U.S. SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549
                         ------------------------------
                                   FORM 10-KSB

(Mark One)

[X]  ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF THE  SECURITIES  EXCHANGE ACT OF
     1934
     For the fiscal year ended December 31, 1999

[ ]  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, BC, CANADA                                  V5T 1C7
(Address of Principal Executive Office)                     (Zip Code)

                                  604-872-6608
                (Issuer's Telephone Number, Including Area Code)

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

       None                                                 None
Title of Each Class                   Name of Each Exchange on Which Registered


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

                                 COMMON STOCK,
                           PAR VALUE $.001 PER SHARE
                         ------------------------------
                                (Title of Class)

Check  whether  the  issuer:  (1)  filed  all  reports  required  to be filed by
Section13  or 15(d) of the  Exchange  Act during the past 12 months (or for such
shorterperiod  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  definitive  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 12 months ended December 31, 1999 were $61,708.

The aggregate market value of the voting common stock held by  non-affiliates of
the Issuer,  based on the most recent  private  placement of common stock of the
Issuer on February 18, 2000 of $2.00 per share, was $16,545,000. As of March 24,
2000, the Issuer had 20,047,500  shares of its common stock, par value $.001 per
share (the "Common Stock"), outstanding.

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


<PAGE>


                               TABLE OF CONTENTS

ITEM                                                                   Page
                                    PART  I

ITEM 1.  BUSINESS........................................................1
ITEM 2.  PROPERTIES.....................................................10
ITEM 3.  LEGAL PROCEEDINGS..............................................10
ITEM 4.  SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS............10

                                    PART  II

ITEM 5.  MARKET FOR REGISTRANT'S COMMON STOCK AND RELATED
           STOCKHOLDER MATTERS..........................................11
ITEM 6.  PLAN OF OPERATION..............................................12
ITEM 7.  CONSOLIDATED FINANCIAL STATEMENTS..............................16
ITEM 8.  CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS
           ON ACCOUNTING AND FINANCIAL DISCLOSURE.......................16

                                   PART  III

ITEM 9.  DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND
           CONTROL PERSONS; COMPLIANCE WITH SECTION 16(A) OF
           THE EXCHANGE ACT.............................................17
ITEM 10. EXECUTIVE COMPENSATION.........................................19
ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
           AND MANAGEMENT...............................................21
ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.................22
ITEM 13. EXHIBITS AND REPORTS ON FORM 8-K...............................24



<PAGE>

FORWARD-LOOKING STATEMENTS

This  report  includes  "forward-looking  statements"  within the meaning of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"). All statements
other  than   statements  of  historical   fact  included  in  this  report  are
forward-looking  statements.  These statements are based on management's current
beliefs and assumptions  about the Company and the industry in which the Company
competes  and  on   information   currently   available  to   management.   Such
forward-looking   statements  include,   without  limitation,   the  information
concerning  possible or assumed  future results of operations of the Company set
forth under the headings  "Business",  "Plan of Operations",  and  "Consolidated
Financial  Statements".  Forward-looking  statements also include  statements in
which  words  such  as  "expect",  "anticipate",  "intend",  "plan",  "believe",
"estimate",   "consider",  or  similar  expressions  are  used.  Forward-looking
statements  are not  guarantees  of  future  performance.  They  involve  risks,
uncertainties  and  assumptions.  The Company's  future results and  shareholder
values  may  differ   materially  from  those  expressed  or  implied  in  these
forward-looking  statements.  Although  the Company  believes  the  expectations
reflected in such  forward-looking  statements  are  reasonable,  it can give no
assurance that such expectations  reflected in such  forward-looking  statements
will prove to have been correct. Readers are cautioned not to put undue reliance
on  any  forward-looking  statements.  The  ability  to  achieve  the  Company's
expectations  is  contingent  upon a number of  factors  which  include  (i) the
Company's  ability to market its  products in the  industry,  (ii) effect of any
current or future  competitive  products,  (iii)  ongoing  cost of research  and
development  activities,  (iv) the retention of key  personnel,  and (v) capital
market conditions.




<PAGE>


                                     PART I
ITEM 1.  BUSINESS

Company Overview

POPstar  Communications,  Inc. (the  "Company" or  "POPstar"),  is a development
stage  Internet  technology  company  currently  in the  process  of  developing
Internet-based facsimile transmission  technology.  The Company field-tested its
technology in 1999 and began to commercially launch its fax-over-IP  services in
March 2000. The Company is marketing its services to Internet Service  Providers
("ISPs") around the world.  POPstar's technology equips ISPs with the ability to
provide  Internet-based  facsimile  transmission  services  to their  end-users.
POPstar  provides  its Enroute  software  free of charge to ISPs in return for a
share of all revenue generated from the use of its software.

The Company was originally incorporated under the laws of the State of Nevada on
June 19, 1995 as Cherokee  Leather,  Inc.  Between 1995 to 1999, the Company was
inactive.  On May  17,  1999,  in  contemplation  of  acquiring  POPstar  Global
Communications  Inc., a British  Virgin  Islands  company  ("POPstar-BVI"),  the
Company changed its name to POPstar  Communications,  Inc. On July 20, 1999, the
Company  acquired  all  of  the  outstanding   common  and  preferred  stock  of
POPstar-BVI in a transaction described as a  "recapitalization".  As the Company
had no operations prior to the acquisition, the acquisition has been treated for
accounting   purposes  as  the  acquisition  of  POPstar  (the   Registrant)  by
POPstar-BVI for the net book value of POPstar's net monetary  liabilities in the
amount  of  $2,517.00.   Immediately   prior  to  its  acquisition  by  POPstar,
POPstar-BVI  was  in  the  business  of  developing   Internet-based   facsimile
transmission technology.

Immediately  prior to the  acquisition,  POPstar had 5,800,000  shares of Common
Stock  outstanding,  of which 2,400,000 shares of Common Stock were cancelled as
part of the acquisition.  Also as part of POPstar's  acquisition of POPstar-BVI,
POPstar  issued  12,875,000  shares of its Common Stock to the  shareholders  of
POPstar-BVI.  Additionally,  management  of  POPstar  had  no  affiliation  with
management of POPstar-BVI prior to the acquisition. Following the acquisition of
POPstar-BVI,  the entire  former  management  and Board of  Directors of POPstar
resigned and was replaced by the management of POPstar-BVI.

POPstar is a developer of Internet-based facsimile transmission technology which
allows ISPs in various  parts of the world to  cooperate  in the  transport  and
delivery of documents,  using the Internet instead of conventional long distance
telephone networks ("LD").  POPstar's Enroute technology allows ISPs to offer to
their end-users,  the ability to transmit and receive  documents from a personal
computer  to  or  from  any  conventional   facsimile  ("Fax")  machine  located
throughout  the world using the Internet as opposed to LD  networks.  Management
believes that the Company's  technology  offers  end-users  several  significant
advantages over conventional Fax machine and computer Fax modem  transmission of
Faxes  over LD  networks,  in that  POPstar's  technology  allows  end-users  to
transmit Faxes through the use of a simple browser  interface (such as Microsoft
Explorer  or  Netscape  Navigator)  without  the need or costs for  conventional
telephone lines or additional hardware.  Management believes that these features
offer  competitive   advantages  for  businesses  that  use  personal  computers
connected  to the  Internet  via local area  networks  ("LANs"),  as well as the
growing number of small office / home office users connected to the Internet via
cable or digital subscriber line access (known as "Broadband"



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<PAGE>

connections) and for business travelers desiring to transmit Fax documents while
traveling throughout the world.

POPstar's  products  include a Web-based user Graphic User Interface  (GUI)and a
File  Conversion  Server  ("FCS").  The FCS permits  text,  HTML and  PostScript
formatted documents (all common formats),  as well as Microsoft documents,  such
as Word, Excel and Access,  to be "attached" to the fax message and converted to
Fax format. Without the FCS, competitors'  browser-based offerings require users
to undertake a complicated  and error prone step to "save" or "translate"  their
document to one of the more common formats before it can be  transmitted.  Thus,
POPstar's  browser-based  entry screen supports full conversion without the need
for the user to download  and  maintain a "printer  driver",  which has been the
traditional method of preparing and sending Fax documents.

One reason for the continued  popularity of Fax, in Asian markets in particular,
is the compatibility with Chinese,  Japanese,  Korean and other character sets -
Fax documents are "image based".  POPstar's FCS supports conversion of Microsoft
documents using these localized character-sets to image format, such that these,
too,  can be  directly  transmitted  from the  computer to the  destination  Fax
machine.

POPstar's  "localized  character"  support  of  Fax  documents  has  enjoyed  an
enthusiastic  reception in trials undertaken in Japan,  Taiwan, Hong Kong, China
and elsewhere.

Although  current Internet users are capable of transmitting  documents  through
the use of electronic mail ("e-mail") from one computer to another, the majority
of businesses  still receive and transmit  their  documents via Fax.  Management
believes that POPstar's  technology  allows companies to combine the convenience
and  costs  savings   provided  by  the  Internet  with  the   compatibility  of
conventional Fax machines.

Transmission of Fax documents  using  POPstar's  network will be priced at rates
competitive  with  those  of  long  distance  rates.  Management  believes  that
POPstar's primary advantages stem from ease of use, savings in avoiding the need
for installation of additional telephone lines for Fax transmission and receipt,
elimination  of hard  copies of  documents  at the point of  origin,  electronic
filing of documents and elimination of manual handling of documents.

POPstar's  technology  will  allow  the  growing  number  of  Internet  users to
capitalize  on the lower costs and  convenience  offered by Internet  technology
while  allowing  them to  further  utilize  their  Internet  connection  for the
transmission or receipt of documents  without the need of purchasing  additional
telephone  connections  (which  require  monthly  and per use fees).  Management
believes  that such  benefits  are even more  significant  to European and Asian
end-users  where  the  installation  of  additional  telephone  connections  are
significantly higher than Internet connectivity costs.

