(Mark One)

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

For the transition period from [ ]to[ ]

Securities registered pursuant to Section 12(b) of the Act:

Securities registered pursuant to Section 12(g) of the Act:

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

Yes  [X]     No [ ]

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (229.405 of this chapter) is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. [ ]

State the aggregate market value of the voting and non-voting common equity held by non-affiliates of the registrant. The aggregate market value shall be computed by reference to the price at which the common equity was sold, or the average bid and asked prices of such common equity, as of a specified date within 60 days prior to the date of filing.

Indicate by check mark whether the registrant has filed all documents and reports required to be filed by Section 12, 13 or 15(d) of the Securities Exchange Act of 1934 subsequent to the distribution of securities under a plan confirmed by a court.     Yes [X]     No [ ]

Indicate the number of shares outstanding of each of the Registrant's classes of common stock, as of the latest practicable date.

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

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

As used in this annual report, the terms "we", "us", "our", and "Virtualsellers" mean Virtualsellers.com, Inc. and our subsidiaries, unless otherwise indicated.

All dollar amounts refer to US dollars unless otherwise indicated.

Our business operations focus on traditional and e-commerce transaction processing and "backroom support" services for other businesses. Part of our services include assisting businesses in their transition from old technologies or dissimilar software systems to state-of-the-art e-commerce capable websites so that they can retail their products and/or services over the Internet.

We provide the following services and/or products:

- through our call center, we provide transaction processing, centralized billing, customer and technical support, customer service, order entry, order fulfilment, bill collection, help desk services and dispatch functions;

- through Virtualsellers.com, we provide complete e-commerce and e-business solutions that allow businesses to immediately and affordably develop and maintain an effective e-business presence on the Internet, and also provide turnkey e-commerce transaction processing services, website development, maintenance and hosting services and customized Internet design, development, deployment and project management services;

- through CallDirect, we sell telephone related products and, in the future, intend to provide transaction processing and customer services;

- through Virtualsellers.com, we also sell our proprietary software engine and language interpreter called TAME (Tag Activated Markup Enhancement); and

- through Sullivan Park, we are an Internet services developer focusing on designing, building and deploying web strategies for established and start-up companies, we specialize in the development of online stores;

Virtualsellers is a Canadian corporation with its head and executive offices located at Suite 1000, 120 North LaSalle Street, Chicago, Illinois 60602 (Telephone: (312) 920-9120; Facsimile (312) 920-1871).

Virtualsellers.com, Inc. was incorporated under the laws of the Province of British Columbia on January 29, 1982 under the name "Thunder Oil & Gas Ltd.". Our name was changed to "Thunder Explorations Ltd." on May 9, 1983. On April 22, 1985, we changed our name to "CAM-NET Communications Network Inc." and on February 1, 1991, our company was continued under the Canada Business Corporations Act. On August 1, 1997, we changed our name to "Suncom Telecommunications, Inc." and on May 31, 1999, we changed our name to "Virtualsellers.com, Inc.".

We had the following subsidiaries as of May 1, 2001:

(1) Canadian Northstar Transmission Systems Ltd. and Canadian-American Communications Inc. are being dissolved but a Notice of Dissolution has not yet been issued.

(2) Northnet Telecommunications Inc. is an Illinois corporation qualified to transact business in Indiana.

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, we filed for and the Court granted protection from our creditors under the CCAA (the "CCAA Proceedings"). Court protection was required to ensure that our assets were kept intact during the reorganization process in order to allow us to carry on our business while formulating a restructuring plan. 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.

Shortly after receiving protection by the Court, it became apparent to us that we would not be able to obtain sufficient new financing for our business operations early enough in the restructuring process to permit us to continue to serve our telecommunications customers. In order to preserve the value of our assets and yield the greatest return to our creditors, we determined that it was in our best interest 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.

We also determined that there was inherent value in the remaining assets of Cam-Net Communications Inc. and Cam-Net Telecommunications Inc., including significant tax losses accrued within our affiliated groups as a result of business losses incurred during previous years. Since we could not utilize these losses at the time and because these losses would cease to have value over time, we decided to sell these businesses. 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 the inter-company debt owned 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$525,000, with GT Communications receiving approximately CDN$360,000 of the proceeds.

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.

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 the call center, see the section entitled "Call Center Operations" in Item 1 - Description of Business.

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 stock. 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.

We continue to operate this business under a newly created subsidiary called eCommerce Solutions Inc. doing business as VirtualSellers.com. For details of the operations of Virtualsellers.com, see the section entitled "E-Commerce Operations" in Item 1 - Description of Business.

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.

We continue to operate CallDirect's business through our subsidiary, Preferred Telemanagement Inc. For details of the operations of CallDirect, see the section entitled "CallDirect Operations" in Item 1 - Description of Business.

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)" in "Item 1 - Description of Business".

On June 1, 2000, we acquired all of the property, assets and undertakings of the internet services development business carried on by Sullivan Park LLC and Edward W. Sharpless.

Under the terms of the Asset Purchase Agreement, the aggregate sum payable by us to Sullivan Park was that number of shares of our common stock equal to the sum of $2,700,000, divided by the closing sale price per share of our common stock on the trading day immediately preceding the earlier of (a) the first anniversary of the date of the Asset Purchase Agreement and (b) the date upon which the common shares payable to Sullivan Park and Mr. Sharpless are registered under the Securities Act of 1933, as amended, and as contemplated in the Asset Purchase Agreement. As part of the acquisition, we entered into an employment agreement with Edward Sharpless and retained several of Sullivan Park's employees.

For further details with respect to Sullivan Park, see the section entitled "Sullivan Park" in "Item 1 - Description of Business".

Subsequent to our year end and 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.

For further details on the proposed operations of our healthcare division, see the section entitled "Healthcare Operations" in "Item 1 - Description of Business".

As of May 1, 2001, our directors and executive officers were as follows:

Our executive officers are traditionally elected to office at the first meeting of the board of directors following our annual meeting of shareholders. Each officer holds office until the first meeting of the board of directors following our next annual meeting or until a successor is chosen. Biographical information with respect to our executive officers is as follows:

Dennis Sinclair obtained his Ph.D., Economics and Sociology, M.A., Sociology and B.A., Psychology from the University of Michigan and has been an adjunct professor at various universities, including the University of Michigan, University of Southern California, University of Redlands, Pepperdine University and a full-time professor at UCLA Graduate School of Management. He has developed extensive experience in consulting to corporate clients by providing general management and corporate consulting services to many companies through his own consulting company. Mr. Sinclair has developed extensive experience in all aspects of operating, directing and managing both private and public companies through his positions as Senior Analyst and Investment Banker with H.J. Meyers Inc. (08/95 to 12/96), an Investment Advisor with Securities America (08/94 to 08/95), a Director of New Business Development with Validyne Engineering Corporation (08/92 to 08/94) and his various other corporate positions prior to 1992.

