U.S. SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

--------------------------------------------------------------------------------

                                   FORM 10-KSB

(Mark One)

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

     For the fiscal year ended December 31, 2000

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

For the transition period from ______________ to ______________

Commission file number 000-27213

                          POPSTAR COMMUNICATIONS, INC.
                 (Name of Small Business Issuer in Its Charter)


          NEVADA                                        88-0385920
(State or Other Jurisdiction of             (I.R.S. Employer Identification No.)
incorporation or organization)

                               107 East 3rd Avenue
                          Vancouver, British Columbia,
                                 Canada V5T 1C7
                    (Address of principal executive offices)

                  Registrant's telephone number: (604) 872-6608

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

Title of each class                  Name of each exchange on which registered
-------------------                  -----------------------------------------
       None                                          None

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

                    Common Shares, par value $.001 Per Share
                                (Title of Class)


     Check  whether  the issuer:  (1) filed all reports  required to be filed by
Section 13 or 15(d) of the  Exchange  Act during the past 12 months (or for such
shorter period that the  registrant was required to file such reports),  and (2)
has been subject to such filing requirements for past 90 days. Yes [X] No [ ]

     Check if there is no disclosure  of  delinquent  filers in response to Item
405 of  Regulation  S-B  contained  in  this  form,  and no  disclosure  will be
contained,  to  the  best  of  registrant's  knowledge,  in  definite  proxy  or
information statements incorporated by reference in Part III of this Form 10-KSB
or any amendment to this Form 10-KSB.

     The  issuer's  revenues  for the fiscal year ended  December  31, 2000 were
$379,136.

     The   aggregate   market   value  of  the  voting   common  stock  held  by
non-affiliates of the issuer, based on a private stock consideration transaction
of the issuer on July 31, 2000 of $2.00 per share, was  $15,989,000.  The issuer
has assumed that its officers, directors and holders of more than ten percent of
the outstanding  common stock are  affiliates.  As of March 26, 2001, the issuer
had  21,952,000  shares of its  common  stock,  par value  $0.001 per share (the
"Common Stock"), outstanding.

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



<PAGE>


                                TABLE OF CONTENTS

                          POPSTAR COMMUNICATIONS, INC.
                      INDEX TO ANNUAL REPORT ON FORM 10-KSB
                        FOR YEAR ENDED DECEMBER 31, 2000


                                                                           Page
                                                                           ----
Part I.......................................................................1

   Item 1:      Business.....................................................1

   Item 2:      Properties...................................................19

   Item 3:      Legal Proceedings............................................19

   Item 4:      Submission of Matters to a Vote of Security Holders..........19

Part II......................................................................20

   Item 5:      Market for Registrant's Common Stock and Related
                Stockholder Matters..........................................20

   Item 6:      Plan of Operation............................................21

   Item 7:      Consolidated Financial Statements............................25

   Item 8:      Changes in and Disagreements With Accountants on
                Accounting and  Financial Disclosure.........................25

Part III.....................................................................25

   Item 9:      Directors, Executive Officers, Promoters and
                Control Persons; Compliance With Section 16(a) of
                the Exchange Act.............................................25

   Item 10:     Executive Compensation.......................................28

   Item 11:     Security Ownership of Certain Beneficial Owners
                and Management...............................................30

   Item 12:     Certain Relationships and Related Transactions...............32

   Item 13:     Exhibits and Reports on Form 8-K.............................34




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<PAGE>


FORWARD-LOOKING STATEMENTS:

     This  Annual  Report on Form  10-KSB  contains  forward-looking  statements
within the meaning of Section 27A of the Securities Act of 1933, as amended; and
Section 21E of the  Securities  Exchange Act of 1934, as amended.  Statements in
this filing about our future results, level of activity,  performance,  goals or
achievements or other future events constitute forward-looking statements. These
statements involve known and unknown risks, uncertainties and other factors that
may cause actual results or events to differ  materially from those  anticipated
in our forward-looking statements.

     In some cases,  you can identify  forward-looking  statements by our use of
words such as "may," "will,"  "should,"  "could,"  "expect,"  "plan,"  "intend,"
"anticipate,"  believe," "estimate," "predict,"  "potential," " or "continue" or
the negative or other  variations of these words, or other  comparable  words or
phrases.  We, POPstar  Communications,  Inc.,  intend that such  forward-looking
statements  be  subject  to the safe  harbors  created  by these  statutes.  The
forward-looking  statements  included  herein are based on current  beliefs  and
expectations that involve a number of risks and uncertainties.  Accordingly,  to
the extent that this Annual Report contains forward-looking statements regarding
the financial  condition,  operating  results,  business  prospects or any other
aspect of us, please be advised that our actual financial  condition,  operating
results and business  performance  may differ  materially from that projected or
estimated by us in forward-looking  statements. The differences may be caused by
a variety of factors,  including but not limited to adverse economic conditions;
intense competition, including intensification of price competition and entry of
new  competitors  and  products'  adverse  federal,  state and local  government
regulation;   inadequate  capital;  unexpected  costs  and  operating  deficits'
increases in general and  administrative  costs;  lower sales and revenues  than
forecast;  loss of  customers;  technological  obsolescence  of our products and
services,  technical problems with our products and services, inability to raise
prices; failure to obtain new customers; the possible fluctuation and volatility
of our operating  results,  financial  condition  and stock price;  inability to
carry out marketing and sales plans;  loss or retirement of key executives;  and
other  specific  risks that may be described  in this Annual  Report or in other
reports filed by us with the  Securities and Exchange  Commission.  In addition,
our business and operations  are subject to substantial  risks that increase the
uncertainty  inherent  in  the  forward-looking  statements.  The  inclusion  of
forward-looking  statements  in this Annual  Report  should not be regarded as a
representation  by us or any other person that our  objectives  or plans will be
achieved.   Forward-looking   statements  are  based  on  management's  beliefs,
expectations  and projections on the date they are made. We assume no obligation
to update  forward-looking  statements if management's beliefs,  expectations or
projections or other  circumstances  should change.  Investors  should not place
undue reliance on forward-looking statements.





                                       ii
<PAGE>

                                     Part I

Item 1:  Business

Company Overview

     We,  POPstar  Communications,  Inc.,  are  in the  process  of  building  a
worldwide  Internet  protocol  messaging network in partnership with independent
Internet service providers,  application service providers and telephone service
companies  (ISPs).  We  currently  offer fax over  Internet  protocol  messaging
services through independent ISPs in North America,  Europe and Asia, and expect
to begin testing voice over Internet  services  beginning in the second  quarter
2001. We intend to launch our  commercial  unified fax and email services in two
phases during the second quarter of 2001:  Phase 1 in the North American  market
during May 2001, and Phase 2 in the European Economic Community and Asia Pacific
in June 2001. We intend to offer enhanced  messaging and  integrated  voice over
Internet  services  during the third quarter  2001.  Once our services are fully
launched,  subscribers  to ISPs that offer our services are  anticipated to have
access to the following range of unified messaging services:

     o    Web-based  email: a service  allowing a user to send and receive email
          messages from any computer;

     o    Fax-to-fax:  a service allowing a user to send a fax over the Internet
          without paying for conventional long distance charges;

     o    Fax-to-email:  a service  allowing a user to send a message from a fax
          machine to an email account;

     o    Email-to-fax:  a service allowing a user to send a fax from a Web page
          or an email account;

     o    Phone-to-email:  a service  allowing  a user to send a message  from a
          telephone to an email account;

     o    PC-to-phone:  a service  allowing a user to send a message  from a Web
          page or an email account to a telephone; and

     o    Message storage and retrieval:  convenient  single-source  mailbox for
          voice mail, email and faxes accessible from the Web or the telephone.

     POPstar's integrated  value-added services packages are designed to provide
ISPs with the  ability to  generate  additional  revenues  by  offering  unified
messaging and voice over Internet  services to their users.  We intend to derive
our revenue through a revenue  sharing  program with ISP partners.  Revenues are
anticipated generated from the delivery of our messaging services.

     The POPstar network services programs support European and Asian languages,
the current  marketing  strategy  focuses on  offering  services  through  North
American, European and Asian ISPs. We currently offer services through six ISPs:
E  Payment  Network   Services  Ltd.,   Swiftech   (Singapore),   Cyber  Express
Communications  Limited,  Cyber House Pvt. Ltd., Linkx Netservices,  and Wisebox
Telecom Technology.

     We have established  alliances with Lucent  Technologies Inc. (for Fax over
Internet/Voice  over Internet  platforms) and Sun Microsystems  Inc.  (regarding
computer platforms). We have written agreements with TransNexus, Inc. (regarding
clearinghouse  settlements),  MIND CTI Ltd. and Digital  Point  Solutions,  Inc.
(regarding   Internet  protocol  billing)  and  RSA  Security  Inc.   (regarding
encryption and digital certificate technology).

     We were incorporated under the laws of the State of Nevada on June 19, 1995
as Cherokee  Leather,  Inc.  Between 1995 to 1999, we were inactive.  On May 17,
1999,  in  contemplation  of acquiring  POPstar  Global  Communications  Inc., a
British Virgin  Islands  company  (POPstar-BVI),  we changed our name to POPstar
Communications, Inc. On July 20, 1999, we acquired all of the outstanding common
and  preferred   stock  of   POPstar-BVI   in  a  transaction   described  as  a
"recapitalization" for accounting purposes. Upon our acquisition of POPstar-BVI,
we assumed its  business of  developing  Internet-based  facsimile  transmission
technology.



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<PAGE>

     Unless the context otherwise  requires,  references herein to "we", "us" or
"POPstar"  refer to  POPstar  Communications,  Inc.  and its  subsidiaries.  Our
principal executive offices are located at 107 East 3rd Avenue, Vancouver, B.C.,
Canada,  and our telephone  number at that location is (604)  872-6608.  Our Web
site is located at  http://www.pop-star.net.  Information  contained  on our Web
site is not part of this Annual Report.

The POPstar Business Model

     POPstar  is a  development  stage  company  in the  process  of  developing
Internet protocol messaging solutions designed to be offered by a global network
of ISPs. Our business is focused on equipping ISPs with Internet  infrastructure
applications that enable them to offer competitive,  unified messaging solutions
and services to their subscribers.  To accomplish this, we intend to provide our
ISP customers with scalable, high-performance products, as well as a broad range
of  consulting  and customer  support  services  that  complement  these product
offerings.

     POPstar's  current  technology  equips  ISPs with the  ability  to  provide
Internet-based  facsimile transmission services to their end-users. We completed
field  testing and  officially  launched  our fax over IP services in  September
2000. In the second quarter 2001, we intend to launch our commercial unified fax
and email  services in two phases:  North  America in May 2001 and the  European
Economic  Community and Asia in June 2001. We also anticipate that we will begin
field testing our voicemail  messaging  services in the second  quarter 2001. We
intend  to  offer  commercial  unified  messaging   services,   including  voice
messaging, fax and email in the third quarter 2001.

     We  currently  market our  services  to ISPs  serving  the North  American,
European and Asian markets.  We plan to offer the following  service  options to
ISPs:

     o    Revenue-sharing   Installations:   ISP  POPstar  Partners  interchange
          end-user  traffic  carriage with other POPstar  Partner  firms,  using
          secure and standards-compliant  clearinghouse and settlement services.
          Specifically,  ISP  Partners can manage their own servers and join the
          POPstar  Clearinghouse  to share  revenue and  messaging  traffic with
          other  POPstar  Partners.  The POPstar  license for IP Fax software is
          provided  free  of  charge  and  the  POPstar  Clearinghouse  provides
          financial  transaction  settlement services and billing information to
          POPstar Partners;

     o    Outsource Service Packages:  The ISP can outsource services related to
          unified  messaging to POPstar.  POPstar will manage the entire unified
          messaging system,  including  hardware,  servers,  software and leased
          lines.  These  services are  supported by  POPstar-owned  "co-located"
          platforms in strategic  cities  around the world,  for use by Small to
          Medium Enterprises (SMEs) and larger organizational users; and

     o    Licensed  Packages:  POPstar  will sell  turnkey  packages to ISPs and
          enterprises  and  in  turn  can  furnish  its  own  unified  messaging
          services.  Our turnkey packages can be used by major service providers
          and larger organizations.

     POPstar is also able to provide network  management,  including secure call
routing and  real-time  settlement/billing  services in  connection  with its IP
messaging services.

     We  anticipate  that our  unified fax and email  services  will be launched
during the second quarter 2001, and that our unified messaging  services will be
launched  during the third quarter 2001, but there can be no assurance that ISPs
will offer  these  services  to enders or that we will  complete  our testing of
these products as  anticipated.  Development  and testing of our technology is a
time-intensive  process, which may delay the launch of these services. Any delay
in launching these services may have a material adverse affect on our business.

Our Products

Fax Over Internet

     Our Enroute  Version 2.3.7 Fax Over Internet  product  includes a Web-based
user graphic user interface and a file  conversion  server.  Our file conversion
server permits text, HTML and PostScript  formatted documents and most Microsoft
documents,  such as Word,  PowerPoint  and  Access,  to be  attached  to the fax
message and  converted to fax format  without the need to save or translate  the
document. Our fax over Internet technology supports conversion of



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<PAGE>

documents in foreign languages into fax format, and we have successfully  tested
our localized character support of fax documents in Japan, Taiwan, Hong Kong and
China.

     Although  Internet users are capable of transmitting  documents through the
use of email from one computer to another, according to Davidson Consulting, the
majority of businesses  still receive and transmit  their  documents via fax. We
believe that our  technology  allows  companies to combine the  convenience  and
costs savings  provided by the Internet with the  compatibility  of conventional
fax machines.

     We intend to price our services at rates that are lower than or competitive
with  traditional  long distance  rates. We believe that the advantages of using
our services for fax  transmission and receipt include ease of use, cost savings
from  avoiding  the  need  to  install   additional   telephone  lines  for  fax
transmission  and receipt,  cost and space savings from eliminating the need for
hard  copies of  documents  at the point of origin and  receipt  and the ease of
electronic  filing  of  documents.  We  believe  that  the cost  savings  of our
technology is especially  significant to end-users in Europe and Asia, where the
installation  of  additional  telephone  lines is generally  significantly  more
expensive than Internet connectivity.

     Our Enroute  Version  2.3.7 Fax Over  Internet  product is provided to most
ISPs on a royalty-free  basis.  Our Internet fax software  includes  support for
inter-ISP settlements,  user authentication  functions,  billing data generation
and other management and operation-related  activities that allow ISPs to manage
and charge their customers for the Internet fax service.  While we offer turnkey
service  packages  for sale,  POPstar  intends to derive its primary  revenue by
receiving a portion of the payments made to ISPs by their  customers who use the
Internet  fax  service.  We intend to charge ISPs a wholesale  price for all fax
traffic  originated  by  their  users  and the  ISPs  delivering  the fax to the
recipient's  conventional  fax machine will receive a portion of this  wholesale
price,  according to a prearranged  formula. We believe that a major obstacle to
commercializing  the use of the  Internet  for the  transmission  of  commercial
traffic such as Internet faxes has been the inability of the ISP to collect fees
on a pay-for-use basis. While the world's traditional  telephone companies share
long distance revenue under terms of settlements  agreements (using billing data
generated by the telephone exchange serving the originating  telephone company),
no   equivalent   mechanism   for  inter-ISP   settlements   on   Internet-based
communication has existed until very recently.  In most cases,  Internet fax and
Internet  voice  transmissions  do not originate  through a telephone  exchange,
making it  necessary  to develop new methods of  calculating,  apportioning  and
distributing respective revenue sharing and settlements between participants.

Billing and Settlement Systems;  Terminating Gateway Services

     Traditionally,  ISPs have needed only  billing  systems to handle  monthly,
flat-fee billings,  as most Internet services were provided on a flat-fee basis.
ISPs that want to generate additional revenue by offering  value-added  services
billed  on a  usage  basis  are  required  to  implement  billing  systems  that
accommodate  usage billing.  Our system provides ISPs with this  capability.  We
believe that  implementation  of usage billing systems for value-added  services
such as ours may substantially increase an ISP's profitability.

     Our Enroute 2.3.7  supports the Mind billing  system,  which allows ISPs to
accept credit and prepaid debit card services,  and the Optigold billing system,
which allows ISPs to bill for the services provided to end users. In April 2000,
we  completed   development  of  the  module  to  allow  end-users  to  register
automatically  at sites  equipped  with either the Mind or the Optigold  billing
systems. We have completed the development and integration of our Enroute system
with the Mind and  Optigold  billing  systems and a data  migration  solution to
customize call records to match the needs of partners with billing systems other
than Mind or Optigold. On May 1, 2000, we connected to the TransNexus commercial
site,  which allows us to generate call records for each of the POPstar enrolled
sites.

     We are in the process of  developing  and testing  Enroute 2.4,  which will
upgrade Enroute 2.3.7. See "Research and Development."

     It has been our experience that implementation of usage billing varies from
between two to six months  depending  on the ISP's  current  billing  system and
whether an ISP is able to integrate  value added billing into its systems.  ISPs
may modify or replace  their  existing  systems or may contract with third party
billing companies, including POPstar, to supply usage-billing services. Costs of
implementing or using  third-party  systems vary  considerably and as an option,
POPstar can  provide  billing  services to the Partner as part of the  outsource
program.  POPstar  assists  ISPs with system  integration  of the ISPs'  billing
system with POPstar's service offerings.



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<PAGE>

     In  response  to the need for  settlements  on  Internet-based  value-added
services  such as Internet fax and Internet  voice  transmissions,  the European
Telecommunications  Standards  Institute,  a  body  governing  inter-operability
between  telephone  companies in Europe,  sponsored the  development of the open
settlement protocol, a key component of our inter-ISP settlements strategy.  Our
technology permits call clearing and settlement between independent partners.

     POPstar is able to  outsource  settlement  services  to  independent  third
parties. We use TransNexus Inc., a developer of the open settlement protocol for
Internet settlement  services,  to provide settlements services to us and to our
partnering  ISPs who  provide  fax  origination  (originating  gateway)  and fax
receipt  (terminating  gateway)  services.  TransNexus also provides  least-cost
routing  information  permitting  our  software  to  route  fax  traffic  to the
terminating gateway able to deliver each fax document for the lowest cost.

     Open settlement protocol is an open protocol which is provided royalty free
to all users.  However,  in order to ensure the  confidentiality  of routing and
user  verification  information  transmitted  between  originating  gateway  and
terminating  gateway  providers,  TransNexus  and us, we  employ  an  encryption
protocol known as BSAFE, provided by RSA Data Security, Inc., for transmissions.
We are required to pay royalties equivalent to 2% of our service revenue for the
use of the BSAFE encryption protocol. Aside from normal incremental improvements
in the our software to comply with evolving industry standards, we are not aware
of any licensing or other significant costs associated with implementing current
or anticipated protocols to our technology.

     In order to service areas without local ISP termination  access, we operate
a "global  terminating  gateway" (a server used for delivery of fax traffic over
traditional  long distance  facilities to locations in the world having no local
POPstar  affiliated  ISP) in Los Angeles,  California.  We have  contracted with
Innosys  Communications,  Inc. (Innosys),  to forward Internet fax transmissions
through  traditional long distance networks to countries having no local POPstar
affiliated  ISP. Terms of the service  agreements  with Innosys permit us to use
other  facilities and carriers,  as conditions may dictate.  Although we believe
that our  relationship  with Innosys is strong and will remain so with continued
contract  compliance,  the termination of the contract with Innosys, the loss of
Innosys'  terminating  gateway service, or a reduction in the quality of service
we receive from Innosys could have a material  adverse  effect on our results of
operations.

International Operations

     To support the anticipated  growth of the global market,  POPstar has begun
to establish operations in key international  markets.  POPstar's  international
operations  currently  includes a sales and support office in Canada operated by
our wholly owned subsidiary,  POPstar  Communications  Canada Corp.; a sales and
support  office in Singapore  operated by our wholly owned  subsidiary,  POPstar
Communications Pte. Ltd.  (POPstar-Singapore);  two additional sales and support
offices in Asia operated by our wholly owned subsidiary,  POPstar Communications
Asia Pacific Ltd. a Hong Kong corporation  (POPstar-Asia  Pacific);  and a sales
and support office in London,  England operated by our wholly owned  subsidiary,
POPstar Communications (Europe) Ltd. (POPstar-Europe).  We plan to establish and
staff other key locations to support sales growth in a region.

     One  objective  of our program is to recruit at least one major ISP in each
major fax traffic location (originating or terminating).  Each major fax traffic
location is  anticipated  to serve a territory  that is defined by long distance
cost  boundaries.  It can be more costly to transmit a fax message  from a major
city to a remote town in the same country,  than to transmit the same message at
discounted  rates from North America.  This is due in part to high domestic long
distance rates in some countries.  We are in the process of recruiting ISPs with
lines terminating in high traffic destination areas as POPstar partners to offer
our customers the lowest prices for our services.

     Generally,   end-users  are  customers  of  an  ISP  that  offers  Internet
connectivity  services for a fee in the host country. Our fax traffic originates
in a manner similar to that of e-mail  traffic,  in that the sender keys in data
corresponding  to his or her  identity,  the  address to which the item is to be
delivered,  and the identity of the sender and of any  attachment  to be sent as
part of the transmission. In the case of a terminating gateway, Internet message
traffic  arrives at the ISP's  facilities in a manner similar to that of e-mail,
and in fact may be  delivered as an e-mail  document to a recipient.  Therefore,
POPstar's  actual  transmission  of faxes  between ISPs is  performed  much like
e-mail,  which is currently free of regulation.  In the case of delivering a fax
document to a conventional  fax machine,  however,  the local telephone  network
must be used.  The ISP must  then  contract  with the  local  telephone  service
provider for outgoing  lines.  (Normal  dial-in  Internet  service does not need
outgoing lines).  At that point, the ISP would normally be required to state the
use to which the lines would be put,  and to comply with local  regulations.  In
both cases, the ISP is required



                                       4
<PAGE>

to make a statement of compliance in the contract  binding the ISP with POPstar,
as a condition of becoming part of the POPstar network.

     We are not aware of regulatory bars to the transport of fax traffic into or
out of any country using Internet  facilities,  but as a precaution,  we require
each  participating  ISP  to  assume  responsibility  for  compliance  with  all
regulations affecting them with respect to our operations.  We do not operate as
a common  carrier in any country and to our  knowledge  are not subject to rules
governing common carrier operations in any country.

     ISPs providing  Internet fax services to their  end-users  collect fees for
such  services in  accordance  with each  Internet  service  provider's  billing
policies.  Originating  gateway ISPs are  required to maintain a credit  balance
with  TransNexus,  our  settlement  house,  and  their  accounts  are  charged a
wholesale rate for the transmission of their end-user's fax with the originating
gateway ISP being free to charge end-users whatever rate it deems appropriate. A
portion  of  revenue  generated  from  message  traffic  originating  in a given
jurisdiction  is  retained  by the  originating  gateway  ISP  partner  in  that
jurisdiction,  with the balance being collected using  electronic funds transfer
methods,  where available,  by TransNexus for subsequent  distribution to us and
our ISP partners through whose facilities the traffic is eventually delivered to
the destination fax machines (the terminating gateway ISP). Distribution of such
revenue to us and the terminating gateway ISP will occur on a monthly basis.

     Our ISP partners'  operations are subject to rules and regulations of their
respective jurisdictions, including those applicable to funds transfers or other
currency   controls.   Internet  service  providers  in  each  jurisdiction  are
responsible for compliance with such rules and regulations.

     It is possible that taxation, licensing,  interconnection fees or political
or regulatory  barriers could limit the viability of a given ISP's operations as
part of our program,  thus  limiting our revenue  associated  with the region in
question.  We are  currently  not aware of any major  market  area  having  such
circumstances.  However,  there can be no assurances  that such barriers may not
develop in the future.

Unified Messaging Services

     We  anticipate  introducing  enhancements  to our  technology  and  service
offerings in the form of unified messaging service support, in which text, voice
and other  messages  will be  accessible  from a single,  unified  mailbox,  and
deliverable over the Internet and other facilities to an intended recipient. The
Internet Engineering Task Force, the International  Telecommunications Union and
a number of other  bodies  are  developing  standards  and  recommendations  for
message  exchange  and  conversion.  We intend to  develop  our  technology  and
services to comply with these evolving standards,  and product  enhancements are
anticipated to be released as these standards  mature.  There are no assurances,
however,  that we will be able to introduce  these  enhancements  as intended or
that it will not face technical and market  obstacles  which may prevent us from
introducing such enhancements.

     We are in the  process of  completing  the  development  and testing of our
Enroute 3.0, our unified  messaging  services  product.  The first  prototype of
Enroute Version 3.0 is being alpha tested and is expected to start field testing
in the second quarter of 2001.  Management  expects the prototype to support the
storage and retrieval of voice, fax and e-mail messages in and from one mailbox,
access to and from the  mailbox  via the  telephone  network  and the  Internet.
POPstar  products are Web-based and designed so that all messages are accessible
to  authorized  users  from any place in the world  with  Internet  access.  See
"Research and Development."

     On July 31,  2000,  we,  through our wholly owned  subsidiary  POPstar-BVI,
acquired from Belcarra  Messaging  Corp. an exclusive  right to use certain mail
server and transfer  agent  software.  We paid  Belcarra a total of $43,000 in a
cash and stock  consideration  transaction;  we paid  CDN$35,000  (approximately
$23,000) in cash and we issued 10,000 shares of common stock valued at $2.00 per
share for a valuation  of  $20,000.  The  technology  allows us to: 1) support a
suite of unified messaging  services  including voice, fax and email; and, 2) to
support  the  storage of unified  messages.  We intend to begin a rollout of the
Belcarra server to users before the end of the first quarter of 2001.

Industry/Market Overview

     Our  current   target  market   consists  of  ISPs  who  provide   Internet
connectivity  and other services to business  users,  small  office/home  office
business users, and residential users. Our technology offers the ISP's customers
a  value-added  service  which is expected  to allow them to transmit  documents
throughout the world at a discount to traditional



                                       5
<PAGE>

long distance telephone  networks.  A majority of the ISPs we offer our services
through serve the Asian market, where we derived 32% of our revenues in 2000.

     Both Internet voice and "real-time"  Internet fax transmissions suffer from
the  Internet's  inherent  problem in that the Internet  transmits data in small
packets.  These packets  often get delayed or lost due to traffic.  These delays
may approach many tens of seconds or even minutes on some international  routes,
and may be  experienced  first hand when  "surfing"  web sites in Asia and other
countries.  In  contrast,  our  technology  transmits  the fax  document  in its
entirety to the terminating  gateway ISP. The terminating  gateway ISP waits and
stores  the  document  until it has  received  the  complete  document  and then
immediately forwards it to the end-user using conventional  telephone lines. Our
"immediate" store and forward transport avoids the Internet's  inherent problems
while  providing  virtually  the same  speed of  delivery  as  conventional  and
real-time services.

     We expect the unified  messaging market to expand because of its ability to
accommodate the increase of non-real-time  communications  and the growth of the
Internet. POPstar anticipates that the key to a successful unified communication
is will be effective performance and customer support.

     At the present time,  unified messaging is still largely an inbound service
that allows  retrieval of email,  voice,  fax and video, or some subset of these
media, from one source or mailbox.  We will seek to unify each of these media in
a single inbound and outbound service.

Competition

     We have several direct competitors in the Internet fax market. Our Internet
fax competitors  typically charge ISPs an up-front acquisition fee and continued
royalty for using their proprietary software and hardware. In contrast,  POPstar
does not charge  ISPs a fee for the  acquisition  of its  technology  but rather
charges ISPs a wholesale rate on a usage basis for the transmission of the ISPs'
end-user's faxes using POPstar's  technology.  Management believes that POPstar,
at the time of writing,  is the only firm offering a revenue-sharing  based plan
to ISPs, and the only firm using a  third-party,  independent  settlement  firm.
Management  believes  that these  factors  provide  POPstar with  advantages  in
recruiting  both large and small ISP  partners.  The  Internet  fax industry was
volatile  during 2000. A number of our  Internet  fax  competitors  discontinued
operations  or  limited  their  Internet  fax  product   offerings,   and  other
competitors were acquired by third parties. We believe that this volatility will
continue in 2001.

     Other competitors include fax "outsourcing" providers.  Such outsourcing is
directed to major  enterprises  having larger numbers of LAN "seats",  where fax
"server" functionality (PC document transmission,  bulk broadcast transmissions,
etc.)  benefits  can be  realized  without  the  overhead  and  complication  of
supporting an in-house fax server.  Such firms  generally  charge premium prices
for such  services,  and often  require the  enterprise  to provide  significant
numbers of phone lines or other special facilities associated with the service.

     We believe that POPstar's  technology  provides a number of advantages over
the traditional  outsourcing model, including the joint marketing of the service
by both POPstar and the ISP serving the enterprise.  The firm providing Internet
connectivity to the  enterprise's  LAN users becomes the natural provider of fax
and unified  messaging  outsourcing,  including such value added aspects as cost
accounting  (assignment  of costs to the  sender and the  sender's  department),
authorization  and control of users by the  enterprise's  LAN manager,  and many
others.

     We also  face  competition  from the  transmission  of  computer  generated
documents via the Internet as attachments to conventional  e-mail.  Transmission
by e-mail is generally  provided free to end-users  (aside from Internet  access
charges),  and it requires  both sender and  recipient  to possess  computer and
e-mail capability. POPstar's technology, however, allows end-users to reach both
e-mail  capable  recipients  and the millions of already  installed fax machines
located   throughout   the  world.   POPstar's   technology   allows   users  to
electronically preserve paper documents, including signatures and file stamps.

     In 2000,  there were  approximately  100 million  e-mail  users  worldwide,
according to Electronic Messaging  Association.  Jupiter  Communications reports
that by 2005,  ISPs  (internet-service  providers) and e-mail service  providers
will have 5.6 billion e-mail messages come across their  networks.  Jupiter also
estimates that by 2005,  advertisers will send 268 billion  marketing e-mails --
22 times the number that were sent out in 2000. To meet this huge demand,  there
are a number of email and unified messaging services available on the market and
a  number  of  competitors   offering   these   services,   including   aol.com,
messageclick.com,  email.com and cti2.com. Of these companies,  a number provide
email and unified messaging at no charge, including hotmail.com,



                                       6
<PAGE>

yahoo.com  and  mail.justice.com,  to name a few.  In the  case  of  free  email
services, the email service is often advertiser-supported.

     Many of our  existing  competitors,  as well as a number of  potential  new
competitors,  have longer operating histories, greater name recognition,  larger
customer  bases and  significantly  greater  financial,  technical and marketing
resources  than us. Such  competitors  may be able to undertake  more  extensive
marketing  campaigns,  adopt  more  aggressive  pricing  policies  and make more
attractive offers to potential employees and distribution partners.  Further, we
cannot assure you that our  competitors  will not develop  Internet fax services
that are equal or superior to ours or that  achieve  greater  market  acceptance
than our offerings.

Research and Development

     Throughout  the fiscal  period  ended  December  31,  2000,  we focused our
efforts on the  development  of our Enroute  Versions  2.3,  2.3.7,  2.4 and 3.0
software  products.  Our research and  development  costs were  $881,487 for the
fiscal year end December 31, 2000.  We  anticipate  that the total  research and
development  expenditures for the fiscal period ending December 31, 2001 will be
approximately $1.5 million.

     We completed the  development of our Enroute  Version 2.3 software  product
and released it for  commercial  service at the end of January 2000.  During the
fourth quarter 2000, we completed  development  of the our Version 2.3.7,  which
included the fax-to-fax  feature,  and released it for commercial service in the
fourth quarter of 2000.

     Our Enroute  Version 2.3.7 product takes  advantage of our  distributed fax
server technology to deliver fax traffic across the Internet to users around the
globe.  The server runs on Solaris UNIX platform,  the clients are Web-based and
file conversion utilities to convert documents to image (TIFF) format runs on NT
operating systems.  The Enroute Version 2.3.7 product development  supports both
single and double byte characters,  making it suitable for use also in the Asian
language  markets.  Other Enroute  Version  2.3.7  developments  provide  secure
compatibility  with  the  IP  open  settlement  protocol  standards.   The  open
settlement  protocol allows for call clearing and settlement between independent
partners.

     During  2001,  we intend  to focus  our  research  and  development  on the
following products:

     o    Version 2.4 of Enroute in the short term

     o    Version 3.0 of Enroute (UMS) in the long term

     o    Enhancements to the Belcarra mail server

     The Enroute  Version 2.4 development  will focus on needed  enhancements to
Version 2.3.7, which will include the development of a new gatekeeper to replace
the least cost routing daemon used in Version  2.3.7,  the  implementation  of a
secure socket program  throughout  the server to provide  security  features,  a
change in user  authorization  procedures,  a real-time  call  record  reporting
gateway to established  Internet protocol billing systems and a secure e-mail to
fax  service.  Our Enroute  Version 2.4 product  was  originally  scheduled  for
commercial release in the third quarter 2000. Our development team experienced a
technical difficulty in the implementation of security procedures and the secure
sockets layer.  Management believes we have made good progress toward completing
this  implementation and that Version 2.4 should be ready for commercial release
in the second quarter 2001.

     The development of the Enroute Version 3.0 IP unified messaging product has
continued throughout 2000. The first prototype of Version 3.0 has been built and
we expect beta testing to begin in the second quarter 2001.  Enroute Version 3.0
is being developed to run across all platforms and operating systems. Management
anticipates this development to include a series of applications to run on UNIX,
NT,  Linux and other  operating  systems and  platforms  without  having to make
operating system specific changes to the applications.  The development  targets
the carrier and backbone markets:  the product will be designed to scale to meet
the needs of the target carriers. The cross-platform development is supported by
an in-house  developed  library of universal  messaging objects (UMO) written in
C++ computing language.  The UMO is being developed to allow us to adapt quickly
to the rapid changes taking place in the rapidly growing  Internet  market.  The
UMO is designed to allow all  applications  to be written just once for UNIX, NT
and Linux compatibility.



                                       7
<PAGE>

     The first  major  release of the new series will be Version  3.1,  which is
scheduled for the third or fourth  quarter  2001. We anticipate  this release to
provide  commercial grade unified messaging  services to public switch telephone
network and desktop  users.  The Version 3.1 product will take  advantage of the
outgoing services provided through the Enroute Version 2.4 product. In addition,
we anticipate  that the Belcarra server capacity will be increased to scale from
tens of thousands of users to a million-plus users.

Major Suppliers

     POPstar uses the Internet software,  Enroute, developed by TGI Technologies
Ltd.  (TGI),  a  Canadian  corporation  affiliated  with  POPstar  and with whom
exclusive,  long-term  supply and development  contracts exist. The Internet fax
software  that  POPstar  uses is  provided  by TGI  under an  exclusive  license
pursuant  to a  licensing  agreement  dated  January  11,  1999  and  subsequent
amendment  dated  August 24, 1999,  by and between our wholly owned  subsidiary,
POPstar-BVI,  and TGI. All the officers and  directors of TGI are also  officers
and directors of our company.  See Item 12 - "Certain  Relationships and Related
Transactions."

     Under the terms of the licensing  agreement,  POPstar-BVI is obliged to pay
TGI, until the fourth  quarter,  2002, a portion of all net sales generated from
the use of TGI's software. POPstar-BVI was obliged to pay TGI 6% of net sales or
a minimum of $600,000 for the year 2000. The licensing  agreement  provides that
we can offset  any  amounts  owing to TGI  against a note  receivable  from TGI.
During 2000, we recorded expenditures of $600,000 (of which $550,000 was offset)
in license  fees to TGI,  being the annual  minimum  prorated for the year ended
December 31, 2000.  For the year 2001,  POPstar-BVI  is obliged to pay TGI 4% of
net sales or a minimum of $500,000. For the year 2002, POPstar-BVI is obliged to
pay TGI 2% of net sales or a minimum of $500,000.  POPstar-BVI is not obliged to
pay any additional licensing fees following the end of the year 2002.

     In addition  to the  licensing  agreement  with TGI,  POPstar-BVI  has also
entered into a services  agreement  with TGI,  whereby TGI has agreed to provide
POPstar-BVI  with  technical  assistance,   software   development,   marketing,
management,  and  other  services  related  to the  enhancements  and use of the
Internet Fax and Unified Messaging technology. All fees for services provided by
TGI to POPstar-BVI under the services  agreement are to be billed to POPstar-BVI
on the basis of TGI's direct and indirect  costs of the services  provided  plus
15%. In 2000, amounts paid under the services agreement totaled $938,495.

     POPstar's  ability to accurately bill ISPs for its Internet fax services is
dependent  on  settlement  services  provided by  TransNexus.  Although  POPstar
believes that its relationship with TransNexus is strong and will remain so with
continued  contract  compliance,  the  termination  of POPstar's  contract  with
TransNexus,  the loss of TransNexus'  settlement  service, or a reduction in the
quality  of service we receive  from  TransNexus  could have a material  adverse
effect on our  results of  operations.  In  addition,  the  accurate  and prompt
billing of our  customers  is  dependent  upon the  timeliness  and  accuracy of
settlement details provided to us by TransNexus.  TransNexus earns a ten percent
(10%) share of the originating gateway's wholesale calling rate.

     In order to service  areas without local ISP  termination  access,  POPstar
operates a "global  terminating  gateway"  (a server  used for  delivery  of fax
traffic over traditional LD facilities to locations in the world having no local
POPstar affiliated ISP) in Los Angeles, California.  POPstar has contracted with
Innosys to forward Internet fax transmissions  through traditional long distance
networks to  countries  having no local  POPstar  affiliated  ISP.  Terms of the
service  agreements  with  Innosys  permit  POPstar  to seek  and  employ  other
facilities and carriers,  as conditions may dictate.  Although  POPstar believes
that its  relationship  with Innosys is strong and will remain so with continued
contract  compliance,  the termination of POPstar's  contract with Innosys,  the
loss of Innosys'  terminating  gateway service, or a reduction in the quality of
service we receive  from  Innosys  could have a material  adverse  effect on our
results of operations.  However,  management  believes that its dependence  upon
this global  terminating  gateway  will lessen  with time,  as more  terminating
POPstar ISPs begin operations in different countries around the world.

Patents, Trademarks and Servicemarks

     We have registered our trade name "POPstar" and the corresponding logo with
the U.S.  Patent and  Trademarks  Office.  In  addition,  we have applied to the
European  Patent and Trademark  Office and the relevant  authorities in 13 other
countries  for  our  trade  name  "POPstar".   Our  applications  are  currently
undergoing  review.  We cannot assure you that our pending  applications will be
successful.



                                       8
<PAGE>

Employees

     As of  March  26,  2001,  we  had 50  workers  employed  either  part-time,
full-time  or as  independent  contractors.  Of these,  30 are  located in North
America, 6 at our U.K. office, 3 at our Singapore  facility,  2 at our Hong Kong
facility, 6 at our facility in Beijing, the People's Republic of China, 2 at our
facility in Shanghai,  the People's  Republic of China and 1 at our field office
in Australia.  Of the 30 employees in North America,  11 are  administrative and
management,  10 are  technical  support  and 9 are in sales and  marketing.  The
employees at our U.K. office include 2 administrative and management  personnel,
2  technical  support  workers  and 2 sales and  marketing  personnel.  Of the 3
employees at our Singapore facility, 1 handles administration, 1 is in sales and
marketing  and 1 is in  technical  support.  Of the 2 employees at our Hong Kong
office, 1 is in technical support and the other handles administration. Of the 6
employees  at the Beijing  facility,  2 are  administrative  and  management,  1
handles sales and marketing,  and 3 are technical support. Of the 2 employees in
Shanghai,  1 is  administrative  and 1 manages sales.  The person working at the
field office in Australia  manages technical support for the Asia Pacific region
including Australia and New Zealand.

     In addition,  pursuant to a services  agreement  dated January 11, 1999 and
subsequently  amended on August 24, 1999,  entered into between  POPstar-BVI and
TGI  Technologies  Ltd.,  pursuant  to  which  TGI  Technologies  Ltd.  provides
POPstar-BVI  with  technical  assistance,   software   development,   marketing,
management and other services, as required.  Through this services agreement, we
have indirect access to the pool of  approximately  22 programming and technical
staff of TGI Technologies Ltd.

     None of our employees are  represented by a labor union and we consider our
relations with our employees to be good.

Risks Related to Our Business

We have a history of losses and expect to incur losses in the future.

     We incurred net losses of $3,141,273 million in fiscal 2000. As of December
31,  2000,  we had an  accumulated  deficit of  $5,183,009.  We expect to derive
substantially  all of our revenues for the  foreseeable  future from our POPstar
unified messaging  services.  We only officially  launched our fax over Internet
services in September  2000 and have not derived any material  revenues from our
fax  over  Internet  service.  We may not be able to  generate  any  significant
revenues from our operations or to achieve  essential  growth rates. In fact, we
may not have any revenue  growth,  and basic revenues could fail to materialize.
Over the longer  term,  we expect to derive  revenues  from  outsourced  unified
messaging  services,  which is based on an unproven  business  model. We need to
attract  ISPs to offer  our  services  and users of our  services  before we can
collect fees for our services.  If our revenues do not  materialize as we expect
or if our  expenses  increase at a greater pace than  revenues,  we may never be
profitable  or,  if we  become  profitable,  we may not be able  to  sustain  or
increase profitability on a quarterly or annual basis.

     Moreover, we expect to incur significant sales and marketing,  research and
development,  and general and administrative expenses. As a result, we expect to
incur significant losses through 2001. See "Plan of Operation."

     The  auditors'  report on our  December  31,  2000  consolidated  financial
statements contain an additional  explanatory paragraph that states that we have
suffered  losses from  operations and have no established  source of significant
revenue  substantial  doubt  exists  about our  ability to  continue  as a going
concern.  The  financial  statements do not include any  adjustments  that might
result from the outcome of this uncertainty.


POPstar is a development  stage company.  Our limited operating history makes it
difficult to evaluate our future prospects.

     On July 20, 1999,  we acquired our existing  business by acquiring  all the
issued and outstanding  common and preferred  shares of  POPstar-BVI,  a company
that  was  developing  fax over  Internet  technologies.  We had no  significant
operations prior to the date of the acquisition.

     We are a  development  stage  company,  which means we have not  completely
developed  the  technologies  related to our business or generated  any material
revenues  from  our  operations.  Our  lack of an  operating  history  makes  an
evaluation of our future  prospects very difficult.  We officially  launched our
POPstar fax over Internet  service,  in September  2000. We currently offer this
service through only six ISPs. It is too early to evaluate whether our business



                                       9
<PAGE>

will be commercially  successful.  You should consider our prospects in light of
the risks,  expenses and  difficulties  we may encounter as a development  stage
company in the new and rapidly evolving market for IP  communications  services.
These risks include our ability:

     o    to  develop  the  technologies  to offer  our  unified  messaging  and
          integrated voice over Internet protocol services as planned

     o    to arrange strategic alliances with ISPs to offer our services

     o    to increase  awareness  of our brand,  increase the number of users of
          our IP telephony services and build user loyalty

     o    to generate revenues to cover increased  administrative  and marketing
          expenditures, which are required to implement our business plan

     o    to compete effectively

     o    to develop new products and keep pace with developing technology

     In addition,  we will  encounter  other risks and  difficulties  frequently
encountered by development  stage companies in new and rapidly evolving markets.
Many of these risks are described in more detail in this "Risk Factors" section.
We may not  successfully  address any of these risks. If we do not  successfully
address  these risks,  our business  would be seriously  harmed and you may lose
your entire investment.


We may need  additional  capital to finance our  operations in the future and we
may not be able to obtain that capital.

     As of December 31, 2000, we had working capital of $4,978,047. We intend to
continue  to enhance  and  expand  product  and  service  offerings  in order to
commercialize our unified messaging services and meet the increasing demands for
service quality, capacity and competitive pricing. Also, the introduction of new
products and services will require significant  marketing and promotion expenses
that we may incur  before we begin to receive the related  revenue.  We also may
require   additional   capital  to  fund,  among  other  things,   unanticipated
opportunities,  strategic alliances,  potential acquisitions,  changing business
conditions  and  unanticipated  competitive  pressures.  If our cash  flow  from
operations  and our  working  capital  is not  sufficient  to meet  our  capital
expenditure and working capital  requirements,  we will need to raise additional
capital from other sources.  Obtaining additional financing will be subject to a
number of factors,  including market conditions,  our operating  performance and
investor  sentiment.  These  factors  may make the  timing,  amount,  terms  and
conditions  of  additional  financings  unattractive  to us. If we are unable to
raise  additional  capital as and when needed,  we may be required to reduce the
scope  of our  business  or our  anticipated  growth,  which  would  reduce  our
revenues.


The  market  for our  services  is at an early  stage.  We need a number  of ISP
operators  to offer our  unified  messaging  services  in order to  successfully
implement and deploy our services.

     The market for Internet-based fax, voice and unified messaging applications
and  services is at an early  stage of  development.  Our  success  depends on a
significant  number of Originating  Gateway ISP operators and their subscribers,
along with a  corresponding  number of  Terminating  Gateway  ISP  operators  in
locations around the world.

     The  implementation  of a POPstar  originating  gateway is complex and time
consuming,  and in many  cases,  these  organizations  must  change  established
business  practices  and  conduct  business  in new  ways.  Independent  ISPs in
particular will need to introduce new procedures for administration, billing and
collections  associated with POPstar unified messaging services.  Our ability to
attract additional  partners for our POPstar messaging services will depend upon
alliances  with  strategic  Internet  vendor  partners,  and using our  existing
customers as reference accounts.

     We  officially  launched  our  POPstar  network in  September  2000.  As of
December  31, 2000,  only four  Originating  Gateway ISP sites were  engaging in
commercial traffic on the POPstar network. Accordingly, our services



                                       10
<PAGE>

and  applications  may not  achieve  significant  market  acceptance.  Unless  a
critical  mass  of  Originating  Gateway  operators,  which  we  estimate  to be
approximately 50 ISPs representing 1,000,000 subscribers,  and their subscribers
join our  POPstar  network,  our  services  may not  achieve  widespread  market
acceptance and our business would be seriously harmed.


Our quarterly  operating  results are volatile and  difficult to predict.  If we
fail to meet the expectations of investors, the market price of our common stock
may decrease significantly.

     Our  quarterly  operating  results  reflect  operating  losses of $625,637,
$694,702,  $803,567 and  $1,017,367,  respectively,  for each of our last fiscal
quarters  ending  December 31, 2000. Our results of operations  will likely vary
significantly in the future. We believe that period-to-period comparisons of our
results of  operations  are not  meaningful  and  should  not be relied  upon as
indicators of future  performance.  Our operating results will likely fall below
the  expectations  of securities  analysts,  if any, or investors in some future
quarter  or  quarters.  Our  failure  to meet these  expectations  would  likely
adversely affect the market price of our common stock.

     Our quarterly  operating results may vary depending on a number of factors,
including:

     o    demand for fax over Internet  protocol,  voice over Internet  protocol
          and unified messaging services;

     o    actions taken by our competitors, including new product introductions,
          product and service enhancements, and marketing activities;

     o    delays in the  implementation  of  end-user  provisioning  and billing
          software by ISPs  offering our services to effect  timely  collections
          from  their  customers,  and to  reduce  their  exposure  to abuses by
          customers;

     o    our  ability to scale our  network  and  operations  to support  large
          numbers of customers, suppliers and transactions;

     o    our  ability  to  develop,  introduce  and  market  new  services  and
          enhancements to our existing products on a timely basis;

     o    changes in our pricing policies or those of our competitors;

     o    our ability to expand our sales and  marketing  operations,  including
          hiring additional sales personnel;

     o    size and timing of usage of our products and services;

     o    our success in maintaining and enhancing  existing  relationships  and
          developing new relationships with strategic partners,  including ISPs,
          major  Internet  product  vendors,  billing  system  vendors and other
          implementation partners;

     o    our  compensation  policies that  compensate  sales personnel based on
          achieving annual and quarterly quotas;

     o    our ability to control costs;

     o    technological changes in our markets; and

     o    general economic and political factors.

Quarterly  revenues  will  also  be  affected  by  delays  associated  with  our
customers'  ability to complete the implementation of POPstar network servers in
a timely  manner.  Delays with the  integration  of POPstar  messaging  services
billing and provisioning will adversely affect our quarterly operating results.



                                       11
<PAGE>

     We plan to increase our operating expenses to:

     o    expand our sales and marketing operations,

     o    fund greater levels of research and development,

     o    develop new partnerships,

     o    relocate some operations to new facilities,

     o    increase our professional services, and

     o    support   capabilities  and  improve  our  operational  and  financial
          systems.

     If our  revenues  do not  develop as we  expect,  our  business,  operating
results and financial  condition could be seriously  harmed and results achieved
in a given quarter could be significantly worse than expected.

     In addition,  because our expense levels are  relatively  fixed in the near
term and are based in part on expectations of our future  revenues,  our failure
to achieve  our revenue  expectations  would have a  disproportionately  adverse
impact on our operating results.


We expect to depend on our POPstar  messaging  services for substantially all of
our revenues for the foreseeable future.

     We only  officially  launched  our fax over  Internet  service in September
2000,  and do not expect to offer  unified  messaging  services  until the third
quarter 2001. We anticipate  that revenues,  if any, from POPstar  services will
constitute  substantially  all of  our  revenues  for  the  foreseeable  future.
Consequently,  a failure to achieve broad market acceptance, or a decline in the
price of, or demand for, our POPstar services, would seriously harm our business
and our results of operations.


Implementation  of our POPstar  Services by ISPs is complex,  time consuming and
expensive. We expect to frequently experience long implementation cycles.

     POPstar messaging services,  especially where offered by larger originating
gateway ISP  operators,  is complex and time  consuming  to  implement.  In many
cases,  our partners  will need to change  established  business  practices  and
conduct business in new ways. In addition, they may need to generally consider a
wide range of other issues before  committing  to offer our services,  including
expected revenues, ease of installation,  ability to work with existing computer
systems,  ability  to  control  subscriber  receivables,  and  ability  to reach
potential  users of the services.  Furthermore,  because we are one of the first
companies  to  offer  an  Internet-based   value-added  messaging  service,  the
supporting  inter-gateway  and  third-party  settlements  service,  many service
provider  partners  will be  addressing  these  issues for the first time in the
context of managing and collecting  large volumes of itemized billing items from
their  end  users.  As a  result,  we must  educate  potential  partners  on the
selection and use of customer billing systems, e-commerce financial systems, and
electronic transaction  management.  In addition,  where a POPstar partner is to
operate as an  terminating  gateway,  additions  and  changes to their  existing
telephone  circuit  connections must be made. It frequently takes several months
to  effect   circuit   provision   by  local   telephone   companies   or  other
telecommunications  service providers. The concept of inter-gateway  settlements
is new to many  organizations.  Those originating  traffic for delivery by other
terminating gateways are required to establish deposit accounts so that payments
to them may be guaranteed  by the  settlement  agency.  The  implementation  and
deployment of POPstar  messaging  servers  requires a significant  commitment of
resources  by our  customers.  Because  we intend  target  both  large and small
partners, we estimate that our sales cycles can range from one to 12 months.


Our POPstar  network was only  recently  introduced  and is at an early stage of
development and market acceptance.

     We began  officially  operating  our POPstar  network in September  2000 by
offering our fax over Internet service.  As of December 31, 2000, only four ISPs
were  originating  commercial  fax over Internet  protocol  traffic  through our
POPstar  network  from a limited  number of  online  subscribers  and we had two
additional terminating ISPs.



                                       12
<PAGE>

Broad and timely  acceptance  of our POPstar  network,  which is critical to our
future success,  is subject to a number of significant risks and  uncertainties.
These include:

     o    Internet  service  providers  and   carrier-provided   fax  and  voice
          messaging on the Internet is a new market and acceptance is uncertain;

     o    our network's ability to support large numbers of originating gateways
          and terminating gateways is unproven;

     o    our ability to create  interfaces  between our POPstar server products
          and the various billing and customer  provisioning systems used by our
          originating gateway partners is uncertain;

     o    our ability to  continuously  enhance the features and services of our
          POPstar  network  to  achieve  and  maintain   widespread   commercial
          acceptance of our messaging services is uncertain; and

     o    we need to  significantly  expand our  internal  resources  to support
          planned growth of our POPstar network.


The  Internet  fax and voice  industry is very  competitive  and we face intense
competition from many participants in this industry. If we are unable to compete
successfully, our business will be seriously harmed.

     The market for our messaging  services is intensely  competitive,  evolving
and  subject to rapid  technological  change.  We expect that the  intensity  of
competition to increase in the future. Increased competition is likely to result
in price reductions,  reduced gross margins and loss of market share, any one of
which could  seriously  harm our business.  Competitors  vary in size and in the
scope and breadth of the products and services offered.  We primarily  encounter
competition  with respect to different  aspects of our solution  from  Callwave,
Inc., j2 Global Communications Inc. (formerly Jfax.com),  Messageclick,  Inc. (a
subsidiary of Verso  Technologies,  Inc.),  Mail.com,  Inc. (after acquiring our
competitor  Netmoves.com) and other established fax service  providers.  We also
compete with fax outsourcing  providers such as Xpedite (a business unit of Ptek
Holdings,  Inc.)  and  IDT  Corporation.  In  addition,  we may  also  encounter
competition from major IP telephony  product vendors,  such as 3Com Corporation,
eGlobe, Inc.,  zeroplus.com,  Inc., AT&T,  Net2Phone,  Inc. (an affiliate of RSL
Communications,  Ltd.), I-Link  Incorporated,  iBasis, Inc., ICG Communications,
Inc., IPVoice Communications, Inc., ITXC Corp. and Worldcom Inc., who offer many
other messaging services similar to those offered by us.

     Many  of our  current  and  potential  competitors  have  longer  operating
histories,  significantly  greater  financial,  technical,  marketing  and other
resources than us, significantly greater name recognition and a larger installed
base of customers.  In addition,  many of our competitors have  well-established
relationships  with our  current  and  potential  customers  and have  extensive
knowledge of our industry.  In addition,  current and potential competitors have
established or may establish cooperative  relationships among themselves or with
third  parties to  increase  the ability of their  products to address  customer
needs.  Accordingly,  it is possible  that new  competitors  or alliances  among
competitors  may emerge and rapidly  acquire  significant  market share. We also
expect that competition will increase as a result of industry consolidations.

     We may not be able to compete  successfully  against our current and future
competitors.


We rely on third parties to implement our POPstar network.

     We rely, and expect to rely  increasingly,  on a number of third parties to
complement  POPstar server  installations at customer sites. If we are unable to
establish and maintain  effective,  long-term  relationships  with our strategic
partners,  or if these  vendors  do not meet the  needs or  expectations  of our
network  partners  (gateway and ISP operators),  our business would be seriously
harmed.  This strategy will also require that we develop new relationships  with
additional  third-party  vendors  to  provide  these  services  if the number of
POPstar partner sites is to increase.  Our current strategic vendor partners are
not   contractually   required  to  continue   to  support   POPstar   messaging
applications. As a result of acquisitions or consolidation in the sectors served
by our vendor partners, we may be unable to establish or maintain  relationships
with vendor  partners able to support our needs.  If these are  unavailable,  we
will be required to procure and resell, or to develop and sell, products able to
meet our requirements.  This would  significantly  limit our ability to meet our
customers'  implementation  needs  over  the  shorter  term.  A  number  of  our
competitors have



                                       13
<PAGE>

significantly more well-established relationships with some of these third party
vendors  and,  as a  result,  these  vendors  may be more  likely  to  recommend
competitors'  products and services rather than our own. In addition,  we cannot
control  the level and  quality of service  provided  by our  current and future
implementation partners.


We depend on suppliers for the success of our POPstar network.

     We expect to  depend  on  originating  gateway  ISPs  joining  our  POPstar
network.  Any  failure  of  these  providers  to join  our  POPstar  network  in
sufficient  and increasing  numbers  reduces the  attractiveness  of joining our
network as a terminating gateway partner.  The benefits to terminating  partners
are  dependent  upon the  volume of  terminating  fax or other  message  traffic
offered  to them,  and this  will  vary in direct  proportion  to the  number of
message "senders", who are end users served by the originating partners.


We depend on the  introduction  of new versions of POPstar and on enhancing  the
functionality and services offered by our POPstar network.

     If we are unable to develop new software  products or  enhancements  to our
existing  products on a timely and  cost-effective  basis, or if new products or
enhancements do not achieve market  acceptance,  our business would be seriously
harmed.  The life cycles of our  products are  difficult to predict  because the
market for our  products  is new and  emerging,  and is  characterized  by rapid
technological  change,  changing customer needs and evolving industry standards.
The introduction of products  employing new  technologies and emerging  industry
standards  could  render  our  existing   products  or  services   obsolete  and
unmarketable.

     To  be   successful,   our  products  and  services  must  keep  pace  with
technological   developments  and  emerging  industry  standards,   address  the
ever-changing and increasingly  sophisticated needs of our customers and achieve
market acceptance.

     In developing new products and services, we may:

     o    fail to develop  and market  products  that  respond to  technological
          changes or evolving  industry  standards in a timely or cost-effective
          manner;

     o    encounter products,  capabilities or technologies  developed by others
          that render our products and services  obsolete or  noncompetitive  or
          that shorten the life cycles of our existing products and services;

     o    experience  difficulties  that could delay or prevent  the  successful
          development,  introduction  and  marketing  of these new  products and
          services; or

     o    fail to develop new  products and services  that  adequately  meet the
          requirements of the marketplace or achieve market acceptance.


If we fail to improve our products in a timely manner, or if our products do not
achieve market acceptance, our business would be seriously harmed.

     We may fail to introduce our unified  messaging and  integrated  voice over
Internet  services or deliver new offerings or product  improvements on a timely
basis or at all.  In the past,  we have  experienced  delays  in the  commercial
releases of our new software packages and services. If new releases or potential
new  products  are  delayed  or do  not  achieve  market  acceptance,  we  could
experience a delay or loss of revenues and customer  frustration.  ISP customers
may  delay   implementation   and   participation  in  the  POPstar  network  in
anticipation of future releases, which could seriously harm our business.


New versions and releases of POPstar software may contain errors or defects.

     Our POPstar  message  server  software  is complex  and,  accordingly,  may
contain  undetected  errors or failures when first introduced or as new versions
are released.  This may result in loss of, or delay in, market acceptance of our
products and services.  We have discovered  software errors in our beta releases
and new products after their



                                       14
<PAGE>

introduction.  We may in the future discover errors and operational  limitations
in new releases or new products after the commencement of commercial  shipments,
which may result in delays in release,  lost  revenues and customer  frustration
during the period required to correct these errors. In addition,  a delay in the
commercial release of future POPstar messaging software could slow the growth of
our POPstar network.


We could be subject  to  potential  product  liability  claims  and third  party
liability claims related to products and services  purchased through our POPstar
network.

     Our partners use our  products  and services to manage  message  traffic on
behalf of their end user subscribers.  Any errors,  defects or other performance
problems  could result in financial or other damages to our partners.  A product
liability claim brought against us, even if not successful, would likely be time
consuming  and costly and could  seriously  harm our business and our ability to
become  commercially  successful.  Although our licensing  and other  agreements
typically contain provisions designed to limit our exposure to product liability
claims,  existing or future laws or unfavorable  judicial decisions could negate
these limitation of liability provisions.

     We may not  successfully  avoid civil or criminal  liability  for  problems
related to the timely  availability  and reliability of message carriage through
our POPstar network.  Any claims or litigation could still require  expenditures
in terms of management time and other resources to defend  ourselves.  Liability
of this sort could  require us to  implement  measures to reduce our exposure to
this liability,  which may require us, among other things, to expend substantial
resources  or to  discontinue  certain  product or service  offerings or to take
precautions  to ensure that certain  products  and  services  are not  available
through our POPstar network.


Our  success  depends on  retaining  our current key  personnel  and  attracting
additional key personnel,  particularly in the areas of partner  recruitment and
support, and research and development.

     Our  future  performance  depends  on the  continued  service of our senior
management,   product  development  and  sales  personnel.   Senior  management,
including Thompson Chu (Chairman), John McDermott (President and a Director) and
Don Lau (Secretary and Treasurer),  have signed long-term employment agreements.
Not all of our key  personnel  are  bound by  long-term  employment  agreements.
Individuals  working in product  development  and/or sales personnel have signed
standard  employment  agreements with a one-month  termination of notice clause.
Currently,  we do not carry key person life  insurance on our senior  management
personnel.  The loss of the services of one or more of our key  personnel  could
seriously  harm our business.  Our future success also depends on our continuing
ability  to  attract,  hire,  train and  retain a  substantial  number of highly
skilled managerial,  technical, sales, marketing and customer support personnel.
We are  particularly  dependent on hiring  additional  personnel to increase our
direct sales and research and development organizations.  In addition, new hires
frequently  require  extensive  training  before they achieve  desired levels of
productivity. Competition for qualified personnel is intense, and we may fail to
retain  our key  employees  or to  attract  or  retain  other  highly  qualified
personnel.


If the protection of our  intellectual  property is inadequate,  our competitors
may gain access to our technology, and we may lose customers.

     We depend on our ability to develop and maintain the proprietary aspects of
our technology.  To protect our proprietary  technology,  we rely primarily on a
combination  of  contractual  provisions,   confidentiality  procedures,   trade
secrets, and copyright and trademark laws.

     We provide a royalty-free license to use, rather than sell, POPstar message
server  software,  and require our  customers to enter into license  agreements,
which impose restrictions on their ability to utilize the software. In addition,
we seek to avoid  disclosure  of our  trade  secrets  through a number of means,
including  but not  limited  to,  requiring  those  persons  with  access to our
proprietary  information  to  execute  confidentiality  agreements  with  us and
restricting  access  to our  source  code.  We seek  to  protect  our  software,
documentation and other written materials under trade secret and copyright laws,
which  afford  only  limited  protection.  We cannot  assure you that any of our
proprietary  rights with  respect to our POPstar  software  will be viable or of
value in the future because the validity,  enforceability and type of protection
of  proprietary  rights in  Internet-related  industries are uncertain and still
evolving.

     We have no  patents,  and  none may be  issued  from  any  possible  patent
application.  Our future patents, if any, may be successfully  challenged or may
not provide us with any competitive  advantages.  We may not develop proprietary
products or technologies that are patentable.



                                       15
<PAGE>

     Despite our efforts to protect our proprietary rights, unauthorized parties
may attempt to copy  aspects of our  products  or to obtain and use  information
that we regard as  proprietary.  Policing  unauthorized  use of our  products is
difficult,  and while we are unable to  determine  the extent to which piracy of
our software products exists, software piracy can be expected to be a persistent
problem.  In  addition,  the laws of some  foreign  countries do not protect our
proprietary  rights to as great an extent as do the laws of the  United  States.
Our means of  protecting  our  proprietary  rights may not be  adequate  and our
competitors may independently develop similar technology, duplicate our products
or design around patents issued to us or our other intellectual property.

     There has been a substantial  amount of litigation in the software industry
and the Internet industry regarding intellectual property rights. It is possible
that in the future,  third parties may claim that we or our current or potential
future products infringe their  intellectual  property.  We expect that software
product developers and providers of Internet  messaging and electronic  commerce
services will  increasingly be subject to  infringement  claims as the number of
products and competitors in our industry segment grows and the  functionality of
products in different  industry segments overlaps.  Any claims,  with or without
merit,  could be  time-consuming,  result in costly  litigation,  cause  product
shipment  delays or require us to enter into  royalty or  licensing  agreements.
Royalty or  licensing  agreements,  if  required,  may not be available on terms
acceptable to us or at all, which could seriously harm our business.

     We must now,  and may in the future have to,  license or  otherwise  obtain
access to intellectual  property of third parties. For example, we are currently
dependent on a provider of data encryption software.  We may be unable to obtain
some required third party intellectual property in the future.


In order to  manage  our  growth  and  expansion,  we will need to  improve  and
implement new systems, procedures and controls.

     We have  recently  experienced  a period of  significant  expansion  of our
operations that has placed strain upon our management systems and resources.  If
we are unable to manage our growth and expansion, our business will be seriously
harmed.  We currently  have 50  part-time,  full-time and  independent  contract
employees,  of which 13 have been hired in the last six  months.  We  anticipate
that we may need to hire up to an  additional 5 to 10 employees  during 2001. We
also plan to expand the  geographic  scope of our customer base and  operations.
This  expansion is expected to result in  substantial  demands on our management
resources.  Our ability to compete effectively and to manage future expansion of
our operations, if any, will require us to continue to improve our financial and
management  controls,  reporting  systems and procedures on a timely basis,  and
expand, train and manage our employee work force. We are currently  implementing
new systems to manage our financial and human resources  infrastructure.  We may
encounter  difficulties in transitioning to the new enterprise resource planning
software system.  Even after we implement this system,  our personnel,  systems,
procedures and controls may be inadequate to support our future operations.


As we expand our international sales and marketing activities, our business will
be susceptible to numerous risks associated with international operations.

     To be successful,  we believe we must expand our  international  operations
and hire  additional  international  personnel.  Therefore,  we expect to commit
significant   resources  to  expand  our   international   sales  and  marketing
activities.  If successful,  we will be subject to a number of risks  associated
with international business activities. These risks generally include:

     o    unexpected changes in regulatory requirements;

     o    tariffs, export controls and other trade barriers;

     o    difficulties in managing and staffing international operations;

     o    potentially  adverse tax consequences,  including  restrictions on the
          repatriation of earnings;

     o    the burdens of complying with a wide variety of foreign laws;

     o    the risks related to the recent global economic turbulence and adverse
          economic  circumstances in Asia and, more recently, the United States;
          and



                                       16
<PAGE>

     o    political instability.


We may need to make  acquisitions in order to remain  competitive in our market.
Our  business  could be  adversely  affected as a result of any of these  future
acquisitions.

     In  order  to  remain  competitive,  we may find it  necessary  to  acquire
additional businesses,  products or technologies.  If we identify an appropriate
acquisition  candidate,  we may  not be  able  to  negotiate  the  terms  of the
acquisition  successfully,  finance the  acquisition,  or integrate the acquired
business,  products or technologies  into our existing  business and operations.
Further, completing a potential acquisition and integrating an acquired business
will cause  significant  diversions  of  management  time and  resources.  If we
consummate  one or more  significant  acquisitions  in which  the  consideration
consists  of stock or  other  securities,  your  equity  could be  significantly
diluted.  If we were to proceed  with one or more  significant  acquisitions  in
which the consideration included cash, we could be required to use a substantial
portion  of  our  available  cash,  including  proceeds  of  this  offering,  to
consummate  any  acquisition.  Acquisition  financing  may not be  available  on
favorable  terms,  or at  all.  In  addition,  we may be  required  to  amortize
significant  amounts of goodwill and other intangible  assets in connection with
future acquisitions, which would seriously harm our business.

Risks Related to the Internet Communications Industry

We depend on  increasing  use of the  Internet  and on the growth of  electronic
messaging  services.  If the use of the Internet and such messaging  services do
not grow as anticipated, our business will be seriously harmed.

     Our POPstar  network  depends on the  increased  acceptance  and use of the
Internet as a medium of  commerce.  Rapid growth in the use of the Internet is a
recent phenomenon.  As a result,  acceptance and use may not continue to develop
at historical rates and a sufficiently  broad base of business customers may not
adopt or continue to use the Internet as a medium of commerce. Demand and market
acceptance for recently  introduced  services and products over the Internet are
subject to a high level of uncertainty,  and there exist few proven services and
products.

     Our business would be seriously harmed if:

     o    use of the  Internet and other  online  services  does not continue to
          increase or increases more slowly than expected;

     o    the technology  underlying the Internet and other online services does
          not effectively support any expansion that may occur; or

     o    the  Internet  and  other  online  services  do not  create  a  viable
          commercial  marketplace,  inhibiting  the  development  of  electronic
          commerce and reducing the need for our products and services.


We depend on the  acceptance of the Internet as a means for  communications  and
this acceptance may not occur on a timely basis.

     The  Internet  may  not  be  accepted  as  a  viable  long-term  means  for
communications for a number of reasons. These include:

     o    inconsistent quality and speed of service.

     o    potentially inadequate development of the necessary  communication and
          computer  network  technology,  particularly  if rapid  growth  of the
          Internet continues;

     o    traffic congestion on the Internet;

     o    delayed   development  of  enabling   technologies   and   performance
          improvements;

     o    delays in the development or adoption of new standards and protocols;



                                       17
<PAGE>

     o    lack of security technologies;

     o    consolidations or acquisitions by major telecommunications carriers in
          one or more countries; and

     o    increased governmental regulation.


Security  risks and concerns  may deter the use of the  internet for  conducting
electronic communications.

     A significant  barrier to  electronic  commerce and  communications  is the
secure transmission of confidential  information over public networks.  Advances
in computer capabilities,  new discoveries in the field of cryptography or other
events or  developments  could result in compromises or breaches of our security
systems or those of other web sites to protect proprietary  information.  If any
well-publicized  compromises of security were to occur, it could have the effect
of  substantially  reducing the use of the web for commerce and  communications.
Anyone who circumvents our security  measures could  misappropriate  proprietary
information and end user message content or cause  interruptions in our services
or  operations.  The  Internet is a public  network,  and data is sent over this
network from many sources. In the past, computer viruses, software programs that
disable or impair computers,  have been distributed and have rapidly spread over
the Internet.  Computer viruses could be introduced into our systems or those of
our customers or suppliers,  which could disrupt our POPstar  network or make it
inaccessible to customers or suppliers. We may be required to expend significant
capital and other resources to protect  against the threat of security  breaches
or to alleviate  problems caused by breaches.  To the extent that our activities
may involve the storage and  transmission  of proprietary  information,  such as
credit card  numbers,  security  breaches,  could expose us to a risk of loss or
litigation and possible  liability.  Our security  measures may be inadequate to
prevent security breaches, and our business would be harmed if we do not prevent
them.


Our POPstar network may experience performance problems or delays as a result of
high volumes of traffic.

     Our POPstar  network is  currently  operating  on a limited  basis.  If the
volume of traffic on specific web sites for our POPstar network  increases,  our
POPstar  network may in the future  experience  slower  response  times or other
problems.  In  addition,  users will depend on Internet  service  providers  and
telecommunications  companies  for the  efficient  operation  of their  computer
networks and other computer equipment for access to our POPstar network. Each of
these has  experienced  significant  outages  in the past and  could  experience
outages,  delays and other  difficulties due to system failures unrelated to our
systems.  Any delays in response time or performance  problems could cause users
of our POPstar network to perceive this service as not functioning  properly and
therefore cause them to use other methods to procure their operating resources.


Increasing government regulation could limit the market for, or impose sales and
other  taxes on the sale of,  our  products  and  services  or on  products  and
services purchased through our POPstar network.

     As Internet commerce and  communications  services evolves,  we expect that
federal,  state or foreign agencies will adopt regulations  covering issues such
as user privacy,  pricing,  content and quality of products and services.  It is
possible  that  legislation  could  expose  companies   involved  in  electronic
messaging content or other  characteristics to liability,  which could limit the
growth of electronic messaging generally. Legislation could dampen the growth in
Internet  usage and decrease its acceptance as a  communications  and commercial
medium. If enacted,  these laws, rules or regulations could limit the market for
our products and services.

     We do not  collect  sales or other  similar  taxes in respect  of  messages
carried through our POPstar network. However, one or more jurisdictions may seek
to impose sales tax collection  obligations on out-of-state  (or out of country)
companies like us that engage in or facilitate  electronic message handling.  In
the United  States,  a number of proposals have been made at the state and local
level that would impose  additional taxes on the sale of goods and services over
the Internet. These proposals, if adopted, could substantially impair the growth
of Internet usage and could adversely affect our opportunity to derive financial
benefit from such activities.  Moreover,  a successful  assertion by one or more
states or any foreign country that we should collect sales or other taxes on the
exchange of message traffic through our POPstar network could seriously harm our
business.

     Legislation  limiting  the  ability  of  the  states  to  impose  taxes  on
Internet-based  transactions  has  been  proposed  in the  U.S.  Congress.  This
legislation  could  ultimately  be enacted  into law or this  legislation  could
contain a limited time period in which this tax  moratorium  will apply.  In the
event that the tax moratorium is imposed for a limited time



                                       18
<PAGE>

period, legislation could be renewed at the end of this period. Failure to enact
or renew  this  legislation  could  allow  various  states  to  impose  taxes on
electronic commerce,  and the imposition of these taxes could seriously harm our
business.


Item 2:  Properties

     As present, we do not own any real property.  Nor do we maintain a physical
office in the United States. Our current  administrative  facility in Vancouver,
BC, Canada is made available to us and our wholly owned  subsidiary  POPstar-BVI
from Trageglobe Consulting Ltd. for CDN$4,489  (approximately  $2,900) per month
pursuant to a formal lease  agreement.  Two directors of  Tradeglobe  Consulting
Ltd.  are  directors of our company.  See Item 12 - "Certain  Relationships  and
Related Transactions."

     Our  wholly  owned  subsidiary  POPstar-Asia  Pacific  maintains  a  sales,
marketing and technical  support  facility in Hong Kong for its Asian operations
pursuant to a formal lease agreement.  The office space is  approximately  1,000
square feet of  executive  offices  located at  Westlands  Centre,  Room 908, 20
Westlands  Road,  Quarry Bay,  Hong Kong.  The monthly  rental rate is currently
$2,000.  The owner of the office  space is Easewell  Management  Ltd., a company
beneficially  owned by Thompson  Chu, our  Chairman of the Board.  See Item 12 -
"Certain Relationships and Related Transactions."

     To assist  POPstar-Asia  Pacific  in its  business  in China,  POPstar-Asia
Pacific  maintains  a  representative  office at Room 405A,  11 Fu Cheng Men Wai
Street,  Xi Cheng District,  Beijing.  The 1,830 square feet of executive office
space used by the Beijing  representative  office is leased at a monthly  rental
rate of $2,200 pursuant to a written lease arrangement.  The owner of the office
space is  Thompson  Chu,  our  Chairman  of the  Board.  See Item 12 -  "Certain
Relationships and Related Transactions."

     On May 22,  2000,  just  prior  to  POPstar-Singapore's  incorporation,  we
entered into a month-to-month  rental agreement for  POPstar-Singapore's  office
space at 70 Anson Road, Unit #16-01/08,  Apex Tower, Singapore. The monthly rate
was approximately $2,450.  Commencing February 1, 2001, we relocated our offices
to a new floor within the same building,  pursuant to a two-year lease agreement
for offices located at 70 Anson Road, Unit #22-05,  Apex Tower,  Singapore.  The
monthly rate is currently approximately $1,010.

     To initiate  business  and create a presence in Europe for POPstar  through
its wholly owned subsidiary,  POPstar-Europe,  we rent an executive office at 90
Long Acre, Covent Garden, London, England on a month-to-month basis. The monthly
rate is (pound)195 (approximately $300).

     In this Item, we have expressed our foreign  currency rents in U.S. dollars
based upon the noon buying rate for the applicable  foreign currency on March 8,
2001 as reported by the New York Federal  Reserve Bank.  The actual U.S.  dollar
value of the rent we pay in foreign currency will vary from these estimates.

     We do not currently intend to invest in any forms of real estate other than
office leases.


Item 3:  Legal Proceedings

     We may from time to time be involved in various claims, lawsuits,  disputes
with third parties,  actions involving allegations of discrimination,  or breach
of contract  actions  incidental to the  operation of its  business.  We are not
currently  involved  in  any  such  litigation  that  we  believe  could  have a
materially adverse effect on our financial condition or results of operations.


Item 4:  Submission of Matters to a Vote of Security Holders

     We did not submit any matters during the fourth quarter of the year covered
by this report to a vote of the security  holders  through the  solicitation  of
proxies or in any other manner.



                                       19
<PAGE>

                                    Part II

Item 5:  Market for Registrant's Common Stock and Related Stockholder Matters

     There is currently no public market for our common stock.

     Since  June 11,  1998,  our  common  stock was  quoted  for  trading on the
National  Association  of  Securities  Dealer  Over-The-Counter  Bulletin  Board
(OTCBB) under the symbol "CHRK". On May 17, 1999 our Board of Directors voted to
change the  corporate  name to POPstar  Communications,  Inc. to reflect our new
focus on  Internet  communications  services.  We changed  our ticker  symbol to
"POPS" on June 3,  1999.  Because we were  unable to meet the OTCBB  Eligibility
Rule  requirements  by October 7, 1999,  our common stock was delisted  from the
OTCBB on October 8, 1999.

     The  following  table shows,  for the periods  indicated,  the high and low
closing bid prices of our common stock as reported by the OTCBB.  Any market for
the common stock should be considered  sporadic,  illiquid and highly  volatile.
Prices reflect  inter-dealer  quotations,  without adjustment for retail markup,
markdowns or commissions, and may not represent actual transactions. The stock's
trading range on the OTCBB was as follows:

        PERIOD                               HIGH                    LOW
        ------                               ----                    ---
        1999
        1st Quarter(1)                        --                     --
        2nd Quarter(1)                        --                     --
        3rd Quarter                           $1.625                 $0.25
        4th Quarter(2)                        $3.00                  $3.00

-----------------

(1)  No trades
(2)  Our common  stock was  delisted on October 8, 1999 for failure to meet NASD
     eligibility standards.


     As of March 26, 2001 there were  21,952,000  shares of Common  Stock issued
and outstanding and approximately 58 holders of record of the common stock.

Dividend Policy

     We have neither  declared nor paid any  dividends on the common stock since
our inception and presently anticipate that no dividends will be declared in the
foreseeable  future.  Any future  dividends will be subject to the discretion of
our  Board of  Directors  and will  depend  upon,  among  other  things,  future
earnings, our operating and financial condition, our capital requirements,  debt
obligation  agreements,  general business  conditions and other pertinent facts.
Therefore,  we cannot  assure you that any dividends on the common stock will be
paid in the future.

Recent Sales of Unregistered Securities

Common Stock

     Incorporated  by  reference  to our Form 10-QSB filed on November 14, 2000,
our Form 10-QSB  filed on August 14,  2000 and our Form 10-QSB  filed on May 15,
2000.

Stock Options

     We maintain a stock option plan (the Amended 1999 Plan) and under the terms
of the  Amended  1999  Plan,  we are  authorized  to  issue up to a  maximum  of
2,000,000  shares of our common  stock from time to time,  upon the  exercise of
options we may grant to directors,  officers,  full-time  employees and contract
workers of our company or our  subsidiaries  and companies wholly owned by these
individuals.



                                       20
<PAGE>

     As of  December  31,  2000,  there  were  outstanding  options  to  acquire
1,056,000 shares of our common stock.  During fiscal 2000, we granted options to
acquire  611,000 shares and issued  144,500  shares upon exercise of options.  A
total of 168,000 options  expired or were cancelled as the employee(s)  left the
company  before the options were  vested.  Subsequent  to December 31, 2000,  we
granted options to a group of employees to purchase in aggregate  362,750 shares
of our  common  stock,  each  with an  exercise  price of  $2.00.  In  addition,
subsequent to December 31, 2000,  10,000  options  expired or were  cancelled as
employee(s)  left the company  before the options were  vested.  As of March 26,
2001, there were outstanding  options to acquire  1,408,750 shares of our common
stock.

     All of our employees  are non-U.S.  persons and all options were granted to
our employees in reliance upon an exemption from  registration  available  under
Regulation S promulgated under the Securities Act of 1933, as amended. No offers
and sales were made in the United States.


Item 6:  Plan of Operation

     We are in the  process of  building a  worldwide  IP  messaging  network in
partnership  with  ISPs.  Beginning  with fax  over  Internet  services,  we are
introducing  our services  into the North  American,  Asian  Pacific and Western
European  markets.  Over the past year, our focus has been primarily on Internet
fax services.

     We estimate that our cash  requirements  for the fiscal year ended December
31, 2001 will be $4.5 million.  We believe that our current cash and  short-term
investments and our revenues from operations will be sufficient to meet our cash
requirements  until  2002.  At December  31,  2000,  we had  working  capital of
approximately  $5 million.  We anticipate  that we will not be required to raise
any additional funding in public or private equity or debt financing in order to
meet our cash  requirements for the remainder of 2001. We cannot assure you that
we will be successful in securing such  financing or that such financing will be
available at the times, in the amounts and on terms that we require.

     During fiscal 2001, we intend to focus our research and development efforts
on the following products:

     o    Version 2.4 of Enroute in the short term

     o    Version 3.0 of Enroute in the long term

     o    Enhancements to the Belcarra mail server

     The Enroute  Version 2.4 development  will focus on needed  enhancements to
Version 2.3.7, which will include the development of a new gatekeeper to replace
the least cost routing daemon used in Version  2.3.7,  the  implementation  of a
secure socket program  throughout  the server to provide  security  features,  a
change in user  authorization  procedures,  a real-time  call  record  reporting
gateway to established  Internet protocol billing systems and a secure e-mail to
fax  service.  Our Enroute  Version 2.4 product  was  originally  scheduled  for
release  in the third  quarter  of 2000.  Our  development  team  experienced  a
technical difficulty in the implementation of security procedures and the secure
sockets layer.  Management believes we have made good progress toward completing
this  implementation and that Version 2.4 should be ready for commercial release
to the North American  market in the second quarter of 2001. We anticipate  that
Version 2.4 will be  commercially  released  from all POPstar  sites  before the
third quarter of 2001 and it is anticipated to be our flagship  product  through
early 2002.

     The development of the Enroute Version 3.0 IP unified messaging product has
continued throughout 2000. The first prototype of Version 3.0 has been built and
we expect beta testing to begin in the second quarter of 2001.  Enroute  Version
3.0 is being  developed  to run  across all  platforms  and  operating  systems.
Management  anticipates  this development to include a series of applications to
run on UNIX, NT, Linux and other operating  systems and platforms without having
to make operating system specific changes to the  applications.  The development
targets the carrier and backbone markets:  the product will be designed to scale
to meet the needs of the target  carriers.  The  cross-platform  development  is
supported by an in-house developed library of universal  messaging objects (UMO)
written in C++  computing  language.  The UMO is being  developed to allow us to
adapt quickly to the rapid changes taking place in the rapidly growing  Internet
market.  The UMO is designed to allow all  applications  to be written just once
for UNIX, NT and Linux compatibility.



                                       21
<PAGE>

     The first  major  release of the new series will be Version  3.1,  which is
scheduled for the third or fourth  quarter  2001. We anticipate  this release to
provide  commercial grade unified messaging  services to public switch telephone
network and desktop  users.  The Version 3.1 product will take  advantage of the
outgoing services  provided through the Enroute Version 2.4 product.  We plan to
implement  enhancements to the Belcarra server designed to increase its capacity
to scale from tens of thousands of users to over one million users.

Capital Expenditures

     Capital  purchases  for the  fiscal  year  ended  December  31,  2000  were
$334,627,  divided between  hardware and software at $258,506,  office furniture
and equipment at $35,256 and leasehold  improvements at $40,865. The hardware is
needed  primarily  to support  POPstar's  own global  gateways  in Los  Angeles,
Seattle and Vancouver and secondarily to help develop a market presence in other
countries.

Employees

     On December 31, 2000, we employed 40 people. During 2001, we expect to hire
approximately  9 to 10 additional  personnel in customer  sales, to increase our
marketing  efforts,  and  approximately 4 to 5 additional  personnel in customer
support positions,  to expand our customer support services to 7 days a week, 24
hours a day.

     We currently employ fifty (50) part-time, full-time and contract workers in
the following areas:

     Administration:  There  are a  total  of 17  administrative  staff  members
employed  throughout our group of companies,  including 11 administrative  staff
members in the  Vancouver  office,  of which 5 are senior  administrative  staff
members;  2  administrative  staff  members in the Beijing  office;  1 part-time
administrative  staff  member in the Shanghai  office;  1  administrative  staff
member in the  Singapore  office;  1 senior  administrative  staff member in the
European  office and 1 part-time  administrative  staff  member in the Hong Kong
office.

     During the  twelve-month  period ended  December  31, 2000,  we hired 2 new
staff members in mid-May - 1 staff member to assist the Corporate  Secretary and
Treasurer in handling our administrative  responsibilities and 1 staff member to
administer the Singapore office. In August, a managing director was hired in the
UK  (London) to manage  activities  in Europe,  the Middle  East and Africa.  In
September,  a support  staff member was hired to handle  marketing and corporate
development in the Vancouver  office.  Subsequent to December 31, 2000, we hired
additional administration staff members: Vancouver (1) and Beijing (1).

     Sales and Marketing: There are a total of 15 sales and marketing personnel.
During the  twelve-month  period ended  December 31, 2000,  we hired 6 new sales
staff.  We hired 4 new sales  staff at the  beginning  of June,  including 3 new
employees in the Vancouver  office and 1 new employee in Singapore.  Starting in
July, 1 new employee was hired to manage  sales in Shanghai.  In  September,  we
hired 1 new sales staff for the Beijing office. Subsequent to December 31, 2000,
4 additional  sales and marketing  personnel were hired for the Vancouver office
and 1 additional sales and marketing person hired for the Beijing office.

     Operations:  We have a total of 18  employees  in  operations  support  and
technical  support.  During the twelve-month  period ended December 31, 2000, we
hired 8 new  operations and technical  support staff.  We hired 3 new operations
support staff in July,  including 1 new employee to handle operations support in
the  Vancouver  office  and  1 new  employee  to  handle  technical  support  in
Singapore.  In  August,  1 new  employee  was hired for  operations  support  in
Vancouver.  In September,  an Operations Specialist from Vancouver moved to Hong
Kong to oversee the Greater China and north Pacific  region and a new operations
specialist  was hired in Vancouver.  Also, in  September,  2 new employees  were
hired for operations support in Vancouver. In December, 1 new employee was hired
for operations support in Singapore. Subsequent to December 31, 2000, we hired a
General  Manager  -  China  Operations   (Beijing   office),   Systems  Engineer
(UK-London).  Also, a System Administrator was hired in Vancouver to replace the
existing employee who moved into the position of Director-Technical  Operations.
The employee who previously held the position of  Director-Technical  Operations
relocated  in  March  2001 to our new  field  office  in  Australia.  The  newly
appointed position is General Manager - Asia Pacific including Australia and New
Zealand and includes the overall management of the Asia Pacific region .

     As of September 1, 2000,  we engaged 3  additional  support  personnel on a
contract basis in our UK (London) office,  including 1 contract worker providing
sales and marketing support; 1 contract worker providing technical



                                       22
<PAGE>

support;  and 1 contract  worker  providing  clerical  support in accounting and
administration.  In December  2000,  we hired 1  additional  contract  worker to
assist sales and marketing at the UK (London) office.

Management's Discussion and Analysis of Financial Condition and
Result of Operations

Overview

     During 2000,  our business plan and efforts  focused on the  development of
our Enroute  Version 2.3 and Version 2.3.7 products and the  recruitment of ISPs
to offer our  services.  We  officially  launched  our  Internet fax services in
September 2000 and have not generated any material revenue from our operations.

     We have  increased  our  spending in research  and  development,  sales and
marketing,  and general and  administrative  expenses.  To the extent that these
expenditures  do not result in commercial  revenues,  our  business,  results of
operations and financial condition could be materially and adversely affected.

     Due  to the  evolution  of our  business  strategy,  we  believe  that  our
historical  results of operations for the periods  presented may not be directly
comparable. We believe the historical results of operations do not fully reflect
the operating  results that we expect to achieve following the commercial launch
of our enhanced messaging and voice over Internet services in 2001.

     You  should  read  the  following   discussion  in  conjunction   with  the
consolidated  financial  statements  and the related  notes to the  consolidated
financial statements.


Overview of the Results of Operations for the Twelve Month Period Ended December
31, 2000

     Revenues

     During the twelve-month period ended December 31, 2000, we earned a nominal
amount of operating revenues totaling $43,469, compared to no operating revenues
during 1999.  Sales for the  twelve-month  period  ended  December 31, 2000 were
derived  from sales of product and  services,  including  maintenance  contracts
$28,875, services rendered $7,249, monthly fees generated from fax mailbox users
$785, and the sale of equipment and parts to ISPs $6,560.

     During the  twelve-month  period  ended  December  31,  2000,  we completed
development  of the Enroute  Version 2.3 (and upgraded  Version  2.3.7) fax over
Internet system,  which was officially launched in September 2000. We anticipate
revenues will increase in 2001 as we launch additional services and enhancements
to our services and as we implement  our sales and marketing  strategies.  As of
December 31, 2000, we had six ISPs offering our services,  and we anticipate the
number of ISPs  offering  our  services  will  increase  during  2001,  which is
anticipated to result in higher revenues.

     During the  twelve-month  period ended  December 31, 2000,  we had revenues
from interest on cash and cash  equivalents of $345,202,  compared to $61,708 in
1999.  Interest  revenues are anticipated to decrease as we use cash to fund our
working capital requirements during 2001.

     Cost of Sales

     For the twelve-month  period ended December 31, 2000, the cost of sales was
$9,535 compared with $0 for the twelve-month  period ended December 31, 1999, as
no sales were made during that period.

     Expenses

     During the year ended December 31, 2000, we incurred $3,508,361 in expenses
compared to $2,088,418  in 1999.  The increase was due primarily to our increase
in business activities and the development our technologies.

     License Fee: The license fees paid to TGI for the years ended  December 31,
2000 and 1999 were $600,000 and $391,074  respectively.  The 53% increase during
the year ended  December  31, 2000 was due to an increase in the minimum  annual
license fee, which was $600,000, compared to $400,000 in 1999. For both periods,
the licensee fee was prorated over a twelve-month period.



                                       23
<PAGE>

     Additional  license fees were paid during the year ended  December 31, 2000
totaling  $103,687,  of which most of this  amount went  towards  payment of the
Belcarra mail server software.  The remaining  amounts went to various licensors
including two independent licensors (McConnell and Buttermer),  Optigold, Cisco,
WAP MX.com.  For the year ended December 31, 1999, a payment of $25,000 was made
to RSA Security as a prepayment on license fees. The increase of 315% represents
an increase in the integration  and use of a  third-party's  technology into our
Enroute software.

     Research  &  Development:  Research  and  development  is  provided  by  an
affiliated  company,  TGI, under  agreement and consists  primarily of technical
assistance,  software development,  and other related services, as required. The
charge is based on TGI's direct and indirect costs of the services provided plus
15%.

     Research & development  costs for the year ended  December 31, 2000 totaled
$881,487 compared with $403,438 for the same period in 1999, representing a 118%
increase.  This  increase  was due  largely in part to an  increase  in software
development  expenditures that includes an increase in the number of programming
and technical staff from 15 to 19). During 2000,  research and development costs
were incurred to continue  development of Enroute  Versions 2.3, 2.3.7,  2.4 and
3.0.  Research  and  development  costs  were  also  incurred  to solve  certain
integration  problems  encountered in the development and integration of payment
modules  that  allowed  our ISP  partners  to accept  credit  card and cash card
payments. These problems were resolved during the third quarter 2000.

     General and  Administrative:  Total general and  administrative  costs were
$1,923,187  and  $1,268,906  for the years  ended  December  31,  2000 and 1999,
respectively,  representing  an increase of 52%. Our general and  administrative
costs consist primarily of salaries and wages of $1,099,984 in 2000, compared to
$93,371,  resulting  from our  increased  hiring  of  research  and  development
personnel and our expansion of our sales and marketing organization;  accounting
& audit fees of $34,117 in 2000,  compared to $20,234,  resulting from increased
costs associated with our reporting  requirements under the Securities  Exchange
Act of 1934, as amended;  professional and legal costs $49,571 in 2000, compared
to $296,190,  resulting  from a decrease in  transactional  activities  in 2000;
directors'  fees of $30,000  in 2000,  compared  to nil in 1999,  as we paid our
independent  directors  a fee of $15,000  per year;  travel &  entertainment  of
$193,430 in 2000 compared to $38,692,  resulting  from an increase in the number
of offices and the size of our international marketing  organization;  sales and
marketing of $24,697 in 2000, compared to $33,263 in 1999;  technical support of
$16,408  compared to nil in 1999,  resulting from the  commercial  launch of our
services in the fourth  quarter 2000; and office & rental  expenses  $151,765 in
2000,  compared to $21,352 in 1999,  as a result of an increase in our number of
offices.  We anticipate that general and  administrative  costs will increase in
2001 as we increase  our business  activities  to launch and  commercialize  our
services and we expand our organization into new geographic markets.

     The rise in  general  and  administrative  costs  was  primarily  due to an
increase  in the  overall  number of staff and the opening of our new offices in
Singapore and the UK (London).

     Losses

     During the twelve-month  period ended December 31, 2000, we incurred a loss
of $3.14  million or $0.14 per share,  compared to a loss of $2 million or $0.14
per share in 1999.

Liquidity and Capital Resources

     As at December 31, 2000,  our cash and short-term  investments  amounted to
$4,430,041, and we had accounts receivable of $104,229, a note receivable in the
amount of $450,000 and prepaid expenses of $34,822. Our working capital position
at December  31,  2000 was  $4,978.047.  During the  twelve-month  period  ended
December  31, 2000,  we raised  $7,486,508  from the issuance of capital  stock,
offset by a net loss of  $3,141,273  in  developing  its  services  and acquired
equipment totaling $334,627 of capital assets.

     Our working capital position,  less known commitments (comprising primarily
personnel  costs,  professional  &  legal  fees,  licensing  fees  and  software
development  expenses) as of December  31,  2000,  is expected to be adequate to
fund our on-going operations during the 2001 fiscal year. Accordingly, we do not
anticipate the need to raise  additional funds to meet our working capital needs
during 2001. If we do not begin to generate material revenues, liquidity will be
reduced as  amounts  are  expended  for  continuing  research  and  development,
expansion  of  sales  and   marketing   activities   and   development   of  its
administrative functions. Our liquidity will also be reduced as amounts are used
for purchases of capital  assets.  In addition,  we continue to incur  operating
losses and will continue to need additional working capital



                                       24
<PAGE>

to fund our operations,  research and development, and marketing efforts for the
2001 fiscal year. As a result,  we will be required to raise additional  capital
to finance our  operations  for the 2002  fiscal  year and beyond.  We intend to
raise such  additional  funding  through the sale of equity or convertible  debt
securities.  We may not be able to raise additional capital on acceptable terms,
if at all, when needed. If we are able to raise capital, it may not be available
on terms  commercially  favorable to us. The sale of equity or convertible  debt
securities may result in dilution to our stockholders.

     If we choose to  accelerate  our  current  growth by  acquiring  additional
unified messaging companies,  then significant additional capital in addition to
the amounts  detailed above will be required to meet these  objectives.  In that
case, we will be required to secure additional funding though the sale of equity
or convertible debt securities.  We may not be able to raise sufficient  capital
necessary for the continuation of our acquisition strategy when needed.


Item 7:  Consolidated Financial Statements

     Information  with  respect  to this  Item is set  forth in the  "Index"  to
Consolidated Financial Statements on Page F-1.


Item 8:  Changes in and Disagreements With Accountants on Accounting
         and Financial Disclosure

     Prior to our acquisition of POPstar-BVI as previously described, we engaged
Barry L.  Friedman,  P.C.,  Certified  Public  Accountants  (BLF),  to audit our
financial  statements for the fiscal years ended December 31, 1998, and December
31, 1997.

     Subsequent to our acquisition of POPstar-BVI,  our newly appointed Board of
Directors elected to replace BLF as our principal  accountant and to retain KPMG
LLP as our  principal  accountant to audit our  financial  statements  effective
August 1, 1999.  BLF was  dismissed  as our  auditor.  KPMG was  previously  the
auditor of POPstar-BVI.  There have been no disagreements  between BLF, KPMG and
us of the type required to be reported  under this Item since the date of KPMG's
engagement.

     The report of BLF on our financial statements for the last two fiscal years
did not contain an adverse  opinion or a  disclaimer  of  opinion,  nor was such
opinion  qualified  or modified as to  certainty,  audit  scope,  or  accounting
principles.  During the periods  preceding our change in accountants,  we had no
disagreements  with BLF on any matter of  accounting  principles  or  practices,
financial statement disclosure, or auditing scope or procedure.


                                    Part III

Item 9:  Directors, Executive Officers, Promoters and Control Persons;
         Compliance With Section 16(a) of the Exchange Act

Directors, Executive Officers, Promoters and Control Persons

     The following table sets forth the names and ages of our current  directors
and executive officers, the principal offices and positions with us held by each
person and the date such person  became our director or executive  officer.  Our
executive officers are elected annually by the Board of Directors. The directors
serve one-year terms until their successors are elected.  The executive officers
serve  terms of one year or until  their  death,  resignation  or removal by the
Board  of  Directors.  There  are no  family  relationships  between  any of the
directors and  executive  officers.  In addition,  there was no  arrangement  or
understanding  between any  executive  officer and any other person  pursuant to
which any person was selected as an executive officer.

     The directors and executive officers of our company are as follows:

Name                           Age           Positions
----                           ---           ---------
John McDermott                 64            President and Director
Thompson Chu                   42            Chairman of the Board of Directors
Don Lau                        43            Secretary and Treasurer
William Wing Yan Lo            40            Director



                                       25
<PAGE>

Name                           Age              Positions
----                           ---              ---------
Yong Kiat Rickie Tang          42               Director

     John  McDermott  (64) has served as our President and a member of our Board
of Directors  since July 13, 1999.  Since August 1989,  Mr.  McDermott  has been
President   and  Director  of  TGI   Technologies   Ltd.,   a  high   technology
manufacturing,  research and development  company and a POPstar affiliate.  From
1978 to  1986,  Mr.  McDermott  was an  Executive  Vice  President  at  Glenayre
Electronics  in  Vancouver,  a Radio  Paging,  Radio  Telephone  and Voice  Mail
company.  Prior to that,  Mr.  McDermott  was Vice  President  of  Marketing  at
Rockwell Wescom in Chicago. Mr. McDermott also held an engineering position with
British Telecom and Alberta Government  Telecom.  He holds an engineering degree
from Liverpool UK and has been  registered as a Professional  Engineer in Canada
since 1969. Mr. McDermott dedicates his full business time to our operations.

     Thompson  Chu (42) has served as Chairman of our Board of  Directors  since
July 13, 1999. Mr. Chu has been the Chairman and a Director of POPstar-BVI since
its inception.  Since 1989, Mr. Chu has been the Chief Executive Officer of TGI.
Mr.  Chu  has   considerable   management   experience   in  the   trading   and
telecommunications  industries in North America,  China and South East Asia. Mr.
Chu has an MBA with distinction from INSEAD in France, a MSc in Science-Business
Administration  from the University of British  Columbia,  a Bachelors degree in
Business  Administration  from Acadia  University  in Nova Scotia,  a diploma in
International  Business from the  Institute of Pacific  Asian  Management of the
University of Hawaii and a diploma in French from the Universite  Sainte-Anne in
Nova Scotia. Mr. Chu dedicates his full business time to our operations.

     Don Lau (43) has served as our Secretary and Treasurer since July 13, 1999.
Since January 1, 1999,  Mr. Lau has been Vice  President,  Corporate  Finance of
POPstar-BVI.  Between  September  1995  to  December  1998,  Mr.  Lau  was  Vice
President,  Corporate  Finance for Tradeglobe  Consulting Ltd., an international
trade consulting and management company. Between November 1991 to July 1995, Mr.
Lau was Managing Director, Corporate Finance of The Nikko Securities Co. Limited
in Hong Kong, where he was responsible for the equity  origination,  merger, and
acquisition business of Nikko Securities in Hong Kong. Mr. Lau has over 15 years
experience in senior  corporate  finance  positions  with Bankers  Trust,  Nikko
Securities  and  Schroders  in  Asia.  Mr.  Lau  holds  an MBA  degree  from the
University of British Columbia and a Bachelors degree in Business Administration
from Acadia  University in Eastern  Canada.  Mr. Lau dedicates his full business
time to our operations.

     William Wing Yan Lo,  J.P.,  (40) joined our Board of Directors on February
15, 2000.  Dr.  William Wing Yan Lo, J.P.,  has served as the Chairman and Chief
Executive  Officer  of  netalone.com  Limited,  a  company  listed  on the Stock
Exchange  of  Hong  Kong,  since  December  1999.  netalone.com  Limited  is  an
integrated Internet investment,  operation and service company.  Before becoming
the Chairman and Chief Executive Officer of netalone.com Limited, Dr. Lo was the
Chief Executive  Officer of Citibank's Global Consumer Banking business for Hong
Kong,  Macau  and  China  from  October  1998  to  October  1999.  Prior  to his
appointment at Citibank,  Dr. Lo was with Pacific Century  Cyberworks  (formerly
Hong Kong Telecom)  since 1990. He was the Founder and became the first Managing
Director of Pacific  Century  Cyberworks'  wholly-owned  interactive  multimedia
subsidiary, Hong Kong Telecom IMS Ltd. (HKTIMS) in 1995, and was responsible for
developing the world's first commercial  broadband  interactive TV (iTV) service
and Netvigator - the leading Internet access and portal service provider in Hong
Kong.

     Dr. Lo serves on a number of public-sector and  private-sector  committees.
Dr. Lo is also a member of the Stock  Exchange of Hong Kong's Growth  Enterprise
Market  Listing  Committee.  In  recognition  of his  contributions  in bringing
multimedia technology and services to the people of Asia, Dr. Lo was selected as
a "1999  Global  Leader  for the  Tomorrow"  by the  global  organization  World
Economic  Forum.  He was  appointed  as a Justice  of the Peace of the Hong Kong
Special  Administrative  Region  Government on July 1, 1999.  Dr. Lo started his
business   career  as  a  management   consultant  with  McKinsey  and  Company,
specializing in competitive strategy formulation, organization effectiveness and
mergers  and  acquisitions.   Dr.  Lo  holds  a  M.Phil.   Degree  in  Molecular
Pharmacology  and a Ph.D.  degree in Genetic  Engineering,  both from  Cambridge
University.

     Yong Kiat Rickie Tang (42) has served as a member of our Board of Directors
since July 13, 1999. Mr. Tang had been a director of POPstar-BVI since March 29,
1999.  Since July 1992,  Mr.  Tang has been the  President  and Chief  Executive
Officer of Kemayan  Corporation  Berhad, a conglomerate listed on the Main Board
of the Kuala  Lumpur Stock  Exchange in  Malaysia.  Mr. Tang holds a Bachelor of
Science degree with Honors in Estate Management from the National  University of
Singapore and a Graduate  Diploma in Marketing  from the Marketing  Institute of
Singapore.



                                       26
<PAGE>

     On February 2, 2000,  we entered into a Nominee  Directors  Agreement  with
Kemayan E.C. Hybrid Ltd.,  netalone.com(BVI)  Ltd.,  trustee of the Thompson Chu
Family Trust and trustee of the John McDermott  Family Trust giving them certain
entitlements  regarding the appointment of their respective nominees to serve as
our directors.  Kemayan E.C. Hybrid Ltd. is a company  beneficially owned by Mr.
Yong Kiat Rickie  Tang, a director of our  company.  Dr.  William Wing Yan Lo, a
director of our  company,  is the Chairman  and Chief  Executive  Officer of the
parent company of  netalone.com  (BVI) Ltd. Mr.  Thompson Chu, a director of our
company,  is a beneficiary of the Thompson Chu Family Trust. Mr. John McDermott,
a director of our company,  is a beneficiary of the John McDermott Family Trust.
Under the terms of this  Nomination  Agreement Mr. Yong Kiat Rickie Tang and Dr.
William Wing Yan Lo were  nominated as directors.  This agreement is valid until
such  time  that  Kemayan  E.C.  Hybrid  and  netalone.com  (BVI)  Limited,   as
shareholders,  each  holder no longer owns or does not have the right to acquire
5% of our issued and outstanding stock.

     On  February  2,  2000,  we and  POPstar-BVI  entered  into  a  Termination
Agreement with Kemayan E.C. Hybrid Ltd., Sunfield  Industries Limited,  Uprising
Overseas Limited,  Golden Harvest Overseas Limited,  trustee of the Thompson Chu
Family Trust and trustee of the John  McDermott  Family Trust  pursuant to which
certain  rights  entitled to by Kemayan E.C.  Hybrid Ltd.,  Sunfield  Industries
Limited,  Uprising  Overseas  Limited and Golden Harvest  Overseas  Limited were
terminated.  Following the Termination Agreement, our Board of Directors and the
major  shareholders  assented to the appointment of two nominee  directors,  one
represented  by  Kemayan  E.C.   Hybrid  Ltd.  and  the  other   represented  by
netalone.com,  if both holders own or have the right to acquire 5% of our issued
and outstanding  stock.  Mr. Yong Kiat Rickie Tang was nominated by Kemayan E.C.
Hybrid  Ltd.  as a  director  and  Mr.  William  Wing  Yan Lo was  nominated  by
netalone.com as a director.  Each party to this agreement  irrevocably agreed to
terminate,  release,  discharge and quit claims to the Shareholders'  Agreement,
the Investor Rights Agreements and Registration Rights Agreement.

     None of our  directors  or  executive  officers or any  business  that such
director or officer has (i) served as a general partner or executive officer has
been subject to any bankruptcy proceeding; (ii) has been convicted or subject to
any criminal  proceeding;  (iii) been  subject to any order,  judgment or decree
permanently or temporarily enjoining,  barring, suspending or otherwise limiting
business,  securities or banking  activities and (iv) been found by any court or
commission to have violated a federal or state securities or commodities law.

Compliance with Section 16(A) of the Exchange Act

     Section 16(a) of the Securities Exchange Act of 1934, as amended,  requires
our Directors  and  officers,  and persons who own more than 10% of a registered
class of our  securities,  to file with the Securities  and Exchange  Commission
initial  reports of changes in  ownership  of our common  stock and other equity
securities.  Officers, Directors and greater-than-10%  shareholders are required
by Securities and Exchange  Commission  regulations to furnish us with copies of
all Section 16(a) forms they file.

     To our  knowledge,  based  solely on a review of the copies of such reports
furnished to us and written representations that no other reports were required,
we believe that during the year ended December 31, 2000, our officers, Directors
and greater-than-10% shareholders filed as set out in the table below:

<TABLE>
Name                           Reporting Person           Form 3/ # of      Form 4/ # of       Form 5/ # of
                                                          transactions      transactions       transactions
-------------------------      ----------------------     -------------   --------------       -------------
<S>                            <C>                        <C>             <C>                  <C>
John McDermott                 President and Director          n/a             Late/1               n/a

Thompson Chu                   Chairman                        n/a             Late/1               n/a

Don Lau                        Secretary and Treasurer         n/a             Late/1               n/a

William Wing Yan Lo            Director                        Late/1          n/a                  n/a

Yong Kiat Rickie Tang          Director                        n/a             Late/1               n/a

Pang Lin Choi                  Beneficial owner of more        n/a             n/a                  n/a
                               than ten percent

Universal Appliances Limited   Beneficial owner of more        Late/1          n/a                  n/a
(Johnson Ko)                   than ten percent

</TABLE>


                                       27
<PAGE>

Committees

     Our Board of Directors currently has no committees.


Item 10:   Executive Compensation

Summary Compensation Table

     The Summary Compensation Table shows certain  compensation  information for
services rendered in all capacities for the years ended December 31, 2000, 1999,
and 1998. The following  information includes the dollar value of base salaries,
bonus  awards,   the  number  of  stock   options   granted  and  certain  other
compensation, if any, whether paid or deferred.


<TABLE>
                                           SUMMARY COMPENSATION TABLE
                               Annual Compensation                           Long Term Compensation
                               -------------------                           ----------------------

                                                                       Awards              Payouts
                                                                       ------              -------
                                                                                   Securities
Name and                                                Other Annual  Restricted    Underlying                 All Other
Principal                                               Compensation    Stock       Options        LTIP      Compensation
Position           Year       Salary($)     Bonus($)         ($)        Awards       SARs (#)    Payouts ($)      ($)
--------           ----       ---------     --------   ------------     ------       --------    -----------      ---
<S>                <C>         <C>             <C>       <C>              <C>        <C>             <C>          <C>
John McDermott     2000        100,000         0         5,600(1)         0          100,000         0            0
(President)        1999         83,333         0         5,600(2)         0          250,000         0            0
                   1998              0         0            0             0                0         0            0
Thompson Chu       2000        100,000         0         5,600(3)         0          100,000         0            0
(Chairman of       1999         50,000         0         5,600(4)         0                0         0            0
the Board)         1998              0         0            0             0                0         0            0
Don Lau            2000         57,600         0            0             0           50,000         0            0
(Secretary &       1999         48,000         0            0             0           50,000         0            0
Treasurer)         1997              0         0            0             0                0         0            0
-------------------
</TABLE>

(1)  Denotes sums paid Mr.  McDermott  pursuant to his employment  agreement for
     car allowance.
(2)  Denotes sums paid Mr.  McDermott  pursuant to his employment  agreement for
     car allowance.
(3)  Denotes  sums paid Mr. Chu  pursuant to his  employment  agreement  for car
     allowance.
(4)  Denotes  sums paid Mr. Chu  pursuant to his  employment  agreement  for car
     allowance.

<TABLE>
                                          OPTION/SAR GRANTS IN 12-MONTH
                                         PERIOD ENDED DECEMBER 31, 2000
                                               (Individual Grants)

                                  Percent of
                    Number of        Total
                   Securities    Options/SAR's
                   Underlying     Granted to      Exercise or                          Potential Realized Value at Assumed
                  Options/SAR's  Employees in     Base Price                               Annual Rates of Stock Price
     Name          Granted (#)    Fiscal Year       ($/Sh)       Expiration Date        Appreciation for Option Term
     ----          -----------    -----------       ------       ---------------        ----------------------------
                                                                                           5%                10%
                                                                                        ----------------------------
<S>                  <C>             <C>            <C>          <C>                     <C>              <C>
John McDermott       34,000          5.6%           $2.00        May 23, 2002             $74,970          $82,280
                     33,000          5.4%           $2.00        May 23, 2003             $76,403          $87,846
                     33,000          5.4%           $2.00        May 23, 2004             $80,223          $96,631
Thompson Chu        100,000         16.4%           $2.00        December 31, 2001       $210,000         $220,000
Don Lau              17,000          2.8%           $2.00        May 12, 2002             $37,485          $41,140
                     17,000          2.8%           $2.00        May 12, 2003             $39,359          $45,254
                     16,000          2.6%           $2.00        May 12, 2004             $38,896          $46,851

</TABLE>



                                       28
<PAGE>

<TABLE>
                                   AGGREGATED OPTION/SAR EXERCISES IN 12-MONTH
                                        PERIOD ENDED DECEMBER 31, 2000
                                    AND DECEMBER 31, 2000 OPTIONS/SAR VALUES


                                                                            Number of Unexercised        Value of Unexercised
                                                                            Securities Underlying             In-The-Money
                                                                               Options/SARs at               Option/SARs at
                             Shares Acquired on                              December 31, 2000(#)         December 31, 2000($)
          Name                  Exercise (#)         Value Realized ($)    Exercisable/Unexercisable   Exercisable/Unexercisable
          ----                  ------------         ------------------    -------------------------   -------------------------
<S>                           <C>                     <C>                   <C>                         <C>
John McDermott                       0                       0                  0 / 250,000               0/$497,500
John McDermott                       0                       0                   0 / 34,000                   Nil
John McDermott                       0                       0                   0 / 33,000                   Nil
John McDermott                       0                       0                   0 / 33,000                   Nil

Thompson Chu                         0                       0                  0 / 100,000                   Nil
Don Lau                               0                       0                  0 / 50,000                   Nil
Don Lau                              0                       0                   0 / 17,000                   Nil
Don Lau                              0                       0                   0 / 17,000                   Nil
Don Lau                              0                       0                   0 / 16,000                   Nil
</TABLE>


Compensation of Directors

     Directors  who are not officers of our company  each  receives a director's
fee of $15,000  per annum.  Each  director  is to  receive  the full  payment of
$15,000, the payment was not pro rated.

     No options were granted to outside directors in their capacity as directors
during 2000.

Report of the Board of Directors on Executive Compensation

     We do not currently have a compensation committee.

     During  2000,  our Board of  Directors  was  responsible  for  establishing
compensation policy and administering the compensation programs of our executive
officers.

     The amount of compensation paid by us to each of our directors and officers
and the terms of those persons'  employment is determined solely by the Board of
Directors,  except as otherwise  noted below.  In the past,  our  President  has
negotiated  all executive  salaries on our behalf,  subject to final approval by
our Board of Directors.  We believe that the compensation  paid to our directors
and officers is fair to the Company.

     Our Board of Directors  believes  that the use of direct stock awards is at
times  appropriate for employees,  and in the future intends to use direct stock
awards to reward outstanding  service to us or to attract and retain individuals
with  exceptional  talent and  credentials.  The use of stock  options and other
awards is intended  to  strengthen  the  alignment  of  interests  of  executive
officers and other key employees with those of our stockholders.

Compensation of President

     The Company  expects to pay to John McDermott,  its President,  a salary of
US$100,000 for the fiscal year ended December 31, 2001. Mr.  McDermott will also
be  entitled  to receive  options to  purchase  common  stock of the Company and
performance bonuses at the discretion of the Board of Directors. Mr. McDermott's
compensation is determined by our Board of Directors and Mr.  McDermott does not
participate in the determination of his compensation.  Factors used to determine
the compensation paid to Mr. McDermott included (i) meeting business  objectives
of launching  products and services;  (ii) the status of our services  roll-out;
(iii) the success of our research and  development  efforts;  (iv) the number of
strategic  relationships  developed by us with ISPs; (v) end-user  acceptance of
our  services;  (vi) the  success  of our  capital  raising  efforts  and  (vii)
employee/officer retention.



                                       29
<PAGE>

Performance Graph

     There was no public market for our securities during 2000.

Employment Contracts

     On July 20, 1999, we entered into a three-year  Employment  Agreement  with
John McDermott, our President,  whereby we agreed to pay Mr. McDermott an annual
salary of $83,333,  subject to annual review.  The Agreement also requires us to
provide,  at our expense,  complete health insurance  coverage for Mr. McDermott
and his family and  annual  automobile  allowance  of $5,600 for  business  use.
Following an annual salary review,  effective  January 1, 2000, Mr.  McDermott's
annual salary was increased to $100,000.

     On July 20, 1999,  we entered  into a two-year  Employment  Agreement  with
Thompson  Chu,  our  Chairman of the Board,  whereby we agreed to pay Mr. Chu an
annual  salary of  $50,000  as  compensation  for his  duties  as our  executive
chairman,  subject to annual review.  The Agreement also requires us to provide,
at our expense,  complete health insurance  coverage for Mr. Chu and his family.
Following an annual salary review,  effective  January 1, 2000, Mr. Chu's annual
salary was increased to $100,000.

     On July 20, 1999, we entered into a two-year Employment  Agreement with Don
Lau, our  Secretary  and  Treasurer,  whereby we agreed to pay Mr. Lau an annual
salary of $48,000,  subject to annual review.  The Agreement also requires us to
provide, at our expense,  complete health insurance coverage for Mr. Lau and his
family.  Following an annual salary review, effective January 1, 2000, Mr. Lau's
annual salary was increased to $57,600.

Item 11:   Security Ownership of Certain Beneficial Owners and Management

     The  following  table  sets  forth,  as  of  December  31,  2000,   certain
information   with  respect  to  our  equity   securities  owned  of  record  or
beneficially  by (i) each  Officer  and  Director;  (ii)  each  person  who owns
beneficially  more than 5% of each class of our outstanding  equity  securities;
and (iii) all Directors and Executive Officers as a group.


<TABLE>
                                                                    Amount and Nature of
   Class of Stock          Name and Address of Beneficial Owner     Beneficial Ownership     Percentage of Class
--------------------- ------------------------------------------------------------------------------------------
<S>                   <C>                                           <C>                      <C>
Common Stock          John McDermott, Director                                    0                    0%
                      107 East 3rd Avenue
                      Vancouver, BC Canada V5T 1C7

Common Stock          Thompson Chu, Director1                               125,000                    *
                      107 East 3rd Avenue
                      Vancouver, BC Canada V5T 1C7

Common Stock          William Wing Yan Lo, Director2                      3,000,000                   12.8%
                      23rd Floor, 3 Lockhart Road
                      Wan Chai, Hong Kong

Common Stock          Yong Kiat Rickie Tang, Director3                    2,000,000                    9.1%
                      335 Bukit Timah Road #10-02
                      Singapore 259718

Common Stock          Don Lau, Secretary and Treasurer4                      25,000                    *
                      107 East 3rd Avenue
                      Vancouver, BC Canada V5T 1C7

                      Officers and Directors, as a group                  5,150,000                   22.0%
                      (5 persons)
------------------------------------------------------------------------------------------------------------------
5% Shareholders
------------------------------------------------------------------------------------------------------------------
Common Stock          Pang Lin Choi5                                      8,525,000                   38.8%
                      2702-6 Lucky Commercial Centre
                      103-9 Des Voeux Road West
                      Hong Kong

Common Stock          Golden Harvest Overseas Limited                     1,500,000                    6.8%
                      28 USJ 2/5K, 47600 Subang Jaya
                      Selangor, Malaysia

Common Stock          innovestor com Limited6                             3,000,000                   12.8%
                      23rd Floor, 3 Lockhart Road
                      Wan Chai, Hong Kong
</TABLE>



                                       30
<PAGE>

<TABLE>
                                                                    Amount and Nature of
   Class of Stock          Name and Address of Beneficial Owner     Beneficial Ownership     Percentage of Class
--------------------- ------------------------------------------------------------------------------------------
<S>                   <C>                                           <C>                      <C>


Common Stock          Kemayan E.C. Hybrid7                                 2,000,000                  9.1%
                      335 Bukit Timah Road #10-02
                      Singapore 259718

Common Stock          Johnson Chun Shun Ko8                                3,332,500                 14.2%
                      Rm. 6301-06, The Center
                      99 Queen's Road Central
                      Hong Kong

Common Stock          iTeleway9                                            1,500,000                  6.6%
                      Room 802, Tower I
                      Harbour Ctr 1 Hok Cheung Street
                      Hunghom, Hong Kong

Common Stock          Prime Star Asia Ltd. 10                              1,500,000                  6.6%
                      GPO Box 4152
                      Hong Kong

Common Stock          Stargate Trust                                       1,525,000                  6.9%
                      1, Osmanthus Road,
                      Yau Yat Chuen
                      Kowloon, Hong Kong

Common Stock          Universal Appliances Limited11                       3,000,000                 12.8%
                      Rm. 6301-06, The Center
                      99 Queen's Road Central
                      Hong Kong
</TABLE>

*   Less than 1%

(1)  Includes  100,000  shares of common stock  subject to vested and  currently
     exercisable  options owned directly by the reporting person,  12,500 shares
     of common stock  subject to vested and  currently  exercisable  options and
     12,500  shares of common  stock owned by Mrs.  Ida Chu,  spouse of Thompson
     Chu.

(2)  Denotes  shares  held  indirectly  by Dr.  William  Wing  Yan Lo as held by
     innovestor.com  Limited.  Mr.  Lo has sole or shared  voting or  investment
     power over innovestor.com Limited. For details, refer to (6) below.

(3)  Denotes  shares held  indirectly by Mr. Tang which are held by Kemayan E.C.
     Hybrid Ltd.  Mr.  Tang is a  principal  of Kemayan  E.C.  Hybrid  Ltd.  For
     details, refer to (7) below.

(4)  Denotes  common stock subject to vested and currently  exercisable  options
     owned by the reporting person.

(5)  Denotes  shares  held by Mr.  Pang Lin Choi (as trustee of each of the John
     McDermott and Thompson Chu Family Trusts).  The John McDermott Family Trust
     holds  2,000,000  shares.  The Thompson  Chu Family  Trust holds  6,525,000
     shares. Mr. Choi, as trustee,  holds sole voting and investment rights with
     respect to the John  McDermott and Thompson Chu Family Trusts  shares.  The
     agreements  pursuant to which Mr. Choi holds such rights can be  terminated
     upon  written  notice from the  beneficiaries  of the Thompson Chu and John
     McDermott Family Trusts.

(6)  Includes  1,500,000  shares of common stock subject to vested and currently
     exercisable  options owned by the reporting  person and 1,500,000 shares of
     common stock.

(7)  Denotes shares held directly by Kemayan E.C.  Hybrid.  Mr. Tang, a director
     of our  company,  has sole voting and  investment  rights over Kemayan E.C.
     Hybrid n.

(8)  Denotes  332,500 shares held directly and 3,000,000  shares held indirectly
     by Johnson Ko. Mr. Ko has sole or shared  voting or  investment  power over
     Universal  Appliances  Limited,  which owns 100% of iTeleway Inc. and Prime
     Star Asia Limited. Refer to (9), (10), and (11).

(9)  Includes  750,000  shares of common stock  subject to vested and  currently
     exercisable  options  owned by the reporting  person and 750,000  shares of
     common stock.

(10) Includes  750,000  shares of common stock  subject to vested and  currently
     exercisable  options  owned by the reporting  person and 750,000  shares of
     common stock.

(11) Denotes shares indirectly held by Universal  Appliances  Limited (UAL); UAL
     owns 100% of iTeleway Inc. and \ Prime Star Asia Limited and Mr. Johnson Ko
     has sole or shared voting and investment power over UAL.



                                       31
<PAGE>

     We believe that the beneficial owners of securities listed above,  based on
information  furnished by the owners, have sole investment and voting power over
the shares,  subject to community  property  laws where  applicable.  Beneficial
ownership is  determined  in  accordance  with the rules of the  Commission  and
generally includes voting or investment power with respect to securities. Shares
of stock subject to options  currently  exercisable,  or  exercisable  within 60
days,  are deemed  outstanding  for purposes of computing the  percentage of the
person  holding such  options,  but are not deemed  outstanding  for purposes of
computing the percentage of any other person.  The preceding  table,  therefore,
includes  information  regarding shares issuable under stock options exercisable
within 60 days for the  following  persons and in the following  share  amounts:
Thompson Chu, options exercisable for 100,000;  Ida Chu, options exercisable for
12,500 shares; innovestor.com Limited, options exercisable for 1,500,000 shares;
Don Lau, options  exercisable for 25,000 shares; and all directors and executive
officers as a group, options exercisable for 1,637,500 shares.


Item 12:   Certain Relationships and Related Transactions

     On January 11, 1999, our wholly owned subsidiary, POPstar-BVI, entered into
a licensing  agreement and a services  agreement with TGI Technologies Ltd., for
the  licensing  and  service  of the IP  technology  termed  Enroute.  Mr.  John
McDermott and Mr.  Thompson Chu are officers of POPstar and are also officers of
TGI.  In  addition,  Mr.  McDermott,  Mr. Chu and Mr.  Yong Kiat Rickie Tang are
directors of TGI.

     Under  the  terms  of the  services  agreement,  TGI will  provide  us with
technical  assistance,  software  development,  marketing,  management and other
services,  as required.  We are charged based on TGI's direct and indirect costs
of the services  provided  plus 15%.  During  fiscal 2000 and 1999,  we incurred
service fees,  including the 15%,  under this  agreement  totaling  $938,495 and
$1,062,139, respectively. The fees paid to TGI in 1999 included salaries paid to
employees,  which  subsequently  became our  employees  and whose  salaries  are
included in our compensation expenses for 2000.

     On March 15, 1999, our wholly owned subsidiary POPstar-Asia Pacific entered
into an oral  month-to-month  lease  arrangement for the lease of  approximately
1,000 square feet of executive offices located at Westlands Centre, Room 908, 20
Westlands  Road,  Quarry  Bay,  Hong  Kong to serve as a sales,  marketing,  and
technical  support  facility for our Asian operations at a rental rate of $2,000
per month.  This arrangement was formalized on July 1, 2000 for a term of twelve
calendar  months  commencing  July 1, 2000 at the  equivalent  monthly rental of
$2,000 (exclusive of any  extraordinary  charges or management fees). The leased
premises are owned by Easewell Management Ltd., a company  beneficially owned by
Mr.  Thompson  Chu, our Chairman of the Board.  During  fiscal 2000 and 1999, we
incurred   rental   expenses   pursuant  to  this   arrangement   of  HK$185,520
(approximately  $24,000) and HK$146,870  (approximately  $19,000)  respectively.
During fiscal 2000 and 1999, there were no  extraordinary  charges or management
fees required to be paid hereunder.

     On March 30, 1999, our wholly owned subsidiary  POPstar-BVI entered into an
unsecured  promissory note with TGI whereby  POPstar-BVI  agreed to lend TGI the
sum of $1,000,000.  The said note provided  interest terms of eight (8%) percent
per annum, compounded annually. The principal and interest are due on either the
earlier  of a demand by us or on March 30,  2001.  Mr.  John  McDermott  and Mr.
Thompson  Chu,  officers of our company,  are also officers of TGI. In addition,
Mr.  McDermott,  Mr. Chu and Mr. Yong Kiat Rickie Tang are directors of TGI. The
agreement  provides  that we can offset any amounts  owing to TGI against a note
receivable (for further details,  refer to February 2, 2000 - Set-off  Agreement
below).

     On July 20, 1999, we acquired all of the  outstanding  common and preferred
stock   of   POPstar-BVI   in   a   business   combination    described   as   a
"recapitalization." For accounting purposes, the acquisition has been treated as
the  acquisition of us by  POPstar-BVI.  Such shares include the shares owned by
our officers and directors.

     On January 1, 2000, our  subsidiary,  POPstar  Communications  Canada Corp,
entered into a month-to-month  lease  arrangement for the lease of approximately
4,800  square  feet of  administrative  space  located  at 107 East 3rd  Avenue,
Vancouver,  British Columbia, Canada to serve as our temporary headquarters at a
rental rate of $4,000 per month.  This  arrangement was revised on April 1, 2000
into a one-year lease for approximately  5,130 square feet of administrative and
office space at the same  location at a rental rate of CDN$4,489 per month which
was prorated to



                                       32
<PAGE>

January 1, 2000. The leased premises are owned by Tradeglobe Consulting Ltd. Mr.
McDermott and Mr. Chu, officers and directors of our company,  are also officers
and  directors of  Tradeglobe  Consulting  Ltd.  During fiscal 2000, we incurred
rental and other fees pursuant to this arrangement of CDN$83,730  (approximately
$55,820).

     On  January   1,  2000,   POPstar-Asia   Pacific   entered   into  an  oral
month-to-month  lease for  approximately  1,830 square feet of executive  office
space at Room 405A, 11 Fu Cheng Men Wai Street,  Xi Cheng  District,  Beijing to
serve as its  representative  office in Beijing,  at a rental rate of $2,200 per
month.  This  arrangement  was  formalized  on July 1,  2000  with a term for 12
calendar months  commencing July 1, 2000 at a monthly rate of $2,200  (exclusive
of rates,  management,  heating  and  air-conditioning  fees).  The owner of the
office space is Mr. Thompson Chu, the Chairman of the Board. During fiscal 2000,
we incurred  rental and other fees  pursuant to this  arrangement  of HK$258,518
(approximately $33,229).

     On January 12, 1999, as amended by a supplemental agreement dated March 29,
1999 and an Investor  Exchange  Agreement  dated July 13, 1999,  we, through our
wholly  owned  subsidiary,  POPstar-BVI,  contracted  to sell,  and Kemayan E.C.
Hybrid  Ltd. (a company  beneficially  owned by Mr.  Yong Kiat  Rickie  Tang,  a
director  of  our  company)  contracted  to  purchase,  250,000  shares  of  our
"restricted" Common Stock on or before March 31, 2000 at $0.833333 per share for
gross proceeds anticipated to be in the amount of $208,333. On February 2, 2000,
we entered into a Share Subscription  Agreement with netalone.com (BVI) Ltd. for
the  subscription  by  netalone.com  (BVI)  Ltd.  of  1,500,000  shares  of  our
restricted common stock at $2.00 per share for gross proceeds of $3,000,000.  As
further  consideration  for  the  Share  Subscription   Agreement,   we  granted
netalone.com (BVI) Ltd. an option to purchase an additional  1,500,000 shares of
restricted  common  stock at an  exercise  price of $2.00  per share at any time
prior to the date  which is 3 months  subsequent  the date on which  our  common
stock are relisted and/or quoted on the OTCBB. The Share Subscription  Agreement
was  subsequently   assigned  from  netalone.com   (BVI)  Ltd.  to  Rich  Income
International  Limited (which later changed its name to innovestor.com  Limited)
pursuant to an Assignment Agreement dated February 9, 2000. Dr. William Wing Yan
Lo, who joined the Board of Directors on February 15, 2000,  is the Chairman and
Chief Executive Officer of netalone.com Ltd., the parent company of netalone.com
(BVI) Ltd. and innovestor.com Ltd.

     On February 2, 2000, our wholly owned subsidiary, POPstar-BVI, entered into
a Set Off Agreement with TGI pursuant to which  POPstar-BVI  may set off amounts
owing to TGI pursuant to provisions of the Licensing Agreement dated January 11,
1999 against any amounts owing by TGI to  POPstar-BVI  pursuant to provisions of
the  promissory  note owed by TGI to  POPstar-BVI  dated March 30, 1999.  During
fiscal 2000, we recorded expenditures of $600,000 (of which $550,000 was offset)
in license fees to TGI,  being the annual  minimum for the  twelve-month  period
ended December 31, 2000. Mr. McDermott and Mr. Chu, officers of our company, are
also  officers  of TGI. In  addition,  Mr.  McDermott,  Mr. Chu and Mr. Tang are
directors of TGI.

     On February 2, 2000,  we entered into a Nominee  Directors  Agreement  with
Kemayan E.C. Hybrid Ltd.,  netalone.com(BVI)  Ltd.,  trustee of the Thompson Chu
Family Trust and trustee of the John McDermott  Family Trust giving them certain
entitlements  regarding the appointment of their respective nominees to serve as
our directors.  Kemayan E.C. Hybrid Ltd. is a company  beneficially owned by Mr.
Yong Kiat Rickie Tang, a director of our company.  Dr. William Lo, a director of
our company,  is the Chairman and Chief Executive  Officer of the parent company
of  netalone.com  (BVI) Ltd. Mr.  Thompson Chu, a director of our company,  is a
beneficiary of the Thompson Chu Family Trust. Mr. John McDermott,  a director of
our company, is a beneficiary of the John McDermott Family Trust.

     On  February  2,  2000,  we and  POPstar-BVI  entered  into  a  Termination
Agreement with Kemayan E.C. Hybrid Ltd., Sunfield  Industries Limited,  Uprising
Overseas Limited,  Golden Harvest Overseas Limited,  trustee of the Thompson Chu
Family Trust and trustee of the John  McDermott  Family Trust  pursuant to which
certain  rights  entitled to by Kemayan E.C.  Hybrid Ltd.,  Sunfield  Industries
Limited,  Uprising  Overseas  Limited and Golden Harvest  Overseas  Limited were
terminated.  As preferred  shareholders of POPstar-BVI,  these shareholders were
extended certain rights under the Preferred Share Purchase Agreements  including
shares  ranking pari passu on matters  relating to the payment of dividends  and
the  right  to vote at all  meetings  of the  members  of  POPstar-BVI,  but not
including on the winding up of POPstar-BVI. There was no cash consideration paid
to any individual that was a party to the Termination  Agreement.  Following the
Termination Agreement,  and assented to by the Board and the major shareholders,
was the  appointment of two nominee  directors,  one represented by Kemayan E.C.
Hybrid Ltd. and the other  represented by  netalone.com,  if each holder owns or
has the right to acquire 5% of our issued and  outstanding  stock.  Kemayan E.C.
Hybrid Ltd. is a company  beneficially  owned by Mr.  Yong Kiat Rickie  Tang,  a
director of our  company.  Mr.  Thompson  Chu, a director of our  company,  is a
beneficiary of the Thompson Chu Family Trust. Mr. John McDermott, a



                                       33
<PAGE>

director of our company,  is a beneficiary of the John  McDermott  Family Trust.
netalone.com Limited is a company beneficially owned by Mr. William Wing Yan Lo,
a director of our company.


Item 13:  Exhibits and Reports on Form 8-K

     (a)  Exhibits.

        Exhibit
        Number      Description
        ------      -----------

         2.1(1)     Acquisition Agreement between POPstar  Communications,  Inc.
                    and POPstar Global Communications Inc., dated July 13, 1999

         3.1(1)     Articles of Incorporation

         3.2(1)     Amended  Articles  of  Incorporation,  filed with the Nevada
                    Secretary of State on May 19, 1999

         3.3(1)     Bylaws

        10.1(1)     Telecommunications Services Agreement by and between INNOSYS
                    COMMUNICATIONS, INC. and POPstar Global Communications Inc.,
                    dated December 18, 1998

        10.2(1)     Licensing   Agreement  between  TGI  Technologies  Ltd.  and
                    POPstar Global Communications Inc., dated January 11, 1999

        10.3(1)     Services  Agreement by and between TGI Technologies Ltd. and
                    POPstar Global Communications Inc., dated January 11, 1999

        10.4(1)     Promissory Note in the amount of U.S. $1,000,000 between TGI
                    Technologies  Ltd. and POPstar Global  Communications  Inc.,
                    dated March 30, 1999

        10.5(1)(2)  Employment   agreement   by  and  between   POPstar   Global
                    Communications Inc. and Don Lau, dated July 20, 1999

        10.6(1)(2)  Employment   agreement   by  and  between   POPstar   Global
                    Communications Inc. and John McDermott, dated July 20, 1999

        10.7(1)(2)  Employment   agreement   by  and  between   POPstar   Global
                    Communications Inc. and Thompson Chu, dated July 20, 1999

        10.8(1)(2)  Services  Agreement  by  and  between  TransNexus,  LLC  and
                    POPstar Global Communications Inc., dated August 10, 1999

        10.9(3)     Share   Subscription   Agreement  by  and  between   POPstar
                    Communications,  Inc.  and  netalone.com  (BVI)  Ltd.  dated
                    February 2, 2000

        10.10(3)    Set Off Agreement dated February 2, 2000

        10.11(3)    Nominee Directors Agreement dated February 2, 2000

        10.12(3)    Termination Agreement dated February 2, 2000

        10.13(3)    Assignment Agreement dated February 9, 2000

        10.14(3)    Share   Subscription   Agreement  by  and  between   POPstar
                    Communications,  Inc.  and  Prime  Star Asia  Limited  dated
                    February 11, 2000

        10.15(3)    Share   Subscription   Agreement  by  and  between   POPstar
                    Communications,  Inc. and iTELEWAY,  Inc. dated February 11,
                    2000

        10.16(4)    Lease  agreement  dated April 1, 2000 between the registrant
                    and Tradeglobe Consulting Ltd.

        10.17(5)    Lease  agreement  dated May 22, 2000 between the  registrant
                    and Pacific Focus Pte. Ltd.

        10.18(5)    Lease  agreement  dated July 1, 2000 between the  registrant
                    and Easewell Management Limited

        10.19(5)    Lease  agreement  dated July 1, 2000 between the  registrant
                    and Mr. Thompson Chu

        10.20(5)    Master  Services  Agreement  dated July 7, 2000  between the
                    registrant and Exodus Communications, Inc.




                                       34
<PAGE>

        Exhibit
        Number      Description
        ------      -----------

        10.21(5)    Purchase Agreement for Intellectual  Property dated July 31,
                    2000 between the registrant and Belcarra Messaging Corp.

        10.22(6)    TransNexus/POPstar  Clearinghouse  Service  Agreement  dated
                    September 20, 2000 between registrant and TransNexus, Inc.

        10.23       Amendment to Licensing  Agreement  between TGI  Technologies
                    Ltd. and POPstar Global  Communications  Inc.,  dated August
                    24, 1999

        10.24       Amendment   to  Services   Agreement   by  and  between  TGI
                    Technologies  Ltd. and POPstar Global  Communications  Inc.,
                    dated August 24, 1999

        10.25(7)    RSA Security/POPstar  Communications Canada Corp OEM Service
                    Provider License Agreement dated September 30, 1999

        10.26(7)    Lease   agreement   dated  December  15,  2000  between  the
                    registrant and Sinpac Investment Pte. Ltd.

-------------------------

     (1)  Incorporated by reference to the Registrant's  Registration  Statement
          on Form 10-SB (File No. 0-27213).

     (2)  Indicates management contract.

     (3)  Incorporated by reference by the identically  numbered  exhibits filed
          in  response  pursuant  to Item 601 of  Regulation  S-B of our  Annual
          Report on Form 10-KSB for the fiscal year ended December 31, 1999.

     (4)  Incorporated  by reference to Exhibit 10.1 filed May 15, 2000,  on our
          Form 10-QSB for the quarter ended March 31, 2000.

     (5)  Incorporated by reference to exhibits filed August 14, 2000,  numbered
          sequentially  Exhibit 10.1 to Exhibit 10.5, on our Form 10-QSB for the
          quarter ended June 30, 2000.

     (6)  Incorporated  by reference to Exhibit 10.1 filed November 14, 2000, on
          our Form 10-QSB for the quarter ended September 30, 2000.

     (7)  Filed without  exhibits or  schedules,  which will be furnished to the
          Securities and Exchange Commission upon written request.


     (b)  Reports on Form 8-K.

     During the twelve-month period ended December 31, 2000, we filed one report
on Form 8-K at the request of the  Commission.  On January 31, 2000,  we filed a
Current Report on Form 8-K, to file a copy of our audited  financial  statements
as of and for the period from December 17, 1998 (inception date) to December 31,
1998. These financial statements give effect to the reverse acquisition by us of
Cherokee Leather, Inc.









                                       35
<PAGE>


                                   SIGNATURES


     In accordance  with Section 13 or 15(d) of the  Securities and Exchange Act
of 1934,  the  registrant  caused  this report to be signed on its behalf by the
undersigned, thereunto duly authorized.

March 26, 2001                         POPSTAR COMMUNICATIONS, INC.


                                       /s/ John McDermott
                                       -----------------------------------------
                                       JOHN MCDERMOTT
                                       President  (Principal Executive Officer)



         In accordance  with the Exchange Act, this report has been signed below
by the  following  persons  on behalf of the  registrant  and in the  capacities
indicated on the 26 day of March, 2001.



/s/ Thompson Chu                 Chairman of the Board and
------------------------         Director
Thompson Chu



/s/ John McDermott               President and Director
-----------------------
John McDermott



/s/ Yong Kiat Rickie Tang        Director
-----------------------
Yong Kiat Rickie Tang


/s/ William Wing Yan Lo          Director
-----------------------
William Wing Yan Lo


/s/ Don Lau                      Secretary and Treasurer
-----------------------
Don Lau
(Principal Financial and
Accounting Officer)




                                       36
<PAGE>


                          POPSTAR COMMUNICATIONS, INC.
                   INDEX TO CONSOLIDATED FINANCIAL STATEMENTS


<TABLE>

                                                                                              Page
<S>                                                                                           <C>
Report of Independent Auditors.............................................................   F-2

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

Consolidated  Statements of Operations  and Deficit for the Years Ended December
     31, 2000, December 31, 1999 and for the Period from
     Incorporation on December 17, 1998 to December 31, 2000...............................   F-4

Consolidated  Statements  of Cash Flow for the Years Ended  December  31,  2000,
     December 31, 1999 and for the Period from Incorporation on December 17,
     1998 to December 31, 2000.............................................................   F-5

Notes to Consolidated Financial Statements.................................................   F-6

</TABLE>






                                      F-1
<PAGE>


Auditors' Report

To the Shareholders and Board of Directors
POPstar Communications, Inc.

We have audited the consolidated  balance sheets of POPstar  Communications Inc.
(a  Development  Stage  Company)  as at  December  31,  2000  and  1999  and the
consolidated  statements of operations  and deficit and cash flows for the years
ended  December  31,  2000 and 1999 and for the  period  from  incorporation  on
December 17, 1998 to December 31, 2000. These consolidated  financial statements
are the  responsibility of the Company's  management.  Our  responsibility is to
express an opinion on these financial statements based on our audit.

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

In our opinion, the consolidated  financial statements referred to above present
fairly, in all material  respects,  the financial  position of the Company as at
December 31, 2000 and 1999 and the results of its  operations and the cash flows
for the  years  ended  December  31,  2000  and  1999  and for the  period  from
incorporation  on  December  17, 1998 to December  31, 2000 in  accordance  with
accounting principles generally accepted in the United States of America.

The accompanying  consolidated  financial statements have been prepared assuming
the Company  will  continue as a going  concern.  As  discussed in note 2 to the
consolidated  financial  statements,   the  Company  has  suffered  losses  from
operations  and has no  established  source of  significant  revenue  that raise
substantial doubt about its ability to continue as a going concern. Management's
plan in regard to these matters are also  described in note 2. The  consolidated
financial  statements do not include any adjustments  that might result from the
outcome of this uncertainty.



"KPMG LLP"
KPMG LLP

Chartered Accountants
Vancouver, Canada
March 8, 2001



                                      F-2
<PAGE>

POPSTAR COMMUNICATIONS, INC.
(A Development Stage Company)

Consolidated Balance Sheets
(Expressed in U.S. dollars)


<TABLE>
-----------------------------------------------------------------------------------------------------
                                                                   December 31,         December 31,
                                                                           2000                 1999
-----------------------------------------------------------------------------------------------------
<S>                                                               <C>                  <C>
Assets

Current assets:
     Cash and cash equivalents                                    $   4,430,041        $      23,745
     Interest receivable                                                 77,350                    -
     Goods and services tax recoverable and other                        26,879                    -
     Note receivable from a company with common controlling
       shareholders (note 4)                                            450,000            1,000,000
     Prepaid expenses                                                    34,822                2,739
     ------------------------------------------------------------------------------------------------
     Total current assets                                             5,019,092            1,026,484

     Equipment, net (note 5)                                            264,805               12,124
-----------------------------------------------------------------------------------------------------
Total assets                                                      $   5,283,897        $   1,038,608
-----------------------------------------------------------------------------------------------------

Liabilities and Shareholders' Equity

Current liabilities:
     Accounts payable and accrued liabilities                     $     164,861        $     195,569
     Deferred revenue                                                     1,500                    -
     Payable to companies with common controlling
       shareholders (note 6)                                            139,489              230,227
     ------------------------------------------------------------------------------------------------
     Total current liabilities                                          305,850              425,796

Shareholders' equity:
     Capital stock (note 7):
         Authorized:
           50,000,000 common voting shares, par value
              of $0.001 per share
         Issued and outstanding:
           21,952,000 (December 31, 1999 - 19,447,500)
              common voting shares                                       21,952               11,130
     Additional paid-in capital (note 7)                             10,139,104            2,643,418
     Deficit accumulated in the development stage                    (5,183,009)          (2,041,736)
     ------------------------------------------------------------------------------------------------
     Total shareholders' equity                                       4,978,047              612,812
-----------------------------------------------------------------------------------------------------
Total liabilities and shareholders' equity                        $   5,283,897        $   1,038,608
-----------------------------------------------------------------------------------------------------
</TABLE>


Operations (note 1)
Going concern (note 2)
Commitments (note 10)

See accompanying notes to consolidated financial statements.



                                      F-3
<PAGE>

POPSTAR COMMUNICATIONS, INC.
(A Development Stage Company)

Consolidated Statements of Operations and Deficit
(Expressed in U.S. dollars)


<TABLE>
----------------------------------------------------------------------------------------------------------------------
                                                                                                   Period from
                                                                                              incorporation on
                                                              Year                  Year          December 17,
                                                             ended                 ended               1998 to
                                                      December 31,          December 31,          December 31,
                                                              2000                  1999                  2000
----------------------------------------------------------------------------------------------------------------------
<S>                                                  <C>                   <C>                   <C>
Revenues:
     Sales                                             $    43,469           $         -           $    43,469
     Cost of sales                                          (9,535)                    -                (9,535)
     ----------------------------------------------------------------------------------------------------------------------
                                                            33,934                     -                33,934
     Interest income (note 4)                              345,202                61,708               406,910
     ----------------------------------------------------------------------------------------------------------------------
                                                           379,136                61,708               440,844

Expenses:
     Accounting and audit fees                              34,117                20,234                54,351
     Amortization                                           81,946                     -                81,946
     Bank interest and charges                               9,337                 2,575                11,912
     Commission                                              8,333                72,916                81,249
     Directors' fee                                         30,000                     -                30,000
     Foreign exchange loss (gain)                           14,306                 1,086                15,392
     Legal and professional fees                            49,571               296,190               345,761
     License fee                                           103,687                25,000               128,687
     Management fee                                              -                 1,950                 1,950
     Office and general                                    151,765                21,352               173,117
     Rent (note 8(c))                                      152,285                28,576               180,861
     Salaries and wages                                  1,099,984                93,371             1,193,355
     Sales and marketing                                    24,697                33,263                57,960
     Travel and entertainment                              193,430                38,692               232,122
     Technical support                                      16,408                     -                16,408
     Related party transactions:
         License fee (note 8(a))                           600,000               391,074               991,074
         Management fees (note 8(b))                             -               366,578               366,578
         Administrative and office salaries (note 8(b))     57,008                72,352               129,360
         Sales and marketing fees (note 8(b))                    -               100,027               100,027
         Software development (note 8(b))                  881,487               403,438             1,284,925
         Travel and entertainment (note 8(b))                    -               119,744               119,744
     ----------------------------------------------------------------------------------------------------------------------
     Total expenses                                      3,508,361             2,088,418             5,596,779
----------------------------------------------------------------------------------------------------------------------
Loss before income taxes                                 3,129,225             2,026,710             5,155,935

Income taxes                                                12,048                15,026                27,074
----------------------------------------------------------------------------------------------------------------------
Loss for the period                                      3,141,273             2,041,736             5,183,009

Deficit accumulated during the development stage,
   beginning of period                                   2,041,736                     -                     -
----------------------------------------------------------------------------------------------------------------------
Deficit accumulated during the development stage,
   end of period                                       $ 5,183,009           $ 2,041,736           $ 5,183,009
----------------------------------------------------------------------------------------------------------------------
Basic and diluted loss per weighted share (note 3(h))  $      0.14           $      0.14           $      0.28
----------------------------------------------------------------------------------------------------------------------
Weighted average number of common shares
   outstanding                                          21,732,294            14,578,843            18,082,458
----------------------------------------------------------------------------------------------------------------------
</TABLE>


See accompanying notes to consolidated financial statements.



                                      F-4
<PAGE>

POPSTAR COMMUNICATIONS, INC.
(A Development Stage Company)

Consolidated Statements of Cash Flows
(Expressed in U.S. dollars)


<TABLE>
----------------------------------------------------------------------------------------------------------------------
                                                                                                   Period from
                                                                                              incorporation on
                                                              Year                  Year          December 17,
                                                             ended                 ended               1998 to
                                                      December 31,          December 31,          December 31,
                                                              2000                  1999                  2000
----------------------------------------------------------------------------------------------------------------------
<S>                                                  <C>                    <C>                 <C>
Cash flows from operating activities:
     Net loss                                        $  (3,141,273)         $  (2,041,736)      $   (5,183,009)
     Non-cash items and transactions:
         Common shares issued for software
           technology                                       20,000                      -               20,000
         Amortization                                       81,946                      -               81,946
         License fee obligation settled by reduction
           in note receivable from a company with
           common controlling shareholders                 550,000                      -              550,000
         Net costs deemed to be issued on
           recapitalization                                      -                 (2,517)              (2,517)
         Common shares issued in consideration for
           legal services rendered                               -                 22,500               22,500
     Changes in non-cash operating
       working capital:
         Interest receivable                               (77,350)                     -              (77,350)
         Goods and services tax recoverable and other      (26,879)                     -              (26,879)
         Prepaid expenses                                  (32,083)                (2,739)             (34,822)
         Accounts payable and accrued liabilities          (30,708)               195,569              164,861
         Deferred revenue                                    1,500                      -                1,500
----------------------------------------------------------------------------------------------------------------------
     Total cash flows from operating activities         (2,654,847)            (1,828,923)          (4,483,770)

Cash flows from investing activities:
     Purchase of equipment                                (334,627)               (12,124)            (346,751)
     Note receivable from a company with common
       controlling shareholders                                  -             (1,000,000)          (1,000,000)
----------------------------------------------------------------------------------------------------------------------
     Total cash flows from investing activities           (334,627)            (1,012,124)          (1,346,751)

Cash flows from financing activities:
     Payable to common controlled companies                (90,738)               230,227              139,489
     Issuance of capital stock                           7,486,508              2,634,565           10,121,073
----------------------------------------------------------------------------------------------------------------------
     Total cash flows from financing activities          7,395,770              2,864,792           10,260,562
----------------------------------------------------------------------------------------------------------------------
Increase in cash and cash equivalents                    4,406,296                 23,745            4,430,041

Cash and cash equivalents, beginning of period              23,745                      -                    -
----------------------------------------------------------------------------------------------------------------------
Cash and cash equivalents, end of period             $   4,430,041          $      23,745        $   4,430,041
----------------------------------------------------------------------------------------------------------------------
Supplementary disclosure:
     Non-cash transactions:
         Common shares issued for software
           technology                                $      20,000          $           -        $      20,000
         License fee obligation settled by reduction
           in note receivable from a company with
           common controlling shareholders                 550,000                      -              550,000
         Common shares issued in consideration for
           legal services rendered                               -                 22,500               22,500
     Income taxes paid                                      12,048                 15,026               27,074
     Interest expense paid                                   9,337                  2,575               11,912
----------------------------------------------------------------------------------------------------------------------
</TABLE>


See accompanying notes to consolidated financial statements.




                                      F-5
<PAGE>

POPSTAR COMMUNICATIONS, INC.
(A Development Stage Company)

Notes to Consolidated Financial Statements
(Expressed in U.S. dollars)

Years ended December 31, 2000 and 1999
================================================================================


1.   Operations:

     The Company was  incorporated  on June 19, 1995 under the laws of the State
     of Nevada as Cherokee  Leather,  Inc. On May 17, 1999, the Company  changed
     its name to POPstar  Communications,  Inc.  The Company is an  IP-messaging
     solution provider of Internet based facsimile  transmission  technology and
     unified  messaging  technology  services.  Over the year ended December 31,
     2000,  the Company has field tested its facsimile  transmission  technology
     and is in the process of field  testing its  unified  messaging  technology
     services.  The Company is considered a development  stage company as it has
     not generated significant revenue to date from its principal business.

     On July 20,  1999,  the  Company  acquired  all the issued and  outstanding
     common  and  preferred  shares  of  POPstar  Global   Communications   Inc.
     ("POPstar")  in exchange for  12,875,000  common shares of the Company with
     the management of POPstar managing  operations for the combined entity. The
     common  shares of the Company  issued in exchange for the shares of POPstar
     are restricted  securities,  as defined under the United States  Securities
     Act of 1933, as amended.  As the Company had no  significant  operations to
     the date of the acquisition, the transaction was accounted for as a capital
     transaction,  whereby  POPstar  effectively  was  considered to have issued
     common  shares for  consideration  equal to the net monetary  assets of the
     Company followed by a  recapitalization.  Accordingly,  these  consolidated
     financial statements reflect the assets, liabilities, revenues and expenses
     of POPstar for all periods prior to July 20, 1999  consolidated  with those
     of the Company from the date of the recapitalization transaction.

2.   Going Concern:

     The Company's  financial  statements are prepared using generally  accepted
     accounting  principles in the United  States  applicable to a going concern
     which contemplates the realization of assets and liquidation of liabilities
     in the normal  course of business.  At December  31, 2000,  the Company had
     started  to  generate   revenues  from  monthly  service  fees  charged  in
     connection with fax mailboxes.  Total revenue is relatively  insignificant,
     is not yet  sufficient  to cover  operating  costs and it has not generated
     sufficient cash flows to fund operations nor meet the Company's liabilities
     as they become due.  During the year ended  December 31, 2000,  the Company
     issued  shares  for cash  (note  7(a)),  continued  development  of certain
     licensed  software (note 8(a)), and paid cash and issued shares to acquire,
     on an  exclusive,  basis,  software  technology  from a third  party  (note
     10(b)). Management anticipates that cash will continue to be available from
     its shareholders,  a company with the common controlling shareholders (note
     4),  or  from  additional  security  issuances  to  third  parties  to fund
     operating requirements for the next fiscal year. There is no guarantee that
     the  licensed  software  will  generate  revenues  sufficient  to cover its
     operating  costs or that  proceeds  received from the issuance of shares or
     other sources will maintain the Company until that time.



                                      F-6
<PAGE>

POPSTAR COMMUNICATIONS, INC.
(A Development Stage Company)

Notes to Consolidated Financial Statements
(Expressed in U.S. dollars)

Years ended December 31, 2000 and 1999
================================================================================


3.   Significant accounting policies:

     (a)  Basis of presentation:

          The  consolidated  financial  statements  include the  accounts of the
          Company   and  its   wholly-owned   subsidiaries,   POPstar,   POPstar
          Communications   Asia   Pacific   Ltd.   ("POPstar   Asia"),   POPstar
          Communications  Pte. Ltd.,  POPstar  Communications  (Europe) Ltd. and
          POPstar  Communications  Canada Corp.  All  intercompany  balances and
          transactions have been eliminated.

          As the Company has not commenced commercial operations at December 31,
          2000,  for  accounting  purposes it is  considered to be a development
          stage enterprise.

     (b)  Foreign operations:

          The  functional  currency of the Company's  wholly-owned  subsidiaries
          outside of the United  States is the United  States  dollar.  Monetary
          items of those  operations that are originally  denominated in foreign
          currencies  are  translated  into United States dollars at the rate of
          exchange in effect at the balance  sheet date and  non-monetary  items
          are translated at historical exchange rates. Revenues and expenses are
          translated at the rate of exchange in effect on the dates they occur.

          Depreciation  or  amortization  of  assets  translated  at  historical
          exchange rates are translated at the same exchange rates as the assets
          to which they relate.

          Exchange gains and losses arising on the translation of monetary items
          are included in income for the current period.

     (c)  Equipment:

          Equipment   is  stated  at  cost.   Depreciation   is  provided  on  a
          straight-line basis at a rate of 25% per annum.

     (d)  Software development:

          Software  development  costs are expensed as incurred unless they meet
          generally accepted  accounting criteria for deferral and amortization.
          The Company  assesses  whether it has met the  relevant  criteria  for
          deferral and amortization at each reporting date. No such expenditures
          have met these  criteria  during the years ended December 31, 2000 and
          1999.



                                      F-7
<PAGE>

POPSTAR COMMUNICATIONS, INC.
(A Development Stage Company)

Notes to Consolidated Financial Statements
(Expressed in U.S. dollars)

Years ended December 31, 2000 and 1999
================================================================================


3.   Significant accounting policies (continued):

     (e)  Income taxes:

          Income taxes are provided for using the asset and liability  method of
          accounting.  A deferred  tax asset or  liability  is recorded  for all
          temporary  differences  between  the  carrying  values of  assets  and
          liabilities  for financial and tax reporting  purposes and of tax loss
          carryforwards based on the enacted tax rates in the expected period of
          reversal  of the  difference.  The  effect of a change in tax rates is
          recorded in the year that includes the enactment date.

          A valuation  allowance is provided to the extent that it is considered
          more likely than not that the deferred tax assets  arising due to loss
          carryforwards or temporary differences will not be realized.

     (f)  Use of estimates:

          The  preparation of financial  statements in conformity with generally
          accepted  accounting  principles requires management to make estimates
          and  assumptions  that  affect  the  reported  amounts  of assets  and
          liabilities  and  disclosure  of  contingencies  at  the  date  of the
          consolidated financial statements and the reported amounts of revenues
          and expenses during the reporting period.

          Assumptions underlying these estimates are limited by the availability
          of reliable data and the uncertainty of predictions  concerning future
          events.  Consequently,  the  estimates  and  assumptions  made  do not
          necessarily  result in a precise  determination  of reported  amounts.
          Actual results could differ from those estimates.

     (g)  Cash, cash equivalents and short-term investments:

          The Company considers all short-term  investments with a maturity date
          at purchase of three months or less to be cash equivalents.

     (h)  Loss per share:

          Basic loss per share is computed by dividing loss  attributable to the
          common  shareholders  by the weighted  average number of common shares
          outstanding during the period. Under the  recapitalization  accounting
          described in note 1, the shares issued to the former  shareholders  of
          POPstar  are  considered  to have  been  outstanding  for all  periods
          presented  proportionate  to their date of issuance.  Diluted loss per
          share  reflects per share amounts that would have resulted if dilutive
          securities,  such as the common share  options,  had been converted to
          common stock at the later of the beginning of the period or their date
          of issuance.



                                      F-8
<PAGE>

POPSTAR COMMUNICATIONS, INC.
(A Development Stage Company)

Notes to Consolidated Financial Statements
(Expressed in U.S. dollars)

Years ended December 31, 2000 and 1999
================================================================================


3.   Significant accounting policies (continued):

     (h)  Loss per share (continued):

          The losses  attributable to the common shareholders for the year ended
          December 31, 2000 is represented  by the net loss of  $3,141,273.  The
          weighted  average  number of common shares  outstanding  for this year
          ended December 31, 2000 is calculated as follows:

<TABLE>
                                                                                                      Weighted
                                                                                   Number            number of
                                                                                of common            of shares
                                                                            shares issued          outstanding
         -------------------------------------------------------------------------------------------------------
         <S>                                                                <C>                   <C>
         Shares outstanding, December 31, 1999                                 19,447,500           19,447,500
         Shares cancelled during the period                                    (2,400,000)          (2,307,945)
         Shares issued during the period                                        4,904,500            4,252,739
         Options exercisable at $0.01 per common share                            340,000              340,000
         -------------------------------------------------------------------------------------------------------
                                                                               22,292,000           21,732,294
         -------------------------------------------------------------------------------------------------------
</TABLE>

          As at December 31,  2000,  there were  outstanding  options to acquire
          1,056,000  common  shares of the Company  (note 7(b)) of which 340,000
          have been  included in the per share  calculation  due to the exercise
          price  being  nominal  and of which  716,000  are not  included in the
          computation of diluted loss per share because to do so would have been
          anti-dilutive for the periods presented.

          The losses  attributable to the common shareholders for the year ended
          December 31, 1999 is represented  by the net loss of  $2,041,736.  The
          weighted  average  number of common  shares  outstanding  for the year
          ended December 31, 1999 is calculated as follows:

<TABLE>
                                                                                                      Weighted
                                                                                   Number            number of
                                                                                of common            of shares
                                                                            shares issued          outstanding
         ------------------------------------------------------------------------------------------------------
         <S>                                                                <C>                   <C>
         Shares outstanding, December 31, 1998                                  5,800,000            2,621,918
         Shares issued on recapitalization                                     12,875,000           11,338,425
         Shares issued subsequent to recapitalization                             772,500              151,000
         Options exercisable at $0.01 per common share                            467,500              467,500
         ------------------------------------------------------------------------------------------------------
                                                                               19,915,000           14,578,843
         ------------------------------------------------------------------------------------------------------
</TABLE>



                                      F-9
<PAGE>

POPSTAR COMMUNICATIONS, INC.
(A Development Stage Company)

Notes to Consolidated Financial Statements
(Expressed in U.S. dollars)

Years ended December 31, 2000 and 1999
================================================================================


3.   Significant accounting policies (continued):

     (h)  Loss per share (continued):

          As at December 31,  1999,  there were  outstanding  options to acquire
          757,500 common shares of the Company (note 7(b)) of which 467,500 have
          been included in the per share  calculations due to the exercise price
          being nominal and of which 290,000  options and the  subscriptions  to
          issue  1,750,000  common  shares of the  Company  (note  7(c)) are not
          included in the computation of diluted loss per share because to do so
          would have been anti-dilutive for the periods presented.

     (i)  Stock based compensation:

          Stock options granted in exchange for employee  services rendered have
          been accounted for using the intrinsic  value based method whereby the
          excess,  if any, of the quoted  market price of the stock at the grant
          date over the exercise  price is recognized in the period of granting.
          The Company  has elected to adopt the  disclosure  only  provision  of
          Statement of Financial  Accounting  Standards No. 123 ("FAS 123") with
          respect to option grants to employees.  Any compensation is recognized
          over  the  service   period  of  the  stock  options  being   granted,
          represented by the vesting period.

          Stock based compensation  awarded as a result of stock options granted
          to  non-employees  are accounted for using the fair value based method
          of accounting.  The fair value is determined using the  option-pricing
          model that takes into  account the stock price at the grant date,  the
          exercise price, the expected life of the option, the volatility of the
          underlying  stock and the expected  dividends on it, and the risk-free
          interest rate over the expected life of the option.  The  compensatory
          impact is recognized based on fair values as services are provided and
          the options earned.

          Stock issued in exchange for services rendered have been accounted for
          based on the  estimated  fair value of the equity  instruments  at the
          date of issuance.

     (j)  Revenue recognition:

          Revenue is  recognized  when all of the  following  criteria  are met:
          persuasive evidence of an arrangement exists; the goods are shipped or
          services  provided,  the price is fixed or determinable and collection
          of the sales proceeds is reasonably assured.




                                      F-10
<PAGE>

POPSTAR COMMUNICATIONS, INC.
(A Development Stage Company)

Notes to Consolidated Financial Statements
(Expressed in U.S. dollars)

Years ended December 31, 2000 and 1999
================================================================================


4.   Note receivable from a company with common controlling shareholders:

     The note receivable  from TGI  Technologies  Ltd.  ("TGI") is unsecured and
     bears interest at 8% per annum.  Both TGI and the Company have greater than
     50%  of  their  respective  voting  shares  owned  by  the  same  group  of
     shareholders.  The funds were  loaned to TGI on March 30,  1999 from monies
     received on the issuance of shares of the Company.  The  principal  and any
     outstanding  accrued  interest  are due on the  earlier  of  demand  by the
     Company or March 30, 2001.  During the year,  the Company offset payment of
     $550,000 (1999 - nil) of the principal  balance  against license fees owing
     (note 8(a)) and interest income of $48,204 (1999 - $60,703) from TGI.


5.   Equipment:

     Equipment consists of the following:

                                                    2000                 1999
     --------------------------------------------------------------------------
     Furniture and equipment                 $    33,971            $   1,224
     Computer                                    269,405               10,900
     Leasehold improvements                       40,865                    -
     Other equipment                               2,510                    -
     --------------------------------------------------------------------------
                                                 346,751               12,124
     Accumulated amortization                    (81,946)                   -
     --------------------------------------------------------------------------
                                             $   264,805            $  12,124
     --------------------------------------------------------------------------


6.   Payable to companies with common controlling shareholders:

     The  payables  to  companies  with  common  controlling   shareholders  are
     non-interest bearing, unsecured and have no specific terms of repayment.





                                      F-11
<PAGE>

POPSTAR COMMUNICATIONS, INC.
(A Development Stage Company)

Notes to Consolidated Financial Statements
(Expressed in U.S. dollars)

Years ended December 31, 2000 and 1999
================================================================================


7.   Capital stock:

     (a)  Common shares:


<TABLE>

                                                               Common stock           Additional
                                                        -----------------------         paid-in
                                                        Shares          Amount           capital          Total
        ---------------------------------------------------------------------------------------------------------
         <S>                                          <C>                 <C>         <C>             <C>
         POPstar Global Communications Inc.:
           Common share issued for cash                              $         -    $         -     $         -
        ---------------------------------------------------------------------------------------------------------
           Balance, December 31, 1998                          -               -              -               -

           Common shares issued for cash at
              $0.000911 per share                     10,500,000           9,565              -           9,565
           Preferred shares issued for cash at
              $0.833333 per share                      2,375,000       1,979,167              -       1,979,167
        ---------------------------------------------------------------------------------------------------------
         Capital stock prior to recapitalization      12,875,000       1,988,732              -       1,988,732

         POPstar Communications, Inc.:
           Balance, January 1, 1998 and
              December 31, 1998                        5,800,000           5,800              -           5,800
           Adjustment on recapitalization:
              Capital stock of POPstar
                Global Communications Inc.
                deemed to have been outstanding
                prior to recapitalization that were
                issued, net of costs                  12,875,000          12,875      1,975,857       1,988,732
              Net costs deemed to be issued on
                recapitalization equaling the deficit
                of POPstar Communications, Inc.                -               -         (8,317)         (8,317)
        ---------------------------------------------------------------------------------------------------------
           Capital stock subsequent to
              recapitalization                        18,675,000          18,675      1,967,540       1,986,215

           Common shares issued for cash at
              $1.00 per share                            125,000             125        124,875         125,000
           Common shares issued in consideration
              for legal services rendered at $1.00
              per share                                   22,500              22         22,478          22,500
           Common shares issued for cash at
              $0.833333 per share                        625,000             625        520,208         520,833
        ---------------------------------------------------------------------------------------------------------
         Balance, December 31, 1999 carryforward      19,447,500     $    19,447    $ 2,635,101     $ 2,654,548
        ---------------------------------------------------------------------------------------------------------
</TABLE>



                                      F-12
<PAGE>


POPSTAR COMMUNICATIONS, INC.
(A Development Stage Company)

Notes to Consolidated Financial Statements
(Expressed in U.S. dollars)

Years ended December 31, 2000 and 1999
================================================================================


7.   Capital stock (continued):

     (a)  Common shares (continued):

<TABLE>

                                                               Common stock           Additional
                                                        -----------------------         paid-in
                                                        Shares          Amount           capital          Total
        ---------------------------------------------------------------------------------------------------------
         <S>                                          <C>                 <C>         <C>             <C>
         Balance, December 31, 1999, carried
           forward                                    19,447,500      $   19,447    $  2,635,101    $  2,654,548

         Common shares cancelled for no
           consideration                              (2,400,000)         (2,400)          2,400              -
         Common shares issued for cash at $2.00
           per share                                   3,000,000           3,000       5,997,000       6,000,000
         Common shares issued for cash at
           $0.833333 per share                         1,750,000           1,750       1,456,583       1,458,333
         Common shares issued on exercise of
           options for cash at $0.01 per share           117,500             118           1,057           1,175
         Common shares issued on exercise of
           options for cash at $1.00 per share            27,000              27          26,973          27,000
         Common shares issued for software
           technology at $2.00 per share                  10,000              10          19,990          20,000
----------------------------------------------------------------------------------------------------------------------

         Balance, December 31, 2000                   21,952,000      $   21,952    $10,139,104     $ 10,161,056
----------------------------------------------------------------------------------------------------------------------
</TABLE>


     (b)  Options:

          (i)  Stock-based compensation:

               In 1999,  the Company  adopted a stock  option plan (the  "Plan")
               pursuant  to  which  the  Company  may  grant  stock  options  to
               directors,   management,  employees  and  contractors.  The  Plan
               authorized  grants of options to purchase up to 757,500 shares of
               authorized  but  unissued  common  stock.  During  the year ended
               December  31,  2000,  the  Company's   shareholders  approved  an
               additional  1,242,500 common shares under the Plan to be eligible
               to be granted as  options.  Stock  options  are  granted  with an
               exercise  price equal to the stock's  market value at the date of
               the grant.  The stock  options have various  periods to expiry as
               noted in the tables below.




                                      F-13
<PAGE>

POPSTAR COMMUNICATIONS, INC.
(A Development Stage Company)

Notes to Consolidated Financial Statements
(Expressed in U.S. dollars)

Years ended December 31, 2000 and 1999
================================================================================


7.   Capital stock (continued):

     (b)  Options (continued):

          (i)  Stock-based compensation (continued):

<TABLE>
               ------------------------------------------------------------------------------------------------
                                                                                                       Average
                                                                                  Options             exercise
                                                                              outstanding                price
              -------------------------------------------------------------------------------------------------
              <S>                                                              <C>                  <C>
              Transactions during the period:
                  Balance, December 31, 1998                                            -        $           -
                  Granted                                                         467,500                 0.01
                  Granted                                                         290,000                 1.00
              -------------------------------------------------------------------------------------------------
              Outstanding and exercisable, December 31, 1999                      757,500                 0.39

              Transactions during the period:
                  Granted                                                         611,000                 2.00
                  Exercised                                                      (144,500)                0.19
                  Expired                                                        (168,000)                1.63
              -------------------------------------------------------------------------------------------------
              Outstanding and exercisable, December 31, 2000                    1,056,000            $    1.15
              -------------------------------------------------------------------------------------------------
</TABLE>

               The fair value of options  granted during 2000 averaged $1.23 per
               share (1999 - $0.10 per share)  calculated  by applying the Black
               Scholes model as discussed below.

               The  following   table   summarizes   options   outstanding   and
               exercisable at December 31, 2000:

<TABLE>
                                                 Outstanding
                                  ---------------------------------------
                                                                 Weighted               Number
              Exercise                                     average period            of shares
              prices                  Number          remaining to expiry          exercisable
            -----------------------------------------------------------------------------------
                                                                 (months)
              <S>                    <C>                  <C>                       <C>
              $0.01                  340,000                           15               90,000

              $1.00                  220,000                           20               70,000

              $2.00                  496,000                           26              100,000
            -----------------------------------------------------------------------------------
                                   1,056,000                                           260,000
            -----------------------------------------------------------------------------------
</TABLE>



                                      F-14
<PAGE>

POPSTAR COMMUNICATIONS, INC.
(A Development Stage Company)

Notes to Consolidated Financial Statements
(Expressed in U.S. dollars)

Years ended December 31, 2000 and 1999
================================================================================


7.   Capital stock (continued):

     (b)  Options (continued):

          (i)  Stock-based compensation (continued):

               The grant date fair  value  price has been  calculated  using the
               Black Scholes  option  pricing model with the following  weighted
               average assumptions: volatility of 8%, expected dividend yield of
               0%,  risk-free  interest  rate of 5% and an expected life of four
               years (1999 - three  years).  Total  compensation  recognized  in
               income for stock-based  compensation  awards as a result of stock
               options granted for the year is nil (1999 - nil).  Based on these
               factors, had compensation expense for the Company's stock options
               been recognized  based on a fair value  methodology as prescribed
               by FAS 123, the  Company's net loss and loss per share would have
               been as follows:

              ------------------------------------------------------------------
                                                          2000             1999
              ------------------------------------------------------------------

              Loss for the year                    $ 3,141,273      $ 2,041,736
              Fair value of options granted            144,464           37,700
              ------------------------------------------------------------------
              Pro forma loss for the year          $ 3,285,737      $ 2,079,436
              ------------------------------------------------------------------
              Pro forma loss per share             $      0.15      $      0.14
              ------------------------------------------------------------------

          (ii) Other:

               During the year ended  December  31,  2000,  the Company  granted
               options to three  investors  to  purchase up to an  aggregate  of
               3,000,000  shares of common  stock at an exercise  price of $2.00
               per share.  The options are  exercisable  by the investors at any
               time prior to the date which is three  months  subsequent  to the
               date on which the Company's stocks are relisted for trading on an
               exchange.

          (iii) Options granted subsequent to year-end:

               Subsequent to December 31, 2000, the Company  granted  additional
               options to purchase 362,750 shares of common stock at an exercise
               price of $2.00 per share.

     (c)  Subscriptions:

          On January 12,  1999,  the  Company  received  subscriptions  to issue
          1,750,000  common  shares of the Company at a price of  $0.833333  per
          common share. The transaction closed on March 30, 2000 with cash being
          received and shares being issued on that date.



                                      F-15
<PAGE>

POPSTAR COMMUNICATIONS, INC.
(A Development Stage Company)

Notes to Consolidated Financial Statements
(Expressed in U.S. dollars)

Years ended December 31, 2000 and 1999
================================================================================


8.   Related party transactions:

     Related party  transactions not disclosed  elsewhere in these  consolidated
     financial statements are as follows:

     (a)  On January 11, 1999,  the Company  entered into a Licensing  Agreement
          with  TGI,   whereby  the  Company  has  been  granted  the  exclusive
          commercial exploitation rights to certain Internet fax server software
          (the "Software").  Under this license, the Company has agreed to pay a
          percentage  of  the  net  revenues   resulting   from  the  commercial
          activities of the Software,  subject to a specified annual minimum, as
          follows:

         --------------------------------------------------------------------
         Calendar                            Percentage               Annual
         year                              of net sales              minimum
         --------------------------------------------------------------------
         2000                                        6%         $    600,000
         2001                                        4%              500,000
         2002                                        2%              500,000
         --------------------------------------------------------------------


          The  agreement  provides that the Company can offset any amounts owing
          to TGI against  the note  receivable  disclosed  in note 4. During the
          year ended December 31, 2000, the Company offset $550,000 (1999 - nil)
          against the note receivable.  During the year ended December 31, 2000,
          the Company recorded  expenditures of $600,000 in license fees to TGI,
          being the annual minimum prorated for the year ended December 31, 2000
          (1999 - $391,074).

     (b)  The Company has also entered into an agreement  with TGI,  whereby TGI
          will provide technical assistance,  software  development,  marketing,
          management  and other  services,  as required.  The charge is based on
          TGI's direct and indirect costs of the services provided plus 15%.

          During the year ended December 31, 2000, the Company  incurred service
          fees, including the 15%, under this agreement totalling $938,495 (1999
          - $1,062,139).




                                      F-16
<PAGE>

POPSTAR COMMUNICATIONS, INC.
(A Development Stage Company)

Notes to Consolidated Financial Statements
(Expressed in U.S. dollars)

Years ended December 31, 2000 and 1999
================================================================================


8.   Related party transactions (continued):

     (c)  During the year ended  December 31, 2000,  POPstar Asia leased  office
          space for its office in Hong Kong for  $2,000 per month from  Easewell
          Management  Ltd.  pursuant  to a leasing  arrangement.  A director  of
          Easewell  Management  Ltd.  is a director  of the  Company.  The lease
          expires June 30, 2001.

          During the year ended  December 31, 2000,  POPstar Asia leased  office
          space for its office in Beijing,  The  People's  Republic of China for
          $2,200 per month pursuant to a leasing  arrangement from a director of
          the Company. The lease expires June 30, 2001.

          During the year ended December 31, 2000, POPstar Communications Canada
          Corp.  leased  office  space for its office in  Vancouver,  Canada for
          CDN$4,489  per month from  Tradeglobe  Consulting  Ltd.  pursuant to a
          leasing arrangement.  Two directors of Tradeglobe  Consulting Ltd. are
          directors of the Company. The lease expires April 30, 2002.


9.   Income taxes:

     There is no  provision  for income  taxes for the years ended  December 31,
     2000 and 1999,  due to the loss and no state  income tax in Nevada.  Income
     taxes  recorded on the  consolidated  statements of operations  and deficit
     represents  withholding  taxes on  interest  income.  The  Company's  total
     deferred tax assets as follows:

     ---------------------------------------------------------------------------
                                                       2000               1999
     ---------------------------------------------------------------------------
     Deferred tax asset                         $   545,449         $  306,673
     Valuation allowance                           (545,449)          (306,673)
     ---------------------------------------------------------------------------
     Net deferred tax asset                     $         -         $        -
     ---------------------------------------------------------------------------




                                      F-17
<PAGE>

POPSTAR COMMUNICATIONS, INC.
(A Development Stage Company)

Notes to Consolidated Financial Statements
(Expressed in U.S. dollars)

Years ended December 31, 2000 and 1999
================================================================================


10.  Commitments:

     (a)  On August 10, 1999, the Company entered into a non-exclusive,  royalty
          free Service  Agreement with  TransNexus,  LLC. Under the terms of the
          Agreement,   TransNexus,   LLC  will  provide  financial   transaction
          settlement  services  and  billing  information  to  Internet  Service
          Providers using the Company's  technology in exchange for a percentage
          of the billings.

          On September 20, 2000, the Company  entered into a new  non-exclusive,
          royalty  free  Service  Agreement  with  TransNexus,   Inc.  (formerly
          TransNexus,  LLC).  Under the new terms of the Agreement,  TransNexus,
          Inc. will operate the Clearinghouse  Services on behalf of the Company
          as the POPstar Clearinghouse  Service's  independent,  and third party
          settlement  agency.  In exchange for  providing  services,  TransNexus
          earns a 10% share of the originating parties' wholesale calling rate.

     (b)  During the year ended December 31, 2000, the Company acquired software
          technology from Belcarra  Messaging Corp. in  consideration of $23,000
          (Cdn $35,000) in cash and 10,000 shares of common stock of the Company
          valued at $2.00 per share.  If the software  technology  meets certain
          predetermined  performance benchmarks by January 10, 2001, the Company
          agreed to issue an  additional  10,000  shares of common  stock to the
          seller.  These  performance  benchmarks were not met and therefore the
          Company has no commitment to issue any additional common stock.

     (c)  The Company leases office space under certain  operating leases from a
          third party and related  parties  (note 8(c)).  Future  minimum  lease
          payments  under these leases are $37,000 for the year ending  December
          30, 2001 and $12,000 in 2002.

     (d)  The Company is  committed  under a software  license  agreement to pay
          support fees of $16,500 (Cdn  $25,000) in 2001,  2002 and 2003 for the
          use of proprietary source code developed by a third party.


11.  Financial instruments:

     The carrying values of cash and cash  equivalents,  notes receivable from a
     company with common controlling shareholders,  accounts payable and accrued
     liabilities and payable to companies with common  controlling  shareholders
     approximate  their  fair  value  due to the  relatively  short  periods  to
     maturity of the instruments.


12.  Segmented information:

     The assets and revenue of the Company have been  classified  for  segmented
     information purposes based on the location of the Company's operations.  In
     2000 and 1999,  the  majority  of the assets and revenue  were  located and
     earned in Canada.





                                      F-18
<PAGE>


                                  EXHIBIT INDEX


        Exhibit
        Number      Description
        ------      -----------

         2.1(1)     Acquisition Agreement between POPstar  Communications,  Inc.
                    and POPstar Global Communications Inc., dated July 13, 1999

         3.1(1)     Articles of Incorporation

         3.2(1)     Amended  Articles  of  Incorporation,  filed with the Nevada
                    Secretary of State on May 19, 1999

         3.3(1)     Bylaws

        10.1(1)     Telecommunications Services Agreement by and between INNOSYS
                    COMMUNICATIONS, INC. and POPstar Global Communications Inc.,
                    dated December 18, 1998

        10.2(1)     Licensing   Agreement  between  TGI  Technologies  Ltd.  and
                    POPstar Global Communications Inc., dated January 11, 1999

        10.3(1)     Services  Agreement by and between TGI Technologies Ltd. and
                    POPstar Global Communications Inc., dated January 11, 1999

        10.4(1)     Promissory Note in the amount of U.S. $1,000,000 between TGI
                    Technologies  Ltd. and POPstar Global  Communications  Inc.,
                    dated March 30, 1999

        10.5(1)(2)  Employment   agreement   by  and  between   POPstar   Global
                    Communications Inc. and Don Lau, dated July 20, 1999

        10.6(1)(2)  Employment   agreement   by  and  between   POPstar   Global
                    Communications Inc. and John McDermott, dated July 20, 1999

        10.7(1)(2)  Employment   agreement   by  and  between   POPstar   Global
                    Communications Inc. and Thompson Chu, dated July 20, 1999

        10.8(1)(2)  Services  Agreement  by  and  between  TransNexus,  LLC  and
                    POPstar Global Communications Inc., dated August 10, 1999

        10.9(3)     Share   Subscription   Agreement  by  and  between   POPstar
                    Communications,  Inc.  and  netalone.com  (BVI)  Ltd.  dated
                    February 2, 2000

        10.10(3)    Set Off Agreement dated February 2, 2000

        10.11(3)    Nominee Directors Agreement dated February 2, 2000

        10.12(3)    Termination Agreement dated February 2, 2000

        10.13(3)    Assignment Agreement dated February 9, 2000

        10.14(3)    Share   Subscription   Agreement  by  and  between   POPstar
                    Communications,  Inc.  and  Prime  Star Asia  Limited  dated
                    February 11, 2000

        10.15(3)    Share   Subscription   Agreement  by  and  between   POPstar
                    Communications,  Inc. and iTELEWAY,  Inc. dated February 11,
                    2000

        10.16(4)    Lease  agreement  dated April 1, 2000 between the registrant
                    and Tradeglobe Consulting Ltd.

        10.17(5)    Lease  agreement  dated May 22, 2000 between the  registrant
                    and Pacific Focus Pte. Ltd.

        10.18(5)    Lease  agreement  dated July 1, 2000 between the  registrant
                    and Easewell Management Limited

<PAGE>

        Exhibit
        Number      Description
        ------      -----------

        10.19(5)    Lease  agreement  dated July 1, 2000 between the  registrant
                    and Mr. Thompson Chu

        10.20(5)    Master  Services  Agreement  dated July 7, 2000  between the
                    registrant and Exodus Communications, Inc.

        10.21(5)    Purchase Agreement for Intellectual  Property dated July 31,
                    2000 between the registrant and Belcarra Messaging Corp.

        10.22(6)    TransNexus/POPstar  Clearinghouse  Service  Agreement  dated
                    September 20, 2000 between registrant and TransNexus, Inc.

        10.23       Amendment to Licensing  Agreement  between TGI  Technologies
                    Ltd. and POPstar Global  Communications  Inc.,  dated August
                    24, 1999

        10.24       Amendment   to  Services   Agreement   by  and  between  TGI
                    Technologies  Ltd. and POPstar Global  Communications  Inc.,
                    dated August 24, 1999

        10.25(7)    RSA Security/POPstar  Communications Canada Corp OEM Service
                    Provider License Agreement dated September 30, 1999

        10.26(7)    Lease   agreement   dated  December  15,  2000  between  the
                    registrant and Sinpac Investment Pte. Ltd.

-------------------------

     (1)  Incorporated by reference to the Registrant's  Registration  Statement
          on Form 10-SB (File No. 0-27213).
     (2)  Indicates management contract.
     (3)  Incorporated by reference by the identically  numbered  exhibits filed
          in  response  pursuant  to Item 601 of  Regulation  S-B of our  Annual
          Report on Form 10-KSB for the fiscal year ended December 31, 1999.
     (4)  Incorporated  by reference to Exhibit 10.1 filed May 15, 2000,  on our
          Form 10-QSB for the quarter ended March 31, 2000.
     (5)  Incorporated by reference to exhibits filed August 14, 2000,  numbered
          sequentially  Exhibit 10.1 to Exhibit 10.5, on our Form 10-QSB for the
          quarter ended June 30, 2000.
     (6)  Incorporated  by reference to Exhibit 10.1 filed November 14, 2000, on
          our Form 10-QSB for the quarter ended September 30, 2000.
     (7)  Filed without  exhibits or  schedules,  which will be furnished to the
          Securities and Exchange Commission upon written request.