(6) Sullivan Park Inc. d/b/a Sullivan Park ceased operations July 19, 2001.

Until our reorganization in the fiscal year ended February 28, 1998, we were a telecommunications holding company with subsidiaries operating in both Canada and the United States. Through our subsidiaries, we provided comprehensive telecommunications services including long distance, local access, cellular and complete telephone management services. We provided these services to commercial and residential customers in British Columbia, Alberta, Ontario, Quebec and in the greater Chicago, Illinois area. Competitive pressures in the telecommunications industry, increasingly high technology costs and the lack of sufficient working capital eroded our potential for profitability in this industry.

Despite a number of cost cutting measures carried out in late 1995 and early 1996, and changes in management, our ability to access the public and private markets in order to generate working capital was frustrated by the delisting of our company's common shares by the Vancouver Stock Exchange in October of 1996. The negative publicity surrounding the delisting eroded our customer base and supplier confidence. This, together with the failure of a major customer to pay a bill of approximately CDN$500,000, adversely affected our ability to go forward, and put enough additional pressure on our working capital requirements that our management concluded that we should seek protection under the Canadian Companies' Creditors Arrangement Act (the "CCAA"), which is similar to bankruptcy legislation in the United States.

On January 14, 1997, the Court granted us protection from our creditors under the CCAA (the "CCAA Proceedings") to preserve our assets and allow us to carry on our business while formulating a restructuring plan.

Shortly after filing our CCAA Proceedings, it became apparent that we would not be able to finance our business operations. We decided to sell our commercial and residential telecommunications customer base for the highest available price. On April 7, 1997, we sold our accounts receivable, capital assets, licences and acquired customer base to Primus Communications, Inc., Primus Telecommunications Canada Inc. and 336246 Canada Inc. for approximately CDN$6,750,000 with approval of the Court. There was a holdback of CDN$1,000,000 to secure the accuracy of our representations and warranties made as part of the sale. To the extent that Primus made claims against the holdback, the trustee was required to retain an equivalent portion of the holdback. Since Primus advanced claims exceeding the amount of the holdback, the full amount of the holdback was held in trust pending resolution of such claims. We entered into a settlement with Primus regarding the holdback, whereby we received CDN$25 ,000 for consulting services, Primus received CDN$275,000 and the balance of the holdback was distributed to creditors under the restructuring plan.

On April 17, 1997, we sold all of the shares in Cam-Net Communications and our interest in Cam-Net Telecommunications to London Holdings Inc. for cash proceeds of CDN$3,070,000. The agreement provided that certain inter-company debt owed by Cam-Net Communications to Cam-Net Communications Network Inc. would be repaid to us in annual instalments equal to 15% of the annual profit of Cam-Net Communications for three fiscal years commencing April 30, 1997. The first CDN$500,000 of the repayment to our company was to be payable to GT Communications Inc., pursuant to the restructuring plan in the CCAA Proceedings. Since we anticipated little or no repayment of such debt, we decided to sell this receivable for CDN$575,000, with GT Communications being entitled to receive approximately CDN$360,000 of these proceeds.

The first step in implementing the restructuring plan was to satisfy the secured creditors. At the filing date of the CCAA proceeding, AT&T held registered security against our company and certain of our subsidiaries which security was alleged to secure approximately CDN$2,800,000 as at the end of June, 1997. On July 3, 1997, the Court approved a settlement between our company and AT&T which included payment of CDN$1,822,725 and issuance of 1,000,000 common shares and 1,000,000 share purchase warrants whereby AT&T could acquire an additional 1,000,000 common shares of our company at CDN$1.00 per common share. AT&T has since released us from any other claims.

GT Communications alleged an equitable security interest in the amount of CDN$2,600,000 against all of our assets and our subsidiaries. After extensive negotiations, the Court approved a settlement entitling GT to an immediate cash settlement of CDN$1,400,000 and confirmation of a claim of CDN$575,000 as an unsecured creditor to be paid only from any repayment received by us from the transaction with London Holdings. Since we anticipated little or no repayment from the transaction with London Holdings, we sold this receivable for CDN$575,000, with GT Communications receiving approximately CDN$360,000 of the proceeds. GT Communications has no further claims against us.

On July 31, 1997, the classes of creditors of our company and our subsidiaries met, and the requisite number of creditors holding the required value of claims approved the restructuring plan. The restructuring plan provided for the distribution of proceeds from the sale of assets and the recovery from lawsuits on account of creditors' indebtedness. The restructuring plan also provided that creditors' unpaid debt after receipt of dividends would be satisfied by a distribution of the common shares by issuing share purchase warrants whereby the unsecured creditors would receive a portion of 13,000,000 share purchase warrants in proportion to their unpaid indebtedness to the total of unpaid debt.

Our creditors approved our restructuring plan on July 31, 1997, and the Supreme Court of British Columbia sanctioned our restructuring plan on August 7, 1997.

On January 1, 1998, we purchased our first call center for $105,000. As consideration for the acquisition, we issued a convertible note for $105,000 which was convertible into our common shares at the rate of $0.10 per common share. On January 5, 1999, the convertible note was converted into 1,050,000 of our common shares. The call center is operated through our subsidiary, NorthNet Telecommunications Inc. doing business as NorthStar Telesolutions. For details of the operations of our call center, see the section entitled "Call Center Operations" below.

In April, 1999, we purchased certain assets and the business of VirtualSellers.com, Inc., an Illinois corporation. As consideration for the acquisition, we paid cash of $170,000, assumed indebtedness of US$28,929, issued 500,000 of our common shares and issued share purchase warrants to purchase up to 361,710 of our common shares. Each share purchase warrant entitled the holder to purchase one common share at a price of $1.50 per common share for a period of two years. As part of the acquisition, we entered into employment agreements with two of the founders of this company.

Although we discontinued the operations of VirtualSellers.com, Inc. as of December 31, 2001, we subsequently launched our Professional Services and Software Products ("PSSP") Group on March 4, 2002. The primary purpose of this Group is to market our TAME V software, provide the information technology services for our Healthtrac division and provide application development and Web-enabling solutions. For details of the operations of our PSSP Group, see the section entitled "PSSP Group Operations" below.

In May, 1999, we purchased certain assets of CallDirect Enterprises Inc. As consideration for the acquisition, we issued 1,200,000 of our common shares and assumed the outstanding indebtedness of approximately CDN$500,000, which we settled for approximately CDN$109,000.

On February 28, 2002, we announced that our subsidiary, Preferred Telemanagement Inc., doing business as CallDirect Enterprises, ceased operation on the last day of our fiscal year, February 28, 2002. As a result, we no longer operate as a catalogue reseller of telephone-related equipment, as well as of products such as multimedia, entertainment, travel, security and computer accessories for offices and homes. These operations are classified as discontinued operations in our annual financial statements filed under Item 8 of this Annual Report on Form 10-K.

In June, 1999, we purchased the rights to a proprietary e-commerce shopping cart software system and language interpreter called TAME (Tag Activated Markup Enhancement) from Seth Russell and Nathan Bawden, doing business as Clickshop. As consideration for the acquisition, we assumed liabilities of $20,000 and issued 300,000 of our common shares (150,000 shares to each of Seth Russell and Nathan Bawden). As part of the acquisition, we entered into an employment agreement with Nathan Bawden. We also agreed to issue a further 300,000 of our common shares one year from closing if Nathan Bawden successfully trained our employees in the use, operation and development of TAME. These additional 300,000 shares were issued on February 13, 2001 (150,000 shares to each of Seth Russell and Nathan Bawden).

For further details on TAME, see the section entitled "TAME (Tag Activated Markup Enhancement)" below.

On June 1, 2000, our subsidiary Sullivan Park Inc. acquired all of the assets of the Internet services development business carried on by Sullivan Park LLC and Edward W. Sharpless in exchange for 6,500,000 of our common shares, which were issued to Edward Sharpless on July 18, 2001. As part of the acquisition, our subsidiary Sullivan Park Inc. entered into an employment agreement with Edward Sharpless and retained several of Sullivan Park's employees.

The former owner of the business of Sullivan Park, which was acquired by our company on June 1, 2000, had filed a claim against our company alleging that the company was in default of the terms of the purchase agreement between our company and the former owner. Under the terms of the agreement, our company was required to issue $2,700,000 of registered common shares of our company to the former owner within one year of the acquisition date of Sullivan Park. We filed a counter claim against the former owner of Sullivan Park, which alleged that the former owner made inaccurate representations to us with respect to the business of Sullivan Park. On July 18, 2001 we reached a settlement with the former owner of Sullivan Park. As part of the settlement, we agreed to issue 6,500,000 common shares to Edward Sharpless, the former owner of Sullivan Park. We also agreed to pay the former owner $8,885 to reimburse him for expenses he had incurred on our behalf.

On July 19, 2001, we discontinued the operations of Sullivan Park Inc. because it was not generating sufficient business to justify maintaining it as a separate operation and because we had already made the decision to focus our efforts and resources on our new health promotion business.

On April 20, 2001, we purchased certain assets of MedWired Corporation including the copyright, object code and source code for MedWired's Practiceportal software, certain registered and unregistered trade or brand names, domain names and trademarks and MedWired's customer list for a purchase price of $200,000 which we paid by issuing 241,935 of our common shares at an issue price of $0.62 per share (the fair market value of our stock at February 27, 2001) and $50,000 in cash.

On June 26, 2001, we acquired Healthscape, Inc.'s proprietary software (and related intellectual property) for the sum of $245,000, $5,000 of which was paid in cash, with the balance paid in 631,579 shares of our common stock having a fair value of $0.38 per share. The Healthscape Expert System analyzes each user's progress and the user health profile and provides tailored information to help each user meet their unique health goals. The Healthscape software, known as the Healthscape Expert System, is expandable to include new healthcare related applications and scalable to accommodate a growing user base.

On August 3, 2001, our wholly-owned Nevada subsidiary, Healthtrac Corporation, acquired Healthtrac, Inc., a California corporation, pursuant to a Merger Agreement dated July 11, 2001. We acquired the shares of Healthtrac, Inc. in exchange for 13,529,412 common shares in the capital of our company. After we acquired all of the shares of Healthtrac, Inc., we merged it into Healthtrac Corporation as provided for in the Merger Agreement. As a result of the merger, we assumed a debt owed to a third party of $892,459, which we settled for $500,000 and paid in shares of our common stock at a price per share of $0.265. Also as a result of the merger, we obtained a loan for $110,000 at an interest rate of 1% over the Bank of America's prime rate from Queensland Teachers Union Health Fund Limited. The loan is convertible at Queensland's option into shares of our common stock on the date of maturity of the loan at a price that is equal to the price per share equal to the ten-day average closi ng price for the ten trading day period ending on the repayment date. Queensland also converted approximately $484,764 of debt owed it by Healthtrac, Inc. into shares of our common stock at a price of $0.265. Queensland also agreed to lend Healthtrac Corporation (the surviving corporation in the merger) money as needed over a period of nine months after the closing of the merger, for the purpose of purchasing books for resale to Healthtrac's customers. The acquisition of Healthtrac, Inc. closed on August 3, 2001, although there are a number of post-closing obligations to be complied with, including the issuance of 316,436 of the total of 13,529,412 common shares that we agreed to issue in the exchange, which will be issued upon the submission to us by some of the shareholders of Healthtrac, Inc., of certain paperwork still required of them pursuant to the merger agreement.

For further details on the operations of our health promotion division, see the section entitled "Health Promotion Operations" below.

We operate one call center through our subsidiary, NorthNet Telecommunications, Inc. doing business as NorthStar TeleSolutions. Our call center is located at 125 Airport Parkway, Greenwood, Indiana.

The call center services market includes traditional teleservices activities such as outbound and inbound customer support, centralized customer billing, customer sales and support, order entry, order fulfilment, bill collection, Internet-based sales and service support, and marketing services including database marketing, market research, and data mining.

The call center industry is intensely competitive and our principal competition comes from large service organizations and numerous independent firms, as well as the in-house call center operations of many of our clients or potential clients. Northstar's principal competitors are AltaSierra Communications Inc. d/b/a/ CSR Central and TelePro Communications, a division of Priority Systems Inc. In addition, most businesses that are significant consumers of these services utilize more than one call center at a time and reallocate work among various firms from time to time. Some of this work is contracted on an individual project basis, effectively requiring that we and other firms seeking such business compete with each other frequently as individual projects are initiated. However, most of our revenue is not generated by individual projects, but from the integrated back office solutions that we provide. These solutions include customer service, tech support, billing, collections, service dispatch, management reporting, database management and collections. By integrating all of these solutions into one package we are able to ensure recurring revenues.

We believe that the principal competitive factors in our industry are technological expertise, service quality, sales and marketing skills, the ability to develop customized products and services and the cost of services. Our call center differentiates itself from its competitors based on its size and scale, advanced technology, service quality, breadth of services provided, industry and client focus, cost of services and business reputation.

We believe that the growth of customer management outsourcing will continue in our target markets as companies focus on their core competencies and seek to benefit from the advantages that outsourcing companies can provide. These advantages include: (i) technologically advanced, scalable systems and software which enable rapid competitive response; (ii) cost savings resulting from economies of scale achieved by leveraging investments in technology and larger customer service centers; (iii) improved time-to-market for new products/services, whether for existing companies or new entrants; and (iv) expertise to target, acquire and retain customers more effectively. We also see that there is a trend among businesses with in-house call center operations toward outsourcing the management of those operations to others and that this trend may attract new competitors into our market including, but not limited to, competitors that are substantially larger and better capitalized than our company.

Government Regulation

Both the federal and state governments regulate telemarketing sales practices. The Federal Telephone Consumer Protection Act of 1991, enforced by the Federal Communications Commission, imposes restrictions on unsolicited telephone calls to residential telephone subscribers. Under the Telephone Consumer Protection Act, it is unlawful to initiate telephone solicitations to residential telephone subscribers before 8:00 a.m. or after 9:00 p.m. local time at the subscriber's location, or to use automated telephone dialling systems or artificial or prerecorded voices to certain subscribers. Additionally, the Telephone Consumer Protection Act requires telemarketing firms to develop a written policy implementing a "do-not-call" list, and to train its telemarketing personnel to comply with these restrictions. The Telephone Consumer Protection Act creates a right of action for both consumers and the state. A court may award actual damages or minimum statutory damages of $500 for certain viol ations, which may be tripled for wilful or knowing violations. Currently, we train our service representatives to comply with the regulations of the Telephone Consumer Protection Act and programs its call management system to avoid initiating telephone calls during restricted hours or to individuals maintained on an applicable do-not-call list.

The Federal Trade Commission regulates both general sales practices and telemarketing specifically. Under the Federal Trade Commission Act, the Federal Trade Commission has broad authority to prohibit a variety of advertising or marketing practices that may constitute "unfair or deceptive acts and practices". Pursuant to its general enforcement powers, the Federal Trade Commission can obtain a variety of types of equitable relief, including injunctions, refunds, disgorgement, the posting of bonds, and bars from continuing to do business, for a violation of the acts and regulations it enforces.

The Federal Trade Commission also administers the Federal Telemarketing and Consumer Fraud and Abuse Prevention Act of 1994. Under the Federal Telemarketing and Consumer Fraud and Abuse Prevention Act, the Federal Trade Commission has issued regulations prohibiting deceptive, unfair or abusive practices in telemarketing sales. Generally, these rules prohibit misrepresentations of the cost, quantity, terms, restrictions, performance or characteristics of products or services offered by telephone solicitation or of refund, cancellation or exchange policies. The regulations also regulate the use of prize promotions in telemarketing to prevent deception and require that a telemarketer identify promptly and clearly the seller on whose behalf the telemarketer is calling, the purpose of the call, the nature of the goods or services offered and, if applicable, that no purchase or payment is necessary to win a prize. The regulations also require that telemarketers maintain records on various asp ects of their business. Analogous restrictions apply to industries regulated by the SEC. We believe that we are in compliance with the Telephone Consumer Protection Act and its implementing regulations, as well as with the regulations promulgated pursuant to the Federal Telemarketing and Consumer Fraud and Abuse Prevention Act. Failure to comply with either the Telephone Consumer Protection Act or the Federal Telemarketing and Consumer Fraud and Abuse Prevention Act could adversely affect or limit our current or future operations.

Most states have enacted statutes similar to the Federal Trade Commission Act generally prohibiting unfair or deceptive acts and practices. Additionally, some states have enacted laws and others are considering enacting laws targeted directly at telemarketing practices. For example, telephone sales in certain states are not final until a written contract is delivered to and signed by the buyer, and such a contract often may be cancelled within three business days. At least one state also prohibits telemarketers from requiring credit card payment, and several other states require certain telemarketers to obtain licenses, post bonds or submit sales scripts to the state's attorney general. Under the more general statutes, depending on the wilfulness and severity of the violation, penalties can include imprisonment, fines and a range of equitable remedies such as consumer redress or the posting of bonds before continuing in business. Many of the statutes directed specifically at telemarket ing practices provide for a private right of action for the recovery of damages or provide for enforcement by state agencies permitting the recovery of significant civil or criminal penalties, costs and attorneys' fees. There can be no assurance that any such laws, if enacted, will not adversely affect or limit our current or future operations.

Our call center provides the traditional teleservices such as outbound and inbound customer support, centralized customer billing, customer sales and support, order entry, order fulfilment, bill collection, Internet-based sales and service support, as well as management reporting, database management, service scheduling and dispatch, and marketing services including database marketing, market research, and data mining. Our call center currently has the capacity for over 80 call center representatives and offers customer service support 24-hours a day, seven days a week. We provide our services for a flat monthly rate or on a per-transaction basis depending on the scope of services required.

In the past, we have provided services to a limited number of cable television operators and Internet service providers in the United States. We have expanded the scope of our call center operations and now service over 50,000 homes with cable television and/or other broadband services. We target businesses that have a customer base of up to 100,000 customers, as we have found that businesses with more than 100,000 customers typically have well established in-house call centers.

We market our call center services through periodic advertising, direct mail, strategic partnerships and outbound telemarketing of the services provided by the call center, as well as by appearances at industry trade-shows.

We plan to concentrate our call center services on customer support and transaction processing, allowing our clients to concentrate on the marketing and growth of their businesses while still maintaining a high level of customer care and service. We plan to continue to seek additional opportunities to add capacity, technology and expertise to our call center business. We are cultivating new customers for the call center which have also begun to provide cable-related services such as local and long distance telecommunications and Internet access. We anticipate that the services offered by our customers can be bundled and/or marketed together.

Separate financial information for the call center can be found at Note 15 to our consolidated financial statements for the fiscal period ended February 28, 2002.

On February 28, 2002, we announced the immediate cessation of our operations as a catalogue reseller of telephone-related equipment, as well as products such as multimedia, entertainment, travel, security and computer accessories for offices and homes. We operated this business through our subsidiary Preferred Telemanagement Inc. doing business as CallDirect Enterprises. We ceased to carry on this business because it was losing money, had a limited market and we had decided to concentrate our efforts and resources on our Healthtrac business.

Since we shut down CallDirect, the results of the CallDirect catalogue division have been included in the Statement of Operations as discontinued operations and prior years have been retroactively adjusted to adopt discontinued operations presentation for CallDirect.

Separate financial information for CallDirect's operations can be found at Note 7 to our consolidated financial statements for the fiscal year ended February 28, 2002.

During the year ended February 28, 2002, we provided e-commerce and e-business solutions, turnkey e-commerce transaction processing services, Web site development, maintenance and hosting services, and customized Internet design, development, deployment and project management services through our eCommerce Solutions Inc. d/b/a VirtualSellers.com and Sullivan Park subsidiaries.

Our Sullivan Park operation was in the Internet services business of developing on-line stores. We ceased operation of this subsidiary on July 19, 2001 because it was not generating sufficient business to justify maintaining it as a separate operation. When we ceased operation of this subsidiary on July 19, 2001, VirtualSellers.com assumed the responsibility for providing Sullivan Park's remaining clients with services, including site hosting and maintenance.

Our VirtualSellers.com operation depended to a large extent on Internet start-up businesses that have themselves gone out of business over the past few years. With the rapid shrinkage in its customer base, this operation began to lose money. As a result, we decided to close this business effective December 31, 2001. While winding down this subsidiary's business, we were contractually obligated to continue to provide Web hosting and maintenance services to one client into calendar year 2002. During the last quarter of our fiscal year 2002, another firm asked us to provide similar services for their sites and, with this new prospect, we decided to reconsider our decision to completely terminate all e-commerce operations. As a result, we launched our PSSP (Professional Services and Software Products) Group on March 4, 2002. Through the PSSP Group we plan to provide businesses with customized e-commerce solutions based primarily on our TAME development platform so that these businesses c an retail their products and services over the Internet. PSSP will be capable of providing some of the services offered by our recently discontinued VirutualSellers.com operation. In this regard, PSSP is able to provide e-commerce applications, Web site development, maintenance and hosting services, customized Internet application design, deployment and project management services. We anticipate that a significant portion of the PSSP Group's revenue will be derived from our Healthtrac division and the sale and support of licenses of our TAME V software as an adjunct to Healthtrac's online product.

E-commerce consists of the use of the Internet to buy and sell goods and services. E-commerce offers both businesses and consumers numerous benefits, including the following:

E-commerce between businesses provides the following benefits:

These benefits allow businesses to focus on growing their customer base and marketing and selling their products around the world in a cost-effective and efficient manner.

The early e-commerce businesses were often Internet-centered companies founded specifically to transact business on the Internet. More recently, traditional businesses, including department stores, car dealers and toy stores, offer their goods and services through the Internet. An increasingly broad selection of products is now being sold online. Accordingly, the need for online stores and transaction processing capabilities is affecting virtually all industries and businesses. A large number of these businesses have neither the time nor the resources to design, develop, construct and manage an e-commerce capable Web site to handle business-to-business or business-to-consumer transactions.

Virtualsellers.com provided a turnkey e-commerce transaction processing service to businesses with existing Internet Web sites and developed, maintained and hosted e-commerce capable Web sites for businesses without existing Web sites. VirtualSellers.com handled all aspects of processing orders. VirtualSellers.com charged a fee depending on the services provided and the cost of the item sold.

For businesses without existing e-commerce capable Internet Web sites, VirtualSellers.com was able to assist companies in designing, building, deploying and managing sophisticated secure e-commerce ready Internet Web sites that provided these businesses with immediately available, customized, secure and complete e-commerce transaction processing capabilities so that these businesses could retail their products and/or services over the Internet.

We ceased operation of this business in December 2001 because it had lost a substantial part of its customer base to the declines in the technology and internet markets, it was losing money and we had made a decision to concentrate our efforts and our resources on our Healthtrac operation.

The PSSP Group has the capability to build, maintain and host e-commerce capable Web sites, including the provision of customized Internet design, development, deployment and project management services. Using these capabilities, the PSSP Group will be in a position to help business clients develop an online selling presence. The PSSP Group will not, however, offer the transaction processing or order fulfilment services that were provided by VirtualSellers.com.

Separate financial information for Virtualsellers.com can be found at Note 15 to our consolidated financial statements for the fiscal year ended February 28, 2002.

We own an application known as the TAME Shopping Cart and an interpretative programming language known as TAME (Tag Activated Markup Enchancer).

A growing number of companies are building increasingly sophisticated Internet applications to perform a combination of marketing, sales and operational functions. Online businesses are constantly seeking innovative technology solutions that will enable them to deliver products and information targeted to their customers' interests and that enable them to provide a higher level of customer service. In addition, these companies are increasingly looking to Internet technology to help them manage their supplier and distributor networks more effectively by automating inter- and intra-company business processes and integrating diverse systems where key information is managed and where key business transactions reside.

Combined, these factors have created demand for comprehensive software platforms that can enable businesses to execute on their key Internet business initiatives quickly and reliably. These platforms allow integration and movement of data between the existing software systems of different businesses across the Internet, as well as productive tools that enable both developers and business users to participate in the construction, maintenance and management of online businesses. TAME provides that solution.

TAME is a platform independent, server side, interpretative programming language that is compatible with Unix, Linux, Microsoft Windows NT and virtually every major operating system. The scope and functionality of the language can be compared to Java, Javascript, or Visual Basic. In addition, TAME can work side by side with any of these programming languages.

We have developed TAME V, a fifth-generation software language that enables us to provide traditional and Internet-based businesses with significant savings in terms of both development time and technology costs for transaction processing services.

TAME has achieved acceptance into the EMC Proven Program. Acceptance into the EMC Proven Program indicates that our infrastructure has passed a rigorous review of its ability to support the operational needs of an Internet-based business or service and has the enterprise storage resources necessary to operate at peak efficiency, adapt to a constantly changing business climate and easily manage Internet-driver growth. EMC Proven E-Infrastructure Program benefits give us the right to display the EMC Proven E-Infrastructure logo in our printed and electronic media, allowing us to add value and market differentiation in the products and services that we offer customers. Such acceptance can allow us to benefit from EMC's vendor network in generating sales for TAME.

Through the use of TAME, our company and our development partners can deliver complete e-business solutions based on an open, scalable architecture provided by the TAME development environment. This ability ensures that clients' existing business processes, intelligence and technology can be easily Web-enabled and integrated to support new online and offline business initiatives.

If, for example, a client decides to implement a different operating system or move its applications onto a different computer network with a different operating system, then TAME can be installed and the applications can be seamlessly migrated so that they will operate on the new operating system. TAME-enabled Web services link sites and applications together to perform functions that individual components alone are not able to perform.

The new release of TAME V is a faster, easier, and more robust version of its predecessors. This platform independent, server-sided programming package is used to produce Web pages, Web-based applications, and virtually any e-commerce application. It serves as "glue" among many varieties of Web-based entities such as XML and XSL.

We market and sell TAME to businesses using a combination of direct and indirect distribution channels, including the following:

We intend to market and sell TAME using the following direct and indirect distribution channels:

Our Web site allows visitors to download, evaluate and purchase TAME. Electronic distribution provides us with a low-cost, globally accessible, 24-hour sales distribution channel. To date, many copies of an evaluation version of TAME have been downloaded from our Web site.

The Internet application products market is intensely competitive, subject to rapid change and significantly affected by new product introductions and other activities of market participants. Primary competitors in the market include Microsoft and Sun Microsystems' software Java and Javascript. As the size and visibility of the market opportunity increases, we believe that additional competitors may enter the market with competing products. Increased competition could result in pricing pressures, reduced margins or the failure of TAME to achieve or maintain market acceptance, any of which could have a materially adverse effect on our business, operating results and financial condition. Many of our current and potential competitors have longer operating histories and substantially greater financial, technical, marketing and other resources than we do. Therefore, they may be able to respond more quickly to new or changing opportunities, technologies, standards or customer requiremen ts. Many of these competitors also have broader and more established distribution channels that may be used to deliver competing products directly to customers through bundling or other means. If competitors were to bundle competing products with their products, the demand for TAME might be substantially reduced and our ability to distribute our products successfully would be substantially diminished.

Competitive factors in the Internet application products market include:

In January 2001, we made a strategic decision to pursue another vertical market for deployment of our TAME software - the healthcare industry. Our decision to enter this field was based on our belief that there is a need to improve the health of patients, lower healthcare costs to health organizations and to supply health and wellness information. The Internet provides a low cost opportunity to provide health promotion, disease management and wellness information and personalize its delivery.

We believe that by using our TAME software we can create health and wellness sites that offer an exchange of health promotion and disease management information and support a broad range of health promotion and disease management services delivered over our secure, Internet-based platform. These sites will be for use by our clients' constituents using resources such as a health encyclopaedia and interactive learning centres. We intend to provide our users with health and wellness news and information and interactive preventive health and information tools. We anticipate that our health and wellness sites will provide proprietary, medically reviewed health and wellness news articles and medical information which will allow users to research current information relating to diseases and common health conditions. We anticipate that our users will be able to remotely access our sites.

Our first step in developing our health and wellness product and services line was our April 20, 2001, acquisition of MedWired Corporation's proprietary Web site development and content management PracticePortal software. The Practiceportal software was designed to facilitate communication between physicians and their patients over the Internet. Originally, we intended to create a health and wellness portal that allows patients to communicate with their providers. This is now a long-term objective for Healthtrac's online products.

On June 26, 2001, we acquired Healthscape, Inc.'s proprietary Expert System software (and related intellectual property). The Healthscape Expert System analyzes each user's progress and the user health profile and provides tailored information to help each user meet their unique health goals. The Healthscape Expert System was intended to be a "virtual coach" for Healthtrac's online product. As part of our long-range plan, we intend to adapt the system into Healthtrac's online product. The Healthscape Expert System is expandable to include new healthcare related applications and scalable to accommodate a growing user base.

On August 3, 2001, we completed a share exchange and merger between our newly formed and wholly-owned Nevada subsidiary, Healthtrac Corporation, and Healthtrac, Inc. in which we acquired the common and preferred stock of Healthtrac, Inc. Healthtrac Corporation is a health promotion and disease management company that provides its products and services to health plans and self-insured employers. It provides health risk assessment tools, participant health status reports, tailored health education tools, general health promotion information, individual programs for self-management of individual health, disease management interventions, the means of measuring and reporting results, and need and demand reduction programs.

Our Healthtrac programs are designed to postpone the onset of morbidity (e.g. disease and disability) through healthy preventive practices, and to encourage and support self-management of chronic disease. These programs are:

Healthtrac offers population health management tools for organizations at risk for health care costs. These tools help identify potential high-risk constituents prior to high claims utilization, reduce health risks and costs by supporting healthy changes and management of chronic conditions, track and reinforce changes over time, and evaluate the impact of these efforts. Our Healthtrac product line includes:

Other Healthtrac services include:

The majority of Healthtrac clients are self-funded employer groups, health plans/managed care organizations, hospital systems, and the military. Healthtrac generally has long-term relationships and long-term contracts with its clients. Many are in the process of renewing their agreements with Healthtrac. We target businesses that have an eligible base of 5,000 or more.

Healthtrac's products and services are delivered via paper/manual delivery, but Healthtrac also has its health risk assessment available for delivery over the Internet. Healthtrac distributes its products and services in the following manner: Healthtrac contracts with an organization, (e.g. a self-ensured employer), to provide a health promotion program to the employer's employees or the healthplan's members. Of the total eligible participants, a percentage of the employees or members become actual Healthtrac program participants. Healthtrac enrolls these participants into our database and then generates the initial health risk assessment for each participant. The participant completes the assessment, returns it to Healthtrac, and then Healthtrac analyzes the assessment using its proprietary algorithms. Healthtrac then generates a letter and report uniquely tailored to each individual, addressing that individual's health status and risks. Based on the findings of the analysis, t he individual is either enrolled in a high risk program or placed in the basic, or low risk, program. The participant then receives health information, educational materials, and self management tools tailored to the individual's health maintenance or improvement goals. The participants are then reassessed at periodic intervals. Healthtrac is exceptional in its market because of this "serial tracking" of its participants. This serial tracking reports the individuals successes and progress toward meeting their health improvement goals over time. Healthtrac also provides aggregate reports to its clients to measure the program's success.

Healthtrac's products and services were initially developed in 1984 when Healthtrac was founded. Healthtrac continually evaluates its health assessment tool to incorporate the most current (accepted and valid) scientific, medical, demand management, and lifestyle behavior change concepts. This requires ongoing design/redesign, testing, and monitoring of the questionnaire responses and the associated algorithms used to calculate risk scores and health status. We also encourage feedback from our clients' medical teams.

Development of our online health risk assessment is complete and we are poised to sell this product to our first client. A static version and tour of the online questionnaire and ancillary products is available for viewing at the www.myhealthtrac.com website.

Healthtrac's operations center is located in Redwood City, California.

If the health of American citizens were improved, logic indicates we would spend less time and money treating the many diseases that are clearly preventable.

There is ample evidence that poor health habits cost dearly: By way of example:

Today, there is an expanding demographic looking for new methods of increasing their well being through health promotion and disease management products. For individuals following a health promotion program or maintaining a healthy lifestyle, the results can be very dramatic: the individual is likely to have more energy, fewer physical problems, greater mental alertness, greater athletic prowess, feel better, look younger, and be healthier than his or her peers who did not adopt healthy living practices. For those individuals following an unhealthy lifestyle, the results can be just as dramatic: increased illness and disease, frequent absenteeism, prolonged disability, and early death.

Interest in worksite health promotion has grown steadily since the mid-1980s when employers became concerned about rapidly rising health care costs. Employers, managed care providers and third party administrators all share the following needs:

Generally speaking, Healthtrac competes in the health promotion and wellness market in which over 20 companies provide health promotion services with primary emphasis on health risk assessments, lifestyle, and behavioural modification and condition specific personal care management. Of these, the Mayo clinic, Wellmed, Staywell, Johnson & Johnson, WelsMD, Lummix and The University of Michigan constitute Healthtrac's competitors. This statement is biased towards health assessments as a core service and the ancillary non-core services that enhance the overall value proposition as it relates to overall health management. Each of these companies possesses unique strengths and weaknesses in delivery of health assessment technologies. We estimate that these five companies combined boast over 2300 current individual group clients and make up the critical mass of the marketplace.

Healthtrac has over 18 years of experience providing comprehensive health assessment, health promotion, and self-care products and services in the United States and internationally. More than one million individuals have used the Healthtrac health assessment instrument and over three million health assessment questionnaires have been completed, making it one of the most highly used and tested questionnaires in the industry.

Our health assessment and associated health promotion programs have been studied more extensively than any other such programs. Numerous studies, published in peer-reviewed medical and scientific literature, have found the health assessment and its educational programs to be highly effective in motivating positive change in health habits, resulting in lower risks and measurable reductions in the use of unnecessary, inappropriate and costly health care services.

Healthtrac has won numerous awards over the years, and is the only five-time winner of the C. Everett Koop National Health Award that recognizes programs that are proven to reduce health risks and health care costs.

Prior to our acquisition of Healthtrac in 2001, it had languished with few resources directed toward marketing, sales, and technology. We are rebuilding our sales and marketing efforts, reestablishing our visibility in the marketplace, and improving our technology platform. During the fiscal year ended February 28, 2002, Healthtrac expanded its marketing and sales efforts in an effort to increase its visibility in the market. We have increased our sales force in an effort to fully service our existing clients and to capture new clients. Healthtrac continues to pursue alliances with strategic sales partners to expand the market penetration of our products and services. Healthtrac is also focused on renewing existing client contracts and selling additional and enhanced products to our existing clients. In addition, Healthtrac completed the migration to our new software platform, the Windows NT/TAME platform, thus vastly improving our technology.

We currently employ 26 people in our call center business, 16 people in our Healthtrac business, five people in our PSSP Group and five administrative staff at our corporate head office. Except for our executive officers, all employees are employees at will, which means that both the employee and our company are free to terminate such employment relationships at any time.

Various federal, state and local laws regulate companies in the health care industry. We do not plan to offer services that are subject to such laws. The following is a summary of some of the healthcare regulatory issues, which we do not believe will affect our operations:

The US Congress enacted the Health Insurance Portability and Accountability Act of 1996 (HIPAA), including Standards for Privacy of Individually Identifiable Health Information. The law included provisions designed to save money for health care businesses by encouraging electronic transactions, but also required new safeguards to protect the security and confidentiality of that information. Most states already have similar laws, but HIPAA ensured the closing of gaps in the protection of patients' privacy and confidentiality.

The law gave Congress until August 21, 1999 to pass comprehensive health privacy legislation. When Congress did not enact such legislation after three years, the law required the Department of Health and Human Services to craft such protections by regulation.

In November 1999, the Department of Health and Human Services published proposed regulations intended to provide patients with new rights and protections against the misuse or disclosure of their health records. In December 2000, the Department of Health and Human Services issued a final rule followed by a comment period. This rule - the HIPAA Standards for Privacy of Individually Identifiable Health Information rule - is commonly referred to as the privacy standards rule. The privacy standards rule establishes a set of basic national privacy standards and fair information practices for the protection by health plans, healthcare clearinghouses, healthcare providers and their business associates of individually identifiable health information. This rule became effective on April 14, 2001 and the compliance date for most entities is April 14, 2003.

In its present form, the privacy standards rule applies only to health plans, health care clearinghouses, and certain health care providers. In today's health care system, however, most health care providers and health plans do not carry out all of their health care activities and functions by themselves; they require assistance from a variety of contractors and other businesses. In allowing providers and plans to give protected health information to these "business associates," the privacy standards rule conditions such disclosures on the provider or plan obtaining, typically by contract, satisfactory assurances that the business associate will use the information only for the purposes for which they were engaged by the covered entity, will safeguard the information from misuse, and will help the covered entity comply with the covered entity's duties to provide individuals with access to health information about them and a history of certain disclosures. Protected health information ma y be disclosed to a business associate only to help the providers and plans carry out their health care functions - not for independent use by the business associate. The privacy standards rule provides for civil and criminal liability for its breach.

The privacy standards rule applies to our Healthtrac business because Healthtrac relates to participants in the healthcare industry. We believe that Healthtrac is a business associate under the HIPAA privacy standards rule. Therefore, we will provide satisfactory assurances to our clients who must comply with HIPAA that we will use its participants' personal health information only for the purpose for which we were engaged by the client. In addition, we have developed our own privacy policy which assures our clients and our individual users that their information will remain confidential.

We believe that we are currently in compliance with the HIPAA privacy standards rule. However, we are continuing to examine all of our procedures related to the processing of protected health information. This process may result in changes in our procedures or expenses associated with ensuring and maintaining information security. The effect of the privacy standards rule on our business is difficult to predict and there can be no assurances that we will adequately address the business risks created by the privacy standards rule and its implementation. In addition, we are unable to predict what changes to the privacy standards rule will be made in the future or how those changes could affect our business.

While the provision of our services does not currently require any regulatory approval, there can be no assurance that such activities will not be subject to licensure in the future.

Other Restrictions Regarding Confidentiality and Privacy of Patient Information

Numerous state and federal laws other than HIPAA govern the collection, dissemination, use, access to and confidentiality of patient health information. Many states are considering new laws and regulations that further protect the confidentiality of medical records or medical information. These state laws are not in most cases pre-empted by the HIPAA privacy standard and may be subject to interpretation by various courts and other governmental authorities, thus creating potentially complex compliance issues for us and our customers and strategic partners. Definitions in the various state and federal laws concerning what constitutes individually identifiable data sometimes differ and sometimes are not provided, creating further complexity. The HIPAA privacy standards rule contains a restrictive definition of de-identified information, which is information that is not individually identifiable, that could create a new standard of care for the industry. These other privacy laws at a state or federal level, or new interpretations of these laws, could create liability for us, could impose additional operational requirements on our business, could affect the manner in which we use and transmit patient information and could increase our cost of doing business. In addition, parties may also have contractual rights that provide additional limits on our collection, dissemination, use, access to and confidentiality of patient health information. Claims of privacy rights or contractual breaches, even if we are not found liable, could be expensive and time-consuming to defend and could result in adverse publicity that could harm our business.

Other countries also have, or are developing, their own laws governing the collection, use, storage and dissemination of personal information or patient data. These laws could create liability for our international operations, impose additional operations requirements or restrictions on our business, affect the manner in which we use or transmit data and increase our cost of doing business.

Our success is dependent upon our proprietary technology and other intellectual property and on our ability to protect our proprietary technology and other intellectual property rights. In addition, we must conduct our operations without infringing on the proprietary rights of third parties. We also intend to rely upon unpatented trade secrets and the know-how and expertise of our employees. To protect our proprietary technology and other intellectual property, we rely primarily on a combination of the protections provided by applicable copyright, trademark, and trade secret laws, as well as on confidentiality procedures and licensing arrangements.

We have one patent application pending with the United States Patent and Trademark Office for our TAME software system and method. We own a number of trademarks, including "Healthtrac" and "Babytrac". We also have trademark applications pending with the United States Patent and Trademark Office for "TAME", "If you don't care about e-commerce, that's your business. If you do that's our business." and Virtualsellers.com and Tiger (Tame) logos. Although we believe that we have taken appropriate steps to protect our unpatented proprietary rights, including our requirement that our employees and third parties who are granted access to our proprietary technology enter into confidentiality agreements, there can be no assurance that these measures will be sufficient to protect our rights against third parties. Others may independently develop or otherwise acquire unpatented technologies or products similar or superior to our technologies or products.

We license certain software and Internet tools from third parties that we include in our services and products. If any of these licenses were terminated, we could be required to seek licenses for similar software and Internet tools from other third parties or develop these tools internally. We may be unable to obtain such licenses or develop such tools in a timely fashion, on acceptable terms, or at all.

Companies participating in the software and Internet technology industries are frequently involved in disputes relating to intellectual property. In the future, we may be required to defend our intellectual property rights against infringement, duplication, discovery, and misappropriation by third parties or defend against third-party claims of infringement. Likewise, disputes may arise in the future with respect to ownership of technology developed by employees who were previously employed by other companies. Any such litigation or dispute could result in substantial costs to, and a diversion of effort by, our company. An adverse determination could subject us to significant liabilities to third parties, require that we seek licenses from, or pay royalties to, third parties, or require us to develop appropriate alternative technology. Some or all of these licenses may not be available to us on acceptable terms or at all, and we may be unable to develop alternate technology at an acce ptable price or at all. Any of these events could have a materially adverse effect on our business, prospects, financial condition, and results of operations.

Much of the information included in this annual report includes or is based upon estimates, projections or other "forward-looking statements" within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934 and are subject to the "safe harbor" created by those sections. While these forward-looking statements, and any assumptions upon which they are based, are made in good faith and reflect our current judgment regarding the direction of our business, actual results will almost always vary, sometimes materially, from any estimates, predictions, projections, assumptions, or other future performance suggested herein. We undertake no obligation to update forward-looking statements to reflect events or circumstances occurring after the date of such statements.

Such estimates, projections or other "forward-looking statements" involve various risks and uncertainties as outlined below. We caution the readers that important factors in some cases have affected and, in the future, could materially affect actual results and cause actual results to differ materially from the results expressed in any such estimates, projections or other "forward-looking statements". Readers should carefully consider the following factors in evaluating our company, our business and any investment in our company.

Risks Related to Our Business

Although we were incorporated in 1982, we have a lack of history regarding our Web site design, development and hosting business, our custom Internet application processing business and our newly created health promotion business. Accordingly, we have a limited operating history and limited financial data upon which you may evaluate our business and prospects. Our potential for future profitability must be considered in light of the risks, uncertainties, expenses and difficulties frequently encountered by companies in their early stages of development, particularly companies in new and rapidly evolving markets. Some of these risks relate to our potential inability to:

We may not successfully address these risks. If we do not successfully address these risks, we may not realize sufficient revenues or net income to reach or sustain profitability, which would adversely affect our continuing business operations.

We have incurred substantial net losses and have a substantial net operating loss carryover. A significant component of these losses were incurred in operations which we no longer operate but we have spent significant funds to develop our current business divisions, procure hardware, software and networking products and develop our operations, research and development and sales and marketing operations. We have continued to incur losses since entering the transaction processing/customer service and Internet software and development business. For the fiscal year ended February 28, 2002, we incurred losses of $9,916,809. As of February 28, 2002, we had an accumulated deficit of $117,073,324. We have incurred significant operating and net losses and negative cash flow and have not achieved profitability. While we feel confident that we can secure additional funds through private placement financing and successfully carry out our business plan, there can be no assurance that we will accomplish these tasks and achieve profitability. If we cannot successfully carry out our business plan, then our continuing business operations would be adversely affected.

We expect to increase our operating expenses in the future by increasing our sales and marketing expenditures. To achieve operating profitability, we will need to increase our customer base and revenue and decrease our costs. We may not be able to increase our revenue or increase our operating efficiencies in this manner. If our revenue grows more slowly than we anticipate or if our operating or capital expenses increase more than we expect, our operating results will suffer. Moreover, because we expect to continue to increase our investment in our business faster than we anticipate growth in our revenue, we will continue to incur significant operating losses and negative cash flow for the foreseeable future. Consequently, it is possible that we will not achieve profitability, and even if we do achieve profitability, we may not sustain or increase profitability on a quarterly or annual basis in the future. The auditors' report on our annual consolidated financial statements for the y ear ended February 28, 2002, contains an explanatory paragraph that states that our recurring losses from operations raise substantial doubt about our ability to continue as a going concern. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.

Our revenue and operating results may vary significantly from quarter to quarter. These fluctuations could cause our stock price to fluctuate significantly or decline. Important factors that could cause our quarterly results to fluctuate materially include:

Our current and future levels of operating expenses and capital expenditures are based largely on our growth plans and estimates of future revenue. These expenditure levels are, to a large extent, fixed in the short term. We may not be able to adjust spending in a timely manner to compensate for any unexpected revenue shortfall, and any significant shortfall in revenue relative to planned expenditures could negatively impact our business and results of operations. In addition, if our customer base expands rapidly or unpredictably, we may not be able to efficiently utilize our infrastructure or we may not have sufficient capacity to satisfy our customers' requirements, which could harm our operating results. Moreover, because many of our expenses are components of our cost of revenues, our gross margins are likely to be negative for the foreseeable future.

Due to these and other factors, quarter-to-quarter comparisons of our operating results may not be meaningful. You should not rely on our results for any one quarter as an indication of our future performance. In future quarters, our operating results may fall below the expectations of public market analysts or investors. If this occurs, the market price of our common stock would likely decline.

We have rapidly expanded our business during the transition to becoming a health promotion/customer service and Internet software and development company, although we have decreased our number of employees from 79 at February 28, 2001 to 52 at February 28, 2002. We have completed several acquisitions of businesses which we now operate.

This growth has placed, and will continue to place, a significant strain on our employees, management systems and other resources. We expect our business to continue to grow in terms of headcount, geographic scope, number of customers and the scope of services we offer. There will be additional demands on our customer service support, research and development, sales and marketing and administrative resources as we try to increase our service offerings, expand our geographic scope and expand our target markets. The strains imposed by these demands are magnified by our limited operating history. We may not be able to successfully manage our growth. In order to manage our growth successfully, we must:

Any failure by us to effectively manage our growth could disrupt our operations or delay execution of our business plan and consequently harm our business.

The markets related to each of our business divisions are rapidly evolving and highly competitive. Some of these will likely be characterized by an increasing number of market entrants, as there are few barriers to entry, and by industry consolidation. We expect that we will face competition from both existing competitors and new market entrants in the future.

Our competitors and other companies may form strategic relationships with each other to compete with us. These relationships may take the form of strategic investments, joint-marketing agreements, licenses or other contractual arrangements, any of which may increase our competitors' ability to address customer needs with their product and service offerings. In addition, we believe that there will be continued consolidation within the markets in which we compete. Our competitors may consolidate with one another, or acquire other technology providers, enabling them to more effectively compete with us. This consolidation could affect prices and other competitive factors in ways that would impede our ability to compete successfully and harm our business. To the extent that these providers expand the scope of these new services to address some of the functionality we currently provide, some of these companies may be unwilling to provide services to us or to enter into relationships with us.

Our success is dependent upon achieving significant market acceptance of our products and services by employers, healthcare organizations, physicians, healthcare professionals and, once we have adapted the Healthtrac products for use on the Internet, Internet consumers. We cannot guarantee that employers, healthcare organizations, medical professionals or Internet consumers will accept Healthtrac, or even the Internet, as a replacement for traditional sources of healthcare information. Market acceptance of our products and services depends upon continued growth in the use of the Internet generally and, in particular, as a source of healthcare information services for medical professionals and consumers. The Internet may not prove to be a viable channel for these services because of inadequate development of necessary infrastructure, such as reliable network backbones, or complementary services, such as high-speed modems and security procedures for the transmission of confidential and pri vate healthcare information, the implementation of competitive technologies, government regulation or other reasons. Failure to achieve and maintain market acceptance would seriously harm our business.

We will compete with other companies providing or maintaining online services or Web sites targeted to doctors and the health promotion and disease management industry, companies providing or maintaining online general health promotion and disease management information and related services, companies providing or maintaining public sector and non-profit Web sites that contain health-related information and services, companies providing or maintaining websearch services particularly geared to medical and healthcare Web sites, and publishers and distributors of traditional media targeted to doctors and the healthcare industry. Competition for users, members and advertisers, as well as general competition in the electronic commerce market, is intense and is expected to increase significantly.

Many of our competitors are larger than we are and have significantly greater financial resources and marketing capabilities than we do, together with better name recognition. It is also possible that new competitors may emerge and acquire significant market share. Competitors with superior resources and capabilities may be able to utilize such advantages to market their Web site, products and services better, faster and/or cheaper than we can. Increased competition is likely to result in reduced gross margins and loss of market share, either of which could have a material adverse effect upon our business, results of operations and financial condition. Because of these competitive factors and due to our comparatively small size and limited financial resources, we may be unable to compete successfully.

Our ability to compete successfully will require that we develop and maintain technologically advanced Web sites and provide superior products and services, attract and retain highly qualified personnel and obtain a significant customer base, and that we develop strategic partnerships that help us expand our products and services. There can be no assurance that we will be able to achieve these objectives. Failure to do so would have a material adverse effect on our business, operating results and financial condition.

The call center, telemarketing and customer relationship management industries are intensely competitive. We compete with numerous independent call centers, telemarketing and customer relationship management firms as well as the in-house operations of many of our existing or prospective clients. We compete for call center, telemarketing and customer relationship management services based on quality, technological expertise, customer service, price, value, range of service offerings, and available capacity.

Most businesses that are significant consumers of call center, telemarketing and customer relationship management services utilize more than one firm to outsource their business and often reallocate work among various firms from time to time. Clients often request call center, telemarketing and customer relationship management services to be provided on an individual project basis and we frequently are required to compete for individual projects as they are initiated.

Our business and operations are substantially dependent on the performance of our key employees. Following the year ended February 28, 2002, we entered into an employment agreement for a two year term with Thomas V. Kalebic to act as our President and CEO. Mr. Kalebic resigned from these positions on June 10, 2002. Although we believe that the loss of Mr. Kalebic will not have a materially adverse impact upon our company, there can be no assurance in this regard, nor any assurance that we will be able to find a suitable replacement for Mr. Kalebic. Furthermore, we do not maintain "key man" life insurance on the lives of any of our officers. If we lose the services of one or more of our executive officers or key employees or if one or more of them decides to join a competitor or otherwise compete directly or indirectly with us, we may not be able to successfully manage our business or achieve our business objectives.

Our future success depends on our ability to identify, hire, train, integrate and retain highly qualified technical, sales and marketing, managerial and administrative personnel. Our success is therefore dependent upon our ability to identify, hire and retain such qualified personnel, for whose services we will be in competition with other prospective employers, many of which may have significantly greater resources than we do. Additionally, demand for qualified personnel conversant with certain technologies is intense and may outstrip supply as new and additional skills are required to keep pace with evolving computer technology. As our customer base and revenue continue to grow, we will need to hire a significant number of qualified personnel. In particular, we need to hire a sufficient number of technical operations personnel in order to deploy customers on a timely basis. Competition for qualified personnel is intense, and we may not be able to attract, train, integrate or ret ain a sufficient number of qualified personnel in the future. As we grow, it will become more difficult to identify qualified personnel to fill technical positions, which will cause us to rely increasingly on internal training programs. Our failure to attract, train, integrate and retain qualified personnel could seriously disrupt our operations and increase our costs by forcing us to use more expensive outside consultants and reduce the rate at which we can increase revenue.

Important components of the compensation of our personnel are stock options and restricted stock, which vest typically over an extended period. We face a significant challenge in retaining our employees if the value of these stock options and restricted stock is either not substantial enough or so substantial that the employees leave after their stock options or restricted stock have vested. To retain our employees, we expect to continue to grant new options subject to vesting schedules, which could be dilutive to investors. If our stock price does not increase significantly above the prices of our options, we may also need to issue new options or grant additional shares of stock in the future to motivate and retain our employees.

Our Call Center and Healthtrac systems utilize sophisticated and specialized telecommunications, network and computer technology and proprietary software and have focused on the application of these technologies to meet our clients' needs. We anticipate that it will be necessary to continue to invest in and develop new and enhanced technology on a timely basis to maintain our competitiveness. Significant capital expenditures may be required to keep our technology up to date. Investments in technology and future investments in upgrades and enhancements to software for such technology may not necessarily maintain our competitiveness. Our future success will also depend in part on our ability to anticipate and develop information technology solutions which keep pace with evolving industry standards and changing client demands.

In addition, our business is highly dependent upon our computer and telephone equipment and software systems, and the temporary or permanent loss of such equipment or systems, through casualty, operating malfunction or otherwise, could have a materially adverse effect upon our company. Our business systems depend on the smooth operation of computer systems that may be affected by circumstances beyond our control. Events that could cause system interruptions are:

Although we back up data as a matter of course, and take other measures to protect against loss, there is still a certain degree of risk of such losses. A system outage or data loss could adversely affect our business.

Despite the security measures that we maintain, our systems may be vulnerable to computer viruses, hackers, rogue employees or similar sources of disruption. Any interruptions in our operations could have a materially adverse effect on our business. Any problem of this nature could result in significant liability to customers or financial institutions and may deter potential customers from using its services. We attempt to limit this sort of liability through back-up systems, contractual provisions and insurance. However, there is no assurance that these contractual limitations would be enforceable, or that our insurance coverage would be adequate to cover potential liabilities.

Our operations are dependent upon our ability to protect our Healthtrac and Call Center information databases against damage that may be caused by fire, power failure, telecommunications failures, unauthorized intrusion, computer viruses and other emergencies. We have taken precautions to protect our company and our customers from events that could interrupt delivery of our services. These precautions include off-site storage of backup data, fire protection and physical security systems, backup power generators and a disaster recovery plan. We also maintain business interruption insurance in amounts that we consider adequate. Notwithstanding such precautions, there can be no assurance that a fire, natural disaster, human error, equipment malfunction or inadequacy, or other event will not occur.

The growth of our Call Center business depends in large part on the industry trend toward outsourcing information technology and administrative services. There can be no assurance that this trend will continue, as organizations may elect to perform such services in-house. We intend to alleviate our dependence upon any one revenue stream by expanding our business operations vertically and horizontally. Nevertheless, a significant change in the direction of this trend toward outsourcing could have a materially adverse effect on our company.

Our future success will depend in large part upon our ability to keep pace with technology. Rapid changes have occurred, and are likely to continue to occur. There can be no assurance that our development efforts will not be rendered obsolete by research efforts and technological advances made by others. The market for information technology services is characterized by rapid technological advances, frequent new product introductions and enhancements, and changes in customer requirements. Although we believe that our Call Center is sufficient for the present, we believe that our future success will depend in large part on our ability to service new products, platforms and rapidly changing technology. These factors will require that we provide adequately trained personnel to address the increasingly sophisticated, complex and evolving needs of our customers. Our ability to capitalize on future acquisitions in the Call Center and health promotion and disease management industries w ill depend on our ability to (i) enhance our software and successfully integrate such software into our technical product support services, (ii) adapt such software to new hardware and operating system requirements and (iii) develop new software products in an industry characterized by increasingly rapid product and technological obsolescence. Our success is dependant upon Healthtrac's ability to upgrade and enhance its existing programs and systems. Our failure to anticipate or respond rapidly to technological advances, new products and enhancements, or changes in customer requirements could have a materially adverse effect on our company.

The market for Internet software and Web site design and development services is characterized by rapid technological change, frequent new hardware, software and networking product introductions and Internet-related technology enhancements, uncertain product life cycles, changes in customer demands and evolving industry standards. Any delays in responding to these changes and developing and releasing enhanced or new services could hinder our ability to retain existing and obtain new customers. In particular, our technology is designed to support a variety of hardware, software and networking products that we believe to be proven and among the most widely used. We cannot assure you, however, that present and future customers will continue to use these products. Even if they do, new versions of these products are likely to be released and we will need to adapt our technology to these new versions. We must, therefore, constantly modify and enhance our technology to keep pace with chang es made to our customers' hardware and software configurations and network infrastructures. If we fail to promptly modify or enhance our technology in response to evolving customer needs and demands, our technology could become obsolete, which would significantly harm our business. In addition, frequent changes in the hardware, software and networking components of the systems and services we provide could adversely affect our ability to automate the deployment process, a key element of our business strategy.

Our success is dependent upon our ability to provide the latest technology for our operation processes and our ability to enhance and provide clinical upgrades in our disease management and health promotion programs based on the latest research. Our success may also require that we continue to perform science-based evaluations on the impact of our programs.

If we do not develop, license or acquire new services, or deliver enhancements to existing products on a timely and cost-effective basis, we may be unable to meet the growing demands of our existing and potential customers. In addition, as we introduce new services or technologies into existing customer architectures, we may experience performance problems associated with incompatibility among different versions of hardware, software and networking products. To the extent that such problems occur, we may face adverse publicity, loss of sales, delay in market acceptance of our services or customer claims against us, any of which could harm our business.

The standard customer agreement for customers of the Call Center are short-term and can be terminated without cause by either party. We expect that there will be terminations and non-renewals from time to time and that we may not be able to replace all of these clients. Our ability to generate revenues and our financial performance could be damaged by a significant number of terminations or non-renewals of such contracts.

Use of the Internet by businesses and consumers as a medium for commerce is still in the early stages of development, and is therefore subject to uncertainty. E-commerce is a relatively recent development. Rapid growth in the use of and interest in the Internet has occurred only recently. Acceptance and use may not continue to develop at historical rates and a sufficiently broad base of consumers and businesses may not adopt or continue to use the Internet and other online services as a medium of commerce. The development of the Internet as a commercial marketplace may occur more slowly than anticipated. Factors that may affect Internet usage include:

These factors could result in slower response times or adversely affect usage of the Internet, resulting in lower numbers of e-commerce transactions and decreased demand for our services. If Internet usage does not continue to increase, demand for our services may be limited and our business and results of operations could be harmed.

Our success depends in large part on our intellectual property, including our proprietary software technology. We currently rely on a combination of copyright, trademark, trade secret and other laws and restrictions on disclosure to protect our intellectual property rights. We currently hold the Internet domain names "www.virtualsellers.com", "www.Healthtrac.com" and "www.MyHealthtrac.com" as well as various other related names, and we use "VirtualSellers", "Healthtrac" and "TAME" as tradenames. Domain names generally are regulated by Internet regulatory bodies and are subject to change and may be superseded, in some cases, by the laws, rules and regulations governing the registration of tradenames and trademarks with the United States Patent and Trademark Office and certain other common law rights. In the event that the domain registrars are changed, new ones are created or we are deemed to be infringing upon another's tradename or trademark, we could be unable to prevent third par ties from acquiring or using, as the case may be, our domain name, tradenames or trademarks which could adversely affect our brand name and other proprietary rights. These legal protections afford only limited protection, and our means of protecting our proprietary rights may not be adequate.

Our intellectual property may be subject to even greater risk in foreign jurisdictions, as the laws of many countries do not protect proprietary rights to the same extent as the laws of the United States. If we cannot adequately protect our intellectual property, our competitive position may suffer.

We may be required to spend significant resources to monitor and police our intellectual property rights. We may not be able to detect infringement and may lose our competitive position in the market before we are able to ascertain any such infringement. In addition, competitors may design around our proprietary technology or develop competing technologies. Litigation may be necessary in the future to enforce our intellectual property rights, to protect our trade secrets, to determine the validity and scope of the proprietary rights of others or to defend against claims of infringement. Any such litigation could result in substantial costs and diversion of resources, including the attention of senior management. Defending against intellectual property infringement and other claims could be time consuming and expensive and, if we are not successful, could subject us to significant damages and disrupt our business.

Other companies, including our competitors, may obtain patents or other proprietary rights that would prevent, limit or interfere with our ability to make, use or sell our services. As a result, we may be found to infringe on the proprietary rights of others. In the event of a successful claim of infringement against us and our failure or inability to license the disputed technology, our business and operating results would be significantly harmed. Intellectual property litigation has become prevalent in the Internet and software fields. Any litigation or claims, whether or not valid, could result in substantial costs and diversion of resources. Intellectual property litigation or claims could force us to do one or more of the following:

If we are forced to take any of the foregoing actions, our business may be seriously harmed. In addition, any of these could have the effect of increasing our costs and reducing our revenue. Our insurance may not cover potential claims of this type or may not be adequate to indemnify us for all liability that may be imposed.

We have limited internal marketing and sales resources and personnel. In order to market our current products and services and any future products and services we may develop, we will have to either develop a marketing and sales force with technical expertise and distribution capability or outsource such duties to independent contractors. There can be no assurance that we will be able to establish sales and distribution capabilities or that we will be successful in gaining market acceptance for our current products or services and any future products and services we may develop. There can be no assurance that we will be able to recruit skilled sales, marketing, service or support personnel, that agreements with distributors will be available on terms commercially reasonable to us, or at all, or that our marketing and sales efforts will be successful. Failure to successfully establish a marketing and sales organization, whether directly or through third parties, would have a materia lly adverse effect on our business, financial condition, cash flows, and results of operations. To the extent that we arrange with third parties to market our products or services, the success of such products and services may depend on the efforts of such third parties. There can be no assurance that any of our proposed marketing schedules or plans can or will be met.

Laws and regulations governing Internet services, related communications services and information technologies and electronic commerce are beginning to emerge but remain largely unsettled, even in areas where there has been some legislative action. It may take years to determine whether and how existing laws, such as those governing intellectual property, privacy, libel, telecommunications, and taxation, apply to the Internet and to related services such as ours. Uncertainty and new laws and regulations, as well as the application of existing laws to the Internet, in our markets could limit our ability to operate in these markets, expose us to compliance costs and substantial liability and result in costly and time consuming litigation. The international nature of the Internet and the possibility that we may be subject to conflicting laws of, or the exercise of jurisdiction by, different countries may make it difficult or impossible to comply with all the laws that may govern our ac tivities. Furthermore, the laws and regulations relating to the liability of online service providers for information carried on or disseminated through their networks is currently unsettled.

The information provided by us is intended to be in addition to, and not in substitution for, medical advice from a user's own physician. However, medical advice may be dispensed both directly by doctors and indirectly through our Healthtrac products. Damage awards in medical malpractice suits can be very high, potentially creating a financial burden that we could not withstand if such a suit were successful and not fully covered by insurance.

The healthcare industry is highly regulated and is subject to changing political, regulatory and other influences. These factors affect the purchasing practices and operations of healthcare organizations. Federal and state legislatures and agencies periodically consider programs to reform or revise the United States healthcare system. These programs may contain proposals to increase governmental involvement in healthcare, lower reimbursement rates or otherwise change the environment in which healthcare industry participants operate. Healthcare industry participants may respond by reducing their investments or postponing investment decisions, including investments in our applications and services. We are unable to predict future proposals with any certainty or to predict the effect they would have on our business.

Existing laws and regulations also could create liability, cause us to incur additional cost or restrict our operations. Many healthcare laws are complex, applied broadly and subject to interpretation by courts and other governmental authorities. In addition, many existing healthcare laws and regulations, when enacted, did not anticipate the methods of healthcare e-commerce and other products and services that we provide. However, these laws and regulations may nonetheless be applied to our products and services. Our failure, or the failure of our business partners, to accurately anticipate the application of these healthcare laws, or other failure to comply, could create liability for us, result in adverse publicity and negatively affect our business.

As described in more detail above, we believe that we are in a position to comply with HIPAA. We are continuing to develop our HIPAA-ready solutions and our business strategy for marketing those solutions and services. Changes in compliance deadlines or in other aspects of the HIPAA regulations may cause us to make changes to our strategy or require us to develop different solutions. The effect of HIPAA on our business is difficult to predict and there can be no assurances that we will adequately address the business risks created by HIPAA and its implementation or that we will be able to take advantage of any resulting business opportunities. In addition, we are unable to predict what changes to the HIPAA regulations will be made in the future or how those changes could affect our business.

The extension of the deadline for complying with the HIPAA transaction standards will cause us to have a longer period of time in which we must accommodate our customers' varying states of readiness to test new systems and move to the new standards. There can be no assurance that we will be able to meet our customers' requested deadlines.

The terrorist attacks in New York and Washington, D.C. on September 11, 2001 appear to be having an adverse affect on business, financial and general economic conditions. This may, in turn, have an adverse effect on our business and results and operations. At this time, however, we are not able to predict the nature, extent and duration of these effects on overall economic conditions or on our business and operating results.

Many of our customers are affected by economic conditions in the United States and throughout the world. Many companies have announced that they will reduce their spending which may include them spending less on information technology systems, Internet applications and healthcare promotion products. If such spending is reduced by customers and potential customers, our sales could be harmed, and we may experience greater pressures on our gross margins. If economic conditions do not improve, or if our customers reduce their overall purchases, our business, sales, gross profits and operating results may be adversely affected.

The trading price of our common shares has been, and in the future is expected to be, volatile and expect to experience further market fluctuations as a result of a number of factors. These factors include, but are not limited to, current and anticipated results of operations as well as changes in our business, operations or financial results, the timing of sales of common shares by our shareholders, prospects of general market and economic conditions and other factors.

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

Our common shares are currently traded on the OTC Bulletin Board and are not listed for trading on the NASDAQ system. A company must meet certain quantitative criteria relating to its total assets, its capital and the trading prices of its securities to be included on the NASDAQ system. In addition, the NASDAQ staff may consider other factors, such as the company's management and the circumstances surrounding the company's operations, when determining whether to approve a company's application for inclusion in the NASDAQ system. We cannot guarantee that we will ever by listed on NASDAQ or any other stock exchange or automated quotation system. As a result, it may be more difficult to dispose of, or to obtain adequate quotations as to the prices, of our common stock.

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

We plan to pursue collaborative arrangements with other market leaders to develop, manufacture and market health promotion and disease management, application development and telecommunication services. Such agreements already exist with ASI, a web hosting company that has 160,000 business available to market its complete e-commerce solutions, and with World Satellite Network (WSNet), a provider of programming, hardware and network edge integrated digital services to private and franchised broadband service providers. Our future success will depend in large part on our ability to continue to form collaborative arrangements with third parties, our strategic interest in the potential products under development and, eventually, our success in marketing or willingness to purchase any such products. These programs may require that we share control over our marketing programs or restrict our ability to engage in certain areas of product development, production and marketing. These progra ms may also be subject to unilateral termination by our collaborative partners without cause or default and without an ability to cure any defaults. Accordingly, we may compete with our partners (and others to whom disclosure maybe made) for commercial sales of any products or services developed in these arrangements. There can be no assurance that we will be able to enter into collaborative arrangements on commercially reasonable terms, that these arrangements, if established, will result in successful programs to develop, manufacture or market products or that, if those programs are successful, our collaborative partners will not seek to compete directly through jointly developed products themselves or obtain them from alternative sources.

In order to grow our business and finance future acquisitions, we will require additional financing. We currently have a working capital deficiency of $1,868,569. As of February 28, 2002, our accumulated deficit was $117,073,324. Furthermore, we have experienced negative cash flows during each of the last three years of operations. We have historically depended upon capital infusion from the issuance of long term debt and equity securities to provide the cash needed to fund operations. Our ability to continue in business depends upon our continued ability to obtain significant financing from external sources. We are currently raising additional funds through the sale of additional equity. If this additional capital were raised through borrowing or other debt financing, we would incur substantial additional interest expense. Sales of additional equity securities, through a traditional underwritten offering, would dilute, on a pro rata basis, the percentage ownership of all holde rs of common shares. There can be no assurance that any such financing would be available upon terms and conditions acceptable to us, if at all. The inability to obtain additional financing in a sufficient amount when needed and upon acceptable terms and conditions could have a material adverse effect upon our company and our revenue growth may be adversely affected. If adequate funds are not available on acceptable terms when needed, we may be required to delay, scale-back or eliminate marketing of one or more of our products or development programs or obtain funds through arrangements with collaborative partners or others that may require us to relinquish rights to certain of our technologies, product candidates or potential products that we would not otherwise relinquish. Inadequate funding also could impair our ability to compete in the marketplace and could result in our dissolution.

We are authorized to issue 150,000,000 each of Class A and Class B preference shares, with such designations, rights and preferences as may be determined from time to time by our board of directors. Accordingly, our board of directors is empowered, without stockholder approval, to issue such preference shares with dividend, liquidation, conversion or other rights which could adversely affect the rights of the our shareholders. The issuance of preference shares could, among other things, adversely affect the voting power of our shareholders and, under certain circumstances, make it more difficult for a third party to gain control of our company, discourage bids for common shares at a premium or otherwise adversely affect the market price for common shares.

Our bylaws contain provisions limiting the liability of our officers and directors for all acts, receipts, neglects or defaults of themselves and all of our other officers or directors or for any other loss, damage or expense happening to our company which shall happen in the execution of the duties of such officers or directors. Such limitations on liability may reduce the likelihood of derivative litigation against our officers and directors and may discourage or deter our shareholders from suing our officers and directors based upon breaches of their duties to our company, though such an action, if successful, might otherwise benefit our company and our shareholders.

Our bylaws contain provisions entitling our directors and officers to indemnification from all costs, charges, expenses, including any amount paid to settle an action or satisfy a judgment reasonably incurred by such officer or director with respect to any civil, criminal or administrative action or proceeding to which such officer or director is made a party by reason of being or having been an officer or director of our company. We have authorized the indemnification of our officers and directors in such other circumstances permitted under the Canadian Business Corporations Act which may reduce the likelihood of derivative litigation against directors and officers and may discourage or deter shareholders from suing directors or officers for breaches of their duties to our company, though such an action, if successful, might otherwise benefit us and our shareholders. Our bylaws also provide for the indemnification of our directors and officers from judgments, fines, amounts paid in sett lement and reasonable expenses as a result of an action or proceeding in which they may be involved by reason of being or having been a director or officer of our company as long as the acts were done in good faith. We are not presently aware of any claims which would result in our indemnification of our directors and officers. Such provisions do not eliminate the personal liability of our directors and officers for monetary damages as a result of a breach of fiduciary duty. We will indemnify against reasonable costs and expenses incurred in connection with any action, suit or proceeding to which any of such individuals were made a party by reason of his or her being or having been such a director of officer, unless such person has been adjudicated to have been liable for negligence or misconduct in his or her corporate duties. Although we may obtain an insurance policy which will cover such indemnity, there can be no assurance that such a policy will be available or that, if available, it will be adequa te. To the extent that we are required to expend funds to indemnify officers and directors, it could have a materially adverse effect upon our financial condition.

Furthermore, our bylaws allow for insurance for the benefit of our officers and directors against such liabilities and in such amounts as the Board of Directors may determine. We currently subscribe to Directors and Officers Liability Insurance from Tri-City Brokerage of Illinois, Inc. for $3,000,000 for each claim and as an annual aggregate.

The grant and exercise warrants of creditors or otherwise or stock options would likely result in a dilution of the value of the common shares. Moreover, we may seek authorization to increase the number of our authorized common shares and to sell additional securities and/or rights to purchase such securities at any time in the future. Dilution of the value of the common shares would likely result from such sales.

In addition, we may determine to grant additional stock options or other forms of equity-based incentive compensation to our management and/or employees to attract and retain such personnel. We also may in the future offer equity participation in connection with the obtaining of non-equity financing, such as debt or leasing arrangements accompanied by warrants to purchase equity securities of our company. Any of these actions could have a dilutive effect upon the holders of the common shares.

We have never paid a cash dividend on the common shares and do not expect to pay dividends in the foreseeable future.

We currently lease the following office locations:

On January 31, 2001, Chambers, Devonshire & Wyerhaus Ltd., a shareholder of our company, commenced a lawsuit against our company and two of our directors, Dennis Sinclair and Raymond Mol, in the Circuit Court of Cook County, Illinois. In the lawsuit, Chambers alleges as follows:

Chambers is seeking the following relief:

Our company and management believe that this lawsuit has no merit. At a hearing held in this lawsuit on July 13, 2001, the Judge in this case struck the Plaintiff's Complaint because it was insufficient in both substance and form. A Complaint is the formal name of the document in which a plaintiff states his claim - a plaintiff without a Complaint has no claim for the court to adjudicate. The Judge gave the Plaintiff in this lawsuit permission to file an amended Complaint if he did so by August 10, 2001. On August 10, 2001, the Plaintiff asked the Judge for an extension of time in which to file the amended Complaint and the court granted the Plaintiff an extension until September 7, 2001. The Plaintiff, without notice to us or our attorneys, filed an amended Complaint on September 7, 2001 of which we have only recently been advised. We believe that the amended Complaint is without merit and we will shortly file a motion asking that it be dismissed.

On September 25, 2001, Rolling Meadows Associates, I, LLC, by Zaragon Holdings, Inc., filed a Complaint in Cook County, Illinois Circuit Court against VirtualSellers.com, Inc. for possession of the premises located at 3075 Tollview Drive, Rolling Meadows Illinois and for rent or damages for withholding possession of these premises for the period from September 1, 2001 through September 30, 2001 in the amount of $26,315 plus all rents accruing through the date of trial. At a hearing held October 16, 2001, the Court granted possession of the premises to the Plaintiff. Subsequently, the Plaintiff filed an amended Complaint asking for $116,762.31 in rent, late fees, costs, interest and attorneys' fees. Thereafter, the Plaintiff again amended its Complaint to demand an additional $683,000, for a total claim of $859,512. We deny that we owe the Plaintiff any money. In addition, we have asserted various affirmative defences and we have filed a Counterclaim arising out of the Plaintiff/landlo rd's interference with our efforts to negotiate a sublease by bypassing us and negotiating a new lease directly with the company with whom we were negotiating a sublease, with whom the Plaintiff/landlord did eventually enter into a new lease. Our affirmative defences include a claim that the demand for the additional $683,000 constitutes an unlawful claim for liquidated damages, that the Plaintiff's interference with our efforts to negotiate a sublease caused us to lose profits in excess of the rent being demanded of us, as well as the opportunity to be released from the liability that the Plaintiff alleges we have under the lease. We are also alleging that the Plaintiff waived any right to seek rental payments, and is estopped from doing so, and that the Plaintiff is itself in material breach of the lease.

We commenced a lawsuit in November, 1996 in the Supreme Court of British Columbia (Vancouver Registry) against Vancouver Telephone Company Ltd., a former customer of our company, who refused to pay outstanding invoices totalling approximately $500,000. On July 17, 2001, we entered into a settlement agreement with Vancouver Telephone, whereby Vancouver Telephone agreed to pay our company CDN$275,000 over eight months, ending on February 1, 2002. We received all payments under the settlement agreement with Vancouver Telephone.

Pursuant to a Loan and Pledge Agreement, dated July 26, 2001, among our company, Strategic Investments Management SA and Dennis Sinclair, as Pledgor, Strategic Investments agreed to loan $100,000 to our company. As evidence of the loan our company executed and delivered to Strategic Investments a six-month negotiable promissory note and Dennis Sinclair, one of our directors, pledged an aggregate of 300,000 of his common shares of our company as security for the obligations to repay the promissory note. As repayment was not made on the maturity date of the loan, Strategic Investments exercised its rights pursuant to the default provisions of the Loan and Pledge Agreement. Strategic Investments executed upon the collateral posted for the loan and received $34,360.30 for the 300,000 shares, leaving a balance due and owing, before the imposition of interest before and after default, of $65,639.70. By letter dated March 5, 2002, the parties agreed upon a settlement whereby we would (1) deli ver a Consent Judgment for the full amount of the loan; (2) deliver an initial payment of $5,639.70 on or before March 20, 2002 together with a promise to pay $5,000 per month during each of the following twelve months; and (3) if payment is made in full, then Strategic Investments will return the Consent Judgment and forgive the interest, and any claim against Dennis Sinclair. We delivered an initial payment of $11,279.40 on or about April 20, 2002 representing the initial payment of $5,639.70 and the next monthly payment of $5,000.

On July 25, 2001 in the Vancouver Registry of the Supreme Court of British Columbia, our company commenced a lawsuit against Telemetrix Solutions Inc. (formerly Telemetrix Resource Group, Inc.) and Tracy Corporation II dba Western Total Communications asserting a claim against Telemetrix and Tracy in the amount of CDN$64,658 jointly and severally (plus pre-judgment interest) pursuant to a letter agreement entered into between the parties on or about July 14, 1998 with respect to a possible business combination between the parties which was never completed. A provision in the agreement regarding the proposed business combination obligated Telemetrix and Tracy to pay our costs in connection with the proposed business combination. Although no Appearance or Statement of Defence has been filed on behalf of Telemetrix and Tracy, they have advised us that they take the position that the British Columbia Court has no jurisdiction over this matter and further, that any dispute must be dealt with by way of arbitration to be held in Denver, Colorado.

On November 9, 2001, Globalcom, Inc. filed a lawsuit against our company in the Circuit Court of Cook County, Illinois, County Department, Chancery Division (Case No. 01 L 014565), claiming that they had provided telecommunications services to our company under a written three year contract and that we were in default of that contract for non-payment of sums due. In this lawsuit, Globalcom, Inc. is claiming that we owe them $32,556.73 in damages and $273,617.68 in liquidated damages (the liquidated damage claim is for the balance of the monthly service charges that would have been paid if the contract had remained in effect for the full term). We believe that the liquidated damages claim is an unenforceable penalty and we have filed a motion to have this part of the claim dismissed on this ground. This motion is scheduled to be heard on July 9, 2002. We dispute the claims made in the lawsuit and we intend to offer a vigorous defence.

On October 18, 2001, Steven & Marc Holdings, Inc. filed a lawsuit against our company in the Supreme Court of the State of New York, Court of New York, Case No. 604972/01. In this lawsuit, Steven & Marc Holdings, Inc., a public relations firm, is claiming that we owe them $61,480, plus interest and costs, for services rendered but not paid for between March and October of 2001. We have filed an Answer in this lawsuit and we are attempting to settle it at a reduced amount on a payment plan.

Other than as set forth above, to our knowledge no other lawsuits were commenced against us during the period ended February 28, 2002, nor did we commence any lawsuits during the same period.

On February 22, 2002, we held an Annual and Special Meeting of our shareholders for the year ended February 28, 2001 to deal with the following matters:

During the year ended February 28, 2002, our common stock, which is quoted on the OTC Bulletin Board, was traded under the symbol "VDOT" and CUSIP number 928254 10 5. On March 25, 2002, following our name change to Healthtrac, Inc., our symbol was changed to "HTAC" and our CUSIP number is now 42226R 10 0. Our common shares continue to trade on the OTC Bulletin Board. The following quotations reflect the high and low bids for our common stock based on inter-dealer prices, without retail mark-up, mark-down or commission and may not represent actual transactions. The high and low prices of our common stock (obtained from Canada Stockwatch and Yahoo Finance) for the periods indicated below are as follows: