<PAGE>   1

                     U.S. SECURITIES AND EXCHANGE COMMISSION
                              WASHINGTON, DC 20549

                                   FORM 10-QSB

(Mark One)

[X]  Quarterly report under Section 13 or 15(d) of the Securities Exchange Act
     of 1934


For the quarterly period ended           December 31, 1999
                               ---------------------------------------------

[ ]  Transition report under Section 13 or 15(d) of the Exchange Act

For the transition period from                        to
                              -----------------------    --------------------

Commission file number                      33-1933 3-D
                      -------------------------------------------------------

                             SMARTSOURCES.COM, INC.
            ---------------------------------------------------------
        (Exact Name of Small Business Issuer as Specified in Its Charter)

                               Colorado  84-1073083
            ---------------------------------------------------------
      (State or Other Jurisdiction of  (I.R.S. Employer Identification No.)
                         Incorporation or Organization)

 2030 Marine Drive, Suite 100 North Vancouver, British Columbia V7P 1V7, CANADA
            ---------------------------------------------------------
                    (Address of Principal Executive Offices)

                                 (604) 986-0889
            ---------------------------------------------------------
                (Issuer's Telephone Number, Including Area Code)


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

Yes [X]   No [ ]

                APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY
                  PROCEEDINGS DURING THE PRECEDING FIVE YEARS:

     Check whether the registrant filed all documents and reports required to be
filed by Section 12, 13 or 15(d) of the Exchange Act after the distribution of
securities under a plan confirmed by a court.

Yes [X]   No [ ]

                      APPLICABLE ONLY TO CORPORATE ISSUERS:

     State the number of shares outstanding of each of the issuer's classes of
common equity, as of the latest practicable date: 11,755,300 shares of Common
Stock

     Transitional Small Business Disclosure Format (check one):

Yes [ ]   No [X]


<PAGE>   2


                         PART I - FINANCIAL INFORMATION


ITEM 1. FINANCIAL STATEMENTS


The financial statements included herein have been prepared by the Company,
without audit pursuant to the rules and regulations of the Securities and
Exchange Commission. Certain information and footnote disclosure normally
included in financial statements prepared in accordance with generally accepted
accounting principles have been condensed or omitted pursuant to such rules and
regulations, although the Company believes that the disclosures are adequate to
make the information presented not misleading.

In the opinion of the Company, all adjustments, consisting of only normal
recurring adjustments, necessary to present fairly the financial position of the
Company as of December 31, 1999 and the results of its operations and changes in
its financial position from inception through December 31, 1999 have been made.
The results of operations for such interim period are not necessarily indicative
of the results to be expected for the entire year.






                                       1

<PAGE>   3


                     SMARTSOURCES.COM INC. AND SUBSIDIARIES
                     CONSOLIDATED BALANCE SHEET (UNAUDITED)
                                DECEMBER 31, 1999

<TABLE>
<CAPTION>
                                                            Sept. 30, 1999           Dec. 31, 1999
                                                            --------------           -------------
<S>                                                          <C>                    <C>
                                                ASSETS
CURRENT ASSETS
Cash and cash equivalents                                     $   164,200            $   197,000
Trade accounts receivable, net                                    184,800                231,000
Prepaid expenses                                                   94,800                125,000
                                                              -----------            -----------
         Total current assets                                     443,800                553,000

CAPITALIZED SOFTWARE COSTS, net                                 1,550,500              1,445,000
PROPERTY AND EQUIPMENT, net                                       764,300                758,000
OTHER ASSETS                                                      198,300                180,000
                                                              -----------            -----------
              TOTAL ASSETS                                    $ 2,956,900            $ 2,936,000


                                    LIABILITIES AND STOCKHOLDERS' DEFICIT

CURRENT LIABILIITES
Accounts payable and accrued liabilities                      $   140,000            $   264,000
Income tax payable                                                 78,300                 79,000
Unearned revenue                                                        -                  8,000
Current portion of long-term debt                                  58,700                 54,000
                                                              -----------            -----------
         Total current liabilities                                277,000                405,000

LONG-TERM LIABILITIES
Due to stockholder                                                 24,700                 24,000
Long-term debt, net of current portion                            414,800                434,000
Deferred tax liability                                             64,200                 72,000
                                                              -----------            -----------
         Total liabilities                                        780,700                935,000

COMMITMENTS AND CONTINGENCIES

MINORITY INTEREST                                               3,441,100              3,520,000

STOCHOLDERS' DEFICIT
Common stock                                                    1,821,300              2,507,000
Accumulated other comprehensive income                            124,500                139,000
Accumulated deficit                                            (3,210,700)            (4,165,000)
                                                              -----------            -----------
       Total stockholders' deficit                             (1,264,900)            (1,519,000)
                                                              -----------            -----------
TOTAL LIABILITIES AND STOCKHOLDERS' DEFICIT                   $ 2,956,900            $ 2,936,000
</TABLE>


       See accompanying notes to these consolidated financial statements.


                                       2



<PAGE>   4


                     SMARTSOURCES.COM INC. AND SUBSIDIARIES
                CONSOLIDATED STATEMENT OF OPERATIONS (UNAUDITED)
                      Three months ended December 31, 1999


<TABLE>
<CAPTION>
                                                          Dec. 31, 1998             Dec. 31, 1999
                                                          -------------             -------------
<S>                                                        <C>                     <C>
REVENUES EARNED                                            $  161,600               $  212,000

COST OF SALES                                                  29,000                   54,000
                                                           ----------               ----------
GROSS PROFIT                                                  132,600                  158,000

OTHER EXPENSES
   Research & Development, exclusive of amortization
      of software costs                                        23,000                  254,000
   Sales and Marketing                                         55,500                  141,000
   General and Administrative                                  75,000                  564,000
   Depreciation and Amortization                               31,000                  142,000
                                                           ----------               ----------
                                                              184,500                1,101,000
                                                           ----------               ----------
OPERATING LOSS                                                (51,900)                (943,000)
                                                           ----------               ----------
OTHER INCOME (EXPENSE)
   Administrative fees                                        (38.700)                       -
   Realized gain(loss) on investments                         (48,400)                       -
   Interest expense                                           (12,400)                 (11,000)
   Other                                                        1,500                        -
                                                           ----------               ----------
                                                              (98,000)                 (11,000)
                                                           ----------               ----------
LOSS BEFORE PROVISION FOR INCOME TAXES                       (149,900)                (954,000)
PROVISION FOR INCOME TAXES                                     59,900                        -
                                                           ----------               ----------
NET LOSS                                                     ($90,000)               ($954,000)
BASIC EARNINGS (LOSS) PER SHARE                                ($0.01)                  ($0.08)
DILUTED EARNINGS (LOSS) PER SHARE                              ($0.01)                  ($0.08)
</TABLE>


       See accompanying notes to these consolidated financial statements.



                                       3



<PAGE>   5


                     SMARTSOURCES.COM INC. AND SUBSIDIARIES
                CONSOLIDATED STATEMENT OF CASH FLOWS (UNAUDITED)
                         Quarter ended December 31, 1999

<TABLE>
<CAPTION>
                                                             Dec. 31, 1998           Dec. 31, 1999
                                                             -------------           -------------
CASH FROM OPERATING ACTIVITIES
<S>                                                           <C>                      <C>
   Net Income (Loss)                                          $  (90,000)              $ (954,000)
Adjustments to reconcile net income(loss) to
 net cash from operating activities
   Depreciation and amortization                                   31,000                 142,000
   Loss on disposal of assets                                      48,400                       -
   Stock-based compensation                                             -                 100,000
   Realized gains (losses) on sale of investments                    (700)                      -
   Deferred income taxes                                          (72,100)                      -
Changes in operating assets and liabilities
   Trade accounts receivable                                      262,600                 (44,000)
   Other assets                                                    (5,100)                (18,000)
   Accounts payable and other current liabilities                  28,600                 149,000
   Administrative fees payable                                     38,700                       -
   Income taxes payable and refundable                             12,200                       -
   Sale deposit                                                   (97,900)                      -
                                                               ----------              ----------
         Net cash flows from operating activities                 155,700                (637,000)

CASH FROM INVESTING ACTIVITIES
   Purchase of property and equipment                                (500)                (14,000)
   Refund of deposit on property and equipment                          -                  16,000
   Proceeds from sale of Familyware                               163,200                       -
                                                               ----------              ----------
         Net cash flows from investing activities                 162,700                   2,000

CASH FROM FINANCING ACTIVITIES
   Repayment of note payable, net                                 (52,900)                      -
   Principal repayments of long-term debt                         (10,600)                (17,000)
   Principal repayments of capital lease obligations                    -                  (2,000)
   Repayment of advances from stockholder                         (97,300)                 (1,000)
   Proceeds from issuance of common stock                               -                 686,000
   Dividends                                                     (140,300)                      -
                                                               ----------              ----------
         Net cash flows from financing activities                (301,100)                666,000

EFFECT OF CHANGES IN EXCHANGE RATES                                  (100)                  1,800
NET CHANGE IN CASH                                                 17,200                  32,800
CASH AND CASH EQUIVALENTS, beginning of period                      1,700                 164,200
CASH AND CASH EQUIVALENTS, end of period                           18,900                 197,000

Supplemental disclosure of Cash Flow information:

         Interest paid                                        $    12,400              $   11,000
         Income taxes paid                                    $      (100)                      0

  Non-cash transactions:

  Property and equipment acquired under capital leases                                 $   21,000
  Accounts payable refinanced under capital lease obligations                          $    6,000
</TABLE>

       See accompanying notes to these consolidated financial statements.


                                       4

<PAGE>   6



NOTE I - ORGANIZATION, REVERSE ACQUISITION, AND OPERATIONS


ORGANIZATION

     SmartSources.com, Inc. (the Company) was incorporated in 1987 in the State
     of Colorado as Cody Capital Corporation. The Company completed a public
     offering in 1988. In 1989, it acquired Telco of Baton Rouge, Inc., which
     was merged into the Company, and the Company changed its name to Telco
     Communications, Inc. In 1994, the Company filed for Chapter 11 bankruptcy
     protection. The Bankruptcy Court (the Court) subsequently converted the
     status of the filing to Chapter 7 and appointed a Trustee to manage the
     affairs of the Company.

     In 1996, under direction of the Court, all authorized but unissued shares
     were sold to an individual, and the Company emerged from bankruptcy with no
     assets, liabilities, and subject to no claims or litigation. In 1997, the
     Company name was changed to Innovest Capital Sources Corporation, and
     control of the Company was obtained by Intrepid International, S.A., a
     Panamanian corporation, through purchase of approximately 85% of the
     Company's outstanding shares.

     From the date of its emergence from bankruptcy on April 12, 1996 until
     December 11, 1998, the date of the acquisition discussed below, the Company
     operated as a development stage company. Prior to the acquisition, the
     Company had no material amount of assets or liabilities.

REVERSE ACQUISITION

     Effective December 11, 1998, the Company completed the acquisition of Nifco
     Investments Ltd. (Nifco Investments) and Subsidiaries. The acquisition was
     effected by exchanging six million shares of common stock for all
     outstanding shares of Nifco Investments. In connection with the
     transaction, the stockholders of Nifco Investment obtained control of the
     Company; and, accordingly, the transaction is characterized as a reverse
     acquisition. However, because the Company had no material amount of assets
     or liabilities, the transaction was accounted for as a recapitalization of
     Nifco Investments, rather than a business combination. The capital
     structure presented in the accompanying financial statements reflects the
     capital structure of the Company subsequent to a one for 75 reverse stock
     split authorized on October 15, 1998 and the six million shares issued in
     connection with the acquisition.

     Concurrent with the acquisition, the Company name was changed to
     SmartSources.com, Inc., and it adopted the September 30 fiscal year-end of
     Nifco Investments.

OPERATIONS

     Nifco Investments was incorporated in the province of British Columbia,
     Canada in September 1998 for the purpose of holding all outstanding shares
     of SmartSources.com Technologies, Inc. ((Technologies), formerly Nifco
     Synergy Ltd.); Intelli Trade Corporation (Intelli Trade); Infer
     Technologies, Inc. (Infer Technologies); and Origin Software Corporation
     (Origin Software).

     Technologies is a British Columbia corporation organized in 1990.
     Operations are located in Vancouver, British Columbia where it is engaged
     in developing and marketing computer and internet-based knowledge
     management software. Over the past five years, efforts have focused
     primarily on international trade compliance applications, which help
     businesses qualify for preferential tariff treatment under the North
     American Free Trade Agreement (NAFTA).

     Intelli Trade is a British Columbia corporation organized in 1994.
     Operations are located in Toronto, Ontario, where it provides international
     trade consulting services.

     Infer Technologies is a Delaware corporation organized in 1999 to exploit
     the Company's knowledge-management applications software known as kServer.
     Operations are located in Silicon Valley.

     Origin Software is a British Columbia corporation organized in September
     1998 to hold the rights to certain software products (see Note 3).

NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

     BASIS OF PRESENTATION - The preceding financial statements are presented in
     accordance with U.S. generally accepted accounting principles.

     PRINCIPLES OF CONSOLIDATION - The consolidated financial statements of
     SmartSources.com, Inc. and Subsidiaries include the



                                       5

<PAGE>   7


     accounts of its direct and indirect wholly-owned subsidiaries: Nifco
     Investments, Inc.; SmartSources.com, Technologies, Inc.; Intelli Trade,
     Inc.; Infer Technologies, Inc.; and Origin Software Corporation. All
     material intercompany accounts and transactions have been eliminated in
     consolidation.

     USE OF ESTIMATES - The preparation of financial statements in conformity
     with generally accepted accounting principles requires management to make
     estimates and assumptions that affect the amounts reported in the
     consolidated financial statements and accompanying notes. Examples of
     estimates subject to possible revision based upon the outcome of future
     events include amortization and valuation of capitalized software costs,
     depreciation of property and equipment, and income tax liabilities. Actual
     results could differ from those estimates.

     REVENUE RECOGNITION - The Company recognizes revenue in accordance with
     American Institute of Certified Public Accountants Statement of Position
     (SOP) 97-2, Software Revenue Recognition, and SOP 98-9, Modification of SOP
     97-2 with Respect to Certain Transactions. Revenue from packaged software
     products is recognized when shipped. Maintenance and subscription revenue
     is recognized ratably over the contract period. Revenue attributable to
     significant support is based on the price charged for the undelivered
     elements and is recognized ratably over the related product's life cycle.
     Revenue from fixed-price service contracts and software development
     contracts requiring significant production, modification, or customization
     are recognized using the percentage-of-completion method. Revenue from
     service contracts that are based on time incurred is recognized as work is
     performed.

     CASH AND CASH EQUIVALENTS - All highly liquid investments, with a maturity
     of three months or less at the time of purchase, are considered to be cash
     equivalents.

     ACCOUNTS RECEIVABLE - The Company extends credit to customers on an
     unsecured basis. Management establishes allowances for doubtful accounts
     based on evaluation of historical and current payment trends as well as
     consideration of specific collection issues that may require additional
     specific allowances.

     CAPITALIZED SOFTWARE AND RESEARCH AND DEVELOPMENT COSTS - Costs incurred
     prior to establishing the technological feasibility of software products
     are charged to research and development expense. Research and development
     expense incurred during fiscal 1998 and 1999 was $38,400 and $374,700,
     respectively. Costs incurred once technological feasibility has been
     established, but prior to release of product to customers, are capitalized
     and amortized on a product-by-product basis. Annual amortization is the
     greater of the amount computed using (a) the ratio that current gross
     revenues for a product bear to total current and estimated future revenues
     or (b) the straight-line method over the remaining estimated economic life
     of the product. Management periodically compares unamortized costs to net
     realizable value and writes off any excess. It is reasonably possible that
     estimates of future gross revenues, the remaining economic useful life of
     the products, or both will be significantly revised. As a result, the
     carrying amount of the capitalized software costs may be reduced materially
     in the near term.

     PROPERTY AND EQUIPMENT - Property and equipment is recorded at cost.
     Depreciation is computed using straight-line and accelerated methods over
     estimated useful lives of the assets. Estimated useful lives by major asset
     category are as follows: Buildings and improvements - 20 years, computer
     equipment and software - four to ten years, furniture and fixtures - five
     years.

     INTANGIBLE ASSETS - Costs of perfecting and protecting patents and
     trademarks are capitalized and amortized using the straight-line method
     over 20 years. No expense was incurred in 1998. Amortization expense for
     1999 was $1,400.

     VALUATION OF LONG-LIVED ASSETS - The Company periodically reviews
     long-lived assets, including identifiable intangible assets, whenever
     events or changes in circumstances indicate that the carrying amount of an
     asset may be impaired and not recoverable. Adjustments are made if the sum
     of the expected future undiscounted cash flows is less than the carrying
     amount.

     INCOME TAXES - Income taxes are provided for the tax effect of transactions
     reported in the financial statements and consist of taxes currently due
     plus deferred taxes. Deferred taxes are recognized for differences between
     the basis of assets and liabilities for financial statement and income tax
     purposes. Deferred tax assets and liabilities represent the future tax
     consequences of those differences, which will either be taxable or
     deductible when the assets or liabilities are settled. Amounts are computed
     using enacted tax rates.

     FOREIGN CURRENCY TRANSLATION - Assets and liabilities of Canadian
     operations, where the functional currency is the local currency, are
     translated into U.S. dollars at current exchange rates. Revenues and
     expenses are translated using average exchange rates prevailing during the
     year. Foreign currency translation adjustments are reported as a component
     of accumulated other comprehensive income.

     NEW ACCOUNTING STANDARD - In June 1998, the Financial Accounting Standards
     Board issued SFAS No. 133, Accounting for Derivative Instruments and
     Hedging Activities. Among other provisions, SFAS No. 133 requires that
     entities recognize all derivatives as either assets or liabilities in the
     balance sheet and measure those financial instruments at fair value.
     Accounting for changes in fair value is dependent on the use of the
     derivatives and whether such use qualifies as hedging activity. The new
     standard, as amended, becomes effective for the Company in fiscal 2001 and
     management is currently assessing the impact, if any, it may have on
     financial position and results of operations.



                                       6


<PAGE>   8


NOTE 3 - CAPITAL STOCK

Common Stock

     The Company has a single class of no par value common stock. Authorized
     shares total 50 million. The capital structure presented in the preceding
     financial statements reflects the capital structure of the Company
     subsequent to a one for 75 stock split authorized on October 15, 1998 and
     the six million shares issued in connection with the acquisition discussed
     in Note 1. Prior to completion of the acquisition in the first quarter of
     fiscal 1999, Nifco Investments, Inc. paid $142,400 of cash dividends to its
     majority stockholder. The dividends paid in both 1998 and 1999 were based
     on equity as reported under accounting principles generally acceptable in
     Canada, which differs substantially from equity as reported under U.S.
     generally accepted accounting principles.

     During the quarter ended December 31, 1999, the Company issued or was
     committed to issue 192,100 shares for total proceeds received of $686,000.
     Subsequent to December 31, 1999 the Company was in the process of raising
     capital through the issuance of additional shares.

     At December 31, 1999, a total of 5,000,000, common shares are reserved to
     honor the exchange rights of holders of the Class B preferred shares of the
     company's subsidiary, Origin Software, though the number of shares that
     will ultimately be issued to honor such rights may be significantly less
     than the total shares reserved. Another 2,412,410 common shares are
     reserved to honor outstanding stock warrants, grants made under the
     Company's stock incentive compensation plan, and the exchange rights of
     holders of the Class A preferred shares of Infer Technologies.

Stock Option Incentive Compensation Plan

     Effective June 21, 1999, the Company adopted the 1999 Stock Incentive
     Compensation Plan (the Plan). Under the Plan, the Company may make grants
     of incentive stock options, nonqualified stock options, and stock awards to
     employees, officers, directors and consultants of the Company and its
     subsidiaries for an amount of common shares equal to 10% of issued and
     outstanding shares, not to exceed 550,000 shares. The Company has granted
     1,034,000 options, and it is in the process of amending the Plan in order
     to ratify the options issued in excess of the amount authorized under the
     plan. The exercise price of incentive stock options and nonqualified stock
     options can be no less than the fair value of the Company's common stock on
     the date of grant. The maximum term of options is ten years; and, unless
     otherwise modified by the Plan administrator, they vest over four years.
     Options granted to senior management during 1999 vest over two years.

     A summary of the status of the Plan at December 31, 1999 is as follows:


<TABLE>
<CAPTION>
                                                                              Weighted-
                                                               Number          Average
                                                              Of Shares      Exercise Price
                                                              ---------      --------------
     Options outstanding at December 31, 1999
<S>                                                           <C>              <C>
        Granted                                               1,094,000        $  5.50
        Exercised                                                     -              -
        Forfeited                                               (60,000)          5.50
     Options outstanding at December 31, 1999                 1,034,000        $  5.50
     Options exercisable at December 31, 1999                         -        $     -
</TABLE>




     A summary of stock options outstanding at December 31, 1999 is as follows:

<TABLE>
<CAPTION>

                                   Options Outstanding                       Options Exercisable
                                   -------------------                       -------------------
                                       Weighted-
                                        Average          Weighted-                           Weighted-
    Range of                           Remaining          Average                             Average
    Exercise           Number         Contractual        Exercise           Number            Exercise
     Prices         Outstanding           Life             Price          Exercisable          Price
    --------        -----------       -----------        ---------        -----------        ---------
<S>                 <C>               <C>                <C>                  <C>             <C>
    $  5.50          1,034,000         4.5 years          $  5.50               -              $   -
</TABLE>

     The Company applies the provision of APB Opinion No. 25, Accounting for
     Stock Issued to Employees, and related interpretations to account for its
     stock-based awards. Accordingly, costs for employee stock options or
     issuance of shares is measured as the excess, if any, of the fair value of
     the Company's common stock at the measurement date over the amount the
     employee must pay to acquire the stock. No compensation expense was
     recognized for grants of awards under the Plan


                                       7

<PAGE>   9


     in the quarter ended December 31, 1999.

     STOCK OPTIONS - OTHER


     Effective December 15, 1999, the Company issued 200,000 options to purchase
     the same number of the Company's common shares as follows: 50,000 shares at
     an exercise price of $5.25, 50,000 shares at an exercise price of $6.00,
     50,000 shares at an exercise price of $7.50 and 50,000 shares at an
     exercise price of $8.00. The options expire on December 14, 2002. The
     options were issued at no cost in connection with the Company entering into
     a consulting agreement with Continental Capital & Equity Corporation
     (Continental). Under the agreement, Continental will assist and advise the
     Company with respect to investor relations professional services.

     As required by SFAS No. 123, Accounting for Stock-Based Compensation, the
     Company has applied the fair value method to account for issuance of the
     options. The Company used the Black-Scholes option pricing model to compute
     estimated fair value of the warrants, based on the following assumptions:

<TABLE>
<S>                                                       <C>
        Risk-free interest rate                               6.0%
        Price volatility                                     52.5%
        Average expected life of options                1.5 years
</TABLE>

     Total compensation cost computed for the options issued to Continental is
     $188,000. The cost is being recognized ratably over the three-year term of
     the options.


NOTE 4 - SUBSEQUENT EVENT

     Subsequent to December 31, 1999, the holders of 5 million class B preferred
     shares of Origin Software notified the Company of their intention to
     convert the class B shares for 457,380 common shares of the Company.



                                       8


<PAGE>   10


ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS

STATEMENT OF OPERATIONS DATA

<TABLE>
<CAPTION>
                                                  THREE MONTHS ENDED DECEMBER 31
                                                  ------------------------------
                                                    1999                  1998
                                                    ----                  ----
<S>                                                <C>                  <C>
Revenues Earned                                    212,000              161,600
Gross Profit                                       158,000              132,600
   R&D, exclusive of amortization                  254,000               23,000
of Software costs
   Sales and Marketing                             141,000               55,500
   General and Administrative                      563,000               72,700
   Depreciation and Amortization                   142,000               33,300
   Other Operating Expenses                          1,000                    -
Operating Loss                                    (243,000)             (51,900)
Other Expenses                                     (11,000)             (98,000)
LOSS BEFORE PROVISION FOR INCOME TAXES            (954,000)            (149,900)
PROVISION FOR INCOME TAXES                               -               59,900
NET LOSS                                          (954,000)             (90,000)
</TABLE>


BALANCE SHEET DATA

<TABLE>
<CAPTION>
                                              DEC. 31,         DEC. 31,
                                                1999             1998
                                                ----             ----
<S>                                        <C>               <C>
Cash and cash equivalents                     197,000           18,900
Working capital                               148,000         (188,000)
Total assets                                2,936,000          933,200
Long-term debt, less current portion          433,000          434,000
Total stockholders' equity                 (1,519,000)      (2,448,100)
</TABLE>

OPERATIONS ANALYSIS

During the quarter ended December 31, 1999 the Company had consolidated revenues
of $212,000, cost of sales of $54,000, other operating expenses of $1,101,000
and a net loss of $954,000.

Revenues for the three months ended December 31, 1999 increased 31% as compared
to 1998 revenues for the same period of $161,600. This is the result of initial
revenue from K-server and an increased client base for the International Trade
products and services.

Gross profit is calculated as net sales less the cost of sales, which consists
of salaries and commissions directly related to earned revenues. For the three
months ended December 31, 1999, the gross profit was $158,000, an increase of
19% over gross profits for the same period in the previous year.

Other operating expenses include Research and Development Costs, Sales and
Marketing, General and Administrative, Amortization and Depreciation. The
aggregate of these costs increased significantly in the quarter ended December
31, 1999 as compared to the same period of the previous fiscal year. The
increase is due to a significant increase in staffing levels across all
departments of the Company.


                                       9
<PAGE>   11


Research and Development costs for the period totaled $254,000, as compared to
$23,000 for the previous year. This is a direct result of continued costs
incurred in the development of the K-Server line of products, including higher
payroll costs due to the increased number of engineers working on K-server and
the establishment of an engineering office in Silicon Valley.

Sales and Marketing costs increased 154% in the period of analysis, from $55,500
to $141,000, as a result of higher payroll costs associated with more sales,
marketing and support personnel, and increased travel expenses incurred in the
promotion of the Company's lines of products.

General and Administrative Expenses increased significantly from $75,000
incurred in the first quarter of fiscal 1999 to $563,000. The increase is
partially due to higher payroll costs resulting from the addition of three new
senior managers in August 1999. Furthermore, during the period the Company
retained the services of a consulting firm to conduct a detailed business
strategy for the K-Server division. The total cost of this study is reflected in
G&A expenses for the period. The Company also incurred significant professional
fees related to a settlement with the Canada Customs and Revenue Agency. The
settlement relates to a review conducted by the Agency of various software
transactions, including those to which the Company was a party. In January 2000,
the Agency agreed to the terms of the proposed settlement; and, accordingly no
additional tax liability will be incurred with respect to the transactions
referred to above.

Amortization and depreciation costs increased from $31,000 to $142,000 mainly as
a result of the amortization costs for the Origin software acquired in May 1999.

During the quarter ended December 31, 1999 the Company did not incur any costs
related to Administrative Fees. In the first quarter of fiscal 1999 these costs
totaled $38,700. Also in that period, the Company incurred a loss on the sale of
investments (Familyware software) of $48,400. No such losses were incurred in
the quarter ending December 31, 1999.

In the period of analysis, the Company's interest expense decreased marginally
by $1,400 due to the reduced long-term debt levels of the company.

As a result of the marginal increase in revenues and significant increase in
operating expenses, the Company had a net loss of $954,000 in the quarter ended
December 31, 1999. In December 31, 1998 the Company reported a net loss of
$90,000 ($149,900 loss before a provision for income taxes of ($59,900)).

INTERNAL AND EXTERNAL SOURCES OF LIQUIDITY:

During the quarter ended December 31,1999, the Company's cash position increased
slightly from $164,200 to $197,000. At December 31,1999, the Company had a
working capital of $147,300 and a current ration of 1.4 to 1. The working
capital position is down slightly as compared to the balance at September
30,1999 when the Company's working capital was $166,800 and a current ratio of
1.6 to 1. The Company maintained its working capital position through the
issuance of additional equity capital during the quarter.

The net loss for the three months ended December 31,1999 was $954,000 as
compared to a net loss of $90,000 for the three months ended December 31,1998.
The Company's primary source of liquidity and cash during the quarter was from
the issuance of equity capital. During the quarter, the Company completed equity
financing that resulted in gross proceeds of approximately $686,000. As a result
of the financing, the number of common shares issued and subscribed to during
the quarter increased from 11,563,200 to 11,755,300.

The Company's ability to fund future operations is dependent upon the generation
of new sales and the raising of additional financing. The Company continued its
plan to diversify its revenue base and reposition its operations to take
advantage of the knowledge management software market. The Company plans to
raise additional equity or debt capital in fiscal 2000 in order to meet cash
flow requirements and carry out its intended business plan. Subsequent to
December 31,1999 the Company had secured additional equity


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capital of approximately $500,000. The Company has also entered into discussions
with a number of investors with the intention of raising an additional $3 to $5
million in either debt or equity capital before the end of the quarter ended
March 31,2000.

There are no legal or practical restrictions on the ability of the subsidiaries
to transfer funds to the parent company (Smartsources.com Inc.)

MATERIAL COMMITMENTS:

The Company has not undertaken any material commitments for expenditures as of
December 31,1999.

TRENDS OR UNCERTAINTIES:

There are no known trends or uncertainties that will have a material impact on
revenues.

                          PART II - OTHER INFORMATION


ITEM 1. LEGAL PROCEEDINGS

None.

ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS

During the quarter ended December 31,1999 the Company issued an aggregate of
192,100 common shares to certain accredited investors. In November 1999, 177,100
shares were sold at a price of $3.45 per share for gross proceeds of $611,000
and in December 1999 15,000 shares were sold at a price of $5.00 per share for
gross proceeds of $75,000.

There were no underwriters involved in these transactions. The sales were made
in reliance upon the exemption from registration afforded by Section 4(2) of the
1933 Act and Rule 506 of Regulation D thereunder.

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

None.

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

None.


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ITEM 5. OTHER INFORMATION

None.

ITEM 6. EXHIBITS AND REPORTS


(11) Computation of per share earnings
(27) Financial Data Schedule




                                   SIGNATURES


     In accordance with the requirements of the Exchange Act, the registrant
caused this report to be signed on its behalf by the undersigned, thereunto duly
authorized.



                                  SMARTSOURCES.COM, INC.


Date:  February 9, 2000           By: /s/ Nathan Nifco
       -----------------          -----------------------------------------
                                  Chairman and C.E.O.





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