POPstar's Fax over Internet Protocol technology  ("Internet Fax") is provided to
ISPs on a  royalty-free  basis.  POPstar's  Internet Fax software  also 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.  POPstar will
derive  revenue by  receiving  a portion of the  payments  made to ISPs by their
customers who use the Internet Fax service.  ISPs who use the POPstar technology
are charged a wholesale  price for all Fax traffic  submitted by users;  POPstar
and the ISP delivering the Fax to the recipient conventional Fax



                                       2
<PAGE>

machine  each  receives  portions  of  this  wholesale  price,  according  to  a
prearranged  formula.  Distribution  of  respective  parties'  portions  of  the
wholesale price ("Settlements") is consigned to an independent, specialist firm.
Management  believes that a major obstacle standing in the way of widespread 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 have long shared LD 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 shares between participants, along with corresponding Settlements.

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    ("ETSI"),    a   body   governing
inter-operability   between  telephone   companies  in  Europe,   sponsored  the
development  of  the  Open  Settlement  Protocol  ("OSP"),  a key  component  of
POPstar's inter-ISP settlements  strategy.  The OSP allows for call clearing and
settlement  between   independent   partners.   POPstar  has  been  informed  by
TransNexus,  LLP, ("TransNexus"),  one of the firms contributing to OSP, that it
is the first commercial user of OSP for Internet Fax transmission settlements.

Traditionally,  ISPs have needed only  billing  systems  which  handle  monthly,
flat-fee billings,  as most Internet services were provided on a flat-fee basis.
However,  ISPs desiring to generate  additional revenue by offering  value-added
services billed on a usage basis, are required to implement billing systems that
accommodate usage billing.  Usage billing for services such as Voice-Over-IP and
Fax-Over-IP  is required  not only by  POPstar's  technology  but by any service
which the ISP  desires  to offer  their  users on a usage  basis as opposed to a
flat-rate  basis.  Management  believes  that  implementation  of usage  billing
systems  for  value-added  services  will  be  required  if ISPs  are to  remain
profitable.  Implementation  of usage  billing  varies  from  between two to six
months depending on the ISPs' current billing system and whether the ISP is able
to modify their system or needs to replace it entirely.  Alternatively, ISPs may
contract  with third party billing  companies to supply usage  billing  service.
Costs of  implementing  or utilizing  third-party  systems varies  considerably.
POPstar assists ISPs with system integration of the ISPs' billing system to work
with POPstar's Internet Fax technology.

Management believes that Settlements should be done by independent trusted third
parties,  and not by POPstar or by any of the ISPs or other carriers  associated
with POPstar. As a consequence,  TransNexus of Atlanta, Georgia, was selected by
POPstar as a qualified settlements house, and subsequently contracted to provide
settlements  services to POPstar and to the  respective  POPstar  partnering ISP
offering  origination  ("Onramp")  and  termination   ("Offramp")  services.  An
additional service rendered by TransNexus is the provision of least-cost routing
information  permitting  POPstar's  software to route Fax traffic to the Offramp
able to deliver each Fax document for the lowest cost.

OSP 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 Onramp and Offramp ISPs, TransNexus, and



                                       3
<PAGE>

POPstar,  POPstar employs an encryption  protocol known as BSAFE provided by RSA
Data Security, Inc. for such transmissions. POPstar is required to pay royalties
equivalent  to 2% of  POPstar's  service  revenue  for  the  use  of  the  BSAFE
encryption protocol.  Aside from normal incremental  improvements in the POPstar
software to comply with evolving industry standards, POPstar is not aware of any
licensing or other  significant  costs associated with  implementing  current or
anticipated protocols to the POPstar technology.

POPstar's products and services,  therefore, consist of an integrated technology
comprising of Internet Fax software, file conversion server, least cost routing,
inter-ISP settlements and support for full accounting,  audit trail and activity
monitoring.

Additionally, the Company anticipates introducing enhancements to its technology
in the form of "Unified  Messaging"  service  support,  in which text, voice and
other messages are accessible from a single,  unified  mailbox,  and deliverable
over the  Internet  and  other  facilities  to the  intended  recipient(s).  The
Internet Engineering Task Force ("IETF"),  the International  Telecommunications
Union  ("ITU")  and a number  of  other  bodies  are  developing  standards  and
recommendations  for message exchange and conversion;  POPstar's  activities are
directed  toward   compliance  with  these  evolving   standards,   and  product
enhancements  will  be  released  as  these  standards  mature.   There  are  no
assurances,   however,  that  the  Company  will  be  able  to  introduce  these
enhancements as intended or that it will not face technical and market obstacles
which may prevent the Company from introducing such enhancements.

Industry Overview

POPstar's  immediate market consists of ISPs who provide  Internet  connectivity
and other services to enterprise  "seats",  Small  Office/Home  Office  ("SOHO")
business users, and residential  users.  POPstar's  technology  offers the ISPs'
customers  a  value-added  service  which  allows  them  to  transmit  documents
throughout  the world at a  significant  discount to  traditional  long distance
telephone network.

Fax usage  continues  to rise.  The Fax portion of LD traffic  billed in 2000 is
estimated to be in excess of $30 billion (approximately 30% of the world total).
The number of Fax  messages is expected to be between 10 and 20 times the number
of email messages sent in the same year. An "enterprise" PC-Fax user may send as
many as 800 pages of Fax per year,  according to some estimates,  and the number
of new Fax machines  purchased,  especially outside Western world,  continues to
grow at 20% per  year or  more.  Additionally,  "outsourced"  (third  party  Fax
carriers) Fax traffic,  largely  "broadcast"  Fax, will generate in excess of $2
billion next year. (All statistics courtesy Davidson Consulting.)

POPstar's Fax methods are "Internet ready".  Both Internet Voice and "real-time"
Internet Fax transmissions  suffer from the Internet's  inherent problem in that
the Internet transmits data in small blocks ("packets"). These packets often get
delayed or lost due to traffic. Such 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,  POPstar's
technology  transmits  the Fax  document in its entirety to the Offramp ISP. The
Offramp 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. POPstar's "immediate" store and forward



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<PAGE>

transport avoids the Internet's  inherent problems while providing virtually the
same speed of delivery as conventional and real-time services.

International Operations

Internet Fax services that span international  boundaries are most attractive to
potential users, due to the high usage of Fax traffic and higher LD rates to and
from  Asian  and other  non-Western  countries.  The  establishment  of  POPstar
operations in key  international  markets  already  includes a sales and support
office in Canada,  operated by the  Company's  wholly owned  subsidiary  POPstar
Communications  Canada  Corp.  as well as a sales  and  support  office in Asia,
operated by the Company's wholly owned subsidiary  POPstar  Communications  Asia
Pacific Ltd., a Hong Kong corporation  ("POPstar-Asia") with other key locations
to be established and staffed as growth dictates.

One  objective of POPstar's  program is the  recruitment  of at least one ISP in
each major Fax traffic location  (originating or  terminating),  the "territory"
handled by a location being defined by LD 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  LD  rates  in some  countries.
POPstar is recruiting  ISPs with lines  terminating in high traffic  destination
areas as POPstar partners.

Generally,  end-users are "conventional" customers of an ISP that legally offers
Internet  connectivity  services for a fee in the host  country.  POPstar's  Fax
traffic  originates in a manner similar to that of e-mail  traffic,  in that the
sender keys in "form" 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  ISP  (Offramp),   Internet  message  traffic  arrives  at  the  ISP
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 a 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 to make
a statement of compliance in the contract  binding the ISP with POPstar and with
TransNexus, as a condition of becoming part of the POPstar network.

POPstar is not aware of regulatory  bars to the transport of Fax traffic into or
out of any country using Internet facilities, but as a precaution, requires each
participating ISP to assume  responsibility  for compliance with all regulations
affecting them with respect to POPstar operations. POPstar does not operate as a
common carrier in any country and to the knowledge of POPstar management, is 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 ISPs' billing  policies.  Onramp or originating
ISPs are  required  to  maintain a credit  balance  with  TransNexus,  POPstar's
settlement  house,  and their  accounts  are  charged a  wholesale  rate for the
transmission of their end-user's Fax with the Onramp ISP being free to charge



                                       5
<PAGE>

end-users  whatever rate it deems  appropriate.  A portion of revenue  generated
from message  traffic  originating  in a given  jurisdiction  is retained by the
Onramp ISP partner in that jurisdiction,  with the balance being collected using
Electronic Funds Transfer methods, where available, by TransNexus for subsequent
distribution  to POPstar and to the ISP partners  through whose  facilities  the
traffic is  eventually  delivered to the  destination  Fax machines (the Offramp
ISP).  Distribution  of such  revenue to POPstar and the Offramp ISP occurs on a
monthly basis.

The respective ISP partners'  operations are subject to rules and regulations of
their respective jurisdictions, including those applicable to funds transfers or
other  currency  controls.   ISPs  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 POPstar's  program,  thus limiting POPstar's revenue associated with the
region in  question.  POPstar is  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.

Research and Development

The design and  development  of the Enroute  Version 2.3  software  was the core
focus for the  Company's  research and  development  activities  during the year
ended December 1999.  Version 2.3 involved  changes to the base  architecture of
the  Enroute  product to meet the needs of the  commercial  market.  The earlier
versions of Enroute were designed for the business  enterprise and the corporate
Intranet  markets.  The market focus for Enroute  Version 2.3 is the  commercial
Internet market.

Enroute Version 2.3 incorporates the following functionality:

     -    Call clearing and settlement;
     -    Call billing;
     -    Double-byte language support;
     -    Increased throughput and scalability;
     -    Improvements in security methods; and
     -    Support of third party hardware products.

Version 2.3 now fully  supports  the Open  Settlement  Protocol  (OSP)  standard
recently established by the International Manufacturers Standards Committee. The
OSP provides a secure,  irrefutable method of tracking the ownership to messages
carried by the network  and uses this  ability to produce  call  records for the
billing and payment for said messages. During the development process interfaces
were  provided to third party  billing  systems for the  generation  of end user
invoices.

Version 2.3 has been designed for the global IP messaging  market.  Accordingly,
support of Asian and other  double-byte  languages is  mandatory.  IP fax is the
first format  supported.  Other formats such as voice and data will follow.  The
typical fax message is made up of a  cover-page  and an  attachment  and the fax
submission  is  from  a web  browser.  The  conversion  of  the  documents  to a
double-byte  image required the development of a new File  Conversion  Server to
handle the  attachments  and  changes  were  required  throughout  the server to
support double-byte and Unicode.