Robert Watson obtained a Master of Business Administration in Hospital Administration and Finance, from the Wharton Graduate School of Business at the University of Pennsylvania. Prior to that Mr. Watson obtained a Bachelor of Arts in Health Policy Studies and Information and Library Science. From March, 2000 to December, 2000, Mr. Watson was the Vice President and General Manager for the eHealth division of Cerner Corporation and the CEO of IQHealth, Inc., a subsidiary of Cerner at Cerner and IQHealth. Mr. Watson was responsible for operating Cerner's eHealth division. From February, 1998 to March, 2000, Mr. Watson was the CEO of American Medical Pathways, Inc. and Corporate Vice President of American medical Response, Inc. Mr. Watson was responsible for the commercialization and release of software responsible for scheduling and managing emergency and non-emergency medical transportation services. From May, 1996 to February, 1998, Mr. Watson was the Executive Vice President of Business Development and Strategic Planning for CallConnect Communications, Inc., a company involved in the provision of health care telecommunications outsourcing products and services. From August, 1994 to May, 1996, Mr. Watson was the Chief Financial Officer for CallConnect.

Mel Baillie obtained a Bachelor of Education Degree from the University of Alberta subsequent to which he undertook post degree studies in Business Administration. In addition to his formal education, Mr. Baillie has taken numerous on the job courses relating to strategic marketing and planning, selling, financial management, management development and leadership and process design and management. Mr. Baillie has significant marketing, sales, operations and strategic management experience acquired from over 20 years in the telecommunications industry. He is currently the President and CEO of Netdriven Solutions Inc., a managed storage networking solutions company, a position he has held since March 1, 2001. Prior to his position with Netdriven Solutions Inc., Mr. Baillie was the Vice President of Marketing and Sales at Bell Intrigna, a position he held between June, 2000 and January, 2001. He was the Vice President of Marketing and Sales for Westel Te lecommunications (12/95 to 12/96) where he directed the marketing department, the major account sales group and commercial sales teams throughout the province of British Columbia. Prior to that Mr. Baillie was the Vice President Sales for Western Canada of Unitel Communications Inc. (1991 to 1995) and the Executive Director of Carrier Relations for AT&T Canada (1991). Mr. Baillie was also a Director, Major Accounts, Western Canada for Northern Telecom Canada Ltd. (1989 to 1991), General Manager, Sales, Western Canada for C.N.C.P. Telecommunications (1988 to 1989), Executive Director, Canadian Government and Offshore Sales for Microtel Ltd. (1983 to 1988) and Marketing Manager and Global Project Manager for Northern Telecom Canada Ltd. (1977 to 1983).

Grayson Hand has over 25 years of senior management and executive business experience. He has acted as a director of Global Technologies Inc., Medical Polymers Technologies Inc., Tanisys Technology Inc. and Leigh Resources Ltd., each of which is a Canadian publicly traded company.

Pierre Prefontaine is currently a manager at Sprint Canada, a telecom business, and has held that position since March, 1999. Prior to his employment at Sprint Canada, Mr. Prefontaine was the President and CEO of Consolidated Technologies Inc. between 1990 and 1999. Mr. Prefontaine was previously a director of our company between November 14, 1996 and April 7, 1999.

Mr. Mol has over 20 years' experience in the teleconstruction industry. Mr. Mol was a promoter for CallDirect Capital Corp. between January and October, 1996, and was the Chief Financial Officer and founding partner of Lifestart Multimedia from April 1993 to October 1995. Mr. Mol was one of our directors between November 14, 1996 and March 15, 2000, and was re-elected as a director at the annual meeting held on August 4, 2000. Mr. Mol previously acted as our Chief Operating Officer, as position he held until June 20, 1998.

We currently employ 37 persons at our call center, 4 persons at CallDirect, 30 persons at Virtualsellers.com, 4 persons at Sullivan Park and 4 administrative staff at our corporate head office. Except for our executive officers, all employees are employees at will and both the employee and our company are free to terminate such employment relationships at any time.

Our current business operations involve traditional and e-commerce transaction processing and "backroom support" services for other companies/entities. Part of our operations include assisting businesses in developing state-of-the-art e-commerce capable websites so that they can retail their products and/or services over the Internet. We provide the following services and/or products:

- through our call center, we provide transaction processing, centralized billing, customer and technical support, customer service, order entry, order fulfilment, bill collection, help desk services and dispatch functions;

- through Virtualsellers.com, we provide complete e-commerce and e-business solutions that allow businesses to immediately and affordably develop and maintain an effective e-business presence on the Internet, and also provide turnkey e-commerce transaction processing services, website development, maintenance and hosting services and customized Internet design, development, deployment and project management services;

- through CallDirect, we sell telephone related products and, in the future, intend to provide transaction processing and customer services;

- through Virtualsellers.com, we sell its proprietary software engine and language interpreter called TAME (Tag Activated Markup Enhancement); and

- through Sullivan Park, we are an Internet services developer focusing on designing, building and deploying web strategies for established and start-up companies, we specialize in the development of online stores.

We operate one call center through our subsidiary, NorthNet Telecommunications, Inc. doing business as NorthStar TeleSolutions. Our call center is located at 68 - 74 South Park Boulevard, 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. Teleservices and other customer call center outsourcing services have evolved significantly in recent years with the expansion of e-business and Internet sales and service programs. Dot.com companies, click-and-mortar e-commerce companies, Internet service providers and application service providers are becoming increasingly focused on providing real-time, customer support for business and consumer-based Internet applications. Our management believes that this trend will continue and anticipate expanded demand for the services offered by our call center.

E-commerce has grown dramatically and with the addition of this new channel comes an increasing need for businesses to optimize the value of their customer relationships. To remain competitive in today's e-business marketplace, companies are realizing the importance of implementing an integrated customer service solution to effectively attract, acquire, retain, service, and measure customer satisfaction at every point in the customer communication cycle in order to maximize the lifetime value of each customer.

The call center industry generates more than $80 billion in revenues in North America with after-tax profit margins of approximately 7 to 10 percent annually and estimated growth rates of 25 to 40 percent a year. Based on these numbers, we anticipate that our call center operations will provide solid long-term growth potential with reasonable and achievable rates of return. In addition, our call center is a business that integrates well with our e-commerce services because most successful Internet business require the services of a full-scale call center to support their continuing operations.

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 by many of our clients or potential clients. 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.

Furthermore, we believe 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.

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 violations, 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 aspects 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 telemarketing 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 currently has the capacity for 70 call center representatives, but we are in the process of opening an office in which we will be able to staff more than 100 call center representatives. The call center offers clients customer service support 24 hours a day, seven days a week. The Call Center specializes in providing the following transaction processing and backroom services for other businesses and organizations:

- inbound/outbound telemarketing, including targeted marketing campaigns, cold calling, inbound marketing promotions and up-selling campaigns;

- customer and technical support through our help desk services;

- customer order entry;

- credit reporting;

- centralized customer billing which can be based on a specified anniversary dates, monthly, bi-monthly, quarterly, semi-annually or annually cycles and which can utilize separate invoices to ensure seemless identification between our customers and their users;

- customer account reconciliations and reporting using either a client's own banking structure or specially dedicated accounts at our bank;

- customer payment collection, including credit card and pre-authorized checking account drafts in order to reduce the number of non-payments;

- collection of customer accounts or disbursement of customer refunds;

- order fulfilment;

- customer service by our customer service representatives who receive comprehensive training including our "People First" training program as well as certification from HCTI for "Excellence in Customer Service" and MEI for "The Cable Ready CSR";

- customer dispatch functions to route all work orders and service calls to our customer's technician;

- remote system access to allow our customers to access their billing information via the Internet;

- direct mail services, involving the insertion of direct mail or other related items into customers' bills before mailing; and

- other computer telephone applications.

We can provide the customer with a package of bundled services or a customized package of any variety of services as are required by each particular customer. The call center provides high quality customer and order support for any company which helps our clients increase customer satisfaction and retention. Our call center provides the following guarantee to its clients:

- ninety percent of all calls will be answered within 30 seconds and the average answer time for all incoming calls will be below 30 seconds;

- phone coverage exists 24 hours a day / seven days a week through live customer service operators;

- all service outages will be recognized and reported within one hour of receipt of incoming calls;

- work orders and service calls will be faxed to all technical / contractor field locations prior to the beginning of each business day;

- all returned logs from technicians of completed work that is typically received in the evening will be responded to and completed in the billing system by noon the next business day which ensures the billing system and CSR's are updated on a regular basis;

- all subscriber invoices will be printed and delivered to the post office within 3 days of the file creation; and

- all incoming customer payments will be opened and posted to subscriber accounts as well as deposited into your bank account by the end of the business day.

We provide our services for a flat monthly rate or on a per transaction basis depending on the scope of services required. Our call center offers clients reports based strictly on subscriber data or custom reports involving high-level analysis. In either case, the reports can be easily downloaded by clients into their own spreadsheets or other statistical or analytical software program for review. These reports include financial reports, subscriber reports, work order and service call reports, telemarketing reports and inventory reports.

We plan to concentrate our call center services on transaction processing and customer service allowing the call center's 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 out 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.

Our call center system and software technologies are designed to improve call center representative production thereby lowering the effective cost per contact made or received, and to improve sales and customer service effectiveness by providing sales and service representatives with real-time access to customer and product information.

We realize significant cost savings through the use of innovative contact handling technology, computer telephone integration and advanced scripting software, all of which optimize agent utilization. Computer telephone integration accepts an inbound call from the public network and routes that call to the most advantageous and available resource to handle the call. Scripting software is used in the call center to provide the call center representative with the appropriate information to use during the contact and to specify the content and sequence of the information captured from the customer.

We use computer telephone integration and adopt the latest technologies so that we can provide the highest level of service while maintaining a competitive expense structure. Because computer telephone integration can be used with over-the-counter desktop software, it allows us to provide both cutting-edge and cost-effective services. This allows us to construct software systems using databases from software companies like Microsoft or Oracle.

We use call tracking software for quality assurance purposes, as well as to monitor customer order entry and billing, assess staff productivity, add information to the database and enable customized data reporting.

We also operate an electronic "knowledge base" that is a clearinghouse for information collected by the call center staff. The knowledge base can be searched to answer customer questions and solve customer problems. Through pop-up screen technology, the call center can simultaneously service numerous clients, with a minimum of manpower.

The call center uses interactive voice response software which allows callers to access certain information using their telephone. This technology decreases the amount of time required by call center representatives by assisting callers without involving a call center representative.

For our outbound telemarketing services, we use predictive dialling software which automatically dials phone numbers from a predetermined list. This software increases the efficiency of the call center staff by eliminating the physical dialling process and reducing downtime associated with telephone calls receiving no answers, busy signals and answering machines.

We use RRE's Cable Subscriber Management Software and DirectTV's online subscriber entry software to manage cable and internet subscribers, which offer a sophisticated outsource to system operators.

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 have over 44,000 cable subscribers. We offer our services to the following businesses:

- e-commerce businesses;

- private and franchised cable television operators;

- Internet service providers;

- providers of technical help desk support services;

- providers of property management services;

- direct broadcast satellite service providers;

- retailers of medical, healthcare and consumer products;

- in-house call centers;

- reservation centers; and

- providers of mail order catalogues, other forms of direct mail, broadcast fax and more traditional forms of marketing 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 are working to provide our e-commerce customers with the services offered by our call center, with the expectation that this expansion will lead to increased transaction volume.

We recently entered into a 3 year agreement with Skyway Partners, a provider of telecommunications services and network edge integrated digital services to multiple dwelling buildings and communities. Skyway's services include high-speed data and Internet access, local dialtone, long distance telephone, digital television and audio content via satellite and cable, as well as content-based services such as portals and e-commerce. Skyway delivers these services under its trade name "HotPipe.net". Our comprehensive billing and customer care solutions will support Skyway's billing and customer care needs, and Skyway will bring an additional subscriber base of 2,500 to NorthStar.

NorthStar is opening a new office at the end of May, 2001. This office will seat nearly 100 customer service representatives in an effort to accomodate the growth that NorthStar has experienced in it's cable and internet services group. NorthStar has lost an agreement with a client due to bankruptcy. This was an 8,000 subscriber client that could not continue with their growth due to limited financial resources and the downturn of the economy. Even though NorthStar lost 8,000 subscribers from this one client, we were able to still show significant growth in the past year from many small to medium sized clients.

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 trade shows relevant to the call center and telecommunications industry. We have entered into a Cooperative Marketing Agreement with Rockwell Electronic Commerce Corporation, a company engaged in the design, development, manufacture and support of call center systems. Under this arrangement, we have agreed to work together to create a marketing plan to develop and pursue opportunities for the marketing and sale of each company's products and services.

Separate financial information for the call center can be found at Note 12 to our consolidated financial statements for the fiscal period ended February 28, 2001.

Through our subsidiary, eCommerce Solutions Inc. doing business as Virtualsellers.com, we provide complete, e-commerce and e-business solutions that allow businesses to immediately and affordably develop and maintain an effective e-business presence on the Internet, and also provide turnkey e-commerce transaction processing services, website development, maintenance and hosting services, and customized Internet design, development, deployment and project management services.

As the importance of the Internet as a communications medium continues to increase, a growing number of businesses and consumers will begin and continue to use the Internet to buy and sell goods and services. The number of Internet users worldwide has grown significantly and is expected to continue to grow significantly in the next few years. Increasingly, these Internet users are becoming online consumers. To meet this demand, companies across all industry segments are and have been scrambling to establish a presence on the Internet. Unfortunately, a large number of businesses have neither the time nor the resources to design, develop, construct and manage an e-commerce capable website to handle business-to-business or business-to-consumer transactions. Furthermore, many large corporations outsource their e-commerce transaction processing so as to gain greater product focus and minimize incremental costs associated with marketing their products online.

Generally, e-commerce offers both businesses and consumers numerous benefits, including the following:

- businesses and consumers can interact 24 hours a day, 7 days a week, regardless of their respective locations;

- businesses can customize website content to match the needs and preferences of individual users by personalizing content for users;

- online stores enable businesses to readily increase the number of products and services offered, thereby enhancing the product selection available to customers;

- online businesses can avoid investments in physical retail locations; and

- much of the interaction between businesses and consumers can be automated, resulting in reduced operating costs.

E-commerce between businesses provides the following benefits:

- reduced cost of selling a businesses' products or services;

- reduced inventory requirements;

- increased ability to minimize and rely on suppliers; and

- reducing time required by senior management and others for operations and allowing more time for strategic planning.

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 adopters of e-commerce were often Internet-centered companies, such as Amazon.com and Beyond.com, which were founded specifically to transact business on the Internet. Today, many businesses consider it important to offer their goods and services through the Internet, and many traditional retailers such as department stores, car dealers, and toy stores have opened online stores to supplement their traditional retail sales models. An increasingly broad selection of products is now being sold online, ranging from the initial online product offerings of books, music, computers and software to more traditional consumer goods such as groceries, clothes, movie tickets, vitamins and prescription drugs. Accordingly, the need for online transaction processing is affecting virtually all industries and businesses.

To succeed online, a business must attract customers to its website and provide an appealing and easy-to-use environment that encourages customers to place an order by clicking on the "buy" button. Once the customer places an order, the business must process the order by effectively and efficiently executing numerous transactions. With the rapid increase in the number of online businesses and the vast array of products and services becoming available online, competition among online businesses is increasingly intense. Due to these competitive pressures, businesses must focus their resources on attracting customers to their websites and providing compelling content to keep customers in their online stores. However, as a business succeeds in these efforts, the increased number of resulting orders creates another set of complex challenges. These challenges include:

- Payment processing. The vast majority of online consumer purchases are conducted using credit cards and such credit card transactions should be processed in real time to confirm an order while the customer is online;

- Fraud prevention. Because of the anonymity offered by the Internet and the speed with which one can make purchases, the opportunity for fraud is significant. In e-commerce transactions, because the credit card is not present, a business is generally held liable by its bank for the full value of the transaction in the event of credit card fraud even if a pre-authorization had been obtained. Online businesses must find ways to combat this fraud to avoid losing both the product being sold and the related revenue.

The online business must often address these demands while the customer is waiting to purchase the goods and/or services online. Information that a traditional retailer can collect during a period of hours, such as fraud screen, often must be available to the online business immediately. In addition, the business must have an e-commerce system that scales as the business grows, provides a high level of reliability and handles peak loads. The business' e-commerce system should also integrate smoothly into its existing business and technology and must support secure, authenticated messaging.

Early adopters of e-commerce business models typically developed custom transaction processing systems. Businesses that built these systems often faced long development cycles, which delayed their time-to-market. These custom systems often limited functionality and scalability and high ongoing maintenance costs. Recently, online businesses have attempted to address their transaction processing needs by either purchasing or outsourcing discrete systems. Businesses that turn to discrete systems like payment processing are still faced with the need to address other potentially costly and time-consuming transaction processing issues, such as fraud screening, pay processing and customer service. In addition, businesses that purchase discrete systems often discover that these systems cannot scale as their business grows.

As the Internet has become an important marketplace, businesses are increasingly turning to e-commerce service providers with the expertise and ability to deliver a comprehensive solution that shortens time-to-market and maximizes the value of their investment. These transaction processing solutions should be available at a low initial and overall cost and, at the same time, be scalable to support the growth of the online business. A solution should also allow the business to maintain control over its online content and customer relationships and to integrate new services easily.

Virtualsellers.com can meet this demand by providing businesses either with or without an existing Internet presence with immediately available, customized, secure and complete e-commerce transaction processing capabilities and solutions so that these businesses can retail their products and/or services over the Internet. Virtualsellers.com provides a solution which has a low initial cost, is scalable to support a business' growth and which allows the business to maintain control over its online content and customer relationships.

Virtualsellers.com's services offers a significant advantage for businesses that either do not wish to or do not have the resources to spend a large amount of time and money developing and maintaining the ability to process e-commerce transactions and sell their products online. In addition, we can help larger businesses with websites keep their focus on the products and services they are selling by taking over the online transaction processing and other related customer services.

The market for Virtualsellers.com's services is intensely competitive and subject to rapid technological change. We expect competition to intensify in the future. Virtualsellers.com's primary source of competition comes from other developers of systems for e-commerce transaction processing such as Loudcloud Inc., Cybersitsce, Clear Commerce, CyberCash, Digital River, Hewlett-Packard (VeriFone), HNC Software, Open Market, PaylinX, ShopNow.com, Signio, iCat, ViaWeb, iBill and Octagon. Each of these companies provides software for e-commerce transaction processing and hosts companies wanting to outsource e-commerce transaction processing. However, each of the companies has its own unique scope of services that it provides. For example, at ViaWeb the client designs the website. ICat sells software but does not exclusively provide a service. In addition, companies (including financial services and credit companies such as First Data Corporation, AT&T and GE Capital), may enter the market for our services. In the future, Virtualsellers.com may also compete with large Internet-centered companies that derive a significant portion of their revenues from e-commerce and may offer, or provide a means for others to offer, e-commerce transaction services.

VirtualSellers.com does not believe that large systems integrators are direct competitors because they provide complete e-commerce systems only to major corporations. VirtualSellers.com targets businesses that cannot afford - in either dollars or time or both - to develop e-commerce capable websites. Some clients will need more complex systems as they grow, and VirtualSellers.com has pursued relationships with systems integrators to pass these clients on in a seamless manner while continuing to receive future revenue streams.

Many of Virtualsellers.com's competitors have longer operating histories, substantially greater financial, technical, marketing or other resources, or greater name recognition than it does. Its competitors may be able to respond more quickly than it can to new or emerging technologies and changes in customer requirements. Competition could seriously impede Virtualsellers.com's ability to sell additional services on terms favourable to it. Its current and potential competitors may develop and market new technologies that render its existing or future services obsolete, unmarketable or less competitive. Virtualsellers.com's current and potential competitors may make strategic acquisitions or establish cooperative relationships among themselves or with other e-commerce transaction service providers, thereby increasing the ability of their services to address the needs of Virtualsellers.com's prospective customers. Virtualsellers.com's current and potential competitors may establish or strengthen co-operative relationships with its current or future channel partners, thereby limiting its ability to sell services through these channels. Competitive pressures could reduce Virtualsellers.com's market share or require the reduction of the prices of its services, either of which could materially and adversely affect its business, results of operations or financial condition.

Virtualsellers.com competes on the basis of certain factors, including:

- system reliability;

- product performance;

- breadth of service offering;

- ease of implementation;

- time to market;

- customer support; and

- price.

Virtualsellers.com believes that it presently competes favourably with respect to each of these factors. However, the market for its services is still rapidly evolving, and it may not be able to compete successfully against current and potential future competitors. VirtualSellers.com concentrates on superior customer service and making the e-commerce transaction easy for both the business and the consumer - safe, secure and timely. VirtualSellers.com also provides clients with a toll free telephone number that its customers can use as an alternative method of order entry and to access other customer service features.

Virtualsellers.com is not currently subject to direct regulation by any government agency, other than regulations applicable to businesses generally, and there are currently few laws or regulations directly applicable to access to, or commence on, the Internet. However, due to the increasing popularity and use of the Internet, it is possible that various laws and regulations may be adopted with respect to the Internet, covering issues such as taxation, user privacy, pricing, and characteristics and quality of products and services. In 1998, the United States Congress established the Advisory Committee on Electronic Commerce which is charged with investigating, and making recommendations to Congress regarding, the taxation of sales by means of the Internet. The adoption of any such laws or regulations upon the recommendation of this Advisory Committee or otherwise may decrease the growth of the Internet, which could in turn decrease the demand for Virtualsellers.com's products or services, increase its cost of doing business or otherwise have an adverse effect on its business, prospects, financial condition, or results of operations. Moreover, the applicability to the Internet of existing laws governing issues such as property ownership, libel, and personal privacy is uncertain. Future federal or state legislation or regulation could have a material adverse effect on Virtualsellers.com's business, prospects, financial condition, and results of operations.

