercises
during Fiscal 2002 by our Senior Management and Directors. It also gives
information concerning stock option values.

                                   Table No. 6
                Aggregated Stock Options Exercises in Fiscal 2002
                    Fiscal Yearend Unexercised Stock Options
                       Fiscal Yearend Stock Option Values
                           Senior Management/Directors

==============================================================================
                   Number                                Value of Unexercised
                       of                       Number of        In-the Money
                   Shares             Unexercised Options          Options at
                 Acquired  Aggregate    at Fiscal Yearend      Fiscal Yearend
                       on      Value         Exercisable/        Exercisable/
Name             Exercise   Realized        Unexercisable       Unexercisable
------------------------------------------------------------------------------
Martyn Armstrong      ---        ---          270,000/nil             nil/nil
Wayne Zielke          ---        ---          270,000/nil             nil/nil
Sted Chen             ---        ---          259,875/nil             nil/nil
Douglas Sarkissian    ---        ---          270,000/nil             nil/nil
==============================================================================

                                                                              61
<PAGE>

6.C.  Board Practices
---------------------

6.C.1.  TERMS OF OFFICE.
------------------------
The directors of the Company are elected annually and hold office until the next
annual general meeting of the members of the Company or until their successors
in office are duly elected or appointed. All directors are elected for a
one-year term. All officers serve at the pleasure of the board of directors. The
Company held its 2002 Annual General Meeting on 11/5/2002. The next Annual
General Meeting of the Shareholders of the Company Must be held no later than
12/5/2003. Refer to ITEM 6.A.1.

6.C.2.  DIRECTORS' SERVICE CONTRACTS.
-------------------------------------
        No Disclosure Necessary

6.C.3.  BOARD OF DIRECTOR COMMITTEES.
-------------------------------------
The Company's Board of Directors has only two committees: an Audit Committee;
and a Compensation Committee. The members of the each of the Audit Committee and
the Compensation Committee do not have any fixed terms for holding their
positions and are appointed and replaced from time to time by resolution of the
Board of Directors.

The members of the Audit Committee are: Martyn Armstrong, Randy Pierson, and Roy
Trivett. Audit Committee members receive no separate remuneration for acting as
such and their appointments are not for any fixed term. Their appointments are
not subject to any specific terms of reference. The Audit Committee, which
recommends to the Board of Directors the engagement of the independent auditors
of the Company and reviews with the independent auditors the scope and results
of the Company's audits, the Company's internal accounting controls, and the
professional services furnished by the independent auditors to the Company. The
Audit Committee met once during Fiscal 2002 and has not met during Fiscal
2003-to-date.

The members of the Compensation Committee are: Martyn Armstrong, Randy Pierson
and Roy Trivett. Compensation Committee members receive no separate remuneration
for acting as such and their appointments are not for any fixed term. Their
appointments are not subject to any specific terms of reference. The
Compensation Committee, which makes recommendations to the Board of Directors on
the terms of the compensation packages provided to employees, including to our
Senior Management, the terms of any bonus or other awards provided to our
employees, including Senior Management, and makes recommendations to the Board
of Directors regarding new Senior Management appointees. The Compensation
Committee met once during Fiscal 2002 and has not met during Fiscal
2003-to-date.

6.D.  Employees
---------------
As of 11/30/2002, the Company had 9 employees, including the three Senior
Management, all operating out of the North Vancouver office. The Company
currently has adequate space to accommodate future growth at its current
location. None of the Company's employees are covered by collective bargaining
agreements.

The following table lists the number of employees and staff functions as at the
end of the fiscal years ended  5/31/2002, 5/31/2001, and 5/31/2000:
                               ---------  ---------      ---------
Engineering                            3         19             20
Administration                         4          4              6
Sales/Sales support                    3          9              8
                                     ----       ----           ----
Totals                                10         32             34

                                                                              62
<PAGE>

Sales and installations are carried out by both an in-house team and by a
network of partners. The Company's partners include e-commerce service
providers, business application software companies and EDI consultants located
in Canada, the US and Korea. The Company's engineering team comprises
approximately one-fourth of its staff, with management, administration, sales
and marketing personnel making up the remainder of the Company's staff.

6.E.  Share Ownership
---------------------
Table No. 7 lists, as of 11/30/2002, Directors and Senior Management who
beneficially own the Company's voting securities, consisting solely of common
share, and the amount of the Company's voting securities owned by the Directors
and Senior Management as a group. Table No. 7 also includes data on Sam Eyde and
Lynne Armstong, the only other persons/companies where the Company is aware that
a shareholder has 5% or greater beneficial interest in the Company's securities.

                                   Table No. 7
                Shareholdings of Directors and Senior Management
                        Shareholdings of 5% Shareholders

==============================================================================
Title                                            Amount and Nature    Percent
  of                                                 of Beneficial         of
Class    Name of Beneficial Owner                        Ownership    Class #
-----------------------------------------------------------------------------
Common   Martyn Armstrong (1)                            7,961,462      30.0%
Common   Roy Trivett (2)                                   212,000       0.9%
Common   Randall Pierson (2)                               170,000       0.7%
Common   John Versfelt                                           0       0.0%
Common   Sam Eyde (3)                                    6,375,000      25.6%
                                                       ------------    -------
TOTAL DIRECTORS/MANAGEMENT/5% HOLDERS                   14,718,462      57.2%
------------------------------------------------------------------------------
(1)    270,000 represent currently exercisable stock options.
     1,850,000 represent currently exercisable warrants
       774,200 shares are held by the SoftCare Employee Share Bonus Trust, for
               the benefit of the employees of the Company, of which trust, Mr.
               Armstrong is the trustee, as to which Mr. Armstrong disclaims
               beneficial ownership.
       104,720 shares are held in trust for the children of Martyn Armstrong, of
               which trust, Mr. Armstrong is the trustee, as to which Mr.
               Armstrong disclaims beneficial ownership.
     Excludes 1,077,840 shares owned by members of his family where he disavows
     beneficial interest and does not have voting or disposition control.
(2)    170,000 represent currently exercisable stock options.
(3)  1,625,000 represent currently exercisable warrants.

#  Based on 23,243,617 shares outstanding as of 11/30/2002 and stock options and
   warrants held by each beneficial holder exercisable within sixty days.

================================================================================

                                                                              63
<PAGE>

STOCK OPTIONS. The terms of incentive options grantable by the Company are done
in accordance with the rules and policies of the TSX Venture Exchange and the
British Columbia Securities Commission, including the number of common shares
under option, the exercise price and expiry date of such options, and any
amendments thereto. Such "terms and conditions", including the pricing of the
options, expiry and the eligibility of personnel for such stock options; and are
described below.

Under the Company's stock option plan (the "Stock Option Plan"), options to
purchase common shares of the Company may be granted to employees and directors
of the Company or subsidiaries of the Company and other persons or companies
engaged to provide ongoing management or consulting services for the Company or
any entity controlled by the Company.

The Stock Option Plan is administered by the Secretary of the Company in
consultation with the board of directors, and is intended to advance the
interests of the Company through the motivation, attraction and retention of key
employees, officers and directors of the Company and subsidiaries of the Company
and to secure for the Company and its shareholders the benefits inherent in the
ownership of common shares of the Company by key employees, officers and
directors of the Company and subsidiaries of the Company. Recommendations to
award options under the Stock Option Plan are presented to the board of
directors of the Company for approval.

The maximum number of common shares of the Company subject to option under the
Stock Option Plan may not exceed 10% of the issued and outstand common shares of
the Company. In determining the number of common shares of the Company subject
to each option granted under the Stock Option Plan, consideration is given to
the present and potential contribution by such person or company to the success
of the Company. The number of common shares of the Company which may be subject
to option under the Stock Option Plan in favor of any one individual and in the
aggregate is limited under the terms of the Stock Option Plan approved by the
shareholders of the Company on 11/20/2000, amended 5/24/2001, and cannot be
increased without shareholder and regulatory approval.

The exercise price per common share may not be less than the discounted market
price of the Company's common shares on the day on which the option is granted.
The discounted market price is determined in accordance with the policies of the
TSX Venture Exchange, upon which the Company's common shares are listed. Each
option is for a term not in excess of five years and is not exercisable unless
the optionee has been continuously employed by, is a director or an officer of,
or engaged in providing ongoing management or consulting services for, the
Company or a subsidiary of the Company continuously since the date of grant of
the option, except: (i) in the case of the death of an optionee, in which case
the option is exercisable for a maximum of twelve months thereafter; or (ii) in
the case of an optionee ceasing to be a participant under the Stock Option Plan
for any reason other than cause or death, in which case the option is
exercisable for a maximum of 30 days thereafter. The Stock Option Plan does not
provide for the granting of financial assistance, whether by way of a loan,
guarantee or otherwise, by the Company in connection with any purchase of common
shares from the Company.

The names and titles of the Directors/Senior Management of the Company to whom
outstanding stock options have been granted and the number of common shares
subject to such options are set forth in Table No. 8 as of 11/30/2002, as well
as the number of options granted to Directors/Senior Management and all
employees as a group.

                                                                              64
<PAGE>

                                   Table No. 8
                            Stock Options Outstanding

===============================================================================
                       Number of Shares of      CDN$
                                    Common  Exercise       Grant   Expiration
Name                                 Stock     Price        Date         Date
-----------------------------------------------------------------------------
Martyn Armstrong                    70,000     $0.10   10/05/2001  10/05/2006
Martyn Armstrong                   200,000     $0.40    6/19/1999   6/18/2004
Randy Pierson                       70,000     $0.10   10/05/2001  10/05/2006
Randy Pierson                      100,000     $0.40    2/01/2000   2/01/2005
Ray Trivett                         70,000     $0.10   10/05/2001  10/05/2006
Roy Trivett                        100,000     $0.40    2/01/2000   2/01/2005
John Versfelt                          nil
                                 ----------
Total Senior Management/Directors  610,000
Total Employees/Consultants/etc. 1,443,108
                                 ----------
TOTAL                            2,053,108

(1)  On 9/26/2002 the Board of Directors authorized and on 11/5/2002 the
     shareholders approved the re-pricing of all stock options to $0.10; this
     re-pricing has yet to take effect.

===============================================================================

Table No. 9 lists, as of 11/30/2002, Directors and Senior Management who
beneficially own the Company's warrants and the amount of the Company's warrants
owned by the Directors and Senior Management as a group. Refer to Table No. 10
for more detailed information about warrants outstanding.

                                   Table No. 9
               Warrant Holdings of Directors and Senior Management
                       Warrant Holdings of 5% Shareholders

==============================================================================
                                                                   Expiration
                                                                      Date of
                                                 Exercise Price         Share
                                     Number of   ---------------     Purchase
Name                                  Warrants   Year #1 Year #2     Warrants
------------------------------------------------------------------------------
Martyn Armstrong                     1,200,000     $0.13   $0.13    5/16/2004
Martyn Armstrong                       650,000     $0.35   $0.35    1/07/2004
Sam Eyde                             1,625,000     $0.12    ----    7/26/2003
                                   ------------
Total Management/Directors/5%       3,475,000
==============================================================================

                                                                              65
<PAGE>

SHARE PURCHASE WARRANTS
-----------------------
Table No. 10 lists, as of 11/30/2002, share purchase warrants outstanding, the
date the share purchase warrants were issued, the exercise price, and the
expiration date of the share purchase warrants. As of 11/30/2002, the Company
was aware of three holders of its 3,613,889 share purchase warrants, all of whom
were resident in Canada or the United States. These warrants were issued in
conjunction with private placements and are non-transferable.

                                  Table No. 10
                       Share Purchase Warrants Outstanding

==============================================================================
                  Number of    Number of
                      Share        Share                           Expiration
                   Purchase     Purchase                              Date of
Effective          Warrants     Warrants                                Share
Date of          Originally        Still                             Purchase
Issuance             Issued  Outstanding       Year #1 Year #2       Warrants
------------------------------------------------------------------------------
 2/22/2001          138,889      138,889         $0.72   $0.72      2/22/2003
12/18/2001          650,000      650,000(1)      $0.35   $0.35      1/07/2004
 5/16/2002        1,200,000    1,200,000(1)      $0.13   $0.13      5/16/2004
 7/26/2002        1,625,000    1,625,000(2)      $0.12   -----      7/26/2003
------------------------------------------------------------------------------
(1) Owned by Martyn Armstrong, President/Director.
(2) Owned by Sam Eyde, 5% shareholder.
==============================================================================

                                                                              66
<PAGE>

ITEM 7.  MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS
----------------------------------------------------------

7.A. Major Shareholders.
------------------------

7.A.1.A. HOLDINGS BY MAJOR SHAREHOLDERS.
----------------------------------------
Refer to ITEM #6.E. and Table No. 7.

7.A.1.B. SIGNIFICANT CHANGES IN MAJOR SHAREHOLDERS' HOLDINGS.
-------------------------------------------------------------
The participation in private placements of equity by the Company and exercise of
stock options/share purchase warrants has lead over the last several years to
some significant changes in the holdings of major shareholders (5% or greater);
table reflects direct holdings of common shares, refer to Table No. 7 for
additional information.

==============================================================================
                                               Shares      Shares      Shares
                                                Owned       Owned       Owned
                                            5/31/2002   5/31/2001   5/31/2000
                                            ---------------------------------
Martyn Armstrong                            4,962,542     774,200   1,000,000
Lynne Armstrong                             1,278,840   1,278,840   1,350,940
==============================================================================

7.A.1.C. DIFFERENT VOTING RIGHTS.
---------------------------------
The Company's major shareholders do not have different voting rights.

7.A.2. CANADIAN SHARE OWNERSHIP.
--------------------------------
On 9/27/2002, the shareholders' list for the Company's common shares showed 79
registered shareholders and 23,243,617 shares issued and outstanding.

Fifteen of these registered shareholders were U.S. residents, owning 5,915,570
shares representing 25% of the issued and outstanding common shares. The Company
has researched the indirect holding by depository institutions, other financial
institutions and fiduciaries and estimates that there are 135 "holders of
record" resident in the United States, holding the aforementioned 5,915,570
common shares. The Company has researched the indirect holding by
depository/financial institutions and estimates that there are 1050 "holders of
record" resident in Canada, holding 17,192,373 common shares.

"Holders of record" include primarily individuals/corporations and exclude
depository institutions and stockbrokerage firms.

Based on this research and other research into the indirect holdings of other
financial institutions, the Company believes that it has in excess of 1200
beneficial owners of its common shares.

7.A.3. CONTROL OF COMPANY.
--------------------------
The Company is a publicly-owned Canadian corporation, the shares of which are
owned by U.S. residents, Canadian residents and other foreign residents. The
Company is not controlled by any foreign government or other person(s) except as
described in ITEM #4.A., "History and Growth of the Company", and ITEM #6.E.,
"Share Ownership".

7.A.4.  CHANGE OF CONTROL OF COMPANY ARRANGEMENTS.
--------------------------------------------------
No Disclosure Necessary

                                                                              67
<PAGE>

7.B.  Related Party Transactions
--------------------------------
In addition to his salary disclosed in Table #4, Wayne Zielke Inc. was paid
$40,000 for consulting work during Fiscal 202. The law firm of Douglas
Sarkissian, former Corporate Secretary, was paid $191,000 during Fiscal 2002.

Except as otherwise disclosed herein, no director, senior officer, principal
shareholder, or any associate or affiliate thereof, had any material interest,
direct or indirect, in any transaction since the beginning of the last financial
year of the Company that has materially affected the Company, or any proposed
transaction that would materially affect the Company, except for an interest
arising from the ownership of shares of the Company where the member will
receive no extra or special benefit or advantage not shared on a pro rata basis
by all holders of shares in the capital of the Company.

7.C. Interests of Experts and Counsel:
--------------------------------------
No Disclosure Necessary


ITEM 8.  FINANCIAL INFORMATION
------------------------------

8.A.  Consolidated Statements and Other Financial Information
-------------------------------------------------------------
The Company's consolidated financial statements are stated in Canadian Dollars
(CDN$) and are prepared in accordance with Canadian Generally Accepted
Accounting Principles (GAAP), the application of which, in the case of the
Company, conforms in all material respects for the periods presented with United
States GAAP, except as discussed in footnotes to the consolidated financial
statements.

The consolidated financial statements as required under ITEM #17 are attached
hereto and found immediately following the text of this Annual Report. The audit
report of Ernst & Young LLP, independent Chartered Accountants, are included
herein immediately preceding the financial statements.

Audited Financial Statements
 for Fiscal 2002, Fiscal 2001 and Fiscal 2000 Ended May 31st

8.A.7.  Legal/Arbitration Proceedings
-------------------------------------
The Company entered into an investor/public relations advisory agreement with
The Equicom Group Inc., an Ontario company in February 2000. On or about
2/20/2001, Equicom brought a legal action in the Courts in Ontario against the
Company for breach of the agreement claiming damages of $25,000. On 4/27/2001
the Company had Ontario legal counsel enter a defense of the Equicom claim and
counterclaimed against Equicom for $37,000 representing fees paid for which the
Company did not receive services promised. The litigation has not proceeded
beyond the pleadings stage and no trial date has been set. The Company intends
to vigorously defend the Equicom claims.

Reference is made to disclosures in ITEM 4A above with respect to the
acquisition and unwinding of Financial Management Group LLC (FMG). FMG is
insolvent. Disclosures of the principals were personal covenants and were
untrue. Cherlynne Casabonne has filed for personal bankruptcy in California. The
Company is considering the utility in taking proceedings to object to the
obligations she has to the Company being relieved due to the
misrepresenta-tions. The Company has taken legal counsel in this matter and the
board has decided, due to cost, not to take further legal proceedings. On
11/5/2002 Hispacom Inc. filed an action to name the Company as a successor in
interest to FMG; the Company is evaluating its legal position but considers the
action to be without merit.

                                                                              68
<PAGE>

The Directors and the management of the Company know of no other material,
active or pending, legal proceedings against them; nor is the Company involved
as a plaintiff in any material proceeding or pending litigation. The Directors
and the management of the Company know of no other active or pending proceedings
against anyone that might materially adversely affect an interest of the
Company.

8.B.  Significant Changes
-------------------------
No significant change has occurred since the date of the annual financial
statements.


ITEM 9.  THE OFFER AND LISTING
------------------------------

9.A.4.  Common Share Trading Information
----------------------------------------
The Company's common shares began trading on the TSX Venture Exchange (formerly
the Canadian Venture Exchange) in Toronto, Ontario, Canada, under its former
name Burmac Energy Corp. in 10/9/1985. The current stock symbol is "SCE". The
CUSIP number is #83402E-10-9.

The Company's common shares began trading on the NASD OTC Bulletin Board in
December 2001 under the symbol SFCEF.OB.

Table No. 11 lists the volume of trading and high, low and closing sales prices
on the NASD Electronic OTC Bulletin Board for the Company's common shares for:
the last six months, the last four fiscal quarters, and the last fiscal year.

                                  Table No. 11
                         NASD Electronic Bulletin Board
                         Common Shares Trading Activity

==============================================================================
                                                                    - Sales -
  Period                                                           US Dollars
   Ended                              Volume           High     Low   Closing
------------------------------------------------------------------------------
Monthly
11/30/2002                            34,000          $0.015  $0.007   $0.007
10/31/2002                           336,500           0.021   0.012    0.019
 9/30/2002                            15,000           0.025   0.025    0.025
 8/31/2002                               nil             ---     ---      ---
 7/31/2002                            25,200           0.08    0.04     0.040
 6/30/2002                            33,300           0.14    0.04     0.080
------------------------------------------------------------------------------
Quarterly
11/30/2002                           385,500          $0.025  $0.01     $0.01
 8/31/2002                            58,500           0.12    0.04      0.04

 5/31/2002                           414,557          $0.25   $0.08     $0.10
 2/28/2002                           178,166           0.38    0.23      0.30
-----------------------------------------------------------------------------
Yearly
 5/31/2002                           592,723          $0.30   $0.08     $0.10
==============================================================================

                                                                              69
<PAGE>

Table No. 12 lists the volume of trading and high, low and closing sales prices
on the TSX Venture Exchange for the Company's common shares for: the last six
months, the last ten fiscal quarters and the last five fiscal years.

                                  Table No. 12
                              TSX Venture Exchange
                         Common Shares Trading Activity

==============================================================================
                                                                    - Sales -
  Period                                                     Canadian Dollars
   Ended                                   Volume      High     Low   Closing
------------------------------------------------------------------------------
Monthly
11/30/2002                                            $0.04   $0.01     $0.02
10/31/2002                                             0.05    0.02      0.03
 9/30/2002                                             0.06    0.04      0.04
 8/31/2002                                             0.09    0.06      0.06
 7/31/2002                                             0.09    0.05      0.07
 6/30/2002                                             0.12    0.07      0.10
------------------------------------------------------------------------------
Quarterly
11/30/2002                                            $0.06   $0.01     $0.02
 8/31/2002                                             0.12    0.05      0.06
 5/31/2002                                            $0.35   $0.20      0.12
 2/28/2002                                             0.53    0.30      0.35
11/30/2001                                             0.40    0.09      0.37
 8/31/2001                                             0.42    0.15      0.18

 5/31/2001                                            $0.60   $0.34     $0.34
 2/28/2001                                             0.90    0.60      0.52
11/30/2000                                             3.10    0.75      0.75
 8/31/2000                                             2.60    1.51      2.00
------------------------------------------------------------------------------
Yearly
 5/31/2002                                            $0.35   $0.09     $0.12
 5/31/2001                                             3.10    0.34      0.34
 5/31/2000                                             6.00    1.07      2.50
 5/31/1999                                             1.30    0.77      0.xx
12/31/1998                                             1.25    0.09      0.xx
==============================================================================


The TSX Venture Exchange
------------------------

The TSX Venture Exchange is a result of the acquisition by the Toronto Stock
Exchange of the Canadian Venture Exchange ("CDNX") from its member firms on
8/1/2001. The CDNX resulted from the merger between the Vancouver Stock Exchange
and the Alberta Stock Exchange that took place on 11/29/1999, to form the CDNX.
The TSX Venture Exchange currently operates as a complementary but independent
exchange from its parent, the Toronto Stock Exchange.

The initial roster of the CDNX was made up of venture companies previously
listed on the Vancouver Stock Exchange or the Alberta Stock Exchange and later
incorporated junior listings from the Montreal Stock Exchange, the Winnipeg
Stock Exchange, and the CDN Over-The-Counter Market. The TSX Venture Exchange is
a venture market as compared to the TSX Stock Exchange that is Canada's senior
market and the Montreal Exchange that is Canada's market for derivatives
products.

                                                                              70
<PAGE>

The TSX Venture Exchange currently has five service centers: Calgary, Toronto,
Vancouver, Winnipeg and Montreal. These service centers provide corporate
finance, surveillance and marketing expertise. The corporate office for the TSX
Venture Exchange is located in Calgary and the operations office is located in
Vancouver.

The TSX Venture Exchange is a self-regulating organization owned and operated by
the Toronto Stock Exchange, which in turn is owned by its member brokerage
firms. It is governed by representatives of member firms and the public.

Organizationally, the TSX Venture Exchange is comprised of seven business areas:
Corporate Finance Services, Trading Services and Market Information Services,
Compliance, Marketing, Technology, Corporate Affairs and Human Resources.

The TSX Venture Exchange acts as a business link between TSX members, listed
companies and investors. TSX Venture Exchange policies and procedures are
designed to accommodate companies still in their formative stages and recognize
those that are more established. Listings are predominately small and medium
sized companies.

Post-trade monitoring of market activity occurs in the market surveillance
department. Sophisticated software analyses trade data from TRADETSX to detect
possible market improprieties. A variety of surveillance and investigative tools
allow the TSX Venture Exchange to perform electronic market monitoring and trade
reviews.

The surveillance department is also responsible for monitoring and reviewing
listed company activities and detecting breaches of the listing policies or the
listing agreement. Market surveillance and listed company surveillance
activities are closely coordinated.

Enforcement action taken by the surveillance department may include the
following:
1)  forcing companies to correct misleading or inaccurate disclosure which
    includes new releases or internet postings:
2)  requiring the resignation of unacceptable directors and officers;
3)  requiring cancellation and return shares to treasury;
4)  requiring undertakings from directors and officers that they will ensure
    compliance with the listing agreement and listings policies in the future;
5)  requiring the termination of unacceptable investor relations services;
6)  halting and suspending trading in the shares of companies;
7)  de-listing companies that have contravened exchange by-laws, rules or
    policies.

The market surveillance department issues TSX notices to inform the public of
halts, suspensions, de-lists and other enforcement actions. All TSX notices can
be found on the TSX website or INFOTSX. In the public interest, trading halts or
suspensions are maintained until the surveillance department is satisfied that
there is adequate disclosure of the company's affairs and a level playing field
for investors.

                                                                              71
<PAGE>

In addition to market surveillance, the TSX Venture Exchange's compliance
department is comprised of an investigative services team that conducts
investigations into alleged violations of securities trading. The TSX Venture
Exchange Conduct Review Committee determines whether a case for discipline
exists. Disciplinary cases either result in a settlement reached between TSX
Venture Exchange and the respondent or they proceed to a disciplinary hearing.
The public can attend disciplinary hearings, view the exhibits filed and obtain
copies of the decisions issued by the panel. If the hearing panel's decision is
not acceptable to either TSX Venture Exchange or the respondent, an appeal
process may be initiated.

Investors in Canada are protected by the Canadian Investor Protection Fund
("CIPF"). The CIPF is a private trust fund established to protect customers in
the event of the insolvency of a member of any of the following self-regulatory
organizations: the TSX Venture Exchange; the Montreal Exchange; the Toronto
Stock Exchange; the Toronto Futures Exchange; and the Investment Dealers
Association of Canada.

Post-trade monitoring of market activity occurs in the market surveillance
department. Sophisticated software analyses trade data from TRADETSX to detect
possible market improprieties. A variety of surveillance and investigative tools
allow the TSX Venture Exchange to perform electronic market monitoring and trade
reviews.

The surveillance department is also responsible for monitoring and reviewing
listed company activities and detecting breaches of the listing policies or the
listing agreement. Market surveillance and listed company surveillance
activities are closely coordinated.

Enforcement action taken by the surveillance department may include the
following:
1)  forcing companies to correct misleading or inaccurate disclosure which
    includes new releases or internet postings:
2)  requiring the resignation of unacceptable directors and officers;
3)  requiring cancellation and return shares to treasury;
4)  requiring undertakings from directors and officers that they will ensure
    compliance with the listing agreement and listings policies in the future;
5)  requiring the termination of unacceptable investor relations services;
6)  halting and suspending trading in the shares of companies;
7)  de-listing companies that have contravened exchange by-laws, rules or
    policies.

The market surveillance department issues TSX notices to inform the public of
halts, suspensions, de-lists and other enforcement actions. All TSX notices can
be found on the TSX website or INFOTSX. In the public interest, trading halts or
suspensions are maintained until the surveillance department is satisfied that
there is adequate disclosure of the company's affairs and a level playing field
for investors.

                                                                              72
<PAGE>

In addition to market surveillance, the TSX Venture Exchange's compliance
department is comprised of an investigative services team that conducts
investigations into alleged violations of securities trading. The TSX Venture
Exchange Conduct Review Committee determines whether a case for discipline
exists. Disciplinary cases either result in a settlement reached between TSX
Venture Exchange and the respondent or they proceed to a disciplinary hearing.
The public can attend disciplinary hearings, view the exhibits filed and obtain
copies of the decisions issued by the panel. If the hearing panel's decision is
not acceptable to either TSX Venture Exchange or the respondent, an appeal
process may be initiated.

9.C.  Stock Exchanges Identified
--------------------------------
The common shares trade on the TSX Venture Exchange in Canada, and the NASD
Electronic OTC Bulletin Board in the United States. Refer to ITEM #9.A.4.


ITEM 10.  ADDITIONAL INFORMATION
--------------------------------

10.A.  Share Capital
--------------------
       Not Applicable

10.B.  Memorandum and Articles of Association
---------------------------------------------

INCORPORATION
The Company was incorporated by registration of its memorandum in British
Columbia. Canada, under Certificate of Incorporation number 230782 on March 30,
1981. The Company does not have any stated "objects" or "purposes" as such are
not required by the corporate laws of the Province of British Columbia. Rather,
the Company is, by such corporate laws, entitled to carry on any activities
whatsoever, which are not specifically precluded by other statutory provisions
of the Province of British Columbia.

POWERS AND FUNCTIONS OF THE DIRECTORS
The powers and functions of the Directors are set forth in the Company's
Articles, which were adopted and filed as of the date of its incorporation. They
provide:
a.  Director is obligated to disclose his potential interest in a proposal,
    arrangement or contract being considered by the Company, and may not vote on
    any proposal, arrangement or contract proposed, but such Director shall be
    counted in the quorum at the meeting of the Directors at which the proposal,
    arrangement or contract is approved;
b.  The Directors may, in the absence of an independent quorum, vote
    compensation to themselves;
c.  There are no limitations on the exercise by the Directors of the Company's
    borrowing powers;
d.  There are no provisions for the retirement or non-retirement of Directors
    under an age limit;
e.  There is no requirement for a Director to hold any shares in the Company.

RIGHTS AND RESTRICTIONS ATTACHED TO THE SHARES
As all of the Company's authorized and issued shares are of one class there are
no special rights or restrictions of any nature or kind attached to any of the
shares. All authorized and issued shares rank equally in respect to the
declaration and receipt of dividends, the rights to share in any profits or
surplus on liquidation, dissolution or winding up of the Company. Each share has
attached to it one non-cumulative vote.

                                                                              73
<PAGE>

ALTERATION OF SHARE RIGHTS
To alter the rights of holders of issued shares of the Company, such alteration
must be approved by the majority vote of 75% of the issued shares of the Company
attending and voting at a meeting of the shareholders of the Company.

ANNUAL GENERAL MEETINGS
Annual General Meetings are called and scheduled upon decision by the Board of
Directors. The Directors may convene an extraordinary general meeting of the
shareholders. The holders of not less than 5% of the issued shares of the
Company may requisition an extraordinary meeting of the shareholders. All
meetings of the shareholders may be attended by registered shareholders or
persons who hold powers of attorney or proxies given to them by registered
shareholders.

FOREIGN OWNERSHIP LIMITATIONS
The Company's Memorandum and Articles of Incorporation do not contain
limitations prohibiting shares being held by non-residents, foreigners or any
other group.

CHANGE OF CONTROL
There are no provisions in the Company's Articles or charter documents that
would have an effect of delaying, deferring or preventing a change in the
control of the Company, or that would operate with respect to any proposed
merger, acquisition or corporate restructuring of the Company.

SHARE OWNERSHIP REPORTING OBLIGATIONS
There are no provisions in the Company's Articles requiring share ownership to
be disclosed. The securities laws of the Provinces of British Columbia require
disclosure of shareholdings by:
a.  insiders who are directors or senior officers of the Company; and
b.  a person who has direct or indirect beneficial ownership of, control or
    direction over, or a combination of direct or indirect beneficial ownership
    of and of control or direction over securities of the Company carrying more
    than 10% of the voting rights attached to all the Company's outstanding
    voting securities.

CANADIAN REGULATIONS
Securities legislation in the Canada requires that shareholder ownership must be
disclosed once a person owns beneficially or has control or direction over
greater than 10% of the issued shares of the Company. This threshold is higher
than the 5% threshold under U.S. securities legislation at which shareholders
must report their share ownership.

Provisions as to the modification, amendment or variation of such shareholder
rights or provisions are contained in the British Columbia Company Act ("COMPANY
ACT") of British Columbia. Unless the COMPANY ACT or the Company's Articles or
Memorandum otherwise provide, any action to be taken by a resolution of the
members may be taken by an ordinary resolution or by a vote of a majority or
more of the shares represented at the shareholders' meeting.

                                                                              74
<PAGE>

The Company's Articles and the COMPANY ACT contain provisions, which require
"special resolutions" for effecting certain corporate actions. Such a "special
resolution" requires a three-quarters vote of shareholders rather than a simple
majority for passage. The principle corporate actions that require a "special
resolution" include:
a.  Transferring the Company's jurisdiction from British Columbia to another
    jurisdiction;
b.  Giving financial assistance under certain circumstances;
c.  Certain conflicts of interest by Directors;
d.  Disposing of all/substantially all of Company's undertakings;
e.  Removing Director before expiration of his term of office;
f.  Certain alterations of share capital;
g.  Changing the Company name; and
h.  Altering any restrictions on the Company's business.

There are no restrictions on the repurchase or redemption of common shares of
the Company while there is any arrearage in the payment of dividends.

10.C. Material Contracts.
-------------------------
Other than as already disclosed elsewhere in this Annual Report under the "ITEM
4, Information on the Company", the Company has not entered into any material
contracts during the prescribed time period, except as follows:
a.  Effective 10/5/2001, the Company entered an information technology
    programming, services and license agreement (the "Hydro Agreement") with the
    British Columbia Hydro And Power Authority ("Hydro"). Under the Hydro
    Agreement the Company has been engaged by Hydro to licence and install
    software products ("Software"), and to perform programming work and software
    customization for Hydro, and to provide maintenance services as required
    under the Hydro Agreement.
b.  SoftCare EC has entered into a strategic alliance with IPNet Solutions Inc.,
    This alliance will make SoftCare a Reseller of IPNet's BizManager suite of
    products. The contract has performance levels to maintain a preferred
    pricing and the company has made a pre-payment on software licences for our
    existing customer base.

10.D.  Exchange Controls.
-------------------------
Canada has no system of exchange controls. There are no exchange restrictions on
borrowing from foreign countries nor on the remittance of dividends, interest,
royalties and similar payments, management fees, loan repayments, settlement of
trade debts, or the repatriation of capital. Any such remittances to US
residents, however, may be subject to a withholding tax pursuant to the Canadian
Income Tax Act as modified by the reciprocal tax treaty between Canada and the
United States. See "Item 10 E, Taxation".

The Investment Canada Act (the "Act"), enacted on 6/20/1985, requires prior
notification to the Government of Canada on the "acquisition of control" of
Canadian businesses by non-Canadians, as defined in the Act. Certain
acquisitions of control, discussed below, are reviewed by the Government of
Canada. The term "acquisition of control" is defined as any one or more
non-Canadian persons acquiring all or substantially all of the assets used in
the Canadian business, or the acquisition of the voting shares of a Canadian
corporation carrying on the Canadian business or the acquisition of the voting
interests of an entity controlling or carrying on the Canadian business. The
acquisition of the majority of the outstanding shares is deemed to be an
"acquisition of control" of a corporation. The acquisition of less than a
majority, but one-third or more, of the voting shares of a corporation is
presumed to be an "acquisition of control" of a corporation unless it can be
established that the purchaser will not control the corporation.

                                                                              75
<PAGE>

Investments requiring notification and review are all direct acquisitions of
Canadian businesses with assets of CDN$5,000,000 or more (subject to the
comments below on WTO investors), and all indirect acquisitions of Canadian
businesses (subject to the comments below on WTO investors) with assets of more
than CDN$50,000,000 or with assets of between CDN$5,000,000 and CDN$50,000,000
which represent more than 50% of the value of the total international
transaction. In addition, specific acquisitions or new businesses in designated
types of business activities related to Canada's cultural heritage or national
identity could be reviewed if the Government of Canada considers that it is in
the public interest to do so.

The Act was amended with the implementation of the Agreement establishing the
World Trade Organization ("WTO") to provide for special review thresholds for
"WTO investors", as defined in the Act. "WTO investor" generally means (i) an
individual, other than a Canadian, who is a national or a WTO member (such as,
for example, the United States), or who has the right of permanent residence in
relation to that WTO member, (ii) governments of WTO members, and (iii) entities
that are not Canadian controlled, but which are WTO investor controlled, as
determined by rules specified in the Act. The special review thresholds for WTO
investors do not apply, and the general rules described above do apply, to the
acquisition of control of certain types of businesses specified in the Act,
including a business that is a "cultural business". If the WTO investor rules
apply, an investment in the shares of the Company by or from a WTO investor will
be reviewable only if it is an investment to acquire control of the Company and
the value of the assets of the Company is equal to or greater than a specified
amount (the "WTO Review Threshold"). The WTO Review Threshold is adjusted
annually by a formula relating to increases in the nominal gross domestic
product of Canada. The 2002 WTO Review Threshold is CDN$209,000,000.

If any non-Canadian, whether or not a WTO investor, acquires control of the
Company by the acquisition of shares, but the transaction is not reviewable as
described above, the non-Canadian is required to notify the Canadian government
and to provide certain basic information relating to the investment. A
non-Canadian, whether or not a WTO investor, is also required to provide a
notice to the government on the establishment of a new Canadian business. If the
business of the Company is then a prescribed type of business activity related
to Canada's cultural heritage or national identity, and if the Canadian
government considers it to be in the public interest to do so, then the Canadian
government may give notice in writing within 21 days requiring the investment to
be reviewed.

For non-Canadians (other than WTO investors), an indirect acquisition of
control, by the acquisition of voting interests of an entity that directly or
indirectly controls the Company, is reviewable if the value of the assets of the
Company is then CDN$50,000,000 or more. If the WTO investor rules apply, then
this requirement does not apply to a WTO investor, or to a person acquiring the
entity from a WTO investor. Special rules specified in the Act apply if the
value of the assets of the Company is more than 50% of the value of the entity
so acquired. By these special rules, if the non-Canadian (whether or not a WTO
investor) is acquiring control of an entity that directly or indirectly controls
the company, and the value of the assets of the Company and all other entities
carrying on business in Canada, calculated in the manner provided in the Act and
the regulations under the Act, is more than 50% of the value, calculated in the
manner provided in the Act and the regulations under the Act, of the assets of
all entities, the control of which is acquired, directly or indirectly, in the
transition of which the acquisition of control of the Company forms a part, then
the thresholds for a direct acquisition of control as discussed above will

                                                                              76
<PAGE>

apply, that is, a WTO Review Threshold of CDN$209,000,000 (in 2002) for a WTO
investor or a threshold of CDN$5,000,000 for a non-Canadian other than a WTO
investor. If the value exceeds that level, then the transaction must be reviewed
in the same manner as a direct acquisition of control by the purchase of shares
of the Company.

If an investment is reviewable, an application for review in the form prescribed
by the regulations is normally required to be filed with the Director appointed
under the Act (the "Director") prior to the investment taking place and the
investment may not be consummated until the review has been completed. There
are, however, certain exceptions. Applications concerning indirect acquisitions
may be filed up to 30 days after the investment is consummated and applications
concerning reviewable investments in culture-sensitive sectors are required upon
receipt of a notice for review. In addition, the Minister (a person designated
as such under the Act) may permit an investment to be consummated prior to
completion of the review, if he is satisfied that delay would cause undue
hardship to the acquiror or jeopardize the operations of the Canadian business
that is being acquired. The Director will submit the application to the
Minister, together with any other information or written undertakings given by
the acquiror and any representation submitted to the Director by a province that
is likely to be significantly affected by the investment.

The Minister will then determine whether the investment is likely to be of net
benefit to Canada, taking into account the information provided and having
regard to certain factors of assessment where they are relevant. Some of the
factors to be considered are (i) the effect of the investment on the level and
nature of economic activity in Canada, including the effect on employment, on
resource processing, and on the utilization of parts, components and services
produced in Canada; (ii) the effect of the investment on exports from Canada;
(iii) the degree and significance of participation by Canadians in the Canadian
business and in any industry in Canada of which it forms a part; (iv) the effect
of the investment on productivity, industrial efficiency, technological
development, product innovation and product variety in Canada; (v) the effect of
the investment on competition within any industry or industries in Canada; (vi)
the compatibility of the investment with national industrial, economic and
cultural policies; (vii) the compatibility of the investment with national
industrial, economic and cultural policies taking into consideration industrial,
economic and cultural objectives enunciated by the government or legislature of
any province likely to be significantly affected by the investment; and (viii)
the contribution of the investment to Canada's ability to compete in world
markets.

The Act sets certain time limits for the Director and the Minister. Within 45
days after a completed application has been received, the Minister must notify
the acquiror that (a) he is satisfied that the investment is likely to be of net
benefit to Canada, or (b) he is unable to complete his review, in which case he
shall have 30 additional days to complete his review (unless the acquiror agrees
to a longer period), or (c) he is not satisfied that the investment is likely to
be of net benefit to Canada.

Where the Minister has advised the acquiror that he is not satisfied that the
investment is likely to be of net benefit to Canada, the acquiror has the right
to make representations and submit undertakings within 30 days of the date of
the notice (or any further period that is agreed upon between the acquiror and
the Minister). On the expiration of the 30 day period (or the agreed extension),
the Minister must quickly notify the acquiror (i) that he is now satisfied that
the investment is likely to be of net benefit to Canada or (ii) that he is not

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satisfied that the investment is likely to be of net benefit to Canada. In the
latter case, the acquiror may not proceed with the investment or, if the
investment has already been consummated, must divest itself of control of the
Canadian business.

The Act provides civil remedies for non-compliance with any provision. There are
also criminal penalties for breach of confidentiality or providing false
information.

10.E.  Taxation.
----------------
A brief description of certain provisions of the tax treaty between Canada and
the United States is included below, together with a brief outline of certain
taxes, including withholding provisions, to which United States security holders
are subject under existing laws and regulations of Canada. The consequences, if
any, of provincial, state and local taxes are not considered.

The following information is general and security holders should seek the advice
of their own tax advisors, tax counsel or accountants with respect to the
applicability or effect on their own individual circumstances of the matters
referred to herein and of any provincial, state or local taxes.

CERTAIN CANADIAN FEDERAL INCOME TAX CONSEQUENCES
The discussion under this heading summarizes the principal Canadian federal
income tax consequences of acquiring, holding and disposing of shares of common
stock of the Company for a shareholder of the Company who is not a resident of
Canada but is a resident of the United States and who will acquire and hold
shares of common stock of the Company as capital property for the purposes of
the INCOME TAX ACT (Canada) (the "Canadian Tax Act"). This summary does not
apply to a shareholder who carries on business in Canada through a "permanent
establishment" situated in Canada or performs independent personal services in
Canada through a fixed base in Canada if the shareholder's holding in the
Company is effectively connected with such permanent establishment or fixed
base. This summary is based on the provisions of the Canadian Tax Act and the
regulations thereunder and on an understanding of the administrative practices
of Canada Customs Revenue Agency, and takes into account all specific proposals
to amend the Canadian Tax Act or regulations made by the Minister of Finance of
Canada as of the date hereof. It has been assumed that there will be no other
relevant amendment of any governing law although no assurance can be given in
this respect. This discussion is general only and is not a substitute for
independent advice from a shareholder's own Canadian and U.S. tax advisors.
The provisions of the Canadian Tax Act are subject to income tax treaties to
which Canada is a party, including the Canada-United States Income Tax
Convention (1980), as amended (the "Convention").

DIVIDENDS ON COMMON SHARES AND OTHER INCOME
Under the Canadian Tax Act, a non-resident of Canada is generally subject to
Canadian withholding tax at the rate of 25 percent on dividends paid or deemed
to have been paid to him or her by a corporation resident in Canada. The
Convention limits the rate to 15 percent if the shareholder is a resident of the
United States and the dividends are beneficially owned by and paid to such
shareholder, and to 5 percent if the shareholder is also a corporation that
beneficially owns at least 10 percent of the voting stock of the payor
corporation.

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The amount of a stock dividend (for tax purposes) would generally be equal to
the amount by which the paid up or stated capital of the Company had increased
by reason of the payment of such dividend. The Company will furnish additional
tax information to shareholders in the event of such a dividend. Interest paid
or deemed to be paid on the Company's debt securities held by non-Canadian
residents may also be subject to Canadian withholding tax, depending upon the
terms and provisions of such securities and any applicable tax treaty.

The Convention generally exempts from Canadian income tax dividends paid to a
religious, scientific, literary, educational or charitable organization or to an
organization constituted and operated exclusively to administer a pension,
retirement or employee benefit fund or plan, if the organization is a resident
of the United States and is exempt from income tax under the laws of the United
States.

DISPOSITIONS OF COMMON SHARES
Under the Canadian Tax Act, a taxpayer's capital gain (or capital loss) from a
disposition of a share of common stock of the Company is the amount, if any, by
which his or her proceeds of disposition exceed (or are exceeded by,
respectively) the aggregate of his or her adjusted cost base of the share and
reasonable expenses of disposition. The capital gain or loss must be computed in
Canadian currency using a weighted average adjusted cost base for identical
properties. One-half of a capital gain (the "taxable capital gain") is included
in income, and one-half (again, to be reduced to two-thirds once the requisite
legislation is enacted) of a capital loss in a year (the "allowable capital
loss") is deductible from taxable capital gains realized in the same year. The
amount by which a shareholder's allowable capital loss exceeds the taxable
capital gain in a year may be deducted from a taxable capital gain realized by
the shareholder in the three previous years or any subsequent year, subject to
certain restrictions in the case of a corporate shareholder and subject to
adjustment when the capital gains inclusion rate in the year of disposition
differs from the inclusion rate in the year the deduction is claimed.

If a share of common stock of the Company is disposed of to the Company other
than in the open market in the manner in which shares would normally be
purchased by the public, the proceeds of disposition will, in general terms, be
considered as limited to the paid-up capital of the share and the balance of the
price paid will be deemed to be a dividend. In the case of a shareholder that is
a corporation, the amount of any capital loss otherwise determined may be
reduced, in certain circumstances, by the amount of dividends previously
received in respect of the shares disposed of, unless the corporation owned the
shares for at least 365 days prior to sustaining the loss and (together with
corporations, persons and other entities, with whom the corporation was not
dealing at arm's length) did not own more than five percent of the shares of any
class of the corporation from which the dividend was received. These loss
limitation rules may also apply where a corporation is a member of a partnership
or a beneficiary of a trust that owned the shares disposed of.

Under the Canadian Tax Act, a non-resident of Canada is subject to Canadian tax
on taxable capital gains, and may deduct allowable capital losses, realized on a
disposition of "taxable Canadian property." Shares of common stock of the
Company will constitute taxable Canadian property of a shareholder at a
particular time if the shareholder used the shares in carrying on business in
Canada, or if at any time in the five years immediately preceding the
disposition 25 percent or more of the issued shares of any class or series in
the capital stock of the Company belonged to one or more persons in a group

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comprising the shareholder and persons with whom the shareholder did not deal at
arm's length and in certain other circumstances. All non-residents who dispose
of taxable Canadian property must file a Canadian tax return to report the
disposition.

The Convention relieves United States residents from liability for Canadian tax
on capital gains derived on a disposition of shares unless:
a.  the value of the shares is derived principally from "real property" in
    Canada, including the right to explore for or exploit natural resources and
    rights to amounts computed by reference to production,
b.  the shareholder was resident in Canada for 120 months during any period of
    20 consecutive years preceding, and at any time during the 10 years
    immediately preceding, the disposition and the shares were owned by him when
    he or she ceased to be resident in Canada, or
c.  the shares formed part of the business property of a "permanent
    establishment" that the holder has or had in Canada within the 12 months
    preceding the disposition.

UNITED STATES FEDERAL INCOME TAX CONSEQUENCES
The following is a general discussion of certain possible United States federal
income tax consequences, under current law, generally applicable to a U.S.
Holder (as hereinafter defined) of common shares of the Company. This discussion
does not address all potentially relevant federal income tax matters and it does
not address consequences peculiar to persons subject to special provisions of
federal income tax law, such as those described below as excluded from the
definition of a U.S. Holder. In addition, this discussion does not cover any
state, local or foreign tax consequences. (see "Taxation - Certain Canadian
Federal Tax Consequences" above).

The following discussion is based upon the sections of the Internal Revenue Code
of 1986, as amended (the "Code"), Treasury Regulations, published Internal
Revenue Service ("IRS") rulings, published administrative positions of the IRS
and court decisions that are currently applicable, any or all of which could be
materially and adversely changed, possibly on a retroactive basis, at any time
and which are subject to differing interpretations. This discussion does not
consider the potential effects, both adverse and beneficial, of any proposed
legislation which, if enacted, could be applied, possibly on a retroactive
basis, at any time. This discussion is for general information only and it is
not intended to be, nor should it be construed to be, legal or tax advice to any
holder or prospective holder of common shares of the Company and no opinion or
representation with respect to the United States federal income tax consequences
to any such holder or prospective holder is made. Accordingly, holders and
prospective holders of common shares of the Company should consult their own tax
advisors about the federal, state, local, and foreign tax consequences of
purchasing, owning and disposing of common shares of the Company.

U.S. HOLDERS
As used herein, a "U.S. Holder" means a holder of common shares of the Company
who is (i) a citizen or individual resident of the United States, (ii) a
corporation or partnership created or organized in or under the laws of the
United States or of any political subdivision thereof, (iii) an estate whose
income is taxable in the United States irrespective of source or (iv) a trust
subject to the primary supervision of a court within the United States and
control of a United States fiduciary as described Section 7701(a)(30) of the
Code. This summary does not address the tax consequences to, and U.S. Holder
does not include, persons subject to specific provisions of federal income tax
law, such as tax-exempt organizations, qualified retirement plans, individual
retirement accounts and other tax-deferred accounts, financial institutions,

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insurance companies, real estate investment trusts, regulated investment
companies, broker-dealers, persons or entities that have a "functional currency"
other than the U.S. dollar, shareholders subject to the alternative minimum tax,
shareholders who hold common shares as part of a straddle, hedging, conversion
transaction, constructive sale or other arrangement involving more than one
position, and shareholders who acquired their common shares through the exercise
of employee stock options or otherwise as compensation for services. This
summary is limited to U.S. Holders who own common shares as capital assets
within the meaning of Section 1221 of the Code. This summary does not address
the consequences to a person or entity holding an interest in a shareholder or
the consequences to a person of the ownership, exercise or disposition of any
options, warrants or other rights to acquire common shares.

DISTRIBUTION ON COMMON SHARES OF THE COMPANY
U.S. Holders receiving dividend distributions (including constructive dividends)
with respect to common shares of the Company are required to include in gross
income for United States federal income tax purposes the gross amount of such
distributions, equal to the U.S. dollar value of such distributions on the date
of receipt (based on the exchange rate on such date), to the extent that the
Company has current or accumulated earnings and profits, without reduction for
any Canadian income tax withheld from such distributions. Such Canadian tax
withheld may be credited, subject to certain limitations, against the U.S.
Holder's federal income tax liability or, alternatively, may be deducted in
computing the U.S. Holder's federal taxable income by those who itemize
deductions. (See more detailed discussion at "Foreign Tax Credit" below). To the
extent that distributions exceed current or accumulated earnings and profits of
the Company, they will be treated first as a return of capital up to the U.S.
Holder's adjusted basis in the common shares and thereafter as gain from the
sale or exchange of the common shares. Preferential tax rates for long-term
capital gains are applicable to a U.S. Holder which is an individual, estate or
trust. There are currently no preferential tax rates for long-term capital gains
for a U.S. Holder which is a corporation.

In the case of foreign currency received as a dividend that is not converted by
the recipient into U.S. dollars on the date of receipt, a U.S. Holder will have
a tax basis in the foreign currency equal to its U.S. dollar value on the date
of receipt. Generally, any gain or loss recognized upon a subsequent sale or
other disposition of the foreign currency, including the exchange for U.S.
dollars, will be ordinary income or loss. However, an individual whose realized
gain does not exceed $200 will not recognize that gain, to the extent that there
are no expenses associated with the transaction that meet the requirements for
deductibility as a trade or business expense (other than travel expenses in
connection with a business trip) or as an expense for the production of income.

Dividends paid on the common shares of the Company generally will not be
eligible for the dividends received deduction provided to corporations receiving
dividends from certain United States corporations. A U.S. Holder which is a
corporation and which owns shares representing at least 10% of the voting power
and value of the Company may, under certain circumstances, be entitled to a 70%
(or 80% if the U.S. Holder owns shares representing at least 20% of the voting
power and value of the Company) deduction of the United States source portion of
dividends received from the Company (unless the Company qualifies as a "foreign
personal holding company" or a "passive foreign investment company," as defined
below). The availability of this deduction is subject to several complex
limitations which are beyond the scope of this discussion.

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Under current Treasury Regulations, dividends paid on the Company's common
shares, if any, generally will not be subject to information reporting and
generally will not be subject to U.S. backup withholding tax. However, dividends
and the proceeds from a sale of the Company's common shares paid in the U.S.
through a U.S. or U.S. related paying agent (including a broker) will be subject
to U.S. information reporting requirements and may also be subject to the 31%
U.S. backup withholding tax, unless the paying agent is furnished with a duly
completed and signed Form W-9 or the recipient is exempt from such procedures.
Any amounts withheld under the U.S. backup withholding tax rules will be allowed
as a refund or a credit against the U.S. Holder's U.S. federal income tax
liability, provided the required information is furnished to the IRS. U.S.
Holders are urged to consult their own tax counsel regarding the information
reporting and backup withholding rules applicable to the Company's common
shares.

FOREIGN TAX CREDIT
A U.S. Holder who pays (or has withheld from distributions) Canadian income tax
with respect to the ownership of common shares of the Company may be entitled,
at the option of the U.S. Holder, to either receive a deduction or a tax credit
for such foreign tax paid or withheld. Generally, it will be more advantageous
to claim a credit because a credit reduces United States federal income taxes on
a dollar-for-dollar basis, while a deduction merely reduces the taxpayer's
income subject to tax. This election is made on a year-by-year basis and applies
to all foreign taxes paid by (or withheld from) the U.S. Holder during that
year. There are significant and complex limitations which apply to the credit,
among which is the general limitation that the credit cannot exceed the
proportionate share of the U.S. Holder's United States income tax liability that
the U.S. Holder's foreign source income bears to his or its worldwide taxable
income. In the determination of the application of this limitation, the various
items of income and deduction must be classified into foreign and domestic
sources. Complex rules govern this classification process. In addition, this
limitation is calculated separately with respect to specific classes of income
such as "passive income, " "high withholding tax interest," "financial services
income," "shipping income," and certain other classifications of income.
Dividends distributed by the Company will generally constitute "passive income"
or, in the case of certain U.S. Holders, "financial services income" for these
purposes. In addition, U.S. Holders which are corporations that own 10% or more
of the voting stock of the Company may be entitled to an "indirect" foreign tax
credit under Section 902 with respect to the payment of dividends by the Company
under certain circumstances and subject to complex rules and limitations. The
availability of the foreign tax credit and the application of the limitations on
the credit are fact specific, and U.S. Holders of common shares of the Company
should consult their own tax advisors regarding their particular circumstances.

DISPOSITION OF COMMON SHARES OF THE COMPANY
A U.S. Holder will recognize gain or loss upon the sale of common shares of the
Company equal to the difference, if any, between (i) the amount of cash plus the
fair market value of any property received, and (ii) the shareholder's tax basis
in the common shares of the Company. Preferential tax rates apply to long-term
capital gains of U.S. Holders which are individuals, estates or trusts. This
gain or loss will be capital gain or loss if the common shares are a capital
asset in the hands of the U.S. Holder, which will be long-term capital gain or
loss if the common shares of the Company are held for more than one year.
Deductions for net capital losses are subject to significant limitations. For
U.S. Holders which are not corporations, any unused portion of such net capital
loss may be carried over to be used in later tax years until such net capital

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loss is thereby exhausted. For U.S. Holders that are corporations (other than
corporations subject to Subchapter S of the Code), an unused net capital loss
may be carried back three years and carried forward five years from the loss
year to be offset against capital gains until such net capital loss is thereby
exhausted.

OTHER CONSIDERATIONS
In the following circumstances, the above sections of this discussion may not
describe the United States federal income tax consequences resulting from the
holding and disposition of common shares:

FOREIGN PERSONAL HOLDING COMPANY
If at any time during a taxable year (i) more than 50% of the total combined
voting power or the total value of the Company's outstanding shares is owned,
directly or indirectly, by five or fewer individuals who are citizens or
residents of the United States and (ii) 60% (50% in some circumstances) or more
of the Company's gross income for such year was "foreign personal holding
company income" (e.g. dividends, interest and similar income), the Company may
be treated as a "foreign personal holding company." In that event, U.S. Holders
that hold common shares would be required to include in gross income for such
year their allocable portions of such "foreign personal holding company income"
to the extent the Company does not actually distribute such income. The Company
does not believe that it currently qualifies as a foreign personal holding
company. However, there can be no assurance that the Company will not be
considered a foreign personal holding company for the current or any future
taxable year.

FOREIGN INVESTMENT COMPANY
If 50% or more of the combined voting power or total value of the Company's
outstanding shares is held, directly or indirectly, by citizens or residents of
the United States, United States domestic partnerships or corporations, or
estates or trusts other than foreign estates or trusts (as defined by the Code
Section 7701(a)(31)), and the Company is found to be engaged primarily in the
business of investing, reinvesting, or trading in securities, commodities, or
any interest therein, it is possible that the Company may be treated as a
"foreign investment company" as defined in Section 1246 of the Code, causing all
or part of any gain realized by a U.S. Holder selling or exchanging common
shares to be treated as ordinary income rather than capital gain. The Company
does not believe that it currently qualifies as a foreign investment company.
However, there can be no assurance that the Company will not be considered a
foreign investment company for the current or any future taxable year.

PASSIVE FOREIGN INVESTMENT COMPANY
Certain United States income tax legislation contains rules governing "passive
foreign investment companies" ("PFIC") which can have significant tax effects on
U.S. Holders of foreign corporations. These rules do not apply to non-U.S.
Holders. Section 1297 of the Code defines a PFIC as a corporation that is not
formed in the United States and, for any taxable year, either (i) 75% or more of
its gross income is "passive income," which includes interest, dividends and
certain rents and royalties or (ii) the average percentage, by fair market value
(or, if the corporation is not publicly traded and either is a controlled
foreign corporation or makes an election, by adjusted tax basis), of its assets
that produce or are held for the production of "passive income" is 50% or more.
If a foreign corporation owns, directly or indirectly, at least 25% by value of
the stock a second corporation, then for purposes of the PFIC tests described
above, the first corporation will be treated as owning a proportionate share of

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the assets of, and as receiving a proportionate share of the income of, the
second corporation. The Company believes that it qualified as a PFIC for its
most recently ended fiscal year and may qualify as a PFIC in subsequent fiscal
years. There can be no assurance that the Company's determination concerning its
PFIC status will not be challenged or that it will be able to satisfy record
keeping requirements that will be imposed on a qualified electing fund ("QEF").
Each U.S. Holder of the Company is urged to consult a tax advisor with respect
to how the PFIC rules affect their tax situation.

A U.S. Holder who holds stock in a foreign corporation during any year in which
such corporation qualifies as a PFIC is subject to United States federal income
taxation under one of two alternative tax regimes at the election of each such
U.S. Holder. The following is a discussion of such two alternative tax regimes
applied to such U.S. Holders of the Company. In addition, special rules apply if
a foreign corporation qualifies as both a PFIC and a "controlled foreign
corporation" (as defined below) and a U.S. Holder owns, actually or
constructively, 10% or more of the total combined voting power of all classes of
stock entitled to vote of such foreign corporation (See more detailed discussion
at "Controlled Foreign Corporation" below).

A U.S. Holder who elects in a timely manner to treat the Company as a QEF (an
"Electing U.S. Holder") will be subject, under Section 1293 of the Code, to
current federal income tax for any taxable year in which the Company qualifies
as a PFIC on his pro rata share of the Company's (i) "net capital gain" (the
excess of net long-term capital gain over net short-term capital loss), which
will be taxed as long-term capital gain to the Electing U.S. Holder and (ii)
"ordinary earnings" (the excess of earnings and profits over net capital gain),
which will be taxed as ordinary income to the Electing U.S. Holder, in each
case, for the shareholder's taxable year in which (or with which) the Company's
taxable year ends, regardless of whether such amounts are actually distributed.

The effective QEF election also allows the Electing U.S. Holder to (i) generally
treat any gain realized on the disposition of his common shares in the Company
(or deemed to be realized on the pledge of his shares) as capital gain; (ii)
treat his share of the Company's net capital gain, if any, as long-term capital
gain instead of ordinary income; and (iii) either avoid interest charges
resulting from PFIC status altogether, or make an annual election, subject to
certain limitations, to defer payment of current taxes on his share of the
Company's annual realized net capital gain and ordinary earnings subject,
however, to an interest charge. If the Electing U.S. Holder is not a
corporation, such an interest charge would be treated as "personal interest"
that is not deductible.

The procedure a U.S. Holder must comply with in making an effective QEF election
will depend on whether the year of the election is the first year in the U.S.
Holder's holding period in which the Company is a PFIC. If the U.S. Holder makes
a QEF election in such first year, i.e., a timely QEF election, then the U.S.
Holder may make the QEF election by simply filing the appropriate documents at
the time the U.S. Holder files his tax return for such first year. If, however,
the Company qualified as a PFIC in a prior year, then in addition to filing
documents, the U.S. Holder must elect to recognize (i) under the rules of
Section 1291 of the Code (discussed herein), any gain that he would otherwise
recognize if the U.S. Holder sold his stock on the qualification date or (ii) if
the Company is a controlled foreign corporation, the U.S. Holder's pro rata
share of the Company's post-1986 earnings and profits as of the qualification
date. The qualification date is the first day of the Company's first tax year in

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which the Company qualified as a QEF with respect to such U.S. Holder. The
elections to recognize such gain or earnings and profits can only be made if
such U.S. Holder's holding period for the common shares of the Company includes
the qualification date. By electing to recognize such gain or earnings and
profits, the U.S. Holder will be deemed to have made a timely QEF election. A
U.S. Holder who made elections to recognize gain or earnings and profits after
5/1/1992 and before 1/27/1997 may, under certain circumstances, elect to change
such U.S. Holder's qualification date to the first day of the first QEF year.
U.S. Holders are urged to consult a tax advisor regarding the availability of
and procedure for electing to recognize gain or earnings and profits under the
foregoing rules.

A QEF election, once made with respect to the Company, applies to the tax year
for which it was made and to all subsequent tax years, unless the election is
invalidated or terminated, or the IRS consents to revocation of the election. If
a QEF election is made by a U.S. Holder and the Company ceases to qualify as a
PFIC in a subsequent tax year, the QEF election will remain in effect, although
not applicable, during those tax years in which the Company does not qualify as
a PFIC. Therefore, if the Company again qualifies as a PFIC in a subsequent tax
year, the QEF election will be effective and the U.S. Holder will be subject to
the rules described above for Electing U.S. Holders in such tax year and any
subsequent tax years in which the Company qualifies as a PFIC. In addition, the
QEF election remains in effect, although not applicable, with respect to an
Electing U.S. Holder even after such U.S. Holder disposes of all of his or its
direct and indirect interest in the shares of the Company. Therefore, if such
U.S. Holder reacquires an interest in the Company, that U.S. Holder will be
subject to the rules described above for Electing U.S. Holders for each tax year
in which the Company qualifies as a PFIC.

If a U.S. Holder does not make a timely QEF election during a year in which it
holds (or is deemed to have held) the common shares in question and the Company
is a PFIC (a "Non-Electing U.S. Holder"), then special taxation rules under
Section 1291 of the Code will apply to (i) gains realized on the disposition (or
deemed to be realized by reasons of a pledge) of his common shares in the
Company and (ii) certain "excess distributions" (generally, distributions
received in the current taxable year that are in excess of 125% of the average
distributions received during the three preceding years or, if shorter, the U.S.
Holder's holding period) by the Company.

A Non-Electing U.S. Holder generally would be required to pro rate all gains
realized on the disposition of his common shares in the Company and all excess
distributions on his common shares in the Company over the entire holding period
for the common shares. All gains or excess distributions allocated to prior
years of the U.S. Holder (other than years prior to the first taxable year of
the Company during such U.S. Holder's holding period and beginning after
1/1/1987 for which it was a PFIC) would be taxed at the highest tax rate for
each such prior year applicable to ordinary income. The Non-Electing U.S. Holder
also would be liable for interest on the foregoing tax liability for each such
prior year calculated as if such liability had been due with respect to each
such prior year. A Non-Electing U.S. Holder that is not a corporation must treat
this interest charge as "personal interest" which, as discussed above, is wholly
nondeductible. The balance of the gain or the excess distribution will be
treated as ordinary income in the year of the disposition or distribution, and
no interest charge will be incurred with respect to such balance.

If the Company is a PFIC for any taxable year during which a Non-Electing U.S.
Holder holds common shares of the Company, then the Company will continue to be

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treated as a PFIC with respect to such common shares in the Company, even if it
is no longer definitionally a PFIC. A Non-Electing U.S. Holder may terminate
this deemed PFIC status by electing to recognize gain (which will be taxed under
the rules discussed above for Non-Electing U.S. Holders) as if such common
shares in the Company had been sold on the last day of the last taxable year for
which it was a PFIC.

Effective for tax years of U.S. Holders beginning after 12/31/1997, U.S. Holders
who hold, actually or constructively, marketable stock (as specifically defined
in the Treasury Regulations) of a foreign corporation that qualifies as a PFIC
may annually elect to mark such stock to the market (a "mark-to-market
election"). If such an election is made, such U.S. Holder will generally not be
subject to the special taxation rules of Section 1291 discussed above. However,
if the mark-to-market election is made by a Non-Electing U.S. Holder after the
beginning of the holding period for the PFIC stock, then the Section 1291 rules
will apply to certain dispositions of, distributions on and other amounts
taxable with respect to the common shares in the Company. A U.S. Holder who
makes the mark-to market election will include in income for the taxable year
for which the election was made an amount equal to the excess, if any, of the
fair market value of the common shares of the Company as of the close of such
tax year over such U.S. Holder's adjusted basis in such common shares. In
addition, the U.S. Holder is allowed a deduction for the lesser of (i) the
excess, if any, of such U.S. Holder's adjusted tax basis in the common shares
over the fair market value of such shares as of the close of the tax year, or
(ii) the excess, if any, of (A) the mark-to-market gains for the common shares
in the Company included by such U.S. Holder for prior tax years, including any
amount which would have been included for any prior tax year but for the Section
1291 interest on tax deferral rules discussed above with respect to Non-Electing
U.S. Holders, over (B) the mark-to-market losses for shares that were allowed as
deductions for prior tax years. A U.S. Holder's adjusted tax basis in the common
shares of the Company will be adjusted to reflect the amount included in or
deducted from income as a result of a mark-to-market election. A mark-to-market
election applies to the taxable year in which the election is made and to each
subsequent taxable year, unless the common shares of the Company cease to be
marketable, as specifically defined, or the IRS consents to revocation of the
election. Because the IRS has not established procedures for making a
mark-to-market election, U.S. Holders should consult their tax advisor regarding
the manner of making such an election.

Under Section 1291(f) of the Code, the IRS has issued Proposed Treasury
Regulations that, subject to certain exceptions, would treat as taxable certain
transfers of PFIC stock by Non-Electing U.S. Holders that are generally not
otherwise taxed, such as gifts, exchanges pursuant to corporate reorganizations,
and transfers at death. Generally, in such cases the basis of the common shares
of the Company in the hands of the transferee and the basis of any property
received in the exchange for those common shares would be increased by the
amount of gain recognized. Under the Proposed Treasury Regulations, an Electing
U.S. Holder would not be taxed on certain transfers of PFIC stock, such as
gifts, exchanges pursuant to corporate reorganizations, and transfers at death.
The transferee's basis in this case will depend on the manner of the transfer.
The specific tax effect to the U.S. Holder and the transferee may vary based on
the manner in which the common shares are transferred. Each U.S. Holder of the
Company is urged to consult a tax advisor with respect to how the PFIC rules
affect their tax situation.

                                                                              86
<PAGE>

Certain special, generally adverse, rules will apply with respect to common
shares of the Company while the Company is a PFIC whether or not it is treated
as a QEF. For example under Section 1298(b)(6) of the Code, a U.S. Holder who
uses PFIC stock as security for a loan (including a margin loan) will, except as
may be provided in regulations, be treated as having made a taxable disposition
of such shares.

CONTROLLED FOREIGN CORPORATION
If more than 50% of the total combined voting power of all classes of shares
entitled to vote or the total value of the shares of the Company is owned,
actually or constructively, by citizens or residents of the United States,
United States domestic partnerships or corporations, or estates or trusts other
than foreign estates or trusts (as defined by the Code Section 7701(a)(31)),
each of which own, actually or constructively, 10% or more of the total combined
voting power of all classes of shares entitled to vote of the Company ("United
States Shareholder"), the Company could be treated as a controlled foreign
corporation ("CFC") under Subpart F of the Code. This classification would
effect many complex results, one of which is the inclusion of certain income of
a CFC which is subject to current U.S. tax. The United States generally taxes
United States Shareholders of a CFC currently on their pro rata shares of the
Subpart F income of the CFC. Such United States Shareholders are generally
treated as having received a current distribution out of the CFC's Subpart F
income and are also subject to current U.S. tax on their pro rata shares of the
CFC's earnings invested in U.S. property. The foreign tax credit described above
may reduce the U.S. tax on these amounts. In addition, under Section 1248 of the
Code, gain from the sale or exchange of shares by a U.S. Holder of common shares
of the Company which is or was a United States Shareholder at any time during
the five-year period ending with the sale or exchange is treated as ordinary
income to the extent of earnings and profits of the Company attributable to the
shares sold or exchanged. If a foreign corporation is both a PFIC and a CFC, the
foreign corporation generally will not be treated as a PFIC with respect to
United States Shareholders of the CFC. This rule generally will be effective for
taxable years of United States Shareholders beginning after 1997 and for taxable
years of foreign corporations ending with or within such taxable years of United
States Shareholders. Special rules apply to United States Shareholders who are
subject to the special taxation rules under Section 1291 discussed above with
respect to a PFIC. Because of the complexity of Subpart F, a more detailed
review of these rules is outside of the scope of this discussion. The Company
does not believe that it currently qualifies as a CFC. However, there can be no
assurance that the Company will not be considered a CFC for the current or any
future taxable year.

                                                                              87
<PAGE>

10.F.  Dividends and paying agents.
-----------------------------------
       Not applicable

10.G.  Statement by experts.
----------------------------
       Not applicable

10.H.  Documents on display.
----------------------------
Any of the documents referred to above can be viewed at the offices of the
Company at: 889 Harbourside Drive, #210 North Vancouver, British Columbia,
Canada V7P 3S1. All of the documents referred to above are in English.

10.I.  Subsidiary Information.
------------------------------
       Not applicable


ITEM 11.  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
---------------------------------------------------------------------
The Company develops products in the Canada and markets its products in the
United States, Europe, Canada and Asia. As a result, the Company's financial
results could be affected by factors such as changes in foreign currency
exchange rates or weak economic conditions in foreign markets. The majority of
its sales are currently made in U.S. dollars; a strengthening of the dollar
could make its products less competitive in foreign markets.

INTEREST RATE RISK
The Company's exposure to market risk for changes in interest rates relate
primarily to the Company's investment portfolio. The Company does not use
derivative financial instruments in its investment portfolio. The primary
objective of the Company's investment activities is to preserve the principal
portion while maximizing yields without significantly increasing risk. This is
accomplished by investing in widely diversified investments, consisting only of
investment grade securities. Due to the nature of our investments, the Company
believes that there is no material risk exposure.


ITEM 12.  DESCRIPTION OF SECURITIES OTHER THAN EQUITY SECURITIES
----------------------------------------------------------------

12.A.  Debt Securities  --- No Disclosure Necessary ---
-------------------------------------------------------
12.B.  Warrants and Rights  --- No Disclosure Necessary ---
-----------------------------------------------------------
12.C.  Other Securities  --- No Disclosure Necessary ---
--------------------------------------------------------
12.D.  American Depository Shares  -- No Disclosure Necessary ---
-----------------------------------------------------------------


                                     PART II

ITEM 13.  DEFAULTS, DIVIDEND ARREARAGES AND DELINQUENCIES
---------------------------------------------------------
          --- No Disclosure Necessary ---


ITEM 14.  MATERIAL MODIFICATIONS TO THE RIGHTS OF SECURITY
----------------------------------------------------------
          HOLDERS AND USE OF PROCEEDS
          ---------------------------
          --- No Disclosure Necessary ---

                                                                              88
<PAGE>

ITEM 15.  CONTROLS AND PROCEDURES
---------------------------------
Within the 90-day period prior to the filing of this report ("Date of
Evaluation"), an evaluation was carried out under the supervision and with the
participation of the Company's management, including the Chief Executive Officer
("CEO") and Chief Financial Officer ("CFO"), of the effectiveness of our
disclosure controls and procedures. Based on that evaluation, the CEO and CFO
have concluded that the Company's disclosure controls and procedures are
effective to ensure that information required to be disclosed by the Company in
reports that it files or submits under the Securities Exchange Act of 1934 is
recorded, processed, summarized and reported within the time periods specified
in Securities and Exchange Commission rules and forms.

The Company's disclosure controls and procedures operate such that important
information flows to appropriate collection and disclosure points in a timely
manner and are effective to ensure that such information is accumulated and
communicated to the Company's management, and made known to the Company's Chief
Executive Officer and Chief Financial Officer, including the period when this
Annual Report on Form 20-F was prepared, as appropriate to allow timely decision
regarding the required disclosure.

There have been no significant changes in the Company's internal controls or the
occurrence of events or other factors that could significantly affect these
controls, subsequent to the Date of Evaluation. Nor have there been any
corrective actions with regard to significant deficiencies or material
weaknesses.


ITEM 16.  RESERVED
------------------

                                                                              89
<PAGE>

                                    PART III

ITEM 17.  FINANCIAL STATEMENTS
------------------------------
The Company's consolidated financial statements are stated in Canadian Dollars
(CDN$) and are prepared in accordance with Canadian Generally Accepted
Accounting Principles (GAAP), the application of which, in the case of the
Company, conforms in all material respects for the periods presented with United
States GAAP, except as discussed in footnotes to the consolidated financial
statements.

The consolidated financial statements as required under ITEM #17 are attached
hereto and found immediately following the text of this Annual Report. The audit
report of Ernst & Young LLP, independent Chartered Accountants, are included
herein immediately preceding the consolidated financial statements.

CONSOLIDATED AUDITED FINANCIAL STATEMENTS
-----------------------------------------

Fiscal 2002/Fiscal 2001/Fiscal 2000
-----------------------------------

Auditor's Report, dated 9/20/2002

Consolidated Balance Sheets at 5/31/2002 and 5/31/2001

Consolidated Statements of Operations and Deficits
 for the years ended 5/31/2002, 5/31/2001, and 5/31/2000

Consolidated Statements of Cash Flows
 for the years ended 5/31/2002, 5/31/2001, and 5/31/2000

Consolidated Statements of Shareholders' Equity
 for the years ended 5/31/2002, 5/31/2001, and 5/31/2000

Notes to Financial Statements


ITEM 18.  FINANCIAL STATEMENTS
------------------------------
The Company has elected to provide consolidated financial statements pursuant to
ITEM #17.

                                                                              90
<PAGE>

ITEM 19.  EXHIBITS
------------------

1.  Incorporated by reference to Form 20-F Registration Statement (as amended),
    Form 20-F Annual Reports, and Form 6-K's

2.  Instruments defining the rights of holders of equity or debt securities
    being registered.
       --- Refer to Exhibit No. 1 ---

3.  Voting Trust Agreements:  Not Applicable

4. Material Contracts:
    --- Incorporated by reference to Form 20-F Registration Statement (as
        amended), Form 20-F Annual Reports, and Form 6-K's ---

5. Foreign Patents: Not Submitted

6. Earnings Per Share Calculation: Not Applicable

7. Ratio of Earnings To Fixed Charges: Not Applicable

8. List of Subsidiaries: Not Applicable

9. Statement Regarding Date of Financial Statements: Not Applicable

10. Additional Exhibits:
    --- Incorporated by reference to Form 20-F Registration Statement (as
        amended), Form 20-F Annual Reports, and Form 6-K's ---

99.  Certifications
     99.1  CEO Certificatio/n Accompanying Periodic Report
           Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
           (18 U.S.C. Section 1350)
     99.2  CFO Certification Accompanying Periodic Report
           Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
           (18 U.S.C. Section 1350)

                                                                              91
<PAGE>

                                    SIGNATURE



Pursuant to the requirements of Section 12g of the Securities Exchange Act of
1934, the Registrant certifies that it meets all of the requirements for filing
on Form 20-F and has duly caused this Annual Report to be signed on its behalf
by the undersigned, thereunto duly authorized.

                  Softcare EC Inc. --- SEC File Number 0-30610
                  --------------------------------------------
                                   Registrant




Dated: December 20, 2002    By /s/ Martyn Armstrong
       -----------------       --------------------------------------------
                               Martyn A. Armstrong,  President/CEO/Director


Dated: December 20, 2002    By /s/ John Versfelt
       -----------------       ---------------------------------------
                               John Versfelt,  CFO/Corporate Secretary


                                                                              92
<PAGE>

                       CONSOLIDATED FINANCIAL STATEMENTS



                  SOFTCARE EC INC.
                  (FORMERLY SOFTCARE EC.COM, INC.)
                  [Expressed in Canadian dollars]
                  May 31, 2002 and 2001


                                                                              93
<PAGE>


                                AUDITORS' REPORT



To the Shareholders of
SOFTCARE EC INC.
(FORMERLY SOFTCARE EC.COM, INC.)

We have audited the consolidated balance sheets of SoftCare EC Inc. (formerly
SoftCare EC.Com, Inc.) as at May 31, 2002 and 2001 and the consolidated
statements of operations, shareholders' equity and cash flows for the years then
ended. These consolidated financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
consolidated financial statements based on our audits.

We conducted our audits in accordance with Canadian and U.S. generally accepted
auditing standards. 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.

In our opinion, these consolidated financial statements present fairly, in all
material respects, the financial positions of the Company as at May 31, 2002 and
2001 and the results of its operations and its cash flows for the years then
ended in accordance with Canadian generally accepted accounting principles. As
required by the British Columbia Company Act, we report that, in our opinion,
after giving retroactive effect to the change in the method of accounting for
earnings per share as explained in Note 20 to the consolidated financial
statements, these principles have been applied on a basis consistent with that
of the preceding year.

                                                           /s/ Ernst & Young LLP
Vancouver, Canada,
September 20, 2002.                                        Chartered Accountants

   COMMENTS BY AUDITOR FOR U.S. READERS ON CANADA - U.S. REPORTING DIFFERENCE

In the United States, reporting standards for auditors require the addition of
an explanatory paragraph (following the opinion paragraph) when the consolidated
financial statements are affected by conditions and events that cast substantial
doubt on the Company's ability to continue as a going concern, such as those
described in Note 1 to the consolidated financial statements. Although we
conducted our audits in accordance with both Canadian and US generally accepted
auditing standards, our report dated September 20, 2002 is expressed in
accordance with Canadian reporting standards which do not permit a reference to
such an uncertainty in the auditor's report when the uncertainty is adequately
disclosed in the financial statements.

                                                           /s/ Ernst & Young LLP
Vancouver, Canada
September 20, 2002.                                        Chartered Accountants


                                                                              94
<PAGE>


SOFTCARE EC INC.
(FORMERLY SOFTCARE EC.COM, INC.)
Incorporated under the laws of British Columbia
<TABLE>

                                         CONSOLIDATED BALANCE SHEETS
                        [See note 1 - Nature of operations and basis of presentation]
<CAPTION>

As at May 31,                                                                [Expressed in Canadian dollars]

                                                                                   2002               2001
                                                                                     $                  $
-----------------------------------------------------------------------------------------------------------
<S>                                                                         <C>                <C>
ASSETS [NOTE 8]
CURRENT
Cash and cash equivalents                                                        14,663          3,099,800
Accounts receivable, less allowance for doubtful accounts of
   $72,328 and $93,608, respectively [NOTE 5]                                   167,162            121,594
Short-term investment [NOTE 6]                                                  535,075                 --
Prepaid expenses and other                                                       79,857             88,669
-----------------------------------------------------------------------------------------------------------
TOTAL CURRENT ASSETS                                                            796,757          3,310,063
Capital assets [NOTE 7]                                                         172,255            311,323
-----------------------------------------------------------------------------------------------------------
TOTAL ASSETS                                                                    969,012          3,621,386
===========================================================================================================


LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT
Bank indebtedness [NOTE 8]                                                      250,000                 --
Accounts payable and accrued liabilities [NOTES 9 AND 16]                       246,847            275,096
Current portion of obligations under capital leases [NOTE 10]                    48,212             88,014
Current portion of subsidiary redeemable Class A preference shares [NOTE 11]     30,000             30,000
Deferred revenue                                                                114,494            112,064
-----------------------------------------------------------------------------------------------------------
TOTAL CURRENT LIABILITIES                                                       689,553            505,174
-----------------------------------------------------------------------------------------------------------
Obligations under capital leases [NOTE 10]                                       14,472             62,348
Subsidiary redeemable Class A preference shares [NOTE 11]                        12,500             42,500
-----------------------------------------------------------------------------------------------------------
TOTAL LIABILITIES                                                               716,525            610,022
-----------------------------------------------------------------------------------------------------------
Commitments and contingencies [NOTE 14]

SHAREHOLDERS' EQUITY
Common stock [NOTE 13]                                                       16,240,438         15,710,538
Shares to be issued [NOTE 13]                                                    13,500                 --
Special Warrants [NOTE 12]                                                           --            100,000
Additional paid-in capital                                                      621,255            550,055
Unearned Employee Stock Bonus Plan [NOTE 13]                                   (990,957)          (990,957)
Deficit                                                                     (15,631,749)       (12,358,272)
-----------------------------------------------------------------------------------------------------------
TOTAL SHAREHOLDERS' EQUITY                                                      252,487          3,011,364
-----------------------------------------------------------------------------------------------------------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY                                      969,012          3,621,386
===========================================================================================================

SEE ACCOMPANYING NOTES

On behalf of the Board:

/s/ MARTYN ARMSTRONG                                   /s/ WAYNE ZIELKE
--------------------------------                       ---------------------------------
Martyn Armstrong, Director                             Wayne Zielke, Director

</TABLE>
                                                                              95
<PAGE>


SOFTCARE EC INC.
(FORMERLY SOFTCARE EC.COM, INC.)
<TABLE>

                               CONSOLIDATED STATEMENTS OF OPERATIONS
                   [See note 1 - Nature of operations and basis of presentation]
<CAPTION>

For the year ended May 31,                                        [Expressed in Canadian dollars]


                                                            2002               2001          2000
                                                              $                  $             $
--------------------------------------------------------------------------------------------------
<S>                                                     <C>               <C>          <C>
REVENUE
Software sales                                             244,259           197,541      348,537
Consulting services                                        124,084            80,286       13,278
Training services                                           10,000             5,231       11,907
Maintenance fees                                           196,659           177,239      173,595
--------------------------------------------------------------------------------------------------
TOTAL REVENUES                                             575,002           460,297      547,317
--------------------------------------------------------------------------------------------------

EXPENSES
Salaries and wages                                       1,658,651         2,830,657    1,821,014
Other compensation [NOTE 13]                                71,200           839,073      861,533
Selling expenses                                            71,614           110,694      112,396
General and administrative expenses [NOTES 14 AND 16]    1,942,704         2,318,516    1,659,791
Amortization and writedown                                 147,346           126,577      113,089
--------------------------------------------------------------------------------------------------
                                                         3,891,515         6,225,517    4,567,823
--------------------------------------------------------------------------------------------------
Operating (loss) for the year                           (3,316,513)       (5,765,220)  (4,020,506)
OTHER INCOME (EXPENSE)
Interest income                                             77,395           308,848      179,533
Interest expense - long-term                               (19,010)          (20,407)     (26,488)
Loss on disposal of subsidiary [NOTE 3]                         --           (89,672)          --
Loss on disposal of capital assets                         (15,349)               --           --
--------------------------------------------------------------------------------------------------
Total other income (expense)                                43,036           198,769      153,045
--------------------------------------------------------------------------------------------------

LOSS FOR THE YEAR                                       (3,273,477)       (5,566,451)  (3,867,461)
==================================================================================================

Basic and diluted (loss) per share [NOTE 4]                 (0.20)             (0.35)       (0.41)
==================================================================================================

SEE ACCOMPANYING NOTES

</TABLE>
                                                                              96
<PAGE>


SOFTCARE EC INC.
(FORMERLY SOFTCARE EC.COM, INC.)
<TABLE>

                                      CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
                               [See note 1 - Nature of operations and basis of presentation]

For the year ended May 31,                                                                 [Expressed in Canadian dollars]
<CAPTION>



                                             COMMON STOCK              SPECIAL WARRANTS            SHARES TO BE ISSUED
                                         SHARES       AMOUNT        SHARES         AMOUNT         SHARES        AMOUNT
                                           #             $            #               $             #              $
--------------------------------------------------------------------------------------------------------------------------
<S>                                    <C>           <C>           <C>            <C>                <C>           <C>
BALANCE, MAY 31, 1999                          --            --     9,999,994      3,321,604             --            --
Deemed Special Warrants
  issued for services
  pursuant to exercise
  of options [NOTE 12]                         --            --     1,000,006      1,280,000             --            --
Amortization of deferred
  stock compensation [NOTE 13]                 --            --            --             --             --            --
Adjustments to effect
  June 18, 1999 reverse
  takeover accounting value
  attributed to the share
  capital of the Company
  net of costs of $199,600              1,391,428       960,316            --             --             --            --
Special Warrants issued for
  services rendered [NOTE 12]                  --            --        51,666             --             --            --
Special Warrants issued
  in private placement, net
  of costs of $280,000 [NOTE 12]               --            --     2,000,000      2,720,000             --            --
Shares issued pursuant to
  exercise of stock options
  [NOTE 13]                                33,334        54,200            --             --             --            --
Shares issued on exercise
  of Special Warrants                  13,051,666     7,321,604   (13,051,666)    (7,321,604)            --            --
Shares issued on exercise
  of Agents' Warrants                      82,700       124,050            --             --             --            --
Shares issued on exercise
  of Share Purchase Warrants              797,000     1,992,500            --             --             --            --
Special Warrants issued in
  private placement,  net of
  costs of $518,782 [NOTE 12]                  --            --     1,495,000      5,087,468             --            --
Loss for the year                              --            --            --             --             --            --
--------------------------------------------------------------------------------------------------------------------------
BALANCE, MAY 31, 2000                  15,356,128    10,452,670     1,495,000      5,087,468             --            --
Shares issued on exercise of
  Special Warrants [NOTE 12]            1,495,000     5,087,468    (1,495,000)    (5,087,468)            --            --
Shares issued on exercise of
  Agents Special Warrants [NOTE 12]       138,600       170,400            --             --             --            --
Special Warrants issued in
  private placement [NOTE 12]                  --            --       138,889        100,000             --            --
Stock based compensation                       --            --            --             --             --            --
Adjustment of employee stock
  bonus plan                                   --            --            --             --             --            --
Loss for the year                              --            --            --             --             --            --
--------------------------------------------------------------------------------------------------------------------------
BALANCE, MAY 31, 2001                  16,989,728    15,710,538       138,889        100,000             --            --
Shares issued on exercise
  of Special Warrants [NOTE 12]           138,889       100,000      (138,889)      (100,000)            --            --
Special Warrants issued in
  private placement, net
  of costs [NOTE 12]                           --            --     1,000,000        120,000             --            --
Stock based compensation                       --            --            --             --             --            --
Shares issued on exercise
  of Special Warrants [NOTE 12]         1,000,000       120,000    (1,000,000)      (120,000)            --            --
Units issued in private
  placement [NOTE 13]                     650,000       175,500            --             --             --            --
Shares issued on exercise
  of Share Purchase
  Warrants [NOTE 12]                       15,000         2,400            --             --             --            --
Shares to be issued for employee
   terminations [NOTE 13]                      --            --            --             --         90,000        13,500
Units issued in private
  placement [NOTE 13]                   1,200,000       132,000            --             --             --            --
Loss for the year                              --            --            --             --             --            --
--------------------------------------------------------------------------------------------------------------------------

BALANCE, MAY 31, 2002                  19,993,617    16,240,438            --             --         90,000        13,500
==========================================================================================================================
SEE ACCOMPANYING NOTES
</TABLE>

continued on next page
                                                                              97
<PAGE>
continued from next page
<TABLE>

                                 CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
                          [See note 1 - Nature of operations and basis of presentation]

For the year ended May 31,                                                       [Expressed in Canadian dollars]
<CAPTION>

                                                                       UNEARNED
                                        ADDITIONAL      DEFERRED       EMPLOYEE                        TOTAL
                                          PAID IN        STOCK          STOCK                      SHAREHOLDERS'
                                          CAPITAL     COMPENSATION    BONUS PLAN       DEFICIT        EQUITY
                                             $             $               $              $              $
----------------------------------------------------------------------------------------------------------------
<S>                                       <C>             <C>          <C>            <C>              <C>
BALANCE, MAY 31, 1999                     1,279,753       (861,533)    (1,279,975)    (2,924,360)      (464,511)
Deemed Special Warrants
  issued for services
  pursuant to exercise
  of options [NOTE 12]                   (1,279,753)            --             --             --            247
Amortization of deferred
  stock compensation [NOTE 13]                   --        861,533             --             --        861,533
Adjustments to effect
  June 18, 1999 reverse
  takeover accounting value
  attributed to the share
  capital of the Company
  net of costs of $199,600                       --             --             --             --        960,316
Special Warrants issued for
  services rendered [NOTE 12]                    --             --             --             --             --
Special Warrants issued
  in private placement, net
  of costs of $280,000 [NOTE 12]                 --             --             --             --      2,720,000
Shares issued pursuant to
  exercise of stock options
  [NOTE 13]                                      --             --             --             --         54,200
Shares issued on exercise
  of Special Warrants                            --             --             --             --             --
Shares issued on exercise
  of Agents' Warrants                            --             --             --             --        124,050
Shares issued on exercise
  of Share Purchase Warrants                     --             --             --             --      1,992,500
Special Warrants issued in
  private placement,  net of
  costs of $518,782 [NOTE 12]                    --             --             --             --      5,087,468
Loss for the year                                --             --             --     (3,867,461)    (3,867,461)
----------------------------------------------------------------------------------------------------------------
BALANCE, MAY 31, 2000                            --             --     (6,791,821)     7,468,342
Shares issued on exercise of
  Special Warrants [NOTE 12]                     --             --             --             --             --
Shares issued on exercise of
  Agents Special Warrants [NOTE 12]              --             --        170,400             --             --    -
Special Warrants issued in
  private placement [NOTE 12]                    --             --        100,000             --             --
Stock based compensation                    332,800             --             --             --        332,800
Adjustment of employee stock
  bonus plan                                217,255             --        289,018             --        506,273
Loss for the year                                --             --             --     (5,566,451)    (5,566,451)
----------------------------------------------------------------------------------------------------------------
BALANCE, MAY 31, 2001                       550,055             --       (990,957)   (12,358,272)     3,011,364
Shares issued on exercise
  of Special Warrants [NOTE 12]                  --             --             --             --             --
Special Warrants issued in
  private placement, net
  of costs [NOTE 12]                             --             --        120,000             --             --
Stock based compensation                     71,200             --             --             --         71,200
Shares issued on exercise
  of Special Warrants [NOTE 12]                  --             --             --             --             --
Units issued in private
  placement [NOTE 13]                            --             --             --             --        175,500
Shares issued on exercise
  of Share Purchase
  Warrants [NOTE 12]                             --             --             --             --          2,400
Shares to be issued for employee
   terminations [NOTE 13]                    13,500
Units issued in private
  placement [NOTE 13]                            --             --             --             --        132,000
Loss for the year                                --             --             --     (3,273,477)    (3,273,477)
----------------------------------------------------------------------------------------------------------------

BALANCE, MAY 31, 2002                       621,255             --       (990,957)   (15,631,749)       252,487
================================================================================================================
SEE ACCOMPANYING NOTES
</TABLE>


                                                                              98
<PAGE>

SOFTCARE EC INC.
(FORMERLY SOFTCARE EC.COM, INC.)
<TABLE>

                                  CONSOLIDATED STATEMENTS OF CASH FLOWS
                      [See note 1 - Nature of operations and basis of presentation]

For the year ended May 31,                                              [Expressed in Canadian dollars]
<CAPTION>

                                                                   2002          2001          2000
                                                                    $              $             $
-------------------------------------------------------------------------------------------------------
<S>                                                             <C>           <C>           <C>
OPERATING ACTIVITIES
Loss for the year                                               (3,273,477)   (5,566,451)   (3,867,461)
Items not affecting cash:
   Amortization and writedown                                      147,346       126,577       113,089
   Provision for (recovery of) doubtful accounts                   (21,280)       60,959        41,323
   Stock based compensation                                         71,200       839,073       861,533
   Special Warrants issued for services rendered                        --            --        66,132
   Loss on disposal of capital assets                               15,349            --            --
   Loss on disposal of subsidiary                                       --        89,672            --
   Shares to be issued                                              13,500            --            --
Changes in non-cash working capital:
   Accounts receivable                                             (24,288)        4,791        31,869
   Prepaid expenses and other                                        8,812        63,916      (139,213)
   Investment tax credit                                                --            --        50,231
   Work in progress                                                     --        57,571       (57,571)
   Accounts payable and accrued liabilities                        (28,249)      (58,636)     (148,982)
   Deferred revenue                                                  2,430       (46,078)       67,027
-------------------------------------------------------------------------------------------------------
CASH (USED IN) OPERATING ACTIVITIES                             (3,088,657)   (4,428,606)   (2,982,023)
-------------------------------------------------------------------------------------------------------

INVESTING ACTIVITIES
Purchase of capital assets                                         (23,627)     (255,294)     (107,306)
Cash acquired in reverse takeover                                       --            --        73,102
Issuance costs paid in reverse takeover                                 --            --       (22,956)
Cash paid in FMG acquisition, net of cash received                      --            --       (13,528)
Cash received from shareholder                                          --            --       448,517
Advances from proposed acquirer                                         --            --       250,000
Sale (purchase) of short-term investments, (net)                  (535,075)    2,996,509    (2,996,509)
-------------------------------------------------------------------------------------------------------
CASH PROVIDED BY (USED IN) INVESTING ACTIVITIES                   (558,702)    2,741,215    (2,368,680)
-------------------------------------------------------------------------------------------------------

FINANCING ACTIVITIES
Increase (decrease) in bank indebtedness                           250,000        (1,202)     (155,832)
Redemption of subsidiary redeemable Class A preference shares      (30,000)      (30,000)      (30,000)
Repayment of long-term debt                                             --       (36,850)      (40,200)
Increase in (repayment of) obligations under capital leases        (87,678)       87,892       (46,416)
Proceeds from Special Warrants issued in private placement         120,000       100,000     7,807,468
Common stock issued on exercise of stock options                        --            --        54,447
Proceeds from units issued in private placements                   307,500            --            --
Common stock issued on exercise of Agent's Warrants                     --       170,400       124,050
Common stock issued on exercise of Share Purchase Warrants           2,400            --     1,992,500
Decrease (increase) in cash held in escrow                              --     2,049,779    (2,049,779)
-------------------------------------------------------------------------------------------------------
CASH PROVIDED BY FINANCING ACTIVITIES                              562,222     2,340,019     7,656,238
-------------------------------------------------------------------------------------------------------

INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS                (3,085,137)      652,628     2,305,535
Cash and cash equivalents, beginning of year                     3,099,800     2,447,172       141,637
-------------------------------------------------------------------------------------------------------
CASH AND CASH EQUIVALENTS, END OF YEAR                              14,663     3,099,800     2,447,172
=======================================================================================================

SUPPLEMENTAL DISCLOSURE
Interest paid                                                       19,011        20,488        26,488
=======================================================================================================
See accompanying notes
</TABLE>
                                                                              99
<PAGE>

SOFTCARE EC INC.
(FORMERLY SOFTCARE EC.COM, INC.)

                            NOTES TO THE CONSOLIDATED
                              FINANCIAL STATEMENTS

May 31, 2002 and 2001                            [Expressed in Canadian dollars]



1. NATURE OF OPERATIONS AND BASIS OF PRESENTATION

SoftCare EC Inc., formerly SoftCare EC.Com, Inc., ("The Company") was
incorporated pursuant to the Company Act of the Province of British Columbia on
March 30, 1981. On November 8, 2001 the Company changed its name from SoftCare
EC.Com, Inc. to SoftCare EC Inc.

The Company and its subsidiary companies develop and market Electronic Data
Interchange ("EDI") software primarily to retailers, financial and public
institutions, utility companies, pharmaceutical companies and wholesalers across
Canada, the United States and Asia. The Company and its subsidiary companies
also develop and market e-commerce software, providing software through internet
portals and by licenses, as well as providing consulting and support services to
both domestic and international markets.

These consolidated financial statements have been prepared in accordance with
Canadian generally accepted accounting principles, on a going concern basis,
which presumes that the Company will be able to realize its assets and discharge
its liabilities in the normal course of business for the foreseeable future.

The Company incurred a loss of $3,273,477 for the year ended May 31, 2002 [2001
- $5,566,451, 2000 - $3,867,461], and has a deficit of $15,631,749 as at May 31,
2002 [2001 - 12,358,272], which has been funded primarily by the issuance of
equity.

The Company's continuation as a going concern is uncertain and is dependent upon
its ability to achieve profitable operations and upon the continued financial
support of its shareholders, option holders and warrant holders or upon its
ability to obtain additional financing or new equity.

The Company's ability to achieve profitability and positive cash flows from
operations will depend upon numerous factors. These factors include its ability
to attract strategic corporate partners for the development, marketing,
distribution, and sale of its software products, the progress of its research
and development programs and its ability to protect its proprietary rights over
product names and trademarks. The outcome of these matters cannot be predicted
at this time. These consolidated financial statements do not include any
adjustments to the amounts and classification of assets and liabilities that
might be necessary should the Company be unable to continue in business.


                                                                             100
<PAGE>
SOFTCARE EC INC.
(FORMERLY SOFTCARE EC.COM, INC.)

                            NOTES TO THE CONSOLIDATED
                              FINANCIAL STATEMENTS

May 31, 2002 and 2001                            [Expressed in Canadian dollars]



2. REVERSE TAKEOVER

On June 18, 1999, the Company completed an agreement with the shareholders of
Softcare EC Solutions Inc. (formerly SoftCare Electronic Commerce Inc).
("Solutions") pursuant to which the Company issued 11,000,000 Special Warrants
to acquire all of the issued and outstanding common shares of Solutions. At the
date of acquisition, the Company was substantially inactive. As a result of the
acquisition, the former shareholders of Solutions acquired 88.8 percent of the
Company as a group. Solutions is considered the accounting acquirer for
financial statement purposes.

The acquisition has been accounted for as a reverse takeover using the purchase
method, and accordingly, for financial statement reporting purposes, the net
assets of Solutions have been included in the consolidated balance sheet at book
values, and the net assets of the Company have been recorded at fair market
value at the date of acquisition. The historical shareholders' equity gives
effect to the shares issuable to the shareholders of Solutions upon exercise of
the 11,000,000 Special Warrants. The results of the Company are included in the
consolidated statements of operations from the date of acquisition on June 18,
1999.

The cost of the acquisition is the estimated fair market value of the net assets
of the Company acquired on June 18, 1999 and consists of:
                                                               $
--------------------------------------------------------------------------------

Cash and cash equivalents                                   73,102
Shareholder receivable                                     448,517
Prepaid expenses and other                                 242,776
Cash advances to Solutions                                 500,000
Accounts payable and accrued liabilities                  (104,479)
--------------------------------------------------------------------------------
Total acquisition cost                                   1,159,916
================================================================================

The reverse takeover was approved by the Canadian Venture Exchange on June 18,
1999.

                                                                             101
<PAGE>
SOFTCARE EC INC.
(FORMERLY SOFTCARE EC.COM, INC.)

                            NOTES TO THE CONSOLIDATED
                              FINANCIAL STATEMENTS

May 31, 2002 and 2001                            [Expressed in Canadian dollars]



3. BUSINESS COMBINATION

Effective April 10, 2000, the Company acquired a 100% interest in the issued and
outstanding common shares of Financial Management Group LLC ("FMG"), for net
cash consideration of $13,528 net of cash acquired. Under the original terms of
the agreement, the Company was to issue 100,000 common shares as additional
consideration for the acquisition of FMG. The Company was also required to issue
200,000 common shares upon achieving certain milestones, as described in the
agreement. The Company also entered into Business Protection Agreements and two
year employment agreements with the two principals of FMG. The Company, upon
acquisition of FMG commenced work on a credit counseling Internet portal,
designed to supercede FMG's software product, which the Company intended to
market to FMG's customers and to others in the credit counseling industry. The
Company controlled the strategic operating, financing and investing activities
of FMG since its acquisition.

The acquisition was originally accounted for using the purchase method of
accounting. The cash consideration of $20,383, net of cash on hand in FMG of
$6,855, amounting to $13,528 was paid to the sellers of FMG on April 10, 2000.

The fair values of the identifiable assets and liabilities acquired on April 10,
2000 are as follows:

                                                                   $
--------------------------------------------------------------------------------

Cash and cash equivalents                                        6,855
Accounts receivable                                             23,491
Prepaid expenses and other                                       3,292
Capital assets                                                  56,017
Bank indebtedness                                              (14,073)
Accounts payable and accrued liabilities                       (98,269)
--------------------------------------------------------------------------------
Net liabilities acquired                                       (22,687)
Goodwill                                                        43,070
--------------------------------------------------------------------------------
TOTAL ACQUISITION COST                                          20,383
================================================================================


                                                                             102
<PAGE>
SOFTCARE EC INC.
(FORMERLY SOFTCARE EC.COM, INC.)

                            NOTES TO THE CONSOLIDATED
                              FINANCIAL STATEMENTS

May 31, 2002 and 2001                            [Expressed in Canadian dollars]



3. BUSINESS COMBINATION (CONT'D.)

The results of operations of FMG are included in the consolidated financial
statements from the date of acquisition on April 10, 2000 to September 22, 2000,
as the Company effectively controlled the strategic, operating, financing and
investing activities of FMG during this period.

In July 2000, the Company discovered material inconsistencies and omissions in
claims and disclosures made by the sellers of FMG and the two principals of FMG.
The inconsistencies and omissions relate to claims and legal actions pending by
and against FMG and certain other matters relating to the ownership of the
software purportedly owned by FMG.

Customary closing procedures including regulatory approval of this transaction
was required and was never obtained due to the discovery of the material
inconsistencies and omissions noted above. The Company terminated the agreement
and the share consideration was not issued.

On September 22, 2000, Management with board approval determined that the
material inconsistencies and omissions could not be resolved and approved a
formal plan to commence the termination of the acquisition. The termination has
been recorded as a disposition of a subsidiary as at September 22, 2000 and
resulted in a write-off of the net book value of net assets amounting to
$89,672. In October 2000, the Company sent a notice of default under the
acquisition agreement to the sellers of FMG and terminated the acquisition
agreement in November 2000.

The Company also terminated its employment of the two principals of FMG in July
2000 with cause. In September 2000, the principals of FMG notified the Company
in writing alleging breach of its employment agreements, threatening legal
action and alleging potential damages in excess of $5,000,000. Following the
Company's notice of default under the Acquisition agreement issued in October
2000, and press release issued by the Company in connection with these matters,
the principals of FMG wrote the Company alleging additional claims for
defamation and negligent and intentional interference with prospective economic
damage. No formal actions have been filed at this time by the principals of FMG
against the Company. The Company believes the claims are without merit and
intends to defend such claims or actions vigorously. The outcome of these
matters cannot be predicted at this time with certainty.

Management believes that these events will not result in any additional
liability to the Company.



                                                                             103
<PAGE>
SOFTCARE EC INC.
(FORMERLY SOFTCARE EC.COM, INC.)

                            NOTES TO THE CONSOLIDATED
                              FINANCIAL STATEMENTS

May 31, 2002 and 2001                            [Expressed in Canadian dollars]



4. SIGNIFICANT ACCOUNTING POLICIES

These consolidated financial statements have been expressed in Canadian dollars
and prepared in accordance with Canadian generally accepted accounting
principles. A reconciliation of amounts presented in accordance with United
States generally accepted accounting principles is detailed in note 18. The
following is a summary of the significant accounting policies used in the
preparation of these consolidated financial statements:

PRINCIPLES OF CONSOLIDATION

These consolidated financial statements include the accounts of the Company and
its wholly-owned subsidiaries, SoftCare EC Solutions Inc. (a Canadian company),
(formerly SoftCare Electronic Commerce Inc.), and Solutions's wholly owned
subsidiaries, SCC Holdings Ltd. (a Canadian company), SCEC Holdings Ltd. (a
Canadian company) and SoftCare Electronic Commerce (U.S.A.) Inc. (a Washington
corporation). All significant intercompany balances and transactions have been
eliminated on consolidation.

TRANSLATION OF FOREIGN CURRENCIES

The Company follows the temporal method of accounting for the translation of
integrated foreign subsidiary operations. Monetary assets and liabilities of
foreign subsidiaries denominated in foreign currencies are translated into
Canadian dollars at the exchange rate in effect at the balance sheet date. Other
balance sheet items are translated at exchange rates in effect when the assets
are acquired or obligations incurred. Revenue and expense items are translated
at the average rate of exchange for the period. Foreign exchange gains and
losses resulting from these translations are reflected in the consolidated
statement of operations.

CASH AND CASH EQUIVALENTS

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

SHORT-TERM INVESTMENTS

Short-term investments are available for sale securities and are carried at
market value. Short-term investments consist of investments in a term note, with
financial institutions with an original maturity of more than three months.


                                                                             104
<PAGE>
SOFTCARE EC INC.
(FORMERLY SOFTCARE EC.COM, INC.)

                            NOTES TO THE CONSOLIDATED
                              FINANCIAL STATEMENTS

May 31, 2002 and 2001                            [Expressed in Canadian dollars]



4. SIGNIFICANT ACCOUNTING POLICIES (CONT'D.)

LEASES

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

All other leases are accounted for as operating leases wherein rental payments
are expensed as incurred.

CAPITAL ASSETS

Capital assets are stated at cost less accumulated amortization. Capital assets
are amortized at rates sufficient to write off their cost over their estimated
useful lives on a declining balance method, after taking into account their
estimated residual values, at the following annual rates:

     Computer and testing equipment                                          30%
     Computer software                                                      100%
     Office equipment                                                        20%
     Office furniture                                                        20%
     Display booths                                                          30%
     Leasehold improvements                      Lesser of the term of the lease
                                                      or the remaining estimated
                                                        useful life of the asset

Computer and office equipment acquired under capital leases is amortized on a
straight-line basis over the lesser of the term of the lease or the remaining
estimated economic life of approximately three to five years.

SOFTWARE DEVELOPMENT COSTS

Software development costs are charged to expense as incurred unless the
development project meets the criteria under Canadian generally accepted
accounting principles for deferral and amortization. The Company has not
deferred any software development costs to date.


                                                                             105
<PAGE>
SOFTCARE EC INC.
(FORMERLY SOFTCARE EC.COM, INC.)

                            NOTES TO THE CONSOLIDATED
                              FINANCIAL STATEMENTS

May 31, 2002 and 2001                            [Expressed in Canadian dollars]



4. SIGNIFICANT ACCOUNTING POLICIES (CONT'D.)

IMPAIRMENT OF LONG-LIVED ASSETS

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

REVENUE RECOGNITION

A software supply arrangement entered into by the Company may encompass multiple
elements, including software sales, consulting services, training services and
maintenance fees. The total fee for a multiple element arrangement is allocated
to each element based upon objective evidence of the fair value of each element.
Fair value is established through the Company's policy to charge to customers
the same price as when the element is sold separately. Revenue from sales made
to re-sellers is recognized after the third-party sale occurs and the revenue is
determinable. Consulting services offered by the Company are not considered
essential to the functionality of the software arrangement. As a result,
consulting and training services revenues are recognized as the work is
performed. Maintenance contract revenue is deferred and recognized over the
respective contract periods. Revenue from direct software sales is recognized
when the product has been delivered, as no significant obligations remain, fees
are fixed and determinable, collectibility is probable, and persuasive evidence
of an arrangement exists. If software sales are contingent upon successful
installation and subsequent customer acceptance, the revenue and work in
progress costs are deferred until customer acceptance is achieved.

ADVERTISING EXPENSE

Advertising costs are charged to expense as incurred. Advertising expense for
the year ended May 31, 2002 amounted to approximately $12,660 [2001 - $26,749;
2000 - $17,400].


                                                                             106
<PAGE>
SOFTCARE EC INC.
(FORMERLY SOFTCARE EC.COM, INC.)

                            NOTES TO THE CONSOLIDATED
                              FINANCIAL STATEMENTS

May 31, 2002 and 2001                            [Expressed in Canadian dollars]



4. SIGNIFICANT ACCOUNTING POLICIES (CONT'D.)

INCOME TAXES

The Company utilizes the liability method of tax allocation. Under this method,
future tax assets and liabilities are determined based on differences between
the financial reporting and tax bases of assets and liabilities, and measured
using the substantially enacted tax rates and laws that will be in effect when
the differences are expected to reverse.

STOCK BASED COMPENSATION

The Company has granted stock options, which are described in note 13. The
Company measures compensation cost based on the intrinsic value of the award at
the date of grant, and recognizes that cost over the vesting period. Any
consideration paid by the option holders on the exercise of stock options is
credited to common stock. The Company accounts for stock-based compensation
arrangements to non-employees using the fair value method and the Black Scholes
model.

EMPLOYEE STOCK BONUS PLAN

Equity instruments contributed to the Employee Stock Bonus Plan (the "Plan") by
the Company are recorded at their estimated fair value at the date of their
contribution and are recorded as a credit in shareholders' equity. A contra
equity account is recognized until allocations to participants are made and
compensation expense is recognized.

Compensation expense is measured based on the intrinsic value of the award at
the date of grant and recognizes that cost in the period when it is likely that
performance criteria will be met and/or the equity instruments allocated to
participants will be released.


                                                                             107
<PAGE>
SOFTCARE EC INC.
(FORMERLY SOFTCARE EC.COM, INC.)

                            NOTES TO THE CONSOLIDATED
                              FINANCIAL STATEMENTS

May 31, 2002 and 2001                            [Expressed in Canadian dollars]



4. SIGNIFICANT ACCOUNTING POLICIES (CONT'D.)

INCOME (LOSS) PER SHARE

Generally accepted accounting principles applicable to reverse takeovers require
that the income (loss) per share figures be calculated on the following basis:

o    the number of shares outstanding from the beginning of the fiscal period to
     the date of the reverse takeover on June 18, 1999 are deemed to be the
     number of shares issued by the Company to the shareholders of Solutions.

o    the number of shares outstanding from the date of the reverse takeover to
     the end of the fiscal period is deemed to be the actual number of shares of
     the Company outstanding in the period.

The Company issued 11,000,000 Special Warrants, each of which was convertible
into one common share. However, no common shares were issued to effect this
reverse takeover. Accordingly, the deemed number of common shares of the Company
outstanding prior to June 18, 1999 is nil.

FOR THE YEAR ENDED MAY 31,
                                          2002           2001          2000
                                            $              $             $
--------------------------------------------------------------------------------

NUMERATOR
Loss for the year                      (3,273,477)    (5,566,451)    (3,867,461)
DENOMINATOR
Weighted average number of
  common shares outstanding            17,555,701     16,517,676     10,440,937
Less: Employee Stock Bonus Plan Shares    774,200        774,200      1,000,000
--------------------------------------------------------------------------------
BASIC LOSS PER COMMON SHARE                 (0.20)         (0.35)         (0.41)
================================================================================

Loss per common share for the years ended May 31, 2002, 2001 and 2000 is
computed by dividing the loss for the year by the weighted average number of
common shares outstanding during the year, excluding shares held by the SoftCare
Employee Stock Bonus Plan Trust ("SESB Trust"). Diluted income (loss) per share
reflects the potential dilution of securities that could result from the
exercise of dilutive options and warrants. For the years ended May 31, 2002,
2001 and 2000 none of the outstanding options and warrants have been included in
the calculation of diluted loss per common share because their effect was
antidilutive.


                                                                             108
<PAGE>
SOFTCARE EC INC.
(FORMERLY SOFTCARE EC.COM, INC.)

                            NOTES TO THE CONSOLIDATED
                              FINANCIAL STATEMENTS

May 31, 2002 and 2001                            [Expressed in Canadian dollars]



4. SIGNIFICANT ACCOUNTING POLICIES (CONT'D.)

FINANCIAL INSTRUMENTS

The carrying value of cash and cash equivalents, accounts receivable, bank
indebtedness, accounts payable and accrued liabilities approximate their fair
values due to the relatively short periods to maturity. The fair value of
short-term investments has been determined based on quoted market prices. The
carrying value of capital lease obligations approximates fair value as the
effective interest rate on these instruments approximate current market rates.
The carrying value of subsidiary redeemable Class A preference shares
approximates fair value based on discounted cash flows.

USE OF ESTIMATES

The preparation of the consolidated financial statements in conformity with
Canadian generally accepted accounting principles requires management to make
estimates and assumptions that affect the amounts recorded in the consolidated
financial statements. Actual results could differ from these estimates.


5. CREDIT AND EXCHANGE RATE RISK

Financial instruments, which potentially subject the Company to concentrations
of credit risk, consist principally of cash and cash equivalents which are held
with one financial institution, short-term investments which are held with one
financial institution, and accounts receivable.

The Company operates internationally, which gives rise to the risk that cash
flows may be adversely impacted by exchange rate fluctuations. The Company's
operations are in the field of supplying electronic commerce computer software
licenses and support services to domestic and international markets. Many of its
customers are outside of Canada and therefore a significant percentage of its
revenues may be derived from, and may be paid in, U.S. dollars [note 17]. The
Company has not entered into contracts for foreign exchange hedges.

The Company performs ongoing credit evaluations of its customers and maintains
allowances for potential credit losses which, when realized, have been within
the range of management's expectations.


                                                                             109
<PAGE>
SOFTCARE EC INC.
(FORMERLY SOFTCARE EC.COM, INC.)

                            NOTES TO THE CONSOLIDATED
                              FINANCIAL STATEMENTS

May 31, 2002 and 2001                            [Expressed in Canadian dollars]



5. CREDIT AND EXCHANGE RATE RISK (CONT'D.)

As at May 31, 2002 two [2001 - six] customers represented 34% [2001 - 63%] of
the accounts receivable balance.

For the year ended May 31, 2002 two [2001 - two, 2000 - one] customers
represented 51% of sales [2001 - 24%; 2000 - 14%].


6. SHORT-TERM INVESTMENT

As at May 31, 2002 the short-term investment consisted of a Business Development
Bank Medium Term Note which had a quoted market value of $532,849 earned
interest at 5.00% per annum and matured in September 2002. As at May 31, 2001 no
short term investments were held.


7. CAPITAL ASSETS
                                                          ACCUMULATED   NET BOOK
                                                COST      AMORTIZATION    VALUE
                                                  $            $            $
--------------------------------------------------------------------------------

2002
Computer and testing equipment                 401,682      337,017       64,665
Computer software                              173,940      167,870        6,070
Office equipment                                35,499       21,265       14,234
Office furniture                               131,510       49,723       81,787
Display booths                                  25,063       19,564        5,499
--------------------------------------------------------------------------------
                                               767,694      595,439      172,255
================================================================================

2001
Computer and testing equipment                 393,500      268,199      125,301
Computer software                              161,800      133,417       28,383
Office equipment                                35,499       17,706       17,793
Office furniture                               131,510       29,275      102,235
Display booths                                  21,755       17,916        3,839
Leasehold improvements                          45,356       11,584       33,772
--------------------------------------------------------------------------------
                                               789,420      478,097      311,323
================================================================================

Capital assets include computer and office equipment acquired under capital
leases having a cost of $333,165 [2001 - $333,165] and accumulated amortization
of $212,557 [2001 - $171,300].


                                                                             110
<PAGE>
SOFTCARE EC INC.
(FORMERLY SOFTCARE EC.COM, INC.)

                            NOTES TO THE CONSOLIDATED
                              FINANCIAL STATEMENTS

May 31, 2002 and 2001                            [Expressed in Canadian dollars]



8. BANK INDEBTEDNESS

The Company has an operating line of credit with a Canadian chartered bank for a
maximum of $250,000 based on the assets pledged in the loan agreement. As at May
31, 2002 the Company had $250,000 outstanding under the line of credit [2001 -
$nil]. Amounts outstanding on the line of credit are payable on demand and bear
interest at the bank's prime lending. The bank's prime lending rate at May 31,
2002 was 4.00% [2001 - $6.25%].


9. ACCOUNTS PAYABLE AND ACCRUED LIABILITIES

The Company has accounts payable and accrued liabilities that consist of the
following at May 31:

                                                    2002               2001
                                                      $                  $
--------------------------------------------------------------------------------

Accounts payable                                   127,996            143,054
Accrued professional fees                           36,365             25,000
Accrued employee vacation                           82,486            107,042
--------------------------------------------------------------------------------
                                                   246,847            275,096
================================================================================


10. OBLIGATIONS UNDER CAPITAL LEASES

The Company leases certain of its computer and office equipment under capital
leases. The future minimum lease payments required under capital leases expiring
May 2004 are as follows:

                                                                     $
--------------------------------------------------------------------------------

2003                                                              65,541
2004                                                               8,714
--------------------------------------------------------------------------------
                                                                  74,255
Less: amount representing interest                               (11,571)
--------------------------------------------------------------------------------
Present value of minimum lease payments                           62,684
Less: current portion                                            (48,212)
--------------------------------------------------------------------------------
Long-term obligations under capital leases                        14,472
================================================================================


                                                                             111
<PAGE>
SOFTCARE EC INC.
(FORMERLY SOFTCARE EC.COM, INC.)

                            NOTES TO THE CONSOLIDATED
                              FINANCIAL STATEMENTS

May 31, 2002 and 2001                            [Expressed in Canadian dollars]



11. SUBSIDIARY REDEEMABLE CLASS A PREFERENCE SHARES

Subsidiary redeemable Class A preference non-voting shares, par value $1.00 per
share.

The Company's subsidiary, SoftCare EC Solutions Inc., has outstanding redeemable
Class A preference shares as follows:

                                              SUBSIDIARY
                                          REDEEMABLE CLASS A
                                           PREFERENCE SHARES       AMOUNT
                                                   #                  $
--------------------------------------------------------------------------------

Balance, May 31, 2001                           72,500             72,500
Redemption of shares for cash                  (30,000)           (30,000)
--------------------------------------------------------------------------------
Balance, May 31, 2002                           42,500             42,500
Less: current portion                          (30,000)           (30,000)
--------------------------------------------------------------------------------
Subsidiary redeemable Class A
   preference shares                            12,500             12,500
================================================================================

Under an agreement between Solutions and one of its shareholders, Solutions
agreed to issue 225,000 redeemable Class A preference shares to the shareholder
in exchange for 665 common shares of Solutions. The subsidiary redeemable Class
A preference shares are mandatorily redeemable based upon the Company's gross
quarterly sales at a redemption price of $1.00 per share. The Company has the
option of accelerating the redemption of these shares at a redemption price of
$1.00 per share. In the event the Company is unable to redeem the shares for
cash, the Company is required to settle this obligation with common shares of
its subsidiary, Solutions. Common shares of the subsidiary are to be issued at a
ratio equal to the proportion of the capital of Solutions that such preference
shares represented when they were created.

The holder of the subsidiary redeemable Class A preference shares is entitled to
cumulative dividend calculated at the bank prime rate. The bank prime rate at
May 31, 2002 was 4.00% [2001 - 6.25%]. The cumulative dividends have been
recorded as interest expense in the consolidated statements of operations.



                                                                             112
<PAGE>
SOFTCARE EC INC.
(FORMERLY SOFTCARE EC.COM, INC.)

                            NOTES TO THE CONSOLIDATED
                              FINANCIAL STATEMENTS

May 31, 2002 and 2001                            [Expressed in Canadian dollars]



12. SPECIAL WARRANTS

The following provides details concerning Special Warrant transactions:

[a]  The Company issued 11,000,000 Special Warrants in exchange for all of the
     issued and outstanding common shares of Solutions pursuant to a reverse
     takeover agreement effective June 18, 1999 [note 2]. Each of the Special
     Warrants is exercisable for one common share of the Company without any
     additional consideration. In these consolidated financial statements, the
     Special Warrants issued to the shareholders of Solutions, the accounting
     acquiror, have been presented as if they were outstanding prior to the
     reverse takeover on the basis such deemed Special Warrants were exchanged
     for common shares.

     Of the 11,000,000 Special Warrants issued, 10,000,000 were issued to the
     existing shareholders of Solutions. These 10,000,000 Special Warrants were
     exercised into common shares and are subject to a voluntary pooling
     agreement, which restricts the holders from trading the common shares on
     any stock exchange until such time as they are released from the pool. At
     May 31, 2002, 7,494,884 [2001 - 4,577,365] shares have been released from
     escrow pool and the remaining 2,505,116 shares were released from the
     escrow pool on June 18, 2002.

     The remaining 1,000,000 Special Warrants which were issued to the SESB
     Trust to provide employee bonus shares were exercised into 1,000,000 common
     shares. Two of the Directors of the Company are also the Trustees of the
     SESB Trust and may only release such shares from the Trust to employees in
     accordance with regulatory approval and the achievement of certain
     performance criteria [note 13].

[b]  During 2000, the Company issued 51,666 Special Warrants as a finder's fee
     and corporate advisory fee upon completion of the reverse takeover. Each
     Special Warrant is exercisable for one common share of the Company without
     any additional consideration.


                                                                             113
<PAGE>
SOFTCARE EC INC.
(FORMERLY SOFTCARE EC.COM, INC.)

                            NOTES TO THE CONSOLIDATED
                              FINANCIAL STATEMENTS

May 31, 2002 and 2001                            [Expressed in Canadian dollars]



12. SPECIAL WARRANTS (CONT'D.)

[c]  On June 18, 1999, pursuant to an offering memorandum, the Company issued
     2,000,000 Special Warrants for gross cash proceeds of $3,000,000 pursuant
     to a broker-assisted private placement. Costs incurred to effect the
     private placement include a commission and other cash costs totalling
     $280,000.

     Each Special Warrant is exercisable, without any additional consideration,
     into one common share and one Share Purchase Warrant ("Underlying
     Warrant"), which is transferable upon regulatory approval. Each Underlying
     Warrant entitled the holder to purchase one common share at a price of
     $2.50 and was exercisable until June 18, 2000, at which time the remaining
     Underlying Warrants expired. Notwithstanding the foregoing, if at any time
     before the expiry date, the common shares of the Company trade on any
     securities exchange over a period of ten consecutive trading days at a
     weighted average price of not less than $3.00 per common share, then at the
     option of the Company, any Underlying Warrants not exercised within 30 days
     of written notice to the holder by the Company will expire.

     Pursuant to this Special Warrant private placement, the Company issued
     196,300 Agent's Special Warrants. Each Agent's Special Warrant is
     exercisable, without any additional consideration, for one Agent's Warrant
     for a period of one year from June 18, 1999. Each Agent's Warrant was
     exercisable for one common share of the Company at $1.50 for a period of
     one year from the closing date of the financing.

     One half of the Agent's Warrants and/or common shares are subject to resale
     restrictions which expire three months from the date the shares are
     released from hold periods.

     The net proceeds of the above-noted offering were $2,720,000.


                                                                             114
<PAGE>
SOFTCARE EC INC.
(FORMERLY SOFTCARE EC.COM, INC.)

                            NOTES TO THE CONSOLIDATED
                              FINANCIAL STATEMENTS

May 31, 2002 and 2001                            [Expressed in Canadian dollars]



12. SPECIAL WARRANTS (CONT'D.)

[d]  On March 29, 2000, the Company issued 1,495,000 Special Warrants for net
     cash proceeds of $5,087,468 pursuant to a broker-assisted private
     placement. These cash proceeds were net of costs incurred to effect the
     private placement totalling $518,782.

     Each Special Warrant was exercisable, without any additional consideration,
     into one common share and one half of one Share Purchase Warrant. Each
     Share Purchase Warrant entitled the holder to purchase one common share at
     an exercise price of $4.25 and was exercisable for one year from the
     closing date of the financing to March 30, 2001, at which time the Share
     Purchase Warrants expired.

     Pursuant to this Special Warrant private placement, the Company issued
     174,500 Agent's Special Warrants. Of these Agent's Special Warrants, 25,000
     were exercisable for one common share at an exercise price of $nil and
     149,500 were exercisable for one common share at an exercise price of
     $3.75. All of these Agent's Special Warrants were exercisable for one year
     from the closing date of the financing, of which 25,000 were exercised for
     $nil prior to expiring, with the remainder expiring on March 30, 2001.

[e]  On February 22, 2001, the Company issued 138,889 Special Warrants for gross
     cash proceeds of $100,000 pursuant to a private placement. No costs were
     incurred to effect this private placement.

     Each Special Warrant is exercisable, without any additional consideration,
     into one common share and one Share Purchase Warrant. Each Share Purchase
     Warrant entitles the holder to purchase one common share at an exercise
     price of $0.72 and is exercisable, at any time, over the two years from the
     closing date of the financing to February 22, 2003, at which time the Share
     Purchase Warrant will expire. Each common share issued was subject to a
     hold period and could not be traded until June 22, 2001.

     On June 5, 2001 138,889 Special Warrants were exchanged for 138,889 common
     shares and 138,889 Share Purchase Warrants.


                                                                             115
<PAGE>
SOFTCARE EC INC.
(FORMERLY SOFTCARE EC.COM, INC.)

                            NOTES TO THE CONSOLIDATED
                              FINANCIAL STATEMENTS

May 31, 2002 and 2001                            [Expressed in Canadian dollars]



12. SPECIAL WARRANTS (CONT'D.)

[f]  On October 24, 2001 the Company issued 1,000,000 Special Warrants for gross
     cash proceeds of $120,000 pursuant to a private placement. No costs were
     incurred to effect this private placement.

     Each Special Warrant is exercisable, without any additional consideration,
     into one common share and one Share Purchase Warrant. Each Share Purchase
     Warrant entitles the holder to purchase one common share at an exercise
     price of $0.16 and is exercisable, at any time, over one year from the
     closing date of the financing to October 24, 2002, at which time the Share
     Purchase Warrant will expire. Each common share issued was subject to a
     hold period and could not be traded until March 29, 2002.

     On April 1, 2002, 1,000,000 Special Warrants were exchanged for 1,000,000
     common shares and 1,000,000 Share Purchase Warrants.

     On April 9, 2002 15,000 Share Purchase warrants were exercised for gross
     proceeds of $2,400.



                                                                             116
<PAGE>
SOFTCARE EC INC.
(FORMERLY SOFTCARE EC.COM, INC.)

                            NOTES TO THE CONSOLIDATED
                              FINANCIAL STATEMENTS

May 31, 2002 and 2001                            [Expressed in Canadian dollars]



13. COMMON STOCK

[a]  AUTHORIZED

100,000,000 [2001 - 100,000,000] common voting shares without par value.

Prior to and in anticipation of the reverse takeover [note 2], options to
acquire 1,000,006 common shares of Solutions, with a fair value at the time of
$1,280,000, were granted to employees. The options were granted to employees in
lieu of salaries and were given in exchange for general financing services
performed over a five month period ended September 15, 1999. These options were
exercised concurrent with the completion of the reverse takeover on June 18,
1999 for nominal cash proceeds of $247. The total excess value of $1,279,753 of
common share issued over cash received was prorated over the five month period
with $861,533 being recorded as compensation expense for the year ended May 31,
2000.

[a]  On December 18, 2001 the Company issued 650,000 units for gross cash
     proceeds of $175,500 pursuant to a private placement. No costs were
     incurred to effect this private placement.

     Each unit consists of one common share and one Share Purchase Warrant. Each
     Share Purchase Warrant entitles the holder to purchase one common share at
     an exercise price of $0.35 and is exercisable, at any time, over the two
     years from the closing date of the financing to January 7, 2004, at which
     time the Share Purchase Warrant will expire. Each common share issued was
     subject to a hold period and could not be traded until April 18, 2002.

[b]  On May 16, 2002 the Company issued 1,200,000 units to the president of the
     Company, for gross cash proceeds of $132,000 pursuant to a non-brokered
     private placement. No costs were incurred to effect this private placement.

     Each unit consists of one common share and one Share Purchase Warrant. Each
     Share Purchase Warrant entitles the holder to purchase one common share at
     an exercise price of $0.13 and is exercisable, at any time, over the two
     years from the closing date of the financing to May 16, 2004, at which time
     the Share Purchase Warrant will expire. Each common share issued was
     subject to a hold period and could not be traded until September 16, 2002.


                                                                             117
<PAGE>
SOFTCARE EC INC.
(FORMERLY SOFTCARE EC.COM, INC.)

                            NOTES TO THE CONSOLIDATED
                              FINANCIAL STATEMENTS

May 31, 2002 and 2001                            [Expressed in Canadian dollars]



13. COMMON STOCK (CONT'D.)

[b]  STOCK OPTIONS
<TABLE>
The following table summarizes stock option transactions:
<CAPTION>
                                                                                          WEIGHTED
                                                                                           AVERAGE
                                                                                          EXERCISE
                                                                    STOCK OPTIONS           PRICE
                                                                          #                   $
----------------------------------------------------------------------------------------------------
<S>                                                                 <C>                    <C>
BALANCE, MAY 31, 1999                                                1,000,006                 --
Options exercised for deemed Special Warrants                       (1,000,006)                --
Options granted to directors                                           800,000               1.50
----------------------------------------------------------------------------------------------------
BALANCE, JUNE 18, 1999                                                 800,000               1.50
Issued options of the Company                                           23,334               1.68
Options granted to directors, employees and consultants                550,000               1.94
Options exercised for common shares on June 18, 1999                  (250,000)            (1.50)
Options exercised for common shares                                    (33,334)            (1.63)
Options cancelled                                                     (100,000)            (1.50)
----------------------------------------------------------------------------------------------------
BALANCE, MAY 31, 2000                                                  990,000              1.74
Options granted to directors, employees and consultants              1,085,339              0.73
----------------------------------------------------------------------------------------------------
BALANCE, MAY 31, 2001                                                2,075,339              1.21
Adjustment to effect repricing of 1,130,000 options                         --             (0.68)
Options granted to directors, consultants and employees              1,286,000              0.19
Options forfeited                                                     (383,063)            (0.40)
Options expired                                                        (40,000)            (1.75)
----------------------------------------------------------------------------------------------------
BALANCE, MAY 31, 2002                                                2,938,276              0.38
====================================================================================================
</TABLE>


On June 18, 1999, 800,000 stock options, exercisable at $1.50, were granted to
Directors of the Company in exchange for 197,557 stock options of Solutions as
part of the reverse takeover [note 2]. These stock options expire in April 2004.
During the year ended May 31, 2002, 200,000 of these options were forfeited on
the resignation of a director and the resignation of a consultant.

On June 18, 1999, 250,000 stock options were granted to officers, directors, and
a consultant, at an exercise price of $1.50. These stock options expire in June
2004.


                                                                             118
<PAGE>
SOFTCARE EC INC.
(FORMERLY SOFTCARE EC.COM, INC.)

                            NOTES TO THE CONSOLIDATED
                              FINANCIAL STATEMENTS

May 31, 2002 and 2001                            [Expressed in Canadian dollars]



13. COMMON STOCK (CONT'D.)

On June 18, 1999, 100,000 stock options were granted to an individual pursuant
to a consulting agreement, at an exercise price of $1.50. These options were not
exercised and were cancelled concurrent with the termination of the consulting
agreement in 1999.

In November 1999, 100,000 stock options were granted to a consultant at an
exercise price of $1.50. These stock options expire on November 2004 or on the
termination of the consulting contract. 10,000 of these options were exercised
on February 15, 2000.

In February 2000, 100,000 stock options were granted to a Director of the
Company, at an exercise price of $3.90. These stock options expire in February
2005.

In August 2000, five stock options to purchase 40,000 shares each, for a total
of 200,000 stock options, were granted to a consultant at an exercise price of
$1.75. The options vested on the date of grant. These five stock options expire
successively on August 27, 2001, 2002, 2003, 2004 and 2005, or on the
termination of the consulting contract. During the year ended May 31, 2002,
40,000 of these options expired.

In September 2000, 40,000 stock options were granted to a consultant at an
exercise price of $2.00. Of the stock options granted 10,000 vested on the date
of grant and 30,000 vested on May 1, 2001. All of these stock options expire on
August 31, 2005, or on the termination of the consulting contract.

On October 19, 2000, the board of directors approved a comprehensive Stock
Option Plan ("the plan"). On November 10, 2000 the plan was approved by the
shareholders. Subsequently, the plan was accepted by the Canadian Venture
Exchange. The plan incorporates the various limitations and restrictions
required by the Canadian Venture Exchange at the time of acceptance. Most
significantly the total number of shares that may be optioned under the plan is
restricted to 20% of the issued and outstanding common shares of the Company.
All options previously granted by the Company were incorporated into the plan.

In March 2001, 100,000 stock options were granted to an employee at an exercise
price of $0.60. The options vested on the date of grant. These stock options
expire on March 6, 2006, or on the termination or resignation of employment.
During the year ended May 31, 2002, 100,000 of these stock options were
forfeited on the resignation of the employee.


                                                                             119
<PAGE>
SOFTCARE EC INC.
(FORMERLY SOFTCARE EC.COM, INC.)

                            NOTES TO THE CONSOLIDATED
                              FINANCIAL STATEMENTS

May 31, 2002 and 2001                            [Expressed in Canadian dollars]



13. COMMON STOCK (CONT'D.)

In May 2001, 100,000 stock options were granted to a director at an exercise
price of $0.40. The options vested on the date of grant. These stock options
expire on May 23, 2006, or on the termination or resignation of the
directorship.

In May 2001, 645,339 stock options were granted to employees at an exercise
price of $0.40. These options vest on the 15th of the anniversary month for each
employee over three years from May 2001. These stock options expire on May 23,
2006, or on the termination or resignation of employment. During the year ended
May 31, 2002, 77,063 of these options were forfeited on employee resignations or
terminations.

On May 24, 2001 the board of directors approved the repricing of all options in
existence at this date. 1,130,000 stock options were repriced from exercise
prices ranging from $0.60 to $3.90 to an exercise price of $0.40. This repricing
was approved by shareholders shareholder in October 2001 and resulted in stock
compensation expense of $7,200.

In October 2001, 500,000 stock options were granted to directors at an exercise
price of $0.10. The options vested on the date of the grant. These stock options
expire on October 5, 2006, or on the termination or resignation of each
directorship. These options are subject to a four month hold period and may not
be exercised until February 5, 2002.

In October 2001, 175,000 stock options were granted to consultant and 100,000
options were granted to an employee at an exercise price of $0.16. The options
vested on the date of the grant. The stock options expire on October 17, 2006,
or on the termination of the consultancy agreement or employment. These options
are subject to a four month hold period and may not be exercised until February
17, 2002. The fair value of these stock options granted to the consultant was
determined to be $24,500, which was recorded as stock compensation expense,
using the Black Scholes option pricing model using the following assumptions:
volatility of 1.410, expected life of five years, expected dividend yield of 0%
and a risk free interest rate of 5%.

In December 2001, 145,000 stock options were granted to employees at an exercise
price of $0.35. The options vested on the 15th of the anniversary month for each
employee over three years from December 2001. These stock options expire on
December 17, 2006, or on the termination or resignation of employment.


                                                                             120
<PAGE>
SOFTCARE EC INC.
(FORMERLY SOFTCARE EC.COM, INC.)

                            NOTES TO THE CONSOLIDATED
                              FINANCIAL STATEMENTS

May 31, 2002 and 2001                            [Expressed in Canadian dollars]



13. COMMON STOCK (CONT'D.)

In January 2001, 40,000 stock options were granted to a consultant at an
exercise price of $0.40. The options vest on the date of the grant, are subject
to a four month hold period and may not be exercised until May 11, 2002. These
stock options expire on January 10, 2007. The fair value of these stock options
granted to the consultant was determined to be $14,800, which was recorded as
stock compensation expense, using the Black Scholes option pricing model using
the following assumptions: volatility of 1.410, expected life of five years,
expected dividend yield of 0% and a risk free interest rate of 5%.

In February 2002, 136,000 stock options were granted to employees at an exercise
price of $0.37. The options vested on the 15th of the anniversary month for each
employee over three years from February 2002. These stock options expire on
February 1, 2007, or on the termination or resignation of employment. During the
year ended May 31, 2002, 6,000 of these options were forfeited on the
termination of an employee.

In May 2002, 190,000 stock options were granted to consultants at an exercise
price of $0.15. The options vest on the date of the grant. These stock options
expire on May 5, 2007. The fair value of these stock options granted to the
consultant was determined to be $24,700, which was recorded as stock
compensation expense, using the Black Scholes option pricing model using the
following assumptions: volatility of 1.410, expected life of five years,
expected dividend yield of 0% and a risk free interest rate of 5%.

At May 31, 2002, the Company had the following stock options outstanding:
<TABLE>
<CAPTION>

                                                    WEIGHTED AVERAGE             OPTIONS
                                                        REMAINING               VESTED AND
     EXERCISE PRICE            OUTSTANDING          CONTRACTUAL LIFE           EXERCISABLE
           $                        #                     YEARS                     #
---------------------------------------------------------------------------------------------
<S>       <C>                 <C>                         <C>                  <C>
          1.75                  160,000                   1.54                   160,000
          0.41                   40,000                   4.66                    40,000
          0.40                1,498,276                   2.97                 1,053,204
          0.37                  130,000                   4.74                        --
          0.35                  145,000                   4.25                        --
          0.16                  275,000                   4.52                   275,000
          0.15                  190,000                   4.92                   190,000
          0.10                  500,000                   4.33                   500,000
---------------------------------------------------------------------------------------------
                              2,938,276                                        2,218,204
=============================================================================================
</TABLE>


                                                                             121
<PAGE>
SOFTCARE EC INC.
(FORMERLY SOFTCARE EC.COM, INC.)

                            NOTES TO THE CONSOLIDATED
                              FINANCIAL STATEMENTS

May 31, 2002 and 2001                            [Expressed in Canadian dollars]



13. COMMON STOCK (CONT'D.)

[c]  EMPLOYEE STOCK BONUS PLAN

On April 15, 1999, the Company established the SESB trust in order to create a
non-leveraged Employee Stock Bonus Plan which covers directors, officers,
consultants and employees who have completed six months or more service with the
Company. Upon the reverse takeover, the SESB trust exchanged its common shares
in Solutions for 1,000,000 common shares of the Company.

Under the terms of the Plan, common shares held by the SESB trust will be
allocated to participants when annual revenue targets are met or exceeded.
However, the Company's Board of Directors has the discretion to allocate shares
even if the targets are not achieved if it is in the best interest of the
Company. Common shares allocated will vest irrevocably for participants in the
Plan when revenue targets are achieved or the directors otherwise resolve that
they are vested.

Upon the termination of an employee, shares that are not vested will be returned
to the plan. Any shares placed in escrow shall be subject to mandatory
repurchase by the Company at a price of US$0.01 per share should the participant
terminate. Five years after establishment of the Plan, there shall be an
exchange of allocated but unvested shares granted under the Plan and remaining
in escrow for a new class of redeemable non-voting preferred shares. Each common
share will be exchanged for one new preferred share.

During the year ended May 31, 2002, no shares [2001 - 225,800 shares; 2000 -
Nil] were allocated or released to employees under the plan. All shares
allocated to employees have either been released to employees or returned to the
SESB trust as a result of employee resignations during the year. The balance of
shares held in the plan as at May 31, 2002 and 2001 is 774,200 and of this
balance none have been allocated for future release.

No compensation expense has been recognized in the statement of operations for
the year ended May 31, 2002 in respect of the SESB Trust [2001- $289,018; 2000 -
$Nil]. Compensation expense is recorded at fair value of the shares once shares
have been committed to be released. At May 31, 2002, the fair value of the
unallocated common shares based on quoted market sources was $92,904 [2001 -
$263,228].


                                                                             122
<PAGE>
SOFTCARE EC INC.
(FORMERLY SOFTCARE EC.COM, INC.)

                            NOTES TO THE CONSOLIDATED
                              FINANCIAL STATEMENTS

May 31, 2002 and 2001                            [Expressed in Canadian dollars]



13. COMMON STOCK (CONT'D.)

[d]  SHARE PURCHASE WARRANTS

The Company has outstanding share purchase warrants as of May 31, 2002, granted
in connection with various private placements and Special Warrant financings,
entitling the holders to purchase one common share for each warrant held as
follows:

     NUMBER OF
     WARRANTS              EXERCISE PRICE           EXPIRATION DATE
--------------------------------------------------------------------------------

       138,889                  $0.72               February 22, 2003
       985,000                  $0.16               November 29, 2002
       650,000                  $0.35               January 7, 2004
     1,200,000                  $0.13               May 15, 2004
--------------------------------------------------------------------------------
     2,973,889
================================================================================

[e]  SHARES TO BE ISSUED

As a result of various employee terminations during the year ended May 31, 2002,
the Company is obliged to issue 90,000 shares to employees as part of the
severance packages agreed with the terminated employees. The shares to be issued
have been valued based on the market price of the shares on the date the
employee was terminated.

                                                                             123
<PAGE>
SOFTCARE EC INC.
(FORMERLY SOFTCARE EC.COM, INC.)

                            NOTES TO THE CONSOLIDATED
                              FINANCIAL STATEMENTS

May 31, 2002 and 2001                            [Expressed in Canadian dollars]



14. COMMITMENTS AND CONTINGENCIES

The Company leases its premises and certain automobiles under operating leases
expiring through 2005. The approximate future minimum lease commitments under
operating lease agreements for the next three years ending May 31 are as
follows:

                                                                      $
--------------------------------------------------------------------------------

2003                                                              224,000
2004                                                               11,000
2005                                                                8,000
--------------------------------------------------------------------------------
                                                                  243,000
================================================================================

Rent expense for the year ended May 31, 2002 amounted to approximately $254,000
[2001 - $241,000, 2000 - $131,000].

Subsequent to the year end the Company relocated its leasehold property and
additional lease commitments were incurred [note 19].

The Company is involved from time to time in routine litigation incidental to
the conduct of its business. The Company is involved in two litigations where
the claimants are claiming amounts of less than $25,000 each. Management intends
to vigorously defend these claims. The outcome of these matters cannot be
predicted at this time with certainty. Accordingly, no amounts with respect to
these claims had been recorded during the year ended May 31, 2002.

During the year end May 31, 2002, the Company laid off a number of employees. To
date, no actions were forthcoming from such employees laid-off. In respect to
these employees' terminations, the Company has an obligation to issue an
aggregate of 90,000 common shares in settlement of termination agreements[note
13].

One of the Company's subsidiaries entered into a lease with the Landlord for the
rental of premises through March 2003. In June 2002, the subsidiary vacated the
premises. The Landlord has made a demand of approximately $200,000 on the
subsidiary for the payment of rentals through March 2003. The Company does not
anticipate paying this amount and it intends to vigorously defend the demand
made by the Landlord. The outcome of this matter cannot be predicted at this
time with certainty. Accordingly, no amounts with respect to this claim had been
recorded during the year ended May 31, 2002.


                                                                             124
<PAGE>
SOFTCARE EC INC.
(FORMERLY SOFTCARE EC.COM, INC.)

                            NOTES TO THE CONSOLIDATED
                              FINANCIAL STATEMENTS

May 31, 2002 and 2001                            [Expressed in Canadian dollars]



15. INCOME TAXES

At May 31, 2002, for Canadian income tax purposes, the Company has approximately
$1,029,000 of undeducted expenditures for tax purposes expiring through May 2005
relating primarily to share issue costs and approximately $9,764,000 of
non-capital losses available for income tax purposes to reduce taxable income of
future years that expire as follows:
                                                               NON-CAPITAL
                                                                 LOSSES
                                                                    $
--------------------------------------------------------------------------------

2003                                                            328,000
2005                                                            829,000
2006                                                            412,000
2007                                                          1,648,000
2008                                                          3,363,000
2009                                                          3,184,000
--------------------------------------------------------------------------------
                                                              9,764,000
--------------------------------------------------------------------------------

At May 31, 2002, the Company also has non-capital loss carryforwards of
approximately $2,155,000 which can be applied to reduce income earned in the
United States which expire as follows:
                                                               NON-CAPITAL
                                                                 LOSSES
                                                                    $
--------------------------------------------------------------------------------

2019                                                            777,000
2020                                                          1,211,000
2021                                                            167,000
--------------------------------------------------------------------------------
                                                              2,155,000
================================================================================

The ability of the Company to use the losses which expire prior to 2021 may be
impacted by the application of provisions contained in the Internal Revenue Code
of the United States.


                                                                             125
<PAGE>
SOFTCARE EC INC.
(FORMERLY SOFTCARE EC.COM, INC.)

                            NOTES TO THE CONSOLIDATED
                              FINANCIAL STATEMENTS

May 31, 2002 and 2001                            [Expressed in Canadian dollars]



15. INCOME TAXES (CONT'D.)

Future income taxes reflect the net tax effects of the temporary differences
between the carrying amounts of assets and liabilities for financial reporting
purposes and the amounts used for income tax purposes. Significant components of
the Company's future tax assets as of May 31 are as follows:

                                                         2002           2001
                                                           $              $
--------------------------------------------------------------------------------

Non-capital loss carryforwards                         4,246,000      3,670,000
Share issue costs                                        375,000        775,000
Unused capital cost in excess of net book value          337,000        350,000
Other                                                     32,000         40,000
--------------------------------------------------------------------------------
Total future assets                                    4,990,000      4,835,000
Valuation allowance                                   (4,990,000)    (4,835,000)
--------------------------------------------------------------------------------
Net future assets                                             --             --
================================================================================


                                                                             126
<PAGE>
SOFTCARE EC INC.
(FORMERLY SOFTCARE EC.COM, INC.)

                            NOTES TO THE CONSOLIDATED
                              FINANCIAL STATEMENTS

May 31, 2002 and 2001                            [Expressed in Canadian dollars]



15. INCOME TAXES (CONT'D.)

A reconciliation of the Company's effective income tax rate to the federal
statutory rate follows:
<TABLE>
<CAPTION>

                                                              2002          2001          2000
                                                                $             $             $
--------------------------------------------------------------------------------------------------
<S>                                                        <C>           <C>           <C>
Tax at statutory rate                                      (1,407,000)   (2,484,000)   (1,731,000)
Foreign tax rate differentials                                 13,000       109,000        75,000
Expenses not deductible for tax                                 5,000       506,000       615,000
Temporary difference for which no new tax benefit
   has been recognized                                      1,536,000     2,092,000     1,145,000
Amortization of share issue costs for tax and accounting     (147,000)     (153,000)     (159,000)
Other                                                              --       (70,000)       55,000
--------------------------------------------------------------------------------------------------
                                                                   --            --            --
==================================================================================================
</TABLE>


16. RELATED PARTY TRANSACTIONS

Directors and officers of the Company provide legal, accounting and advisory
services to the Company. During the year ended May 31, 2002, the Company paid
$552,634 [2001 - $457,181, 2000 - $463,692] for these services which were
charged to general and administrative expenses. At May 31, 2002, $18,932 [2001 -
$34,756] is included in accounts payable and accrued liabilities. All
transactions are in the normal course of operations and are recorded at exchange
amounts established and agreed upon between the related parties.


17. SEGMENTED INFORMATION

The Company operates in one business segment and substantially all of the
Company's operations, assets and employees are located in Canada. The following
represents sales based on the location of the customer.

                                             2002         2001       2000
                                               %            %          %
--------------------------------------------------------------------------------

Canada                                         89           37         34
U.S.                                           11           61         60
Other                                          --            2          6
================================================================================

                                                                             127
<PAGE>
SOFTCARE EC INC.
(FORMERLY SOFTCARE EC.COM, INC.)

                            NOTES TO THE CONSOLIDATED
                              FINANCIAL STATEMENTS

May 31, 2002 and 2001                            [Expressed in Canadian dollars]



18.   RECONCILIATION OF GENERALLY ACCEPTED ACCOUNTING PRINCIPLES

The Company prepares its consolidated financial statements in accordance with
Canadian generally accepted accounting principles ("Canadian GAAP"), which as
applied in these consolidated financial statements conform in all material
respects to those accounting principles generally accepted in the United States
("U.S. GAAP"), except as follows:

CONSOLIDATED STATEMENT OF OPERATIONS
<TABLE>
<CAPTION>

                                                             2002           2001         2000
                                                               $              $             $
--------------------------------------------------------------------------------------------------
<S>                                                        <C>           <C>           <C>
Net income (loss) in accordance with Canadian GAAP         (3,273,477)   (5,566,451)   (3,867,461)
Effects of accounting for stock compensation expense               --            --       (91,975)
--------------------------------------------------------------------------------------------------
Net income (loss) in accordance with U.S. GAAP             (3,273,477)   (5,566,451)   (3,959,436)

Loss per share                                                  0.20           0.35          0.42

Weighted average number of common shares
   outstanding under U.S. GAAP                             16,781,501    15,743,476     9,440,937
==================================================================================================
</TABLE>

The following table sets out the amounts that would have been reported in the
balance sheet had these statements been prepared in conformity with U.S. GAAP.

CONSOLIDATED BALANCE SHEETS
                                                         2002            2001
                                                           $               $
--------------------------------------------------------------------------------

Additional paid in capital                              713,230         642,030
Deficit                                             (15,723,724)    (12,450,247)
================================================================================

Canadian GAAP require debt-like preferred shares and their dividends to be
treated as long term debt and interest expense respectively. Under Securities
and Exchange Commission (SEC) rules, these shares are to be recorded as
mezzanine debt and the dividend as a charge to retained earnings.

                                                                             128
<PAGE>
SOFTCARE EC INC.
(FORMERLY SOFTCARE EC.COM, INC.)

                            NOTES TO THE CONSOLIDATED
                              FINANCIAL STATEMENTS

May 31, 2002 and 2001                            [Expressed in Canadian dollars]



18.   RECONCILIATION OF GENERALLY ACCEPTED ACCOUNTING PRINCIPLES (CONT'D.)

RECENT PRONOUNCEMENTS

In June 2001, the Financial Accounting Standards Board issued Statements of
Financial Accounting Standard No. 142, Goodwill and Other Intangible Assets.
Statement 142 prohibits the amortization of goodwill and intangible assets with
indefinite useful lives. Statement 142 requires that these assets be reviewed
for impairment at least annually. Intangible assets with finite lives will
continue to be amortized over their estimated useful lives. The Company will
adopt FAS 142 as of June 1, 2002 and does not expect that the adoption of the
Statements to have a significant impact on the Company's financial position and
results of operations

In August 2001, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 144, Accounting for the Impairment or
Disposal of Long-Lived Assets (FAS 144), which addresses financial accounting
and reporting for the impairment or disposal of long-lived assets and supersedes
SFAS No. 121, Accounting for the Impairment of Long-Lived Assets and for
Long-Lived Assets to be Disposed Of, and the accounting and reporting provisions
of APB Opinion No. 30, Reporting the Results of Operations for a disposal of a
segment of a business. FAS 144 is effective for fiscal years beginning after
December 15, 2001, with earlier application encouraged. The Company will adopt
FAS 144 as of June 1, 2002 and does not believe it will have a material impact
on the Company's financial position and results of operations.



                                                                             129
<PAGE>
SOFTCARE EC INC.
(FORMERLY SOFTCARE EC.COM, INC.)

                            NOTES TO THE CONSOLIDATED
                              FINANCIAL STATEMENTS

May 31, 2002 and 2001                            [Expressed in Canadian dollars]



19. SUBSEQUENT EVENTS

[i]   STOCK OPTIONS

On June 4, 2002, 190,000 stock options were granted to an employee at an
exercise price of $0.15. The options vested on the date of the grant. These
stock options expire on June 3, 2007, or on the termination of employment. These
options are subject to a four month hold period and may not be exercised until
October 4, 2002.

Subsequent to the year end, the following stock options were forfeited as a
result of the resignation or termination of directors, consultants and
employees:

               EXERCISE                               OPTIONS EXPIRED
                 PRICE                                 OR CANCELLED
                   $                                         #
--------------------------------------------------------------------------------

                 1.75                                     160,000
                 0.40                                     385,835
                 0.37                                     100,000
                 0.35                                      60,000
                 0.10                                     150,000
--------------------------------------------------------------------------------
                                                          855,835
================================================================================

[ii]  OFFICE RELOCATION

On July 1, 2002 the Company relocated its operations to new leasehold premises.
The Company has entered into a six year lease that expires on June 30, 2008. The
lease provides for a seven month rent-free period that expires January 31, 2003.
Subsequent to the rent free period the approximate future minimum lease
commitments over the lifetime of the lease for the years ending May 31 are as
follows:
                                                                      $
--------------------------------------------------------------------------------

2003                                                               42,000
2004                                                              126,000
2005                                                              132,500
2006                                                              133,000
2007                                                              139,500
2008                                                              140,000
2009                                                               11,700
--------------------------------------------------------------------------------
                                                                  724,700
================================================================================

                                                                             130
<PAGE>
SOFTCARE EC INC.
(FORMERLY SOFTCARE EC.COM, INC.)

                            NOTES TO THE CONSOLIDATED
                              FINANCIAL STATEMENTS

May 31, 2002 and 2001                            [Expressed in Canadian dollars]



19. SUBSEQUENT EVENTS (CONT'D.)

[iii] PRIVATE PLACEMENT

Pursuant to a non-brokered private placement on July 26, 2002 the Company issued
3,250,000 units at a price of $0.10 per unit for gross cash proceeds of
$325,000. Each unit is comprised of one common share and one-half of a
non-transferable Share Purchase Warrant. Each whole Share Purchase Warrant
entitles the holder to purchase one common share at an exercise price of $0.12
and is exercisable, at any time, within one year from the closing date of the
financing. No costs were incurred to effect the private placement.


20. CHANGE IN ACCOUNTING PRINCIPLES

EARNING PER SHARE

Effective May 31, 2001, the Company retroactively adopted the new
recommendations of the Canadian Institute of Chartered Accountants Section 3500
("earnings per share') with respect to the calculation of loss per common share.
The change in accounting policy has been applied retroactively and all prior
years have been restated. The impact of this change in accounting policy was to
exclude non-allocated and unvested shares held by the SESB trust [note 13 [c]]
from the weighted average number of common shares outstanding in the calculation
of loss per common share [note 4]. For the year ended May 31, 2001, the change
resulted in an increase in the loss per common share of $(0.02) [2000 - $(0.01)]
to $(0.35) [2000 - $(0.41)] from (0.33) [2000 - $(0.40)] that would have been
reported had the change not been made.


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