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<PAGE>

Major software  modules  within Enroute  Version 2.3 were rewritten in C++ using
threaded  technology to support the expected heavy traffic within the commercial
IP network.  Modules  included the FCS, the Cover-Page  Generator  (CPG) and the
Messenger.  Each of these modules would have created traffic  bottlenecks within
the network and rewrite was again considered mandatory.  At year end Version 2.3
was ready for commercial testing.

The Company incurred software development  expenditures of $403,438 for the year
ended December 31, 1999.

Competition

Internet Fax  competitors  include  UUNet  (Worldcom),  NetCentric,  NetXchange,
Net2Fax,  and  JFax.  These  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.  POPstar's  services are provided to
ISPs at rates  competitive  or lower  than those of its  competitor's  published
rates. Management believes that these factors provide POPstar with advantages in
recruiting both large and small ISP partners.

Other types of competitors include Fax "outsourcing"  providers such as Xpedite.
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.

Management  believes 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  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.

The Company also faces  competition from the transmission of computer  generated
documents via the Internet as attachments to conventional  e-mail.  Transmission
by e-mail is currently  generally free to end-users  (aside from Internet access
charges). Transmission by e-mail, however, requires both sender and recipient to
possess computer and e-mail capability.  POPstar's technology,  however,  allows
end-users  to reach the  millions  of already  installed  Fax  machines  located
throughout the world.  Additionally,  transmission  using  POPstar's  technology
allows  users to  preserve a paper  trail of  document  transmission,  including
signatures and file stamps.

POPstar's management believe that the advantages of independent settlements, ISP
partner-driven  recruitment of users, and web-page entry of Fax traffic from the
desktop will permit POPstar to effectively compete with its competitors.



                                       7
<PAGE>

Many of the Company's 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 the Company.  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,  there can be no  assurance  that the  Company's  competitors  will not
develop Internet Fax services that are equal or superior to those of the Company
or that achieve greater market acceptance than the Company's offerings.

Dependence Upon Key Customers

POPstar's   success  will  depend  upon  the  number  of   destinations   served
economically by POPstar affiliated ISPs, and the number of Internet users served
by POPstar partner ISPs operating  Internet Fax Offramps.  POPstar's  ability to
deliver Internet Fax services more  economically than traditional LD services is
dependent on soliciting sufficient numbers of ISP partners throughout the world.
Therefore, POPstar will focus on partnering with large, multi-city ISPs. Failure
to obtain  sufficient ISP partners will limit  POPstar's  ability to deliver its
services at lower costs than  traditional  LD services and  therefore may have a
materially adverse effect on the Company's results of operations.

Major Suppliers

POPstar uses Internet Fax software 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 by and between  the  Company's  wholly  owned
subsidiary,  POPstar-BVI  and TGI. All of the officers and  directors of TGI are
also officers and directors of the 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.  For the year 1999, POPstar-BVI was obliged to pay TGI 8%
of net sales derived from the use of the Internet Fax software,  or a minimum of
$400,000. The actual amount paid was $391,074,  which was less than the $400,000
due to the Licensing  Agreement  being entered into during 1999.  POPstar-BVI is
obliged to pay TGI 6% of net sales or a minimum of  $600,000  for the year 2000.
For the  year  2001,  POPstar-BVI  is  obliged  to pay TGI 4% of net  sales of 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  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 1999,
amounts paid under the Services Agreement totaled $1,062,139.



                                       8
<PAGE>

POPstar's  ability to  accurately  bill ISPs for its  Internet  Fax  services is
dependent on settlement  services provided by TransNexus,  of Atlanta,  Georgia.
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 the Company  receives from TransNexus  could
have a  material  adverse  effect on the  Company's  results of  operations.  In
addition,  the  accurate  and  prompt  billing  of the  Company's  customers  is
dependent upon the timeliness and accuracy of settlement details provided to the
Company by TransNexus.

In order to service areas without local ISP termination access, POPstar operates
a "global  Offramp" (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 Communications,
Inc.  ("Innosys"),  to forward Internet Fax transmissions through traditional LD
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' Offramp  service,  or a reduction in the quality of service the
Company  receives  from  Innosys  could  have a material  adverse  effect on the
Company's  results  of  operations.   However,   Management  believes  that  its
dependence  upon this global Offramp will lessen with time, as more  terminating
POPstar ISPs begin operations in different countries around the world.

Trademarks

The Company has made  application to the U.S.  Patent and Trademarks  Office for
the  registration  of the Company's trade name POPstar and its logo. The Company
has also made  application to the European  Patent and Trademark  Office and the
relevant  authorities in 14 other countries in the world for the Company's trade
name POPstar.  The Company's  applications are currently  undergoing  review. No
assurances,  however,  can  be  given  as to  successfulness  of  the  Company's
application.

Employees

As of March 24, 2000, the Company had 19 full-time  employees.  Of these, 14 are
located in North  America,  2 at the  Company's  Hong Kong facility and 3 at the
Company's  facility  in  Beijing,  the  People's  Republic  of China.  Of the 14
employees  in  North  American,  8  are  administrative  and  management,  4 are
technical support and the balance are in sales and marketing. Of the 2 employees
at the Company's Hong Kong office, 1 is technical support and the other is sales
and  marketing.  Of the 3  employees  at the  Beijing  facility,  1 is sales and
marketing, 1 is technical support and 1 is administrative.

In addition,  pursuant to a Services  Agreement  dated  January 11, 1999 entered
into  between  the  Company's  wholly-owned  subsidiary,  POPstar-BVI,  and TGI,
pursuant to which TGI provides POPstar-BVI with technical  assistance,  software
development, marketing, management and other services, as required. Through this
Services   Agreement,   the  Company  indirectly  has  access  to  the  pool  of
approximately 15 programming and technical staff of TGI.



                                       9
<PAGE>

None of the Company's employees are represented by a labor union and the Company
considers its relations with its employees to be good.

ITEM 2.   PROPERTIES

As present,  the Company  does not own any real  property.  Nor does the Company
maintain  a  physical  office  in  the  United  States.  The  Company's  current
administrative  facility  in  Vancouver,  BC,  Canada is made  available  to the
Company and its wholly owned subsidiary  POPstar-BVI from Trageglobe  Consulting
Ltd. pursuant to an oral  month-to-month  lease for  approximately  4,800 square
feet of  office  space  located  at 107  East  3rd  Avenue,  Vancouver,  British
Columbia,  Canada.  The monthly rental rate is currently  $4,000.  See Item 12 -
"Certain Relationships and Related Transactions."

Additionally,  POPstar  Communications  Asia  Pacific  Limited,  a wholly  owned
subsidiary of POPstar-BVI,  maintains a sales,  marketing and technical  support
facility  in  Hong  Kong  for  its  Asian   operations   pursuant  to  an  oral,
month-to-month  lease for  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, the
Company's  Chairman  of the  Board.  See Item 12 -  "Certain  Relationships  and
Related Transactions."

To assist POPstar  Communications Asia Pacific Limited in its business in China,
POPstar Communications Asia Pacific Limited 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 an oral  month-to-month
lease. The owner of the office space is Thompson Chu, the Company's  Chairman of
the Board. See Item 12 - "Certain Relationships and Related Transactions."

Arrangements are being made for all of the above oral  month-to-month  leases to
be formalized into written leases.

ITEM 3.   LEGAL PROCEEDINGS

The  Company  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.  The
Company is not currently involved in any such litigation which it believes could
have a  materially  adverse  effect on its  financial  condition  or  results of
operations.

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

The  Company 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.



                                       10
<PAGE>

                                    PART  II

ITEM 5.   MARKET FOR REGISTRANT'S COMMON STOCK AND RELATED STOCKHOLDER MATTERS

Since June 11, 1998, the Company's  Common Stock was admitted for trading on the
Over-The-Counter  Bulletin  Board (the "OTCBB")  under the symbol "CHRK." On May
17, 1999 the Company's  Board of Directors voted to change the Company's name to
POPstar Communications, Inc. to reflect its new focus on Internet communications
services. Additionally, the Company changed its ticker symbol to POPS on June 3,
1999.  Although the Company ultimately  complied with the OTCBB Eligibility Rule
on January 13, 2000, the Company was unable to meet the OTCBB  Eligibility  Rule
requirements  by October 7, 1999. As a result,  the  Company's  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 the Company 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:

                    1998             HIGH     LOW
                    ----             ----     ---
                    1st Quarter       --      --
                    2nd Quarter       --      --
                    3rd Quarter       --      --
                    4th Quarter       --      --

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

                    -------------------
                    * There were no inside quote activities reported
                      during 1998 and the first two quarters of 1999.

As of March 24, 2000 there were  20,047,500  shares of Common  Stock  issued and
outstanding  and  approximately  62 holders of record of the Common  Stock.  The
Company has neither  declared  nor paid any  dividends on the Common Stock since
its inception and presently  anticipates  that no dividends  will be declared in
the foreseeable  future.  Any future dividends will be subject to the discretion
of the Company's  Board of Directors  and will depend upon,  among other things,
future  earnings,  the  operating and  financial  condition of the Company,  its
capital requirements,  debt obligation  agreements,  general business conditions
and  other  pertinent  facts.  Therefore,  there  can be no  assurance  that any
dividends on the Common Stock will be paid in the future.

Recent Sales of Unregistered Securities

All sales of unregistered  securities  occurring  during the year ended December
31, 1999 in private transactions have been previously reported in a Form 10-QSB.
The following  sales of  unregistered  securities in private  transactions  have
occurred since January 1, 2000:



                                       11
<PAGE>

Common Stock

Pursuant to a Share  Subscription  Agreement dated February 2, 2000, the Company
issued 1,500,000 shares of common stock to Innovestor.com Limited,  resulting in
net cash proceeds of $3,000,000 to the Company. The issuance was conducted under
an exemption  provided by Rule 506 of Regulation D promulgated  under Securities
Act of 1933 and Section 4(2) of the Securities Act of 1993.

Pursuant to a Share Subscription  Agreement dated February 11, 2000, the Company
issued 750,000  shares of common stock to Prime Star Asia Limited,  resulting in
net cash proceeds of $1,500,000 to the Company. The issuance was conducted under
an exemption  provided by Rule 506 of Regulation D promulgated  under Securities
Act of 1933 and Section 4(2) of the Securities Act of 1993.

Pursuant to a Share Subscription  Agreement dated February 11, 2000, the Company
issued 750,000  shares of common stock to iTELEWAY  Inc.,  resulting in net cash
proceeds of  $1,500,000  to the Company.  The issuance  was  conducted  under an
exemption  provided by Rule 506 of Regulation D promulgated under Securities Act
of 1933 and Section 4(2) of the Securities Act of 1993.

Stock Options

On January 1, 1999, the Company  granted to a group of employees and contractors
options to purchase 217,500 shares of the Company's  common stock,  each with an
exercise price of $0.01.

On January 1, 1999, the Company granted to John  McDermott,  President and Chief
Executive  Officer of the  Company,  options to  purchase in  aggregate  250,000
shares of the Company's common stock, each with an exercise price of $0.01.

Between  March 12, 1999 and July 21,  1999,  the  Company  granted to a group of
employees and contractors options to purchase in aggregate 290,000 shares of the
Company's common stock, each with an exercise price of $1.00.

ITEM 6.   PLAN OF OPERATION

The Company is at the  implementation  phase of its  business  plan.  The market
launch of the POPstar Global  Partnership  Program is currently in process.  The
Company plans to introduce key,  value-added  services,  beginning with fax over
IP, into the North American,  Asia Pacific and Western Europe markets initially.
Other services  planned to be introduced  include  fax-to-email and email-to-fax
services in the second quarter of 2000,  voice over IP  integration  and unified
messaging  services in the third quarter of 2000. The Company's  current initial
partners are located in North  America,  Europe and Asia and provide the Company
with an early  global  presence.  The Company aims to provide a full range of IP
products and services to the global, business-to-business, sector of the market.

Throughout the fiscal period ended  December 31, 1999,  the Company  focused its
efforts on the  development  of its Enroute  Version 2.3 software  product.  The
development of the Company's  Enroute Version 2.3 software product was completed
and released for  commercial  service at the end of January 2000.  The Company's
Enroute Version 2.3 product takes advantage of POPstar's  distributed fax server
technology to deliver fax traffic across the public 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



                                       12
<PAGE>

on NT operating systems.  The Enroute Version 2.3 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 developments  provide secure
compatibility  with  the  IP  Open  Settlement  Protocol  standards.   The  Open
Settlement  Protocol allows for call clearing and settlement between independent
partners.

Management anticipates that research and development expenditures for the fiscal
period ending December 31, 2000 will be approximately $1,000,000.

The current research and development focus will be as follows:
o    Version 2.4 of Enroute in the short term.
o    Version 3.0 of Enroute in the long term.

The Enroute Version 2.4 development will focus on needed enhancements to Version
2.3, which will include the development of a new gatekeeper to replace the least
cost routing daemon used in Version 2.3, the  implementation  of a secure socket
(SSL) program  throughout the server to provide security  features,  a change in
user  authorization  procedures,  a real-time call record  reporting  gateway to
established  IP billing  systems and a secure e-mail to fax service.  Management
anticipates that the Enroute Version 2.4 product will be released before the end
of the second quarter of 2000 and add e-commerce  functionality to the Company's
product.

The  development of the Enroute  Version 3.0 IP unified  messaging  product will
continue  throughout  2000.  Management  anticipates that the first prototype of
Version 3.0 of Enroute will be built and tested at the end of the first  quarter
in 2000.  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 PSTN and the  Internet.  POPstar  products  are Web based so
that all messages are accessible to authorized users from any place in the world
with Internet access.

The Version 3.0 IP unified  messaging  product 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 the  Company to adapt  quickly  to the rapid  changes
taking place in the exploding  Internet market. The UMO is designed to allow all
applications to be written just once for UNIX, NT and Linux compatibility.

The  first  major  release  of the new  series  will be  Version  3.1,  which is
scheduled for the end of the third quarter in 2000. The Company anticipates this
release to provide  commercial  grade  unified  messaging  services  to PSTN and
desktop  users.  The Version 3.1 product  will take  advantage  of the  outgoing
services provided through the Version 2.4 product.

The capital  purchases  scheduled for the fiscal period ending December 31, 2000
are  expected  to be in the order of  $1,000,000,  split  between  hardware  and
software at  $750,000  and office  furniture  and  equipment  at  $250,000.  The
hardware is needed to support primarily POPstar's own global gateways in Los



                                       13
<PAGE>

Angeles  and  Vancouver  and on a lower  scale to help seed the  market in other
countries.

The number of  employees  is  expected  to grow  rapidly  over the course of the
fiscal period ending December 31, 2000 from the current 19 to a projected number
of 45.  Global  offices are to be staffed in the UK,  Canada and the US, also in
Hong Kong,  China and Singapore.  Major growth is expected in customer sales and
support services on a 7 days a week, 24 hours a day basis.

Overview

During 1999, the Company's  business plan and efforts focused on the development
of its Enroute  Version 2.3 product and the  recruitment  of ISP  partners.  The
Company began to commercially launch its fax-over-IP services in March 2000 and,
therefore,  did not generated any commercial  revenue in fiscal 1999, apart from
$61,708 of interest income.

The Company has  increased its spending in research and  development,  sales and
marketing,  and general  and  administrative  expenses.  To the extent that such
expenditures  do not result in  commercial  revenues,  the  Company's  business,
results of operations and financial  condition could be materially and adversely
affected.

Due to the evolution of the Company's  business  strategy,  the Company believes
that its historical  results of operations for the periods  presented may not be
directly  comparable.  The Company believes the historical results of operations
do not fully  reflect the  operating  results  that are  expected to be achieved
following the commercial launch of the Company's value-added IP services.

The following  discussion  should be read in conjunction  with the  consolidated
financial   statements   and  the  related  notes  thereto  and  other  detailed
information appearing elsewhere herein.

Liquidity and Capital Resources

At December 31, 1999 the Company had cash and cash equivalents of $23,745.  This
compares to cash and cash  equivalents of $nil as of December 31, 1998. Net cash
used by operating  activities  increased  from $nil for the period from December
17, 1998 to December 31, 1998 to $1,828,923 for the twelve months ended December
31, 1999. The increased use of cash is primarily attributable to the increase in
the operating  loss, of  approximately  $2,041,736.  This increase was offset by
increased 1999 financing activities, of $2,864,792,  attributable to increase in
payables to common controlled  companies of $230,227 and increase in issuance of
capital stock of $2,634,565.  The balance of the difference is  attributable  to
net changes in investing activities.

Investing  activities  for the twelve  months  ended  December  31, 1999 totaled
$1,012,124. The Company's investing activities included a note receivable from a
company  with common  controlling  shareholders  of  $1,000,000  and purchase of
equipment of $12,124.

Net cash  provided  by  financing  activities  amounted to  $2,864,792.  This is
comprised of an increase of $230,277 in payables to common controlled  companies
and issuance of $2,634,565 of capital stock as follows:

     o    On January 1, 1999, the Company's wholly owned subsidiary, POPstar-BVI
          issued an  aggregate  of  10,500,000  shares of Common Stock for gross
          proceeds



                                       14
<PAGE>

          of $9,565.50.  Those 10,500,000  shares of Common Stock of POPstar-BVI
          were  exchanged  for  Common  Stock of the  Company as a result of the
          recapitalization  of the Company in July 1999 as described in Item 1 -
          "Business".

     o    On March  30,  1999,  POPstar-BVI  completed  a private  placement  of
          1,750,000  shares of Preferred  Stock at a purchase price of $0.833333
          per share for gross proceeds of $1,458,333.  Those 1,750,000 shares of
          Preferred Stock of POPstar-BVI  were exchanged for Common Stock of the
          Company  as a result of the  recapitalization  of the  Company in July
          1999 as described in Item 1 - "Business".

     o    On June 30, 1999, POPstar-BVI completed a private placement of 625,000
          shares of Preferred  Stock at a purchase  price of $0.833333 per share
          for gross  proceeds of  $520,833.  Those  625,000  shares of Preferred
          Stock of POPstar-BVI were exchanged for Common Stock of the Company as
          a  result  of the  recapitalization  of the  Company  in July  1999 as
          described in Item 1 - "Business".

     o    On July 20, 1999, the Company completed a private placement of 125,000
          shares  of  Common  Stock at a  purchase  price of $1.00 per share for
          gross proceeds of $125,000.

     o    On September  10, 1999,  the Company  issued  22,500  shares of Common
          Stock at a price of  $1.00  per  share  to the  Company's  then  legal
          counsel for legal services rendered.

     o    On November 12, 1999, the Company  completed a private  placement of a
          further  625,000  shares  of  Common  Stock  at a  purchase  price  of
          $0.833333 per share for gross proceeds of $520,833.

Subsequent to the 1999 year end, the Company  completed  the  following  private
placements:

     o    On February  9, 2000,  the Company  completed a private  placement  of
          1,500,000  shares of  Common  Stock at a  purchase  price of $2.00 per
          share for gross proceeds of $3,000,000.

     o    On February 18, 2000, the Company  completed a private  placement of a
          further  aggregate of  1,500,000  shares of Common Stock at a purchase
          price of $2.00 per share for gross proceeds of $3,000,000.

In addition,  pursuant to share purchase  agreements entered into on January 12,
1999, as amended by  supplemental  agreements  dated March 29, 1999 and Investor
Exchange  Agreements dated July 13, 1999, the Company,  through its wholly owned
subsidiary,  POPstar-BVI, contracted to sell in a private placement an aggregate
of  3,000,000  shares of the  Company's  "restricted"  Common Stock on or before
March 31, 2000 at $0.833333 per share for gross  proceeds  anticipated  to be in
the amount of $2,500,000.

The Company's  cash  position less known  commitments  and  contingencies  as of
yearend 1999 plus outside financing  received through March 24, 2000 is expected
to be adequate to fund the Company's on going operations  during the 2000 fiscal
year.

The Company's  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.   Additionally,  the  Company's
liquidity will also be reduced as amount are used for purchases of capital



                                       15
<PAGE>

assets.  In addition,  the Company  continues to incur operating losses and will
continue to need additional working capital to fund its operations, research and
development,  and marketing  efforts for the 2001 fiscal year. As a result,  the
Company will be required to raise  additional  capital to finance its operations
for the  2001  fiscal  year and  beyond.  The  Company  intends  to  raise  such
additional  funding through the sale of equity or convertible  debt  securities.
However,  there can be no assurance  that the Company will be able to raise such
additional  capital  when  needed,  or on terms  commercially  favorable  to the
Company,  if at all. Such option will result in additional  material dilution to
the Company's stockholders.

If the company  chooses to speed up its 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, the Company will be required to raise  additional  funding though the sale
of equity or convertible debt securities.  There can be no assurance the Company
will be able to raise sufficient  capital  necessary for the continuation of its
acquisition  strategy  when needed,  or on terms  commercially  favorable to the
Company, if at all.

Year 2000 Issues

Because many  computer  applications  have been written  using two digits rather
than four to define  the  applicable  year,  some  data-sensitive  software  may
recognize a date using "00" as the year 1900 rather than the year 2000. The Year
2000 Issue could result in system failures or miscalculations that could disrupt
our operations.

To our knowledge,  we have not experienced any system failures or disruptions of
our  operations  resulting  from the Year 2000  Issue,  although  we continue to
monitor our systems.

To date, we have spent  approximately  $50,000 on year 2000 compliance.  At this
time,  we do not  expect  to incur  future  expenditures  relating  to year 2000
compliance matters.

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

Subsequent to the acquisition of POPstar-BVI by the Company, the Company's newly
appointed  Board of  Directors  elected to retain  KPMG LLP  ("KPMG"),  as their
principal  accountant  to audit the  Company's  financial  statements  effective
August 1, 1999.  KPMG were  previously the auditors of  POPstar-BVI.  There have
been no  disagreements  between BLF, KPMG and Management of the type required to
be reported under this Item since the date of their engagement.



                                       16
<PAGE>

On August 1, 1999, the Company's board of directors  determined to replace Barry
L.  Friedman,  P.C.  ("BLF") as its auditors with KPMG LLP  ("KPMG"),  effective
August 1, 1999.

The report of BLF on the Company's 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 the replacement of BLF, the Company 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 the current  directors and
executive officers of the Company,  the principal offices and positions with the
Company  held by each  person  and the date such  person  became a  director  or
executive  officer of the  Company.  The  executive  officers of the Company 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 the Company are as follows:

Name                       Age          Positions
----                       ---          ---------
John McDermott             63           President and Director

Thompson Chu               42           Chairman of the Board of Directors

Don Lau                    42           Secretary and Treasurer

William Wing Yan Lo        39           Director

Yong Kiat Rickie Tang      41           Director


John  McDermott has served as the Company's  President and a member of its Board
of Directors  since July 13, 1999.  Since August 1989,  Mr.  McDermott  has been
President of TGI Technologies Ltd., a high technology manufacturing and research
and development company.  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  is  registered  as a  Professional
Engineer in Canada since 1969. Mr. McDermott is expected to



                                       17
<PAGE>

contribute  the  whole  of his  time  to  the  operations  of  Company  and  its
subsidiaries.

Thompson  Chu has served as the  Company's  Chairman  of the Board of  Directors
since July 13,  1999.  Prior to that date,  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 is  expected  to  contribute
approximately  50% of his  time  to  the  operations  of  the  Company  and  its
subsidiary.

Don Lau has served as the Company's  Secretary & 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 Canada. Mr. Lau is expected to contribute the whole of
his time to the operations of Company and its subsidiaries.

William Wing Yan Lo, J.P.,  joined the Company's  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  Ltd., a company listed on the Stock Exchange
of Hong Kong, since December 1999.  Netalone.com Ltd. is an integrated  Internet
investment,  operation  and service  company.  Before  becoming the Chairman and
Chief  Executive  Officer of  Netalone.com  Ltd., 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  Hongkong  Telecom since 1990. He was the Founder and became the
first  Managing  Director  of  Hongkong   Telecom's   wholly-owned   interactive
multimedia  subsidiary,  Hongkong  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 is a prominent and  respected  person in Hong Kong and serves on a number
of public-sector and private-sector  committees. Dr. Lo is a member of the Stock
Exchange of Hong Kong's Growth Enterprise Market Listing  Committee.  Dr. Lo was
selected as a "1996 Global Leader for the  Tomorrow" by the global  organization
World Economic Forum for his contributions in bringing multimedia technology and
services to the people of Asia.  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.



                                       18
<PAGE>

Phil.  Degree  in  Molecular  Pharmacology  and  a  Ph.  D.  degree  in  Genetic
Engineering, both from Cambridge University.

Yong Kiat Rickie Tang has served as a member of the Company's Board of Directors
since  July 13,  1999.  Prior to that  date,  Mr.  Tang has 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.

Compliance with Section 16(A) of the Exchange Act

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

To the  Company's  knowledge,  based  solely on a review  of the  copies of such
reports  furnished  to the  Company and  written  representations  that no other
reports were required,  the Company believes that during the year ended December
31, 1999, its officers,  Directors and  greater-than-10%  shareholders  complied
with all Section 16(a) filing requirements.

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, 1999, 1998
and 1997.  Other than as set forth  herein,  no executive  officer's  salary and
bonus  exceeded   $100,000  in  any  of  the  applicable  years.  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
                                                                     ------               -------
                                                                     Restricte   Securities
                                                     Other Annual    Stock       Underlying   LTIP           All Other
Name and Principal               Salary    Bonus     Compensation    Awards ($)    Options    Payouts      Compensation
Position             Year         ($)        ($)          ($)                     SARs (#)       ($)            ($)
------------------               ------    -----     ------------    ----------    -------    -------      ------------
<S>                  <C>         <C>      <C>       <C>             <C>        <C>           <C>            <C>
John McDermott       1999        83,333     -0-       5,600(1)          -0-        250,000       -0-            -0-
(President)
                     1998             0     -0-          -0-            -0-            -0-       -0-            -0-
                     1997             0     -0-          -0-            -0-            -0-       -0-            -0-

Thompson Chu         1999        50,000     -0-          -0-            -0-            -0-       -0-            -0-
(Chairman of the
Board)
                     1998             0     -0-          -0-            -0-            -0-       -0-            -0-
                     1997             0     -0-          -0-            -0-            -0-       -0-            -0-

Don Lau              1999        48,000     -0-          -0-            -0-        50,000        -0-            -0-
(Secretary &
Treasurer)
                     1998             0     -0-          -0-            -0-            -0-       -0-            -0-
                     1997             0     -0-          -0-            -0-            -0-       -0-            -0-
--------------------------------------------------------------------------------------------------------------------------
</TABLE>

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



                                       19
<PAGE>
<TABLE>


                                             OPTION/SAR GRANTS IN 12- MONTH
                                             PERIOD ENDED DECEMBER 31, 1999
                                                  (Individual Grants)

                            Number of Securities      Percent of Total
                                 Underlying        Options/SAR's Granted
                           Options/SAR's Granted      to Employees In         Exercise or Base
Name                                (#)                 Fiscal Year             Price ($/Sh)           Expiration Date
----------------------------------------------------------------------------------------------------------------------
<S>                               <C>                       <C>                    <C>                 <C>
John McDermott                    250,000                   33%                    $0.01               March 31, 2002

Thompson Chu                         0                       0                       0                        0

Don Lau                            50,000                    6.6%                  $1.00                June 30, 2002

</TABLE>


<TABLE>

                                      AGGREGATED OPTION/SAR EXERCISES IN 12- MONTH
                                             PERIOD ENDED DECEMBER 31, 1999
                                       AND DECEMBER 31, 1999 OPTIONS/SAR VALUES


                                                                    Number of Unexercised
                                                                    Securities Underlying       Value of Unexercised
                                                                    Options/SARs At             In-The-Money Option/SARs
                          Shares Acquired On    Value Realized      December 31, 1999 (#)       At December 31, 1999 ($)
Name                         Exercise (#)            ($)           Exercisable/Unexercisable    Exercisable/Unexercisable
----                         ------------            ---           -------------------------    -------------------------
<S>                           <C>                 <C>                <C>                            <C>
John McDermott                   -0-                 -0-                 0 / 250,000                    247,500
Thompson Chu                     n/a                 n/a                     n/a                          n/a
Don Lau                          -0-                 -0-                 0 / 50,000                       -0-

</TABLE>


Compensation of Directors

During the 1999 fiscal period, no Directors  received any compensation for their
services as Directors.  Commencing  March 1, 2000,  Directors of the Company who
are not officers will each receive a director's fee of $15,000 per annum.

Employment Contracts

On July 20, 1999,  the Company  entered into a three-year  Employment  Agreement
with John McDermott,  the Company's President,  whereby the Company will pay Mr.
McDermott an annual salary of $83,333.  The Agreement  also requires the Company
to provide, at its expense, complete health insurance coverage for Mr. McDermott
and his family and annual automobile  allowance of $5,600 for business use. With
effect  from  January 1, 2000,  Mr.  McDermott's  annual  salary was  revised to
$103,450.

On July 20, 1999, the Company entered into a two-year Employment  Agreement with
Thompson Chu, the Company's Chairman of the Board,  whereby the Company will pay
Mr. Chu an annual salary of $50,000 as compensation  for his duties as executive
chairman of the Company.  The Agreement also requires the Company to provide, at
its expense, complete health insurance coverage for Mr. Chu and his family. With
effect from January 1, 2000, Mr. Chu's annual salary was revised to $103,450.



                                       20
<PAGE>

On July 20, 1999, the Company entered into a two-year Employment  Agreement with
Don Lau, the Company's Secretary and Treasurer, whereby the Company will pay Mr.
Lau an annual  salary of $48,000.  The  Agreement  also  requires the Company to
provide, at its expense,  complete health insurance coverage for Mr. Lau and his
family. With effect from January 1, 2000, Mr. Lau's annual salary was revised to
$59,600.

ITEM 11.  SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

The following  table sets forth,  as of December 31, 1999,  certain  information
with respect to the Company's equity  securities owned of record or beneficially
by (i) each  Officer  and  Director  of the  Company;  (ii) each person who owns
beneficially  more than 5% of each  class of the  Company's  outstanding  equity
securities; and (iii) all Directors and Executive Officers as a group.

<TABLE>

Title                                                                                  Common Stock          Percent of
of Class                        Name and Address of Beneficial Owner                    Outstanding          Outstanding
--------                        ------------------------------------                    -----------          -----------
<S>                             <C>                                                     <C>                  <C>
Common Stock                    John McDermott                                                   0                   0%
                                107 East 3rd Avenue
                                Vancouver, BC Canada

Common Stock                    Don Lau                                                          0                   0%
                                107 East 3rd Avenue
                                Vancouver, BC Canada

Common Stock                    Thompson Chu                                                     0                   0%
                                107 East 3rd Avenue
                                Vancouver, BC Canada

Common Stock                    Yong Kiat Rickie Tang1                                   1,750,000                9.00%
                                335 Bukit Timah Road #10-02
                                Singapore 259718

Common Stock                    Pang Lin Choi2                                           8,525,000               43.84%
                                2702-6 Lucky Commercial Centre
                                103-9 Des Voeux Road West
                                Hong Kong

All Directors and Officers as                                                            1,750,000                9.00%
a Group (4 Persons in total)
---------------------------------
</TABLE>

(1)  Denotes  shares  beneficially  owned by Mr.  Tang but held by Kemayan  E.C.
     Hybrid Ltd. Mr. Tang is a principal of Kemayan E.C. Hybrid Ltd.

(2)  Denotes  shares held by Mr. Pang Lin Choi as trustee of the John  McDermott
     and  Thompson  Chu Family  Trust.  The John  McDermott  Family  trust holds
     2,000,000  shares of the Company's  Common Stock (the "McDermott  Shares").
     The  Thompson  Chu Family  Trust holds  6,525,000  shares of the  Company's
     Common Stock (the "Chu  Shares").  Mr. Choi, as trustee,  holds sole voting
     and investment rights with respect to the McDermott and Chu shares.

The Company  believes that the  beneficial  owners of  securities  listed above,
based on information  furnished by such owners,  have sole investment and voting
power with respect to such  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  or  warrants   currently
exercisable, or exercisable within 60 days, are deemed outstanding for purposes



                                       21
<PAGE>

of computing the percentage of the person holding such options or warrants,  but
are not deemed outstanding for purposes of computing the percentage of any other
person.

ITEM 12.  CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

On January 11, 1999, the Company's 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 Internet Fax  Technology,  as  previously
described.  Mr. John McDermott and Mr. Thompson Chu, officers of the Company are
also  officers of TGI. In  addition,  Mr.  McDermott,  Mr. Chu and Mr. Yong Kiat
Rickie Tang are directors of TGI.

On March 30, 1999, the Company's 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.  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 the  Company or on March 30,  2001.  Mr. John
McDermott  and Mr.  Thompson  Chu,  officers of the Company are also officers of
TGI.  In  addition,  Mr.  McDermott,  Mr. Chu and Mr.  Yong Kiat Rickie Tang are
directors of TGI.

As  previously  discussed,  on July 20,  1999,  the Company  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 POPstar (the Registrant) by POPstar-BVI. Such
shares  include the shares owned by officers and directors of the Company as set
forth in the  Section  "Security  Ownership  of  Certain  Beneficial  Owners and
Management" hereunder.

On March 15, 1999, the Company's wholly owned subsidiary,  POPstar-Asia, entered
into an oral  month-to-month  lease 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 the Company's Asian  operations at a rental rate of $2,000
per month. The leased premises are owned by Easewell  Management Ltd., a company
beneficially owned by Mr. Thompson Chu, the Company's Chairman of the Board.

On January 1, 2000, the Company  entered into an oral  month-to-month  lease 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 the
Company's  temporary  headquarters  at a rental  rate of $4,000 per  month.  The
leased premises are owned by Tradeglobe  Consulting  Ltd. Mr.  McDermott and Mr.
Chu,  officers and directors of the Company,  are also officers and directors of
Tradeglobe Consulting Ltd.

On January 1, 2000, POPstar  Communications Asia Pacific Limited 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.  The owner of the  office  space is Mr.  Thompson  Chu,  the
Company's Chairman of the Board.

On January 12, 1999, as amended by a supplemental agreement dated March 29, 1999
and an Investor Exchange Agreement dated July 13, 1999, the Company,



                                       22
<PAGE>

through  its 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 the Company)  contracted to purchase,  250,000 shares of the
Company's "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,  the Company  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 the Company's restricted Common Stock at $2.00 per share for
gross  proceeds  of  $3,000,000.   As  further   consideration   for  the  Share
Subscription Agreement, the Company granted  Netalone.com(BVI) Ltd. an option to
purchase  an  additional  1,500,000  shares of  restricted  Common  Stock of the
Company  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 the Company's  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  Ltd.)  pursuant to an
Assignment Agreement dated February 9, 2000. Dr. William Wing Yan Lo, who joined
the Company's  Board of Director 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, the Company's 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. At December 31, 1999, no amounts were set off. Mr.  McDermott and Mr. Chu,
officers of the Company are also  officers of TGI. In addition,  Mr.  McDermott,
Mr. Chu and Mr. Tang are directors of TGI.

On February 2, 2000, the Company entered into a Nominee Directors Agreement with
Kemayan E.C. Hydrid 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
directors of the Company.  Kemayan  E.C.  Hybrid Ltd. is a company  beneficially
owned by Mr. Yong Kiat Rickie Tang, a director of the Company. Dr. William Lo, a
director of the  Company,  is the Chairman  and Chief  Executive  Officer of the
parent  company of  Netalone.com(BVI)  Ltd. Mr.  Thompson Chu, a director of the
Company,  is a beneficiary of the Thompson Chu Family Trust. Mr. John McDermott,
a director of the Company, is a beneficiary of the John McDermott Family Trust.

On February 2, 2000,  the Company 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. Kemayan E.C. Hybrid Ltd. is a company beneficially owned by Mr. Yong
Kiat Rickie Tang, a director of the Company. Mr. Thompson Chu, a director of the
Company,  is a beneficiary of the Thompson Chu Family Trust. Mr. John McDermott,
a director of the Company, is a beneficiary of the John McDermott Family Trust.



                                       23
<PAGE>

ITEM 13.  EXHIBITS AND REPORTS ON FORM 8-K

(a)      Exhibits.

EXHIBIT        DESCRIPTION OF EXHIBIT
-------        ----------------------
 2.1*          Acquisition  Agreement between POPstar  Communications,  Inc. and
               POPstar Global Communications Inc., dated July 13, 1999

 3.1*          Articles of Incorporation

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

 3.3*          Bylaws of the Company

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

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

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

10.4*          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*+         Employment agreement by and between POPstar Global Communications
               Inc. and Don Lau, dated July 20, 1999

10.6*+         Employment agreement by and between POPstar Global Communications
               Inc. and John McDermott, dated July 20, 1999

10.7*+         Employment agreement by and between POPstar Global Communications
               Inc. and Thompson Chu, dated July 20, 1999

10.8*          Services  Agreement  by and between  TransNexus,  LLC and POPstar
               Global Communications Inc., dated August 10, 1999

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

10.10          Set Off Agreement dated February 2, 2000

10.11          Nominee Directors Agreement dated February 2, 2000

10.12          Termination Agreement dated February 2, 2000

10.13          Assignment Agreement dated February 9, 2000



                                       24
<PAGE>

EXHIBIT        DESCRIPTION OF EXHIBIT
-------        ----------------------
10.14          Share    Subscription    Agreement   by   and   between   POPstar
               Communications,  Inc. and Prime Star Asia Limited dated  February
               11, 2000

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

16*            Letter by former auditor Barry L. Friedman

27             Financial Data Schedule

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

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

+    Indicates management contract.


(b)  Reports on Form 8-K.

At the request of the Commission, the Company filed a Current Report on Form 8-K
on January 31, 2000,  to file a copy of its 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 the Company
of Cherokee Leather, Inc.





                                       25
<PAGE>

                                   SIGNATURES

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


March 29, 2000                POPSTAR COMMUNICATIONS, INC.


                              /s/   JOHN McDERMOTT
                              -------------------------------------
                              JOHN McDERMOTT
                              Chief 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 29th day of March, 1999.

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


/s/ John McDermott
---------------------------     Chief Executive Officer
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





                                       26
<PAGE>



                          POPSTAR COMMUNICATIONS, INC.
                   INDEX TO CONSOLIDATED FINANCIAL STATEMENTS


                                                                            Page
                                                                            ----

Report of Independent Auditors .............................................F-2

Consolidated Balance Sheets as of December 31, 1999 and 1998 ...............F-3

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

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

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



<PAGE>


                         REPORT OF INDEPENDENT AUDITORS

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,  1999  and  1998  and the
consolidated  statements of  operations  and deficit and cash flows for the year
ended  December 31, 1999, the period from  incorporation  on December 17 1998 to
December 31, 1998 and for the period from  incorporation on December 17, 1998 to
December  31,   1999.   These   consolidated   financial   statements   are  the
responsibility of the Company's management.  Our responsibility is to express an
opinion on these consolidated financial statements based on our audits.

We conducted our audits in accordance with generally accepted auditing standards
in the United States. Those standards require that we plan and perform the audit
to obtain reasonable  assurance about 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 audit  provides 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, 1999 and 1998 and the results of its  operations and its cash flows
for the year ended December 31, 1999, the period from  incorporation on December
17 1998 to December 31, 1998 and for the period from  incorporation  on December
17, 1998 to December 31, 1999 in accordance with generally  accepted  accounting
principles in the United States.

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 revenue.  This raises  substantial
doubt about its ability to continue  as a going  concern.  Management's  plan in
regard to these  matters is  described in note 2. These  consolidated  financial
statements do not include any adjustments  that might result from the outcome of
this uncertainty.

KPMG LLP

Chartered Accountants

Vancouver, Canada

March 17, 2000



                                      F-2
<PAGE>


POPSTAR COMMUNICATIONS, INC.
(A Development Stage Company)

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

December 31, 1999 and 1998


<TABLE>

---------------------------------------------------------------------------------------------------------------------------
                                                                                     1999                 1998
---------------------------------------------------------------------------------------------------------------------------
<S>                                                                        <C>                           <C>
Assets

Current assets:
     Cash                                                                  $       23,745                $   -
     Note receivable from a company with common controlling
       shareholders (note 4)                                                    1,000,000                    -
     Prepaid expenses                                                               2,739                    -
---------------------------------------------------------------------------------------------------------------------------
     Total current assets                                                       1,026,484                    -

     Equipment                                                                     12,124                    -
---------------------------------------------------------------------------------------------------------------------------
Total assets                                                               $    1,038,608                $   -
---------------------------------------------------------------------------------------------------------------------------
Liabilities and Shareholders' Equity

Current liabilities:
     Accounts payable                                                      $      160,505                $   -
     Accrued liabilities                                                           35,064                    -
     Payable to companies with common controlling shareholders
       (note 5)                                                                   230,227                    -
---------------------------------------------------------------------------------------------------------------------------
     Total current liabilities                                                    425,796                    -

     Shareholders' equity:
         Capital stock (note 6)
           Authorized: 50,000,000 common voting shares, par
                       value of $0.001 per share
           Issued and outstanding: 19,447,500 common voting
                                   shares                                       2,654,548                    -
         Deficit accumulated in the development stage                          (2,041,736)                   -
---------------------------------------------------------------------------------------------------------------------------
     Total shareholders' equity                                                   612,812                    -

Going concern (note 2)
Commitment (note 9)
Contingency (note 10)
Subsequent events (note 13)

---------------------------------------------------------------------------------------------------------------------------
Total liabilities and shareholders' equity                                 $    1,038,608                $   -
---------------------------------------------------------------------------------------------------------------------------
</TABLE>

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          Period from
                                                                         incorporation on     incorporation on
                                                                             December 17,         December 17,
                                                        Year ended                1998 to              1998 to
                                                      December 31,           December 31,         December 31,
                                                              1999                   1998                 1999
---------------------------------------------------------------------------------------------------------------------------
<S>                                                 <C>                           <C>           <C>
Revenues:
     Interest income (note 4)                        $      61,708                 $    -        $      61,708

Expenses:
     Accounting and audit fees                              20,234                      -               20,234
     Bank interest and charges                               2,575                      -                2,575
     Commission                                             72,916                      -               72,916
     Foreign exchange loss                                   1,086                      -                1,086
     Legal and professional fees                           296,190                      -              296,190
     License fee                                            25,000                      -               25,000
     Management fee                                          1,950                      -                1,950
     Office                                                 21,352                      -               21,352
     Rent                                                   28,576                      -               28,576
     Salaries and wages                                     93,371                      -               93,371
     Sales and marketing                                    33,263                      -               33,263
     Travel and entertainment                               38,692                      -               38,692
     Related party transactions:
         License fee (note 7(a))                           391,074                      -              391,074
         Management fees (note 7(b))                       366,578                      -              366,578
         Administrative and office salaries
           (note 7(b))                                      72,352                      -               72,352
         Sales and marketing fees (note 7(b))              100,027                      -              100,027
         Software development (note 7(b))                  403,438                      -              403,438
         Travel and entertainment (note 7(b))              119,744                      -              119,744
---------------------------------------------------------------------------------------------------------------------------
     Total expenses                                      2,088,418                      -            2,088,418
---------------------------------------------------------------------------------------------------------------------------
Net loss before income taxes                             2,026,710                      -            2,026,710

Income taxes                                                15,026                      -               15,026
---------------------------------------------------------------------------------------------------------------------------
Net loss                                                 2,041,736                      -            2,041,736

Deficit accumulated during the development
   stage, beginning of period                                 -                         -                 -
---------------------------------------------------------------------------------------------------------------------------
Deficit accumulated during the development
   stage, end of period                              $   2,041,736                 $    -        $   2,041,736
---------------------------------------------------------------------------------------------------------------------------
Basic and diluted loss per weighted
   share (note 3(g))                                 $        0.14                 $    -        $        0.14
---------------------------------------------------------------------------------------------------------------------------
Weighted average number of common shares
   outstanding                                          14,111,343                      -           14,111,343
---------------------------------------------------------------------------------------------------------------------------
</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          Period from
                                                                         incorporation on     incorporation on
                                                                             December 17,         December 17,
                                                        Year ended                1998 to              1998 to
                                                      December 31,           December 31,         December 31,
                                                              1999                   1998                 1999
---------------------------------------------------------------------------------------------------------------------------
<S>                                                 <C>                            <C>          <C>
Cash flows from operating activities:
     Net loss                                       $   (2,041,736)                $    -       $   (2,041,736)
     Non-cash transactions:
         Common shares issue in consideration
           for legal services rendered                      22,500                      -               22,500
         Net costs deemed to be issued on
           recapitalization                                 (2,517)                     -               (2,517)
     Changes in non-cash operating
       working capital:
         Prepaid expenses                                   (2,739)                     -               (2,739)
         Accounts payable                                  160,505                      -              160,505
         Accrued liabilities                                35,064                      -               35,064
---------------------------------------------------------------------------------------------------------------------------
     Total cash flows from operating activities         (1,828,923)                     -           (1,828,923)

Cash flows from financing activities:
     Payable to common controlled companies                230,227                      -              230,227
     Issuance of capital stock                           2,634,565                      -            2,634,565
---------------------------------------------------------------------------------------------------------------------------
     Total cash flows from financing activities          2,864,792                      -            2,864,792

Cash flows from investing activities:
     Note receivable from a company with
       common controlling shareholders                  (1,000,000)                     -           (1,000,000)
     Purchase of equipment                                 (12,124)                     -              (12,124)
---------------------------------------------------------------------------------------------------------------------------
     Total cash flows from investing activities         (1,012,124)                     -           (1,012,124)
---------------------------------------------------------------------------------------------------------------------------
Increase in cash                                            23,745                      -               23,745

Cash, beginning of period                                     -                         -                 -
---------------------------------------------------------------------------------------------------------------------------
Cash, end of period                                 $       23,745                 $    -       $       23,745
---------------------------------------------------------------------------------------------------------------------------
Supplementary information:
     Income taxes paid (note 8)                     $       15,026                 $    -       $       15,026
     Interest expense paid                                   2,575                      -                2,575
---------------------------------------------------------------------------------------------------------------------------
</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)

Year ended December 31, 1999 and
Period from incorporation on December 17, 1998 to December 31, 1998
--------------------------------------------------------------------------------


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 a provider  of
     Internet based facsimile  transmission  technology and is in the process of
     field testing its services,  as such, it is considered a development  stage
     company.

     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  continuing to manage operations for the combined
     entity.  The common shares of the Company issued in exchange for the shares
     of  POPstar  cannot be sold  until  July 20,  2000  except  pursuant  to an
     effective  registration  statement  under the United State laws or upon the
     express written agreement of the Company. As the Company had no significant
     operations to the date of the  acquisition,  the  transaction was accounted
     for as a capital transaction, whereby POPstar was considered to have issued
     common  shares for  consideration  equal to the net monetary  assets of the
     Company.  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 capital transaction.

2.   Going concern:

     The Company's  financial  statements are prepared using generally  accepted
     accounting  principles applicable to a going concern which contemplates the
     realization  of assets and  liquidation of liabilities in the normal course
     of business.  However,  the Company does not have an established  source of
     revenue sufficient to cover its operating costs and to allow it to generate
     sufficient  cash flows to fund  operations and meet its liabilities as they
     become due. During 1999, the Company issued shares for cash (note 6(a)) and
     commenced development of certain licensed software (note 7(a)).  Subsequent
     to  December  31,  1999,  the  Company  issued  additional  shares for cash
     consideration (note 13). Management  anticipates that cash will continue to
     be available from its shareholders, the company with the common controlling
     shareholders  (note  4),  or from  additional  security  issuances  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, page 2
(Expressed in U.S. Dollars)

Year ended December 31, 1999 and
Period from incorporation on December 17, 1998 to December 31, 1998
--------------------------------------------------------------------------------


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")  and  POPstar
          Communications Canada Corp. All intercompany balances and transactions
          have been eliminated.

          As the Company has not commenced commercial operations at December 31,
          1999,  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 of 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 to December 31, 1999.

     (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.



                                      F-7
<PAGE>

POPSTAR COMMUNICATIONS, INC.
(A Development Stage Company)

Notes to Consolidated Financial Statements, page 3
(Expressed in U.S. Dollars)

Year ended December 31, 1999 and
Period from incorporation on December 17, 1998 to December 31, 1998
--------------------------------------------------------------------------------


3.   Significant accounting policies (continued):

     (e)  Income taxes (continued):

          A  valuation  allowance  is  provided  to the  extent  that  it is not
          considered  more likely than not that the deferred tax assets  arising
          due to loss carryforwards or temporary differences will 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)  Loss per share:

          Basic loss per share is computed by dividing  losses  attributable  to
          the  common  shareholders  by the  weighted  average  number of common
          shares  outstanding  during  the  period.   Under  the  capitalization
          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.

          The losses  attributable to the common  shareholders is represented by
          the net loss of  $2,041,736.  The  weighted  average  number of common
          shares outstanding during the period 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
---------------------------------------------------------------------------------------------------------------------
                                                                               19,447,500           14,111,343
---------------------------------------------------------------------------------------------------------------------
</TABLE>


                                      F-8
<PAGE>

POPSTAR COMMUNICATIONS, INC.
(A Development Stage Company)

Notes to Consolidated Financial Statements, page 4
(Expressed in U.S. Dollars)

Year ended December 31, 1999 and
Period from incorporation on December 17, 1998 to December 31, 1998
--------------------------------------------------------------------------------


3.   Significant accounting policies (continued):

     (g)  Loss per share (continued):

          As at December 31, 1999, the 757,500 issued and outstanding options to
          acquire common shares of the Company (note 6(b)) and the subscriptions
          to issue  3,000,000  common  shares of the Company (note 6(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.

     (h)  Stock based compensation:

          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.  Any  compensation
          is  recognized  over the  service  period of the stock  options  being
          granted, represented by the vesting period.

          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.

          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.

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 received  interest
     income of $60,703 from TGI.

5.   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-9
<PAGE>

POPSTAR COMMUNICATIONS, INC.
(A Development Stage Company)

Notes to Consolidated Financial Statements, page 5
(Expressed in U.S. Dollars)

Year ended December 31, 1999 and
Period from incorporation on December 17, 1998 to December 31, 1998
--------------------------------------------------------------------------------


6.   Capital stock:

     (a)  Common shares:

<TABLE>
         ------------------------------------------------------------------------------------------------------
                                                                                   Shares               Amount
         ------------------------------------------------------------------------------------------------------
<S>                                                                            <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
              Preferred shares issued for cash at $0.833333 per share           2,375,000            1,979,167
         ------------------------------------------------------------------------------------------------------
         Capital stock prior to recapitalization                               12,875,000        $   1,988,732
         ------------------------------------------------------------------------------------------------------
         POPstar Communications, Inc.:
              Balance, January 1, 1998 and December 31, 1998                    5,800,000        $       5,800

              Adjustment on recapitalization:
              Common shares of POPstar Global Communications
                Inc. deemed to have been outstanding prior to
                recapitalization that were issued, net of costs                12,875,000            1,988,732
              Net costs deemed to be issued on recapitalization
                equaling the deficit of POPstar Communications, Inc.                 -                  (8,317)
         ------------------------------------------------------------------------------------------------------
              Capital stock subsequent to recapitalization                     18,675,000            1,986,215

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



                                      F-10
<PAGE>

POPSTAR COMMUNICATIONS, INC.
(A Development Stage Company)

Notes to Consolidated Financial Statements, page 6
(Expressed in U.S. Dollars)

Year ended December 31, 1999 and
Period from incorporation on December 17, 1998 to December 31, 1998
--------------------------------------------------------------------------------


6.   Capital stock (continued):

     (b)  Options:

          During the year, the Company  adopted a stock option plan (the "Plan")
          pursuant to which the Company may grant stock  options to  management,
          employees and  contractors.  The Plan authorizes  grants of options to
          purchase up to 757,500 shares of authorized but unissued common stock.
          Subsequent to year end, the Company authorized an additional 1,247,250
          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.

        ------------------------------------------------------------------------
                                              1999                         1998
                                           options      Exercise        options
                                       outstanding         price    outstanding
        ------------------------------------------------------------------------
         Outstanding, beginning
           balance                            -         $    -                -
         Granted                           467,500          0.01              -
         Granted                           290,000          1.00              -
        ------------------------------------------------------------------------
         Outstanding and
           exercisable, December 31        757,500      $   0.39              -
        ------------------------------------------------------------------------

          The fair value of  options  granted  during  1999  averaged  $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, 1999:

        ------------------------------------------------------------------------
                                     Outstanding
                         --------------------------------
                                                 Weighted
         Exercise                          average period         Exercisable
         prices            Number     remaining to expiry              number
        ------------------------------------------------------------------------
                                                 (months)
         $0.01           467,500                     21.1             127,500
         $1.00           290,000                     28.0              40,000
        ------------------------------------------------------------------------
                         757,500                                      167,500
        ------------------------------------------------------------------------

          517,500 of the stock  options  were  originally  granted as options to
          acquire common shares of POPstar.  Upon  acquisition of POPstar by the
          Company on July 20, 1999 (note 1), the  options  were  converted  into
          options to acquire  common  shares of the Company at the same exercise
          price. The remaining 240,000 were granted by the Company subsequent to
          the acquisition.



                                      F-11
<PAGE>

POPSTAR COMMUNICATIONS, INC.
(A Development Stage Company)

Notes to Consolidated Financial Statements, page 7
(Expressed in U.S. Dollars)

Year ended December 31, 1999 and
Period from incorporation on December 17, 1998 to December 31, 1998
--------------------------------------------------------------------------------


6.   Capital stock (continued):

     (b)  Options:

          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 three  years.
          Total  compensation  recognized in income for stock based compensation
          awards as a result of stock options  granted for the year is nil (1998
          - 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:

        ------------------------------------------------------------------------
                                                           1999           1998
        ------------------------------------------------------------------------
         Net loss                                $    2,041,736          $   -
         Fair value of options granted                   37,700              -
        ------------------------------------------------------------------------
         Pro forma net loss                      $    2,079,436          $   -
        ------------------------------------------------------------------------
         Pro forma loss per share                $        0.15           $   -
        ------------------------------------------------------------------------


     (c)  Subscriptions:

          On  March  31,  1999,  the  Company  received  subscriptions  to issue
          3,000,000  common  shares of the Company at a price of  $0.833333  per
          common share.  The transaction  will close on March 31, 2000 with cash
          being received and shares being issued on that date.



                                      F-12

<PAGE>

POPSTAR COMMUNICATIONS, INC.
(A Development Stage Company)

Notes to Consolidated Financial Statements, page 8
(Expressed in U.S. Dollars)

Year ended December 31, 1999 and
Period from incorporation on December 17, 1998 to December 31, 1998
--------------------------------------------------------------------------------


7.   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, a company with common controlling shareholders,  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
           -------------------------------------------------------------------
            1999                                8%                 $  400,000
            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. At December
          31, 1999,  no setoffs  have been  applied.  During  1999,  the Company
          recorded  expenditures  of $391,074 in license fees to TGI,  being the
          annual minimum prorated from the start date of agreement.

     (b)  The Company has also  entered  into an  agreement  with TGI, a company
          under common control,  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, the Company incurred service fees, including the 15%,
          under this agreement totalling $1,062,139.

     (c)  During the year, POPstar Asia entered into a leasing  arrangement with
          Easewell  Management  Ltd.,  a company  with a common  director as the
          Company.  The  office  space is rented  on a month to month  basis for
          $2,000 per month.




                                      F-13
<PAGE>

POPSTAR COMMUNICATIONS, INC.
(A Development Stage Company)

Notes to Consolidated Financial Statements, page 9
(Expressed in U.S. Dollars)

Year ended December 31, 1999 and
Period from incorporation on December 17, 1998 to December 31, 1998
--------------------------------------------------------------------------------


8.   Income taxes:

     There is no provision  for income  taxes for the period ended  December 31,
     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 asset as of December 31, 1999 is as follows:

     Deferred tax asset                               $     306,673
     Valuation allowance                                   (306,673)
---------------------------------------------------------------------------
     Net deferred tax asset                           $        -
---------------------------------------------------------------------------


9.   Commitment:

     On August 10, 1999, the Company entered into a non-exclusive,  royalty free
     Service Agreement with TransNexus,  LLC, a company  incorporated  under the
     laws of the State of Georgia. 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.  The charging  rates for these
     arrangement have been established  through  negotiation  subsequent to year
     end.

10.  Uncertainty due to the Year 2000 Issue:

     The Year 2000 Issue arises because many computerized systems use two digits
     rather than four to identify a year.  Date-sensitive  systems may recognize
     the  year  2000 as 1900  or some  other  date,  resulting  in  errors  when
     information  using  year 2000  dates is  processed.  In  addition,  similar
     problems  may  arise in some  systems  which use  certain  dates in 1999 to
     represent  something  other  than a date.  Although  the change in date has
     occurred,  it is not possible to conclude that all aspects of the Year 2000
     Issue that may affect the Company,  including  those  related to customers,
     suppliers, contractors or other third parties, have been fully resolved.

11.  Financial instruments:

     The carrying  values of cash,  notes  receivable from a company with common
     controlling shareholders, accounts payable, 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.




                                      F-14
<PAGE>

POPSTAR COMMUNICATIONS, INC.
(A Development Stage Company)

Notes to Consolidated Financial Statements, page 10
(Expressed in U.S. Dollars)

Year ended December 31, 1999 and
Period from incorporation on December 17, 1998 to December 31, 1998
--------------------------------------------------------------------------------


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
     1999,  the  majority of the assets and revenue  were  located and earned in
     Canada.

13.  Subsequent events:

     Subsequent to December 31, 1999:

     (a)  the  Company  issued  3,000,000  common  shares for total  proceeds of
          $6,000,000. The Company also granted the purchasers options to acquire
          3,000,000  common shares of the Company  exercisable  at $2 per common
          share. The options expire three months subsequent to the date on which
          the  Company's  shares  are  relisted  and/or  quoted  on  the  NASDAQ
          Over-The-Counter Bulletin Board; and

     (b)  2,400,000  previously  issued  common  shares  were  cancelled  by the
          Company for no consideration.



                                      F-15

<PAGE>

                                  EXHIBIT INDEX
                                  -------------

EXHIBIT        DESCRIPTION OF EXHIBIT
-------        ----------------------

 2.1*          Acquisition  Agreement between POPstar  Communications,  Inc. and
               POPstar Global Communications Inc., dated July 13, 1999

 3.1*          Articles of Incorporation

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

 3.3*          Bylaws of the Company

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

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

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

10.4*          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*+         Employment agreement by and between POPstar Global Communications
               Inc. and Don Lau, dated July 20, 1999

10.6*+         Employment agreement by and between POPstar Global Communications
               Inc. and John McDermott, dated July 20, 1999

10.7*+         Employment agreement by and between POPstar Global Communications
               Inc. and Thompson Chu, dated July 20, 1999

10.8*          Services  Agreement  by and between  TransNexus,  LLC and POPstar
               Global Communications Inc., dated August 10, 1999

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

10.10          Set Off Agreement dated February 2, 2000

10.11          Nominee Directors Agreement dated February 2, 2000

10.12          Termination Agreement dated February 2, 2000

10.13          Assignment Agreement dated February 9, 2000



<PAGE>

EXHIBIT        DESCRIPTION OF EXHIBIT
-------        ----------------------

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

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

16*            Letter by former auditor Barry L. Friedman

27             Financial Data Schedule

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

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

+    Indicates management contract.