The Internet Tax Freedom Act was enacted in October, 1998 and is effective through October, 2001. The Internet Tax Freedom Act bars state or local governments from imposing taxes that would subject buyers and sellers of electronic commerce to taxation in multiple states. The Internet Tax Freedom Act also bars state and local governments from imposing taxes on Internet access through October of 2001. When the Internet Tax Freedom Act expires or if it is repealed, Internet access and sales across the Internet may be subject to additional taxation by state and local governments, thereby discouraging purchases over the Internet and adversely affecting Virtualseller.com's business.

Virtualsellers.com provides a turnkey e-commerce transaction processing service to businesses with existing Internet websites and develops, maintains and hosts e-commerce capable websites for businesses without existing websites. VirtualSellers.com has expanded its e-commerce solutions capacity by establishing a technology facility capable of handling 53 million e-commerce transactions a day. VirtualSellers.com provides this service in a secure environment and handles all aspects of processing orders. VirtualSellers.com charges a fee depending on the services provided and the cost of the item sold.

By taking control of the e-commerce transaction and by receiving payment for the e-commerce transaction from the user directly, Virtualsellers.com has positioned itself to ensure that the user is satisfied with its online purchase and the processing of the transaction. Major criticism has been aimed at the e-commerce industry for lack of customer service and Virtualsellers.com endeavours to complete each e-commerce transaction in a timely manner or provide a refund to the user.

While many companies offer partial solutions to businesses that want to sell products and services over the Internet, VirtualSellers.com is one of the few that provides full service, end-to-end e-commerce business solutions. VirtualSellers.com views a business' website as a point-of-sale and attempts to mirror in-store point-of-sale experiences as closely as possible by concentrating its efforts on customer service.

For businesses without existing e-commerce capable Internet websites, VirtualSellers.com can assist companies in designing, building, deploying and managing sophisticated secure e-commerce ready Internet websites that provide these businesses with immediately available, customized, secure and complete e-commerce transaction processing capabilities so that these businesses can retail their products and/or services over the Internet. There are no monthly fees and minimal set-up charges. VirtualSellers.com earns income by charging a percentage of each e-commerce transaction.

VirtualSellers.com allows clients to bypass all the traditional steps necessary to creating a secure website. These include the need for software and hardware, Internet access, software programming and website design, and Internet-accepted business banking accounts. In addition, clients will avoid hiring and paying for the labour necessary to learn the systems and process the orders.

For businesses with existing websites, VirtualSellers.com's goal is to provide e-commerce transaction processing service within one hour of successfully completing an extensive screening process. All clients are subsequently monitored to ensure that they have the financial and logistical ability to deliver the products they offer for sale.

VirtualSellers.com has the capability to build, maintain and host an e-commerce capable website and therefore provide businesses with the ability to develop an online selling presence by reducing a business' time to market and allowing the business' existing customers to purchase its products or services over the Internet. VirtualSellers.com offers a variety of e-commerce transaction processing services, including:

- integrated online marketing;

- secure real time on-line order processing and clearing, including a proprietary 8-point fraud verification check;

- secure online order billing, payment acceptance and verification, and payment collection;

- business banking account services;

- shopping cart software which allows consumers to order several items, calculates applicable taxes, totals the order and accepts a credit card as payment;

- inventory interface;

- order fulfilment tracking;

- inventory tracking;

- payment collection;

- customer service support;

- order tracking;

- retention of commissions at the point-of-sale; and

- provision of all the necessary documentation to facilitate product delivery.

VirtualSellers.com processes and clears orders in the following manner:

- an initial 8-point fraud check is performed;

- the credit card payment is authenticated and authorized;

- the payment is deposited, the commission is deducted, and a check and shipping information is sent to the client;

- all order processing, customer service and follow-up on orders is performed; and

- clients are sent verification of orders for shipment through either email, fax or postal mail. Clients only receive the verified and completed order.

Through its professional services group, Virtualsellers.com also provides customized Internet design, development, deployment and project management services. Virtualsellers.com begins by conducting a feasibility study to outline a business' objectives and define possible solutions. After selecting the appropriate business solutions, Virtualsellers.com provides system, database, security, backup and recovery design services as well as providing detailed system and program specifications. At this point, Virtualsellers.com can develop and document the required solution, including the preparation of user, training and system documentation. Virtualsellers.com then implements the solution, including the installation of hardware and software, training, data conversion and testing.

VirtualSellers.com uses its proprietary programming software language, TAME, to deliver these end-to-end e-commerce solutions. For more details on TAME, see the section entitled "TAME (Tag Activated Markup Enhancer)" in "Item 1 - Description of Business". In addition, Virtualsellers.com's call center uses Rockwell's Transcend and Contact Integration Manager technology, a live agent software package developed exclusively for the call center industry. This technology package, combined with our TAME application development language ensures maximum customer management and marketing services. Virtualsellers.com's network is based on storage from EMC Corporation and routing from Cisco Systems, and is scalable to meet clients' demands.

The technology underlying Virtualsellers.com's e-commerce transaction service solutions provides businesses with the following benefits:

- Scalable Solutions. Virtualsellers.com's services allow businesses to deliver consistent quality of service as their transaction volumes grow, and to handle daily and seasonal peak periods. As a result, businesses do not have to expand these areas of their transaction processing infrastructure as their businesses grow.

- Highly Reliable Solutions. Virtualsellers.com's systems are engineered to provide high reliability, and provide transaction processing 24 hours a day, 7 days a week. In addition, Virtualsellers.com offers its businesses support 24 hours a day, 7 days a week.

- Customer Satisfaction. Because our services enable online businesses to process e-commerce transactions in real-time, businesses can improve their level of customer satisfaction and reduce their support costs by avoiding delayed responses and minimizing the need for follow-up communications. Businesses can also ensure customer satisfaction by utilizing our Call Center services in connection with their e-commerce transaction processing.

VirtualSellers.com has been providing e-commerce solutions for four years and has serviced companies in both the business-to-business and business-to-consumer markets. VirtualSellers.com's clients include a wide range of businesses and have included the Kansas City Royals, former AFL Kansas City Chiefs football coach Hank Stram, Beanie Babies stuffed toys and various music products.

VirtualSellers.com has found that a vast majority of managers of businesses - as well as entrepreneurs - do not have the time or resources to create and manage a website designed to sell their products in a secure environment. Moreover, many larger corporations continue to outsource this and other aspects of their e-commerce business and solutions in order to keep their focus on products and product development and to minimize incremental costs associated with developing and maintaining presence on the Internet.

These two types of businesses provide VirtualSellers.com with its core market. We believe that VirtualSellers.com can use its flexibility to turn potential competitors into partners or clients. To do so, we have created the VirtualSellers.com affiliate program, which allows ISPs, website designers, website portal providers and others to partner with us both for strategic benefit and financial gain. These affiliates become a valuable source of referrals.

Target customers for Virtualsellers.com's e-commerce transaction services include Internet-centered businesses, including those who have developed custom transaction processing systems and established retailers that have opened online stores to supplement their traditional retail models. Virtualsellers.com reaches these businesses through a sales force as well as through an indirect sales channel that leverages existing sales and marketing infrastructures developed by its affiliates.

Virtualsellers.com's products and services are marketed through direct and indirect channels. All products and services are also offered directly through our e-commerce capable website "Virutalsellers.com". Virtualsellers.com's efforts in marketing and selling their e-commerce transaction processing services, their website development, maintenance and hosting services and their customized design, development, deployment and project management services is accomplished through:

- Virtualsellers.com's website;

- direct sales by Virtualsellers.com's own staff through outbound telemarketing programs;

- tradeshows; and

- referrals provided through a marketing agreement with IMC (Internet Marketing Consortium) Cable Print Network Marketing Inc.

Separate financial information for Virtualsellers.com can be found at Note 12 to our consolidated financial statements for the fiscal period ended February 28, 2001.

We also operate 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 through our subsidiary Preferred Telemanagement Inc. doing business as CallDirect Enterprises. CallDirect is based in Delta, British Columbia, Canada. We use the call center to provide customer service functions for CallDirect and through our website "www.calldirect.com", CallDirect retails its products over the Internet.

The market for customer-premise telecommunications products is highly competitive. CallDirect competes with a variety of traditional dealers, distributors, and retailers, including catalog companies, electronics specialty stores, and office products and computer superstores. A variety of external and internal factors could adversely affect CallDirect's ability to compete. These include the function, performance, price, and reliability of the products offered by CallDirect and its competitors and the effectiveness of the marketing efforts of CallDirect and its competitors. Certain competitors of CallDirect have greater financial, technical, sales, marketing, and other resources than CallDirect. There can be no assurance that CallDirect will compete effectively against existing competitors or new competitors that may enter the market. In addition, while CallDirect currently does not know of any competitor specializing in distributing a broad line of telecommunications products directly to business end users via catalog, outbound telemarketing, and the Internet, there can be no assurance that CallDirect will be able to compete successfully in the future in these direct marketing channels, which may attract new market entrants, or in other channels that CallDirect may enter or that may be developed for telecommunications products for such customers.

CallDirect is a catalogue reseller of telephone-related equipment as well as products such as multimedia, entertainment, travel, security and computer accessories for offices and homes. CallDirect markets brand name, private label and high quality, leading-edge proprietary products through both its direct response catalogue and its e-commerce capable website. CallDirect currently focuses on selling brand name products but plans to expand its offering of proprietary and private label products under the CallDirect name in order to build brand awareness.

CallDirect continually updates its product line to ensure that customers have access to the latest telecommunications products and services. CallDirect regularly assesses and analyzes the performance of each product and product group to ensure that each marketing dollar is as efficiently spent as possible.

CallDirect's current product line is divided into the following categories:

- headsets and accessories;

- cordless telephones;

- corded telephones;

- conferencing devices;

- small/home office; and

- phone accessories.

CallDirect also provides transaction processing and limited customer services. We plan to use our call center to expand the customer service functions that CallDirect offers its clients. CallDirect also has several years of credit card clearing experience and has established extensive business banking relationships, which facilitate e-commerce transactions. Our experience and relationships will allow us to become a e-commerce transaction processing firm in Canada.

CallDirect retails its products through its catalogue and over the Internet through its website, "www.calldirect.com".

CallDirect's catalogue and its website are its primary sales tools which are designed to provide all the information necessary for a customer to purchase any of its products. The catalogue includes product description, full-colour photographs, product specifications, prices, as well as information concerning the use and application of telecommunication products. It has an end-use-end orientation and is designed to appeal to both technical and non-technical users. The product copy follows generally accepted direct response principles of presenting user benefits, explaining product features and soliciting orders. The catalogue also features a complete easy to use index, an e-mail address, web address, direct fax number, and a toll-free telephone number.

CallDirect's catalogue has been and will be produced in-house on advanced desktop publishing equipment. Essentially all of the text, graphics and photos used in the catalogues are digitized. Use of this equipment for page production will provide CallDirect significant speed and cost savings over traditional catalogue and production methods.

In response to the significant changes in the telecommunications industry following the introduction of e-commerce, an area of opportunity opened up for direct distribution of commercial grade telecommunication products to business end users primarily in small to medium sized businesses including branch offices of large organizations, via the Internet. The market for accessory and add-on products is not well served by the large telecom and interconnect companies because of relatively small dollar volumes.

CallDirect believes that its direct response catalogue and its website will enable it to establish a direct relationship with the end user, especially small home office users. CallDirect believes that its focus of sourcing out new and innovative products that are not available (or are available on a limited basis) through the standard telecom channels allows it to remove a lot of the cost presently associated with large conglomerates. CallDirect will typically be able to offer products to end users on a more cost effective basis.

CallDirect plans to continue to realize sales growth by:

- acquiring new customers through increased catalogue circulation and via its website;

- stimulating repeat purchases from new and existing customers via e-mail broadcasts;

- supplementing catalogue mailing, links and banners with outbound telemarketing to target potentially high volume key accounts; and

- working with the larger inter-connect companies that are more involved with selling large switches and key systems and not involved in the accessories to these telephone users.

Increasing the number of prospective customers can also be achieved by accessing customer lists that have been developed by other major business-to-business direct marketers. CallDirect has an opportunity to significantly increase the number of its active customers who have a proven track record of purchasing both through catalogues and over the Internet, and recently purchased a business mailing list and mailed approximately 35,000 of its product catalogues to a number of reputable businesses, in a effort to expand its customer base. CallDirect's strategy also parallels its belief that it can successfully encourage its customers to make repeat purchases by constantly updating its product line with innovative technology (e-commerce) and by providing excellent customer service and care.

CallDirect's target customer is a telephone intensive person. These customers are typically found in small to medium size businesses, including branch offices of large organizations, that are heavily dependent on telecommunications. Direct marketing to this target customer offers the customer superior purchasing convenience, access to technical knowledge and support, and a wider selection of products than those which are offered through competing distribution channels.

CallDirect also believes that it can stimulate repeat purchases from existing customers through efficient database management. CallDirect is developing a proprietary in-house customer list which identifies the type of customer, purchasing agent, administrator or potential buyer, to allow it to effectively target its marketing efforts. Based on the size of active customer lists that have been developed by major business-to-business marketers, there is an opportunity to significantly expand an active list of customers. CallDirect is continuously acquiring new customers by mailing catalogues to prospective customers. Good database management enables CallDirect to target specific customers.

We have obtained potential customer names through the rental of selected mailing lists which include the names of business buyers from non-competing catalogues, subscribers to business publications, and members of trade associations. CallDirect also rents selected consumer lists of individuals whose demographic profiles match those of existing customers. CallDirect is typically allowed to use names from a rented list only once, unless the customer responds to CallDirect's catalogue, in which case the name may be added to CallDirect's in-house list.

CallDirect believes that direct marketing is the most cost effective way to market its telecommunication products to its telecommunication customers, and that this marketing channel gives it a distinct advantage over its competition versus other channels of distribution.

CallDirect believes that prompt and courteous service is critical in encouraging customers to make repeat purchases. The object of CallDirect's customer care organization, which will be responsible for in-bound sales, technical support and training, is to set the standard in an industry that other companies, should they decide to enter this marketplace, will find very difficult to match.

Over the last three years, CallDirect has built an extensive database of more than 40,000 small home businesses and medium to large businesses including all levels of government. CallDirect uses this database as a prime marketing tool. This comprehensive database, which stores information on both customers and their purchasing history, is used to identify high volume and potentially high volume customers. To maximize sales opportunities offered by these customers, CallDirect has initiated a Key Account Program designed to provide these high volume customers with special pricing and service agreements.

CallDirect intends to produce three direct response catalogues per year but constantly reviews catalogues and response rates and compares the product offerings to be included in the catalogue with its online business in order to maximize the efficiency and profitability of the catalogues. The periodic upgrading of the catalogue with the information collected from the sales from its e-commerce website enables CallDirect to quickly adjust to changing market conditions.

CallDirect's e-commerce capabilities enable it to test new products quickly without waiting the normal 8 to 12 weeks between catalogue offerings. In addition, prices can be updated daily or as required. This enables CallDirect to get new products into the marketplace quickly and easily.

Separate financial information for CallDirect's operations can be found at Note 12 to our consolidated financial statements for the fiscal period ended February 28, 2001.

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

The Internet has experienced dramatic growth, both in terms of the number of users and as a means of conducting business transactions, and is expected to continue to grow rapidly. The emergence of the Internet has enabled new online business models and spurred the development and deployment of Internet applications to facilitate business interactions that were not practical to address with traditional computing systems. This public infrastructure enables companies to market and sell their products and services to customers through e-business applications as well as to forge closer ties with their partners and suppliers.

As the number of companies conducting business online has increased, the Internet has become a highly competitive business environment and has in turn energized the entire business world. A growing number of companies are building Internet applications that perform a combination of marketing, sales and operational functions. The Internet promotes competition in markets and makes it easy for customers to locate and transact business with competitive vendors. As a result, companies are seeking to differentiate themselves from competitors by developing increasingly sophisticated websites and Internet applications to attract and retain customers. Online businesses are looking for innovative technology solutions that enable them to deliver products and information targeted to their customers' interests and that enable them to provide a higher level of customer service. More broadly, this heightened competition is raising the importance of technology in increasing business efficiency. 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. Such a platform includes software platforms that allow integration and movement of data between existing software applications 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.

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 its 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 it does. Therefore, they may be able to respond more quickly to new or changing opportunities, technologies, standards or customer requirements. 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:

- the quality and reliability of software;

- cost per user;

- application server scalability, availability and performance;

- productivity features for creating, editing and adapting content;

- ease of use and interactive user features;

- compatibility with the user's existing network components and software;

- systems; and

- interoperability with emerging Internet standards such as XML, Java, and HTML.

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.

TAME also has full compatibility with XML (eXtensible Markup Language), the website programming language that has quickly become the de facto standard for electronic business information. XML is easy to learn, easily extensible to support new data attributes and flexible enough to represent any information.

Unlike many competing software programs that use HyperText Markup Language (HTML), TAME's XML compatibility allows its users to develop, build and modify their websites regardless of their existing programming language, operating system, server system or Internet browser. TAME acts like glue, creating a layer between users and the systems they must interact with, and binding them together.

We recently developed TAME V, a "Generation 5" 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 VirtualSellers.com's information technology 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 mange Internet-driver growth. EMC Proven E-Infrastructure Program benefits give VirtualSellers.com the right to display the EMC Proven E-Infrastructure logo in its printed and electronic media, allowing it to add value and market differentiation in the products and services it offers customers. In addition, VirtualSellers.com will be included in a number of EMC-driven marketing initiatives. Such acceptance will allow us to benefit from EMC's vendor network in generating sales for both TAME and Virtualsellers.com.

We use TAME to provide our transaction processing clients a quick, easy and seamless way to establish a presence on the Internet, and as the key facilitator for e-commerce solutions. With the software, a business can quickly, easily and seamlessly launch a new website, upgrade an existing one, add leading-edge shopping cart technology to a website, or add new services for its own customers. For those companies that already have websites, TAME gives them the opportunity to remain on the cutting edge of Internet technology without having to continuously invest in new software and hardware.

In addition to using TAME for our clients, we operate a high technology laboratory in the Chicago area that serves as the testing ground for TAME - both in terms of upgrading the software to keep pace with technology changes and to test new applications for clients. Through the operation of the lab, we ensure that new versions of and new applications for TAME are market-ready and real world tested.

Through the use of TAME, our company and our development partners can deliver complete and end-to-end 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 move to a different operating system, TAME can be installed and the applications can be seamlessly moved to their new home. TAME-enabled Web services link sites and applications together to perform functions that individual components alone are not able to perform.

TAME has many benefits and competitive advantages including:

- Platform Independence. TAME is compatible with Unix, Linux, Microsoft Windows NT and virtually every other major computer operating system which simplifies Web and enterprise infrastructure development over clients' existing architectures.

- Flexibility. TAME enables applications to communicate with each other within the Web's infrastructure, and more importantly provides a framework for connecting websites and applications to create dynamic TAME-enabled Internet services.

- Ease of Use. TAME is quick and easy to learn and dramatically reduces development and coding time compared to other competing software languages.

- Reduction of Bandwidth Requirements. Because TAME processes data requests at the server side, only formatted data results are sent to the user's browser. In order to display a data-driven Internet web page, the browser must receive formatting information to control how the pages look. This savings in file size translates directly to savings in bandwidth and produces exceptionally fast Web pages. The less data being sent, the less bandwidth an application will require.

- Faster Loading. For users connected to the Internet via modems, TAME means dramatically faster loading of pages and for businesses hosting websites on dedicated (and expensive) Internet connections, it means lowered connection costs.

- TAME is XML-Enabled. XML (extensible Markup Language) is acclaimed as the de facto standard in data sharing via the Internet, and is considered the replacement for current electronic data interchange (EDI) technology that many companies use for business-to-business transactions. Because XML is embedded in TAME, the time required to develop website tags is greatly reduced. TAME can access many dissimilar databases from different operating systems and provide a common interface to display the data. TAME includes a dynamic Internet web page engine and provides Internet access to databases, giving developers the ability to easily create solutions that can be deployed on all major operating systems and server environments, resolving common problems associated with many of today's non-XML Internet browsers.

- Browser Compatibility. Whereas most XML solutions require specific Internet browsers (such as MSIE 5.0), TAME XML will function on nearly all browsers, including lower versions of Netscape Navigator, MSIE, OPERA and AOL's proprietary browsers. This browser compatibility is a key advantage to TAME because industry standards for XML are still in their infancy. By not basing an XML strategy in loosely defined standards, TAME will be able to grow with the industry and in fact help drive that growth.

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 applications. It serves as "glue" among many varieties of Web-based entities such as XML and XSL.

Much has been made recently about Internet shopping carts and the software that supports them. Shopping carts in general collect information about an online shopping session so that orders can be calculated and managed. While simple shopping cart solutions stop there, more complex systems interface with other elements of the transaction process such as databases, inventory control systems, payment verification systems and accounting systems. These systems together make up the buying and selling process.

As it exists now, the TAME shopping cart can work fluidly as an XML solution, meaning that as XML becomes standardized, applications using TAME can adapt to the standards or create their own XML standards for a particular task. Because it uses XML, the TAME shopping cart is superior to other similar solutions available today because of its operating system compatibility, speed, development time and browser compatibility. Unlike many existing shopping cart programs, TAME XML-enabled systems can be deployed on virtually all operating system platforms.

Our Virtualsellers.com Web Wizard is powered by TAME, and allows site owners to host the Web Wizard under a corporate homepage as part of the site's services. The Web Wizard can be completely customized and "branded" for each particular client, and can be used to create a virtual mall or custom-branded portal using easy point and click site management.

The Web Wizard has features the following:

- data driven dynamic pages, which simplify global shop and mall changes;

- reporting and online tracking;

- customizable style sheet and template library;

- fully scalable, with no limits on the number of store fronts;

- personal webpage building capabilities;

- multiple management models to track usage;

- multiple background and text options;

- multiple payment, shipping and invoicing options;

- custom invoicing options;

- custom international currency options;

- multiple company notification options; and

- multiple area taxing options.

Because the Web Wizard is powered by TAME:

- updates and edits can be made online in real time, 24 hours a day;

- little or no technical support is required;

- the application is web-based and platform independent;

- updating is easy because of its centrally located software;

- site owners are able to realize fast time-to-market; and

- automatic, dynamic page linking, ODBC interface connectivity and a database driven "knowledge base" engine of FAQs are readily available.

The Web Wizard's full-featured turnkey e-commerce offers complete shopping cart functionality, secure real-time transaction processing, automatic email confirmation of purchases and an internal search engine, which can search by product, category, SKU or price. In addition, the Web Wizard offers SSL secure transaction processing, easy to create special pricing offers and promotions, real-time shop administration and the ability to check order status and monitor account status at any time.

Because credit card processing approval, web checks, phone orders, fax orders and charge backs are handled by Virtualsellers.com, businesses are relieved of the risks and hassles involved in turnkey transaction management. Shop owners can also use the Virtualsellers.com merchant account, speeding their time to market, thereby reducing their risk.

The ContentMessenger is available through the TAME website, and is a cost-effective way to make any content, from text to photographs and graphic images, universally available for delivery, editing or browsing via the web or wireless devices, and offers the following features:

- open standards system;

- total security;

- content management capabilities;

- content delivery capabilities;

- custom options for providers and users; and

- varied account management options.

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

- direct sales by our own staff through our outbound telemarketing program;

- sales through our website - www.tameable.com;

- sales through industry trade shows like COMDEX; and

- sales through reselling agreements with companies like RedHat Inc.

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

- sales through strategic relationships with hardware vendors;

- direct sales to application service providers who in turn sell to their customers;

- direct sales to internet and other service providers who provide website development and e-commerce solutions;

- agents who develop or resell integrated solutions;

- organizations that use TAME to create websites and Web applications with electronic commerce, content management and personalization capabilities for Internet, intranet and extranet use; and

- sponsorship of seminars for potential customers and promoting special events.

Our website 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 website.

We continue to develop market awareness of the "TAME" brand. Our branding strategy includes participating in trade shows and conferences, promoting special events and advertising our products and services in print and electronic media.

One example of a website built with TAME is www.webshoppersclub.com, a website that provides data in 13 languages and uses 24 currencies. Rather than replicating the same site in multiple languages, TAME allows the user to specify the parameters of the information desired such as language, currency or products, and then retrieves the data and delivers it. The result is an application that dynamically gathers, translates and displays information on the fly rather than accessing an existing page or converting existing content to fit the request.

On June 1, 2000, we acquired all of the property, assets and undertakings of the Internet services development business carried on by Sullivan Park. We continued the business operations of Sullivan Park by incorporating its customers, operations and employees into a new subsidiary which we incorporated on September 13, 2000 as "Sullivan Park Inc.". Sullivan Park is an Internet services developer, focussing on building successful business-to-business Internet companies, providing e-business development services to medium and large-sized businesses, and offering services as a business-to-business incubator. General services provided by Sullivan Park include designing and running websites, e-commerce development, Internet consulting, back-office integration and web-based remote application services. Specific services to Sullivan Park's customers include the development and hosting of on-line stores, including services such as site concept, site design, media production, media acquisition, artwork, animation, web programming, database programming and application server programming.

Since its acquisition, Sullivan Park has become our primary sales and marketing division, promoting and selling services delivered by our various business units. Sullivan Park's clients are Fortune 500, mid- and large-sized companies that outsource their enterprise website development and e-commerce solutions.

Sullivan Park recently identified the banking industry as a vertical market opportunity for our suite of services. In response to an industry mandate to increase fee-based revenue and customer retention, Sullivan Park developed Storebuilder, a software and service application giving bank customers the ability to build enterprise e-commerce websites through a bank's web portal. In addition to expanding the number of TAME licenses and generating annual income through monthly service fees, the customers are tied to our complete range of services, including transaction processing, customer service, warehousing and order fulfillment.

Storebuilder is based on TAME's modular production environment, enabling Sullivan Park to leverage existing development and rapidly customize and deploy the product across additional vertical markets. Sullivan Park will continue to promote Storebuilder in markets with significant subscriber bases and repeat revenue opportunities, including: Internet service providers, telephone companies, satellite and cable companies, utilities, entertainment, telephone directories and affinity groups.

Since the acquisition of Sullivan Park, we have targeted the following types of companies as consumers of our services:

- enterprise (large companies integrating e-business capabilities into existing channels or improving internal processes and efficiencies);

- commerce (business and consumer products companies requiring Internet-based catalog, shopping, transaction processing, transaction management, order processing, order fulfillment, customer support and infrastructure services); and

- entrepreneurs (start-up Internet companies specializing in business-to-business and e-commerce).

While entrepreneurs were Sullivan Park's primary target a year ago, the amount of start-up activity declined with the overall economy during the period. In response, Sullivan Park shifted its resources to favor enterprise and commerce. That strategy proved effective as; despite the downturn in the sector over the past year, Sullivan Park has continued to expand its client base and display revenue growth.

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. Much has been written over the recent years regarding the problems and issues associated with the electronic and Internet connectivity with the healthcare industry. The explosion of Internet based services is also adding a new twist to the market and is producing a highly accessible and low cost alternative to traditional health and wellness programs. The Internet provides a low cost opportunity to provide healthcare and wellness information and personalize its delivery.

We believe that by using our TAME software we can deliver a state of the art Internet and call center enabled health and wellness portal product to employers, health plans, pharmaceutical companies, and physicians so that these parties can improve and facilitate communications between them and their patients, lower health care costs and improve health by providing individuals with information regarding a healthier lifestyle. Improving communications between may also lead to a reduction in the number of inaccurate prescriptions and negative drug interactions.

We intend to create health and wellness portals which offer an exchange of healthcare information and supports a broad range of healthcare transactions delivered over our secure, Internet-based platform. We intend to provide our users with health and wellness news and information, interactive preventative health and information tools and opportunities to purchase health-related products and services. We anticipate that our health and wellness portal 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 also anticipate that our users will be able to remotely access our portal.

As the first step in developing our health and wellness portal, we, subsequent to year-end, purchased the assets of MedWired Corporation. The assets acquired included certain proprietary web portal development and content management software, the MedWired Practiceportal, as well as MedWired's existing client base. The primary design of the MedWired Practiceportal software was to facilitate the communication between physicians and their patients. The Practiceportal software includes drug and consumer health information selected and approved by the physician, secured communications options between the physician and their patients, and limited scheduling options.

The Practiceportal software will provide physicians with an immediate presence on the Internet and, more importantly, with a dynamic, upgradeable platform for integrating patients, practice partners such as healthplans and hospitals, and vendors. MedWired's Practiceportal software provides: