EWRX INTERNET SYSTEMS INC, ARS, 2000-05-09

EWRX INTERNET SYSTEMS INC
ARS, 2000-05-09
BUSINESS SERVICES, NEC

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ANNUAL REPORT
- --------------------------------------------------------------------------------
1999

[PHOTOGRAPHS CONSISTING OF A RACE CAR, THE FENDER OF A CLASSIC CAR, A SPORTS
CAR, A PICKUP TRUCK AND A MAN WORKING AT A COMPUTER ON THE INTERNET DELETED]

[EWRX.COM LOGO]

EWRX Internet Systems, Inc.
Phone: 604.669.6079
Email: [email protected]

<PAGE>

EWRX Internet Systems Inc.
#440-755 Burrard Street
Vancouver BC Canada V6Z 1X6
Tel: 604-669-6079
Fax: 604-669-6042

1999... A year of transitions, fundamentals and growth. [EWRX.COM LOGO]
Where the Net Works

Dear Shareholders:

This past year was a new beginning for EWRX and its shareholders. In less than a
year EWRX has become an award winning leader in the specialty automotive
aftermarket. By utilizing our Internet expertise and knowledge, EWRX has
completed almost 70% of the development of its planned Internet Portal,
MotorWRX.com. Our focus on this objective has always and will remain our primary
goal. The acceptance by the Securities and Exchange Commission of our 10-SB
Filing was a major step for the Company and sets the stage for future expansion
into both domestic and international financial markets.

HIGHLIGHTS FOR THE YEAR 1999:
- -----------------------------

- - Divested all mineral holdings from the Company and successfully negotiated
the return of 3.5 million shares from mining interest to the Company's
treasury, without penalty, reducing the outstanding shares in the Company
from 11,949,366 as of December 31, 1998 to 8,459,366 March 31, 1999.
- - Received shareholders approval to change the Company name from Europa
Resources Inc. to EWRX Internet Systems Inc., and launched a new direction
for the Company.
- - Completed the 100% acquisition of Classicar Source Inc. and North Fork
Publishing Inc. two award winning Internet companies.
- - Commenced the creation of MotorWRX.com the first specialty automotive
aftermarket portal. - Launched Motorhood.com, a digital neighborhood for
personal auto related websites and communities on the Internet.
- - Completed audits of all four EWRX Companies, EWRX Internet Systems Inc.,
EWRX Canada Ltd., The Classicar Source and North Fork WebWRX Inc.
- - Filed Form 10-SB with the U.S. Securities and Exchange Commission and
became fully reporting (January 2000).
- - Raised $926,000 through Regulation D, Rule 506 private placement.
- - Hired 6 senior programmers and editors for Classicar and North Fork WebWRX.
- - Formed alliances with several strategic partners: AdForce, AdSmart,
Critical Path, Data Return, Fairmarket Auction Network, SEMA, Starbelly.com
and Xceed Inc.
- - Made initial inroads to expanding the EWRX business model to foreign
automotive markets such as Japan, Australia, and Europe.

Building our Future
- -------------------

As we enter the new millennium, we will continue to have a balanced
approach to our business and our growth. We will remain focused on
providing greater value to our customers, employees and stockholders alike.
We are excited about our future and we look forward to reporting to you
throughout the year as we continue to expand our infrastructure, our
services and our presence around the world.

Sincerely,

/S/ Ronald C. Davis
Ronald C. Davis
President & CEO

<PAGE>
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 under section 13 or 15(d) of the Securities Exchange Act
of 1934 for the transition period from _____ to _____.

Commission file number 0-27195

EWRX INTERNET SYSTEMS INC.
(Name of Small Business Issuer in its charter)

NEVADA 98-0117139
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)

#301-543 Granville Street
Vancouver, BC Canada V6C 1X8
(Address of principal executive offices) (Zip Code)

Issuer's Telephone Number: 604-669-6079

Securities to be registered under Section 12(b) of the Act: None

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

Common Stock
------------
(Title of class)

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

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 [ ]

<PAGE>

Issuer's revenues for most recent fiscal year: $98,736

Aggregate market value of the voting stock held by non-affiliates computed as
the average bid and asked prices of such stock, as of March 15, 2000:
$35,000,851.

Number of common shares outstanding as of March 15, 2000: 14,829,580.

Documents incorporated by reference:

1. The information required by Items 9, 10, 11 and 12 of Part III appears in
the Issuer's Proxy Statement for the 2000 Annual Meeting to be filed within
thirty (30) days of the date of this Annual Report on Form 10-KSB.

2. Exhibits to Issuer's Registration Statement on Form 10-SB (No. 0-27195).

Transitional Small Business Disclosure Format (Check one):

Yes [ ] No [ X ]

<PAGE>

PART I

ITEM 1. DESCRIPTION OF BUSINESS..............................................1

ITEM 2. DESCRIPTION OF PROPERTY..............................................8

ITEM 3. LEGAL PROCEEDINGS....................................................9

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS..................9

PART II

ITEM 5. MARKET FOR COMMON EQUITY AND RELATED SHAREHOLDER MATTERS.............9

ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION...........12

ITEM 7. FINANCIAL STATEMENTS................................................18

ITEM 8. CHANGES IN AND DISAGREEMENT WITH ACCOUNTANTS........................19

PART III

ITEM 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS;
COMPLAINCE WITH SECTION 16(A) OF THE EXCHANGE ACT...................19

ITEM 10. EXECUTIVE COMPENSATION..............................................19

ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT......19

ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS......................19

ITEM 13. EXHIBITS AND REPORTS ON FORM 8-K....................................19

i
<PAGE>

FORWARD LOOKING STATEMENTS

WHEN USED IN THIS FORM 10-KSB, THE WORDS "EXPECT," "ANTICIPATE," "INTEND,"
"PLAN," "BELIEVE," "SEEK," AND "ESTIMATE" OR SIMILAR EXPRESSIONS ARE INTENDED TO
IDENTIFY SUCH FORWARD-LOOKING STATEMENTS. HOWEVER, THIS FORM 10-KSB ALSO
CONTAINS OTHER FORWARD-LOOKING STATEMENTS. FORWARD-LOOKING STATEMENTS ARE NOT
GUARANTEES OF FUTURE PERFORMANCE AND ARE SUBJECT TO CERTAIN RISKS, UNCERTAINTIES
AND ASSUMPTIONS, INCLUDING, BUT NOT LIMITED TO, THE FOLLOWING RISK FACTORS,
WHICH COULD CAUSE THE COMPANY'S FUTURE RESULTS AND STOCK VALUES TO DIFFER
MATERIALLY FROM THOSE EXPRESSED IN ANY FORWARD-LOOKING STATEMENT MADE BY OR ON
BEHALF OF THE COMPANY. MANY SUCH FACTORS ARE BEYOND THE COMPANY'S ABILITY TO
CONTROL OR PREDICT. READERS ARE CAUTIONED NOT TO PUT UNDUE RELIANCE ON
FORWARD-LOOKING STATEMENTS. THE COMPANY DISCLAIMS ANY INTENT OR OBLIGATION TO
UPDATE PUBLICLY ANY AND ALL FORWARD-LOOKING STATEMENTS, WHETHER AS RESULT OF NEW
INFORMATION, FUTURE EVENTS OR OTHERWISE.

PART I

ITEM 1. DESCRIPTION OF BUSINESS
- -------------------------------

EWRX Internet Systems Inc. (the "Company", "Registrant" or "EWRX" pronounced
"EWorks") is a publicly traded company. Its primary businesses are destination
community Websites, electronic commerce projects ("e-commerce") and Website
development focused in the Specialty Automotive Aftermarket as defined below.
EWRX was incorporated in the State of Nevada on June 25, 1997.

The Website of the Company is ewrx.com. The corporate office is located at
#301-543 Granville Street, Vancouver, BC, Canada V6C 1X8 and its telephone and
fax numbers are (604)669-6079 and (604)669-6042.

Corporate Objective
- -------------------

The corporate objective of EWRX is to utilize the Internet to develop a
comprehensive online community providing a wide-range of services and content
for users within the Specialty Automotive Aftermarket (defined below). An online
community is a series of related websites focused in a particular area of
interest where participants can interact, acquire relevant information and have
easier access to the goods and services that are relevant to, in the case of
EWRX, the Specialty Automotive Aftermarket.

The Company is, and expects to continue generating revenues from several
e-commerce related sources including: Online advertising through banner
advertising development, banner placements and other online advertising projects
for other parties; Market consulting such as Internet launch strategies, site
development analysis and Internet marketing plans; Website hosting Specialty
Automotive Aftermarket related businesses and organizations; and through Special
Projects.

1
<PAGE>

The Specialty Automotive Aftermarket consists of automotive products that are
added to a vehicle by choice and not need. This market includes products to
enhance the appearance, performance and enjoyment of vehicles and excludes
typical repair and maintenance products such as oil filters, sparkplugs and the
like. There are sub-markets within the Specialty Automotive Aftermarket
including classic cars, light trucks, rod and custom, off-road vehicles, racing,
and street performance.

When evaluating the Specialty Automotive Aftermarket, EWRX found a growing but
fragmented industry made up of a large number of smaller markets that together
service millions of people who have a high degree of interest in specialty
automotive products and services. Annual product sales in this market has been
estimated to be $21 billion per year according to SEMA (Specialty Automotive
Equipment Marketing Association), the largest automotive trade association in
the world (1998 SEMA Market Report).

EWRX owns five Internet websites. Its primary websites, Classicar.com and
ClassicTruck.com, ("EWRX Websites"), are two of the largest destination Internet
websites for classic vehicle enthusiasts. Combined, the two sites receive an
average of 10.0 million hits and 2.5 million page views per month. The sites
contain more than 3,500 pages of content and 93 chat groups and messages boards
that are supervised by more than 30 volunteers across the United States. Users
can share technical tips, information and stories with other enthusiasts,
classified advertising, monthly e-mail, newsletters, buying and selling of parts
and other products and services.

EWRX also has several additional websites under development, including
Motorhood.com and Speedwrx.com (domain names reserved). Included are
MotorWrx.com, which when completed will provide a single gateway on the Internet
to the EWRX Specialty Automotive Aftermarket online community. EWRX is also
developing BigBadCatalog.com, a Specialty Automotive Aftermarket electronic
catalog. Other websites that will cater to specific sub-markets within the
Specialty Automotive Aftermarket, such as racing, rod and custom, and restyling,
will also be developed in due course.

In addition to owning and operating the aforementioned websites, EWRX, through
its wholly-owned subsidiary North Fork Webwrx Inc., (previously known as North
Fork Publishing Inc.), a website developer, provides website design and
consulting services to third parties as well as to EWRX. North Fork has
developed and services over 70 websites. North Fork provides custom software and
Website design services, Internet database services and custom e-commerce
software solutions to a variety of businesses seeking to maximize the use of the
Internet. North Fork also provides technical support services to the EWRX group
of websites. Typically, North Fork retains the ownership and rights to
proprietary software and related systems that are developed in conjunction with
custom projects. The developed software is also available through leasing to
other users in the Internet business.

2
<PAGE>

Historical Background
- ---------------------

Prior to 1999, the Company's sole business was in the resource sector. The
company was formerly known as Europa Resources Inc.

In the first quarter of 1999, the Company made the strategic decision to change
its business direction. In particular, the Company implemented a new business
strategy to acquire, finance and operate Internet related companies that either
have existing websites or websites that are under development and are capable of
operating profitably. The Company believes that the substantial growth in
Internet commerce activities in recent years, when combined with carefully
selected acquisition and development opportunities, represents a significant
business opportunity.

Effective May 14, 1999, shareholders approved changing the name of the Company
from Europa Resources Inc. to EWRX Internet Systems Inc. (pronounced "e-works").

During the second quarter of 1999, the Company completed its first acquisition
as part of its new Internet-related business strategy. EWRX acquired 100% of the
shares of common stock of Classic Car Source, Incorporated ("Classic Car") and
100% of the shares of Common Stock of North Fork Publishing Incorporated ("North
Fork") by issuing 1.45 million shares of Common Stock of the Company and paying
$200,000 in cash.

Classic Car was a privately held, state of Washington-based company that owned
two websites, Classicar.com and Classictruck.com, both of which are destination
class websites on the Internet. North Fork is an affiliated, privately held,
state of Washington-based company that provides website design and Internet
consulting services as previously discussed.

Prior to 1999, the Company's sole business was in the resource sector. In July
1997, the Company agreed in principle to acquire a 49% interest in the Granat
Joint Venture ("Granat"), a Ukrainian-Canadian joint venture between the Company
and Ivaniv Special Quarry ("ISQ"), an open joint-stock company of the Ukraine.
The Granat interest was purchased from Aurora Pacific Consulting & Development
Corp. ("Aurora"). The individual who controlled Aurora later became a director
of the Company. Granat was formed for the purposes of mining, production and
marketing of industrial garnets and related products in the Ukraine.

3
<PAGE>

1997 and $64,000 in 1998 towards the $300,000 obligation. The Company has been
released from any further obligation as discussed below. From October to
December 1997, the Company also acquired a controlling interest over 25% of the
shares of ISQ for $204,000 and funded $12,000 in 1997 and $342,532 in 1998
towards development of the properties of Granat.

Due to the lack of adequate financial accountability from Granat and ISQ, the
Company was unable to control the operations of the entity. In addition, the
Company was not able to obtain reliable financial information with which to
account for its investment. As a result, the Company has written off its entire
investment in each year as payments were made. Coincidentally, during this
period the Ukrainian and Russian economies experienced a significant downturn.
Additionally, the International Monetary Fund, with which the Company had been
working, announced it would terminate financial support for Russia and the
Ukraine. This action led to the Russian and Ukrainian economies collapse.

The combination of all of these factors caused the Company in late 1998 to
relinquish its interest in Granat and ISQ to Aurora. In return, the Company
obtained the 2,000,000 shares of restricted Common Stock it had issued in
connection with acquiring the interest in Granat and was released from any
ongoing obligations under the Purchase Agreement, including the remaining unpaid
purchase price of $196,000. The director of the Company who controlled Aurora
resigned as a director.

Strategic Alliances and Affiliations
- ------------------------------------

Xceed, Inc.

In July 1999, EWRX signed a consulting agreement with Xceed, Inc., a world
leading Internet architect and e-commerce solution provider. Under the terms of
the agreement, Xceed was appointed as the Company's Internet consultant and
co-developer in connection with the redevelopment and re-programming of EWRX
websites. The affiliation with Xceed will provide an accelerated development of
its websites and enhance the visibility of EWRX on the Internet marketplace.

As part of the business relationship with Xceed, it may make an equity
investment in the Company. Further, EWRX hopes to build a partnership with Xceed
including business contacts and association among Xceed, EWRX and their other
Internet clients.

Data Return Inc.

Data Return of Dallas-Ft. Worth, an Internet hosting facility has provided
Website hosting to EWRX, its subsidiaries and many of its clients since January
1998. Data Return manages a remote data center with more than 350 Compaq
ProLiant systems running the Microsoft Windows NT Server network operating
system. Data Return hosts business-critical Websites for individual companies as

4
<PAGE>

well as for Internet service providers (ISPs), website developers, and
telecommunications carriers. The staff of Data Return consists of
Microsoft-certified and Compaq-certified professionals.

All equipment is housed in multiple data centers in Dallas-Fort Worth and
connected to the Internet via a multi-backbone network with local access to
seven Tier-1 backbone providers. In layman's terms, this means that Data Return
provides seven redundant connectors to provide service continuity. Further, Data
Return utilizes two backup diesel generator systems to supplement conventional
power sources in the event of loss of primary power.

Specialty Equipment Marketing Association (SEMA)
- ------------------------------------------------

Since 1996, EWRX subsidiaries have been members of the Specialty Equipment
Marketing Association, the largest automotive after market trade association in
the world. Dan Jondron, President of Classic Car and North Fork, has been SEMA's
primary instructor for Internet marketing related topics since that time.

Market Segments
- ---------------

All references in this section are from SEMA's 1998 Market Report.

The Specialty Automotive Aftermarket is made up of a large number of smaller
markets, with their own interests, products and services. This market is
strictly driven by buyers seeking specific products and services related to the
hobby aspects of vehicles as opposed to transportation and maintenance.

Because of market fragmentation and because the Internet is new to the specialty
automotive industry, the online community has not been exposed to the wide
variety of goods and services available to it from this market. Despite being
fragmented, it is a growing market. In 1997, the retail sales of the Specialty
Automotive Aftermarket, were $19.3 billion dollars and the market has grown
57.4% since 1990, at a compounded annual growth rate of 8% per year.

Consumers who make up this industry are predominately younger to middle aged
men. Over 55% are under the age of 44, and enjoy higher education and higher
income levels than the general population. On average, these consumers own 2.9
vehicles and are willing to spend a significant amount of money ($1,000-$5,000
per year depending on the market niche) to improve the appearance and
performance of their vehicles.

In general, the market can be divided into three main segments.

5
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* Specialty Accessories and Appearance, (52.4% market share). Includes all
exterior or interior products that improve either the comfort or looks of a
vehicle.

* Racing and Performance (22.9% market share). Includes all products that
improve performance and efficiency (for example: carburetors, spark plugs, drive
shafts and other engine parts).

* Wheels, tires and suspension components (24.7% market share). Includes
specialty products for wheels such as performance shocks, struts, specialty high
performance tires and brakes.

When evaluating the Specialty Automotive Aftermarket, EWRX recognized that the
Internet has significant potential to provide these consumers with better
prices, more selection, greater availability and easier access to products and
services. EWRX believes that it has the opportunity to establish brand dominance
in this marketplace by creating an Internet portal through which all the market
segments in this industry enter and congregate.

Competition and Uncertainty of Market Acceptance
- ------------------------------------------------

The traditional marketplace for Specialty Automotive Aftermarket products and
services is well established and includes mail order, retail outlets, direct
customer advertising and private party transfers, all of which makes the market
for the Company's services highly competitive. In addition, many companies and
individuals are engaged in developing e-commerce using the Internet marketplace.
Some of these companies have greater financial resources and larger technical
staffs than the Company, which could result in the Company being at a
competitive disadvantage. In addition, companies not currently in direct
competition with EWRX may introduce competing products in the future.

Introducing e-commerce based upon the Internet marketplace remains an emerging
industry and is characterized by rapid technological changes and introductions
of new products and services. Demand for and market acceptance of newly
introduced services and products, such as those planned by the Company, are
subject to a high level of uncertainty.

Dependence on Key Customers, Suppliers and Strategic Relationships
- ------------------------------------------------------------------

Until recently, the Company was in the development stage and had no material or
critical customers or suppliers, the loss of whom would have a material impact
on operations. The Company will endeavor to develop such relationships in the
future. The creation of relationships with key customers, as well as
relationships with key suppliers and others is significant in order to further
the Company's business objectives in the future. No assurance can be given that
such relationships will be created, or that, if created, such relationships will
continue to be beneficial to the Company.

Impact of Technological Change
- ------------------------------

Rapid technological changes, innovations and frequent new product introductions
characterize the Internet as a whole. The Company's success will depend to a
substantial degree on its ability to design, develop and enhance its web pages

6
<PAGE>

and related services, to successfully market such services, and to attract new
customers. This will require the timely selection, development and marketing of
new products or services and enhancements on a cost-effective basis. There can
be no assurance that the Company will achieve these objectives or that products
or technologies developed by others will not render the Company's web pages,
products or technologies noncompetitive. A fundamental technological change
could have a material adverse effect upon the Company.

Governmental Approvals and Regulations
- --------------------------------------

The Company believes that no significant governmental approvals are necessary
for any of its products or services. Further, the Company believes that
compliance with federal, state and local laws or regulations that have been
enacted or adopted to regulate the environment has not had, nor will have, a
material effect upon the Company's capital expenditures, earnings, competitive
or financial position.

A major risk of Internet companies is the unknown but potential regulation and
taxation of Internet activities. The Internet industry is currently unregulated
primarily because it is an international business subject to self-regulation by
its participants who control websites in e-commerce. The United States
government is examining the merits and disadvantages of regulation of content
and taxation of e-commerce in the current year and in future years. The Company
has no way to determine what the action of the United States government might
have on its future activities and related revenues and profits.

Effect of Y2K and Risks of Year 2000 Compliance
- -----------------------------------------------

The Company did not and does not expect to experience any material effect as a
result of the so-called Year 2000 problem.

Employees
- ---------

At March 15, 2000, the Company employed 29 people full time and 15 consultants
on a part-time basis.

The future success of the Company depends to a significant extent upon certain
senior management, technical personnel and software development personnel. The
Company also believes that its future success will depend in large part on its
ability to hire and retain highly skilled technical, managerial and marketing
personnel, as well as to attract and retain replacements for or additions to
such personnel in the future. Demand for new, specially trained and experienced
personnel has increased worldwide. The loss of certain key employees, or the
Company's inability to attract and retain other qualified employees, could have
a material adverse effect on the Company's business.

Reports to Security Holders
- ---------------------------

The public may read and copy any material filed by the Company with the SEC at
the SEC's Public Relations Reference Room at 450 Fifth Street, N.W., Washington
D.C. 20549 and/or obtain information on the operation of the Public Reference
Room by calling the SEC at 1-800-SEC-0330. In addition, the Company is an

7
<PAGE>

electronic filer and, as such, all items filed by the Company with the SEC are
available on the Internet. The SEC maintains a web site that contains reports,
proxy and information statements, and other information regarding issuers that
file electronically with the SEC, which site is available at http://www.sec.gov.
The Company also maintains an Internet site that contains information about the
Company. The site is available at http://www.ewrx.com.

ITEM 2. DESCRIPTION OF PROPERTY
- -------------------------------

Corporate Offices
- -----------------

Vancouver, British Columbia

The general corporate activities of EWRX are conducted in the Vancouver, British
Columbia office. The principal business office is #301 - 543 Granville Street,
Vancouver, BC, Canada V6C 1X8. These activities include financing, investor
relations, accounting, marketing and general corporate administration. The
company has leased approximately 4600 square feet of other office space in
downtown Vancouver at competitive rates for two years.

Bellingham, Washington

The Company's principal operations are located in Bellingham, Washington.
Bellingham is strategically located near Seattle's major technological and
Internet employment base. The operations offices are located at 1200 Harris
Avenue - Suite 104, Bellingham, Washington 98225. The Company believes there are
sufficient technical personnel in this area as required for its business
activities. The activities in Bellingham include Website development and
maintenance, programming and Internet consulting and marketing services.

All corporate and operations offices are leased facilities leased at competitive
rates for their respective locations. The Company's other property consists of
office equipment, Website domains and proprietary software.

The Company also maintains an executive office in Denver, Colorado. This office
coordinates corporate governance, securities law compliance, legal and auditing
functions. It is maintained on a part-time basis by William Wilson, a director
of the Company, who also operates other companies' operations from such site.

Trademarks and Domain Sites
- ---------------------------

The Company owns thirty-five (35) Websites domain names and adds new domains as
required with the expansion of its Web activities. Applications for certain
trademarks related to the domain names and the Company's Internet business is
anticipated in 2000. Currently the Company holds no trademarks.

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<PAGE>

ITEM 3. LEGAL PROCEEDINGS
- -------------------------

The Company is not a party to any pending legal proceeding nor is its property
the subject of any pending legal proceeding.

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

No matters were submitted to a vote of security holders during the fourth
quarter of the year ended December 31, 1999.

PART II

ITEM 5. MARKET FOR COMMON EQUITY AND RELATED SHAREHOLDER MATTERS
- ----------------------------------------------------------------

Market Information
- ------------------

Since January 27, 2000 and from May 25, 1999 through October 18, 1999, the
Common Stock of the Company has been traded on the OTC Bulletin Board ("OTCBB")
under the trading symbol "EWRX." From October 18, 1999 through November 17,
1999, the Common Stock traded under the symbol "EWRXE". The National Association
of Securities Dealers, Inc. ("NASD") added the "E" pending clearance of
disclosures in a Form 10-SB by the SEC. From November 17, 1999 though January
27, 2000, the NASD removed the Company's stock from listing on the OTCBB and the
Company's Common Stock traded on the "pink sheets" (an informal stock quotation
service) under the symbol "EWRX". The Company re-listed its Common Stock on
OTCBB effective on January 27, 2000 following clearance of its Form 10-SB by the
SEC.

From June 8, 1998 to May 25, 1999, the Common Shares of the Company traded on
the OTCBB market under the trading symbol "ERRI".

The following table sets forth for the period indicated the high and low sale
prices. The quotations below reflect inter-dealer prices, without retail markup,
markdown or commission and may not represent actual transactions. For current
price information, EWRX shareholders are encouraged to consult publicly
available sources.

1999 High Bid Low Bid
---- -------- -------

First Quarter $1.4000 $0.1875
Second Quarter $3.0000 $0.8750
Third Quarter $2.0625 $0.4375
Fourth Quarter $2.0625 $0.7000

1998
----

First Quarter (did not trade)
Second Quarter $1.96875 $1.96875
Third Quarter $1.96875 $0.34375
Fourth Quarter $0.5500 $0.06250

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Holders
- -------

At March 15, 2000, the Company had 14,829,580 Common Shares outstanding and had
approximately 80 shareholders of record.

Dividends
- ---------

The Company has no fixed dividend policy. The Board of Directors from time to
time having regard to operating results, capital requirements and general
financial condition and requirements will consider dividend distributions. The
Company has paid no dividends at any time. For the foreseeable future, it is
anticipated that the Company will use all available cash flows to finance its
growth and that dividends will not be paid to shareholders.

Recent Sales of Unregistered Securities
- ---------------------------------------

Reconciliation of Share Issuances (reacquisitions) for the period December 31,
1998 through December 31, 1999

Date Price Number Common Additional Exemption
Month Year Consideration per Share (1) of Shares Stock Paid-in Capital Rule 504 Rule 506 Section 4 (2)
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
2,000,000
Balance, December 31, 1998 11,949,366 11,949 1,008,051

Feb. 1999 Debt settlement $0.30 664,010 (2) 664 198,539 282,344 381,666
Feb. 1999 Cash $0.30 299,999 300 89,700 299,999
March 1999 Cash, net of
finders
fee of 64,286
shares $0.35 1,281,886 (3) 1,282 402,467 1,281,886
April 1999 Cash $0.70 281,428 (4) 282 196,719 281,428
April 1999 Reacquisition of
shares ** $0.001 (1600000) (5) (1600) 1,600 (1,600,000)
April 1999 Reacquisition of
shares ** $0.001 (2,000,000) (6) (2,000) 2,000 (2,000,000)
June 1999 Finder's fee $0.001 130,000 (7) 130 (130) 130,000
June 1999 Investment in
Classic Car
& North Fork $1.10 1,600,000 (8) 1,600 1,758,400 1,600,000
June 1999 Stock options
issued as
compensation 161,189
--------------------------------------------------------------------------------

Balance, June 30, 1999 12,606,689 12,606 3,818,444

Sept. 1999 Cash $0.85 870,291 (9) 870 673,404 870,291
Sept. 1999 Services $0.85 75,000 75 63,675 75,000
Dec. 1999 Warrants to
employees $1.00 545,000 -- -- 545,000

--------------------------------------------------------------------------------
Balance, December 31, 1999 13,551,980 13,552 4,555,614 10,495,023 945,291 2,111,666
================================================================================

</TABLE>

** These shares have been reacquired by the Company at no cost to it and
subsequently returned to authorized and unissued common stock.

10
<PAGE>

(1) The share price of the Company common stock has fluctuated widely since its
inception. The Company issued shares in 1997, 1998 and 1999 with reference
to the prevailing market price when applicable. The initial price of $0.01
was used for sale of stock to founders, consultants and early-stage
financiers of the Company at a time when the Company's stock did not trade.
Subsequently, and after an agreement in principle had been reached to
acquire the Garnet Project in the Ukraine at about the same time it closed,
stock was sold to family, friends and business associates at $1.50 in
private placement financing under a Regulation D, Rule 504 filing. A
trading market developed in 1998 with the highest price being $2.00 per
share; however, because of the difficulties with the mining joint venture
in 1998 as described in Item 1, the price dropped as low as $.07 per share
in late 1998. As the Company changed its direction from industrial minerals
to e-commerce, the price moved up to $0.30 in 1999. The Company disclosed
all activities related to the Internet acquisitions and the market price
responded in fluctuations from $0.30 to $2.875. The market price was
extremely sensitive during this period to increases at times the Company
announced its fulfillment of business goals and sharp decreases during
selling-off by investors when market conditions and perceptions were not
favorable. During this period of fluctuation, Management endeavored to
complete private placement financing and the two Internet company
acquisitions at the then current market price with appropriate discounting
to reflect the restricted nature of the securities sold. As management had
little control over the market price, it could only react at any given time
as it completed the financing and the acquisitions.

(2) Includes 142,000 shares issued to Ronald Davis, an officer and director of
EWRX, and 239,666 shares issued to his wife for debt reduction of $42,600
and $71,900 respectively.

(3) Includes 64,286 shares issued as a finder's fee under Rule 504.

(4) The market price of the common shares of the Company when this private
placement was subscribed ranged from $0.38 to $1.38 during the month of
March, 1999, just prior to the transaction. The pricing of the placement
($0.70) was determined with reference to the mid range of prices during the
prior month with a discount to reflect the restrictive nature of these
securities.

(5) In April and July 1999, the Company agreed with certain investors to
rescind their purchase of 1,600,000 shares of Common Stock of the Company
sold at $0.01 each previously sold under Rule 504 of Regulation D.

(6) In April 1999, the entire two million Common Share block of shares issued
in 1997 to a foreign national company for mineral properties in the Ukraine
was reacquired by the Company in connection with relinquishing its interest
in the joint venture covering such properties. The shares were returned to
authorized but unissued status.

(7) In June, 1999, the Company issued 130,000 shares of Common Stock of the
Company to two consultants for finder's fees under Section 4(2) of the
Securities Act of 1933. The market price of the common shares of the
Company when these transactions took place was $1.35.

(8) In June 1999, the Company issued 1,450,000 shares of Common Stock of the
Company to the owners of CCI and North Fork as part of the acquisition of
all of the assets of these entities and 150,000 shares of the Common Stock
of the Company to a consultant as a finder's fee for the same acquisition
under Section 4(2) of the Securities Act of 1933. The market price of the
common shares of the Company when these transactions took place was $1.35
and the transaction price was reduced by approximately 20% to $1.10 per
share.

11
<PAGE>

(9) Represents units sold for $0.85 per unit to accredited investors in a
September, 1999 placement yielding approximately $800,000 to the Company.
Each unit consisted of one common share and a non-transferable warrant
exercisable at $1.00 for two years from the date of the subscription. Two
warrants are required to be exercised in order to purchase one share of
common stock.

ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS AND RESULTS OF OPERATION
- ---------------------------------------------------------------------

Plan of Operations
- ------------------

EWRX's primary business objective during the next twelve months is to develop
and operate websites that facilitate commercial transactions in the Specialty
Automotive Aftermarket. By using proprietary information management software and
by using the Internet as an e-commerce marketplace, the Company believes that it
can provide participants with enhanced selection and pricing for automotive
products and services. In return, the Company plans to charge a fee, on a
transaction-by-transaction basis for all business conducted by third parties
using the Company's websites. The Company also expects to generate additional
revenues from its websites by selling advertising to third parties. Further, the
Company expects its wholly owned subsidiary, North Fork WebWrx, to earn
increased service revenues by continuing to provide custom software and website
design services, Internet database services and custom e-commerce software
solutions to a variety of businesses that are seeking are to utilize the
Internet for commercial purposes. Reference is also made to Item 1 - Description
of Business.

To achieve its primary objectives, over the next twelve months, EWRX anticipates
that it will:

1) Raise up to $5 million through the private placement sale of common shares.
Proceeds will be used for general corporate purposes and to fund planned
website development activities as outlined below. Refer to the discussion
under "Capital Resources" below.

2) Complete the re-development and re-programming of the Classicar.com and
Classictruck.com websites. This work will be accomplished in conjunction
with a contract with Xceed, Inc. who will provide the Company with certain
developmental and programming services. Both websites will then be fully
capable of conducting planned e-commerce operating activities. Through
December 1999, the Company has completed a portion of this work and related
costs have been capitalized as Website development costs.

3) Develop other related Internet sites that are focused on specific
communities within the Specialty Automotive Aftermarket such as racing, hot
rods, etc. The Company has registered the domain names "Speedwrx.com" and
"Motorhood.com" for such purposes.

12
<PAGE>

4) Develop the Company's MotorWrx.com website. MotorWrx.com provides a single
gateway on the Internet to the EWRX group of websites and ultimately will
provide links to other websites related to the Specialty Automotive
Aftermarket. EWRX intends MotorWrx.com to be an important destination site
for the Specialty Automotive Aftermarket on the Internet and it is planned
to provide a single point entry for automotive enthusiasts. Included in
this development will be creation of the Motorhood.com and Speedwrx.com
websites.

5) Development of BigBadCatalog.com, an electronic catalog for the Specialty
Automotive Aftermarket. Development of this new website will be undertaken
in part under the contract with Xceed, Inc. referred to previously in (2)
above. EWRX plans to integrate digitized standard printed catalogs for
automobile parts manufacturers and distributors into BigBadCatalog.com.
This will create a centralized point of sale on the Internet where auto
enthusiasts can purchase automotive parts directly from participating
manufacturers and distributors.

6) Increase brand awareness for the Motorwrx.com, ClassicCar.com,
Classictruck.com, and related websites and brands. The Company has
initiated a program to significantly increase overall brand awareness of
the various EWRX websites through a national advertising program in
conjunction with certain co-sponsors.

7) Expand services provided to third parties by North Fork WebWrx. North Fork
Webwrx is an Internet solutions provider serving a variety of businesses by
providing high-end website design services, Internet database programming,
custom e-commerce applications and strategic Internet marketing consulting.
With public acceptance of the Internet surging, and business-to-business
commerce changing the traditional distribution systems, EWRX believes that
North Fork WebWrx can expand its market share in the following areas:

WEBSITE DEVELOPMENT. Design, development, and maintenance of a wide range
of business-to-business commerce sites, Intranet (internal business
communications) and large-scale consumer sites.

ONLINE ADVERTISING. Banner ad development, banner placements and other
online advertising projects for third parties.

MARKET CONSULTING. Providing market-consulting services, such as Internet
launch strategies, site development analysis and Internet marketing plans.

WEBSITE HOSTING. North Fork WebWrx currently hosts over 70 websites for
classic car and classic truck related businesses and organizations.

SPECIAL PROJECTS. Developing proprietary software for resale.

8) As appropriate opportunities arise and provided that sufficient funding is
available, complete additional acquisitions or form joint ventures and/or
strategic alliances with other website-related companies servicing the
Specialty Automotive Aftermarket.

Subject to availability of financing (refer to "Capital Resources" below), the
Company intends to complete the re-design of its current websites, increase
banner advertising and other sales programs, and to develop its electronic

13
<PAGE>

catalog all during the first half of 2000. The on-going re-design of the
Company's websites was initiated in July 1999, and when completed, a variety of
e-commerce revenue streams will begin. These activities are expected to be the
principal sources of future revenues for the Company.

The Company believes that revenues to be earned during the next twelve months,
together with planned sales of Common Shares as described below under "Capital
Resources," will provide sufficient funding for operations during that twelve-
month period. However, no assurance can be given that the types of revenues
projected by the Company or that the financing contemplated by the Company will
occur. Additional capital will be required for significant expansion of website
capabilities and other planned Company activities such as development or
acquisition of additional websites.

In connection with its website developmental activities as set out above, the
Company estimates that it will incur the following website development costs
during the next twelve months:

Estimated Costs Through Year 2000 *

Anticipated Date Graphic
of Improvement Redevelopment Programming Total
- -------------- ------------- ----------- -----

Classicar.com $ 65,000 $ 30,000 $ 95,000
March 2000

Classictruckstop.com $ 45,000 $ 25,000 $ 70,000
April 2000

BigBadCatalog.com $ 75,000 $200,000 $275,000
June 2000

MotorWrx.com $ 10,000 $ 40,000 $ 50,000
June 2000

Other Proposed $300,000 $485,000 $785,000
Internet Sites -
Speedwrx.com and
Motorhood.com
December 2000
----------
$1,275,000
==========

* May change based on market conditions and the Company's ability to obtain
financing for these projects.

14
<PAGE>

Revenues and Financing
- ----------------------

Through December 31, 1999, the Company realized minimal revenues from banner
advertising and website consulting services, principally because the acquisition
of Classic Car and North Fork was completed only in late June 1999 and EWRX's
efforts were primarily focused on development of existing and new web sites.
EWRX intends to derive its future revenues from these same sources, from the
electronic catalog, BigBadCatalog, and from other e-commerce programs on its
websites. The Company anticipates that Internet and related e-commerce will
continue to become more accessible and that the market opportunities for the
Company will expand in North America and internationally. The Company intends to
expand the content and to improve the services on its websites, and where
appropriate, to add new websites that are compatible with its existing websites
related to the Specialty Automotive Aftermarket.

Additional capital, as described in CAPITAL RESOURCES below, will be required
for significant expansion of Website capabilities and other Company activities
such as additional Websites and related acquisitions.

During the first quarter of 2000 and throughout 1999 and 1998, the Company's
principal source of funds has come from sales of Common Shares by way of private
placement and from advances made by an officer/shareholder. Over this period,
approximately $2.43 million ($1.4 million in 1999) has been raised from sales of
Common Stock. At December 31, 1999 there were net advances from Shareholders
amounting to $138,700 ($64,000 at December 31, 1999). Proceeds have primarily
been used to acquire Classic Car and North Fork, initiate work for website
re-design as discussed previously and for corporate administrative and sales
costs. Prior to 1999, the Company also incurred costs and made cash advances to
a now defunct mineral joint venture located in the Ukraine. See discussion under
"Financial Condition and Results of Operations" below. The Company is continuing
to investigate and solicit funding primarily through private placements of its
securities.

Capital Resources
- -----------------

As of February 29, 2000, the Company completed a private placement of 1,277,600
units, including issuance of 54,600 units for commissions, at $1.00 per unit.
Each unit consisted of one common share and one non-transferable warrant
exercisable at $1.00 for two years from the date of the subscription. Net
proceeds of approximately $1.198 million was raised in cash and the Company was
relieved of $25,000 of liabilities. The private placement increased the number
of fully diluted common shares by 1,277,600 shares. This placement was not
subject to an underwriting agreement.

The Company has had preliminary discussions with third parties to raise up to
$5,000,000 using a combination of shares and warrants at the market price at the
time of any subscription. Proceeds from the proposed sale of Common Stock will
be used to pay offering costs and to expand the brand recognition of the
Company's websites through advertising and marketing and to fund website
redesign that will in turn enhance the commercial value of Websites as
previously discussed. Proceeds will also be used for general working capital,
and general and administrative purposes.

The Company's monthly general and administrative costs (e.g. salaries, rent,
corporate expenses) are approximately $200,000. The Company anticipates, subject
to adequate financing, that by mid-2002, there will be sufficient revenue from
the operations of its websites from providing other Internet related services to
pay for these costs and related sales and marketing costs.

15
<PAGE>

The Company is dependent upon the proceeds of its proposed offering of Common
Stock to implement its business plan and to finance its working capital
requirements. Should the Company's plans or its assumptions change or prove to
be inaccurate or offering proceeds are insufficient to fund the Company's
operations, the Company would be required to seek additional financing sooner
than anticipated. The Company may determine, depending upon available
opportunities, to seek debt or additional equity financing to fund the cost of
continuing expansion or other acquisitions. To the extent that the Company
incurs indebtedness or issues debt securities, it will be subject to risks
associated with such indebtedness, including interest rate fluctuations,
collateral arrangements and the possibility that cash flows may prove inadequate
to repay such indebtedness. The Company has no current arrangements with respect
to additional financing.

There can be no assurances given that the Company will be successful in
generating sufficient revenues from its planned activities or that it can raise
sufficient capital to allow it to continue as going concern which contemplates
the realization of assets and the satisfaction of liabilities in the normal
course of business. These factors can affect the ability of the Company to
implement its general business plan including specific plans to re-design
websites, to develop an on-line Specialty Automotive Aftermarket equipment
catalog, to implement other sales programs for its website visitors, the
principal means of revenue generation for the Company's Internet markets.

On July 15, 1999, the Company entered into an agreement with Harmonic Research,
Inc. (Harmonic), an investment fund management company, to sell by way of
private placement units consisting of common shares and warrants on behalf of
the Company. The initial term of the agreement was for 90 days and is extended
in 90-day increments. To date, Harmonic has placed securities on behalf of the
Company outside of the terms of this agreement. The Company did not extend the
agreement in October 1999. Under the initial agreement terms, Harmonic provided
financial advisory services and was paid $15,000. Upon signing the initial
agreement, the Company also granted Harmonic a warrant to purchase 150,000
shares of the Company's common stock at $1.00 per share for three years. In
addition, Harmonic is also entitled to receive certain fees should the Company
enter into a merger, consolidation, reorganization, and business combination or
acquire another company where Harmonic is the finder. No such transaction is
under consideration by the Company at this time.

Financial Condition and Results of Operations
- ---------------------------------------------

Until recently, the Company was a development stage enterprise. Its principal
assets today are its investments in Classic Car and North Fork and registration
of the Company's securities under the Securities Exchange Act of 1934. From
inception to date, the Company has incurred significant operating losses
resulting in its working capital deficit.

From its formation in 1997 through the first half of 1999, the Company did not
generate any significant operating revenues. Beginning in the third quarter of
1999 and upon completion of the purchase of Classic Car and North Fork discussed
previously, the Company has entered the e-commerce marketplace. Revenues in 1999
were derived primarily from banner advertising on Company websites.

16
<PAGE>

Salaries and benefits increased in 1999 when compared to 1998 primarily as a
result of increases in personnel in 1999 in anticipation of commencing
e-commerce operating activities as a result of the acquisition of Classic Car
Source and North Fork completed in June 1999. Such costs for the year ended
December 1998 when compared to the period from inception (June 1997) to December
1997 increased due primarily to management of the now terminated mineral joint
venture in the Ukraine as discussed elsewhere in this annual report.

Consulting, management and professional fees are primarily accounting and legal
expenses. Increases in these expenses in 1999 when compared to 1998 are a result
of costs incurred relating to the acquisition of Classic Car Source and North
Fork and completion of the Company's registration of securities under the
Securities Exchange Act of 1934. Such costs for the year ended December 1998
when compared to the period from inception (June 1997) to December 1997
increased due to a full year versus partial year and related primarily to
management of the now terminated mineral joint venture in the Ukraine as
discussed below.

From inception through December 1998, the Company's sole business was in the
resource sector and the Company held certain mineral interests in the Ukraine.
The Company's interests were held in the Granat Joint Venture ("Granat") as
discussed in Note 2 of Notes to Financial Statements. The Company finalized its
purchase pursuant to a Purchase Agreement dated October 7, 1997 whereby the
Company agreed to pay $300,000 in installments and issued 2,000,000 restricted
common shares. The common shares were valued at $.01 per share, the price for
which the shares were being sold at the time the Company negotiated the terms of
the agreement. The Company paid $40,000 in 1997 and $64,000 in 1998 towards the
$300,000 obligation. The Company has been released from any further obligation
as discussed below. From October to December 1997, the Company also acquired a
controlling interest over 25% of the shares of ISQ for $204,000 and funded
$12,000 in 1997 and $342,532 in 1998 for development.

Due to the lack of adequate financial accountability from Granat and ISQ, the
Company was unable to control the operations of the entity.

As a result of the inability of the Company to obtain reliable financial
information with which to account for its investment, the Company has written
off the investment in each year as payments were made. Coincidentally, during
this period the Ukrainian and Russian economies experienced a significant
downturn. These factors caused the Company to relinquish its interest in Granat
and ISQ to Aurora in return for the 2,000,000 restricted common shares and a
release from any ongoing obligations under the original Purchase Agreement,
including the remaining unpaid purchase price of $196,000. The director of the
Company who controlled Aurora resigned as a director.

During 1998 and 1997, the Company issued stock and made cash payments toward the
purchase of its interest in Granat, the purchase of ISQ shares and advances to
Granat as follows:

2,000,000 common shares issued $ 20,000
Expenditures made and liabilities recognized during 1997 320,000
--------
Written off in 1997 340,000
========
Expenditures incurred and written off in 1998 $342,532
========

17
<PAGE>

Marketing and promotion cost in 1999 pertain to creating broad awareness within
the Internet community of the Company's websites and its related products and
services. All such costs were incurred subsequent to the acquisition of Classic
Car and North Fork.

Overall during 1999, general and administrative expenses increased when compared
to 1998 as a result of commencing operating activities subsequent to the
acquisitions of Classic Car and North Fork. Higher costs resulted from increased
staff, enlarging office facilities to include two locations, and other
administrative expenses. Such increases occurred primarily in the third and
fourth quarters of 1999 and are expected to be ongoing at the rate of
approximately $200,000 per month. During the first half of 1999, general and
administrative costs decreased when compared to 1998 and as a result of
reductions in front office staff upon termination of the mineral joint venture
in the fourth quarter of 1998. In the year ended December 1998, such expenses
related primarily to administration of the now terminated mineral joint venture
in the Ukraine discussed elsewhere in this annual report.

Increases in depreciation and amortization in 1999 when compared to 1998 relate
primarily to amortization of goodwill recorded in connection with the
acquisition of Classic Car and North Fork. Such amortization commenced in July
1999.

Due to operating losses since inception, the Company has not incurred any
liability related to income taxes.

Effects of Year 2000 Compliance
- -------------------------------

The Company did not and does not expect to experience any material effect as a
result of the so-called Year 2000 problem.

ITEM 7. FINANCIAL STATEMENTS
- ----------------------------

The following financial statements are filed as a part of this Form 10-KSB
immediately following the signature page:

Description Page No.
- ----------- --------

Index F-1

18
<PAGE>

ITEM 8. CHANGES IN AND DISAGREEMENT WITH ACCOUNTANTS
- ----------------------------------------------------

There have been no disagreements on accounting and financial disclosures from
the inception of the Company through to the date of this FORM 10-KSB.

On May 4, 1999, the Company's shareholders approved the appointment of Jackson &
Rhodes P.C. as the Company's auditors for the periods ending December 31, 1998
and December 31, 1999.

PART III

ITEM 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS; COMPLIANCE
WITH SECTION 16(a) OF THE EXCHANGE ACT
- --------------------------------------------------------------------------------

The information required by this item appears in the Company's Proxy Statement
for the 2000 Annual Meeting to be filed within 30 days of the date of this
Annual Report on Form 10-K and is hereby incorporated by reference.

ITEM 10. EXECUTIVE COMPENSATION
- -------------------------------

ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
- -----------------------------------------------------------------------

ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
- -------------------------------------------------------

ITEM 13. EXHIBITS AND REPORTS ON FORM 8-K
- -----------------------------------------

a. Exhibits and Index of Exhibits. Exhibits required to be filed are listed
below and, except where incorporated by reference, immediately follow the
financial statements.

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

2.1 (i) "Stock Purchase And Sale Agreement" (April 11, 1999) (1)

2.1 (ii) "Merger Agreement And Plan Of Reorganization" (June 15, 1999) (1)

2.3 (i) Agreement with Optima Promotions (September 1, 1998) (1)

2.3 (ii) Agreement with Harmonic Research Inc. (July 12, 1999) (1)

19
<PAGE>

3.1 Articles of Incorporation of the Registrant. (June 24, 1999) (1)

3.2 By-laws of the Registrant. (June 25, 1999) (1)

3.3 Specimen certificate for Common Stock, $0.001 par value. (1)

3.4 Certificate of Amendment to Articles of Incorporation of the
Registrant. (May 18, 1999) (1)

4.1 Warrant Agreement issued by the Registrant in September-October, 1999.

10.1 (i) Employment agreement with Johnscott Lee. (May 4, 1999) (1)

10.1 (ii) Employment agreement with Dan Jondron. (May 4, 1999) (1)

10.4 Letter of Intent - EWRX Internet Systems Inc. & Xceed, Inc. (July 6,
1999) (1)

10.5 (i) Stock Option Plan of the Registrant. (March 4, 2000)

10.5 (ii) Stock Option Agreements (May 6, 1999) (1)

11.0 Statement regarding Computation of Per Share Earnings

22.1 (i) Subsidiaries of the Registrant (1)

22.1 (ii) Company Structure (1)

27 Financial Data Schedule

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

(1) Incorporated by reference from the Company's Registration Statement on Form
10-SB (No. 0-27195)

(b) Reports on Form 8-K. The Company has filed no reports on Form 8-K during
the last quarter of the period covered by this report.

20
<PAGE>

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the Registrant has duly caused this Report to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of Vancouver,
Province of British Columbia, Country of Canada, on this 30th day of March,
2000.

EWRX INTERNET SYSTEMS, INC.
a Nevada corporation

By: /s/ Ronald C. Davis
-----------------------
Ronald C. Davis, President and Chief
Executive Officer

Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has caused this Report to be signed by the following persons in the
capacities and on the dates indicated.

Title of Position
Signature Held with Registrant Date
--------- -------------------- ----

/s/ Ronald C. Davis President, Chief Executive Officer March 5, 2000
- ------------------- and Director
Ronald C. Davis

/s/ Richard P. Ott Treasurer and Director March 5, 2000
- ------------------
Richard P. Ott

/s/ William R. Wilson Secretary and Director March 5, 2000
- ---------------------
William R. Wilson

/s/ Dan Jondron Director March 5, 2000
- ---------------
Dan Jondron

/s/ Robert R. Gilmore Chief Financial Officer (Acting) March 5, 2000
- ---------------------
Robert R. Gilmore

21
<PAGE>

EWRX INTERNET SYSTEMS INC.
AND SUBSIDIARIES

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

Page

Independent Auditors' Report for December 31, 1999 and 1998 ................F-2

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

Consolidated Statements of Operations
For the Years Ended December 31, 1999 and 1998.........................F-4

Consolidated Statements of Changes in Stockholders' Equity (Deficit)
For the Years Ended December 31, 1999 and 1998.........................F-5

Consolidated Statements of Cash Flows
For the Years Ended December 31, 1999 and 1998.........................F-6

Notes to Consolidated Financial Statements..................................F-7

F-1
<PAGE>

INDEPENDENT AUDITORS' REPORT

Board of Directors
EWRX Internet Systems Inc.

We have audited the accompanying consolidated balance sheets of EWRX Internet
Systems Inc. and subsidiaries as of December 31, 1999 and 1998, and the related
consolidated statements of operations, stockholders' equity (deficit) and cash
flows for the years then ended. 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. Those standards require that we plan and perform the audits 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 audits provide a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the consolidated financial position of EWRX
Internet Systems Inc. and subsidiaries as of December 31, 1999 and 1998, and the
results of their operations and their cash flows for the years then ended, in
conformity with generally accepted accounting principles.

The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. As discussed in Note 1 to the
financial statements, the Company's significant operating losses and its working
capital deficit and stockholders' deficit raise substantial doubt about its
ability to continue as a going concern. The financial statements do not include
any adjustments that might result from the outcome of this uncertainty.

/s/ Jackson & Rhodes P.C.
-------------------------
Jackson & Rhodes P.C.

Dallas, Texas
March 27, 2000

F-2
<PAGE>
<TABLE>
<CAPTION>

EWRX INTERNET SYSTEMS INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
December 31, 1999 and 1998

Assets

1999 1998
----------- -----------
Current assets:
<S> <C> <C>
Cash $ 5,214 $ --
Receivables 37,422 6,264
Prepaids and other 2,636 1,815
----------- -----------
Total current assets 45,272 8,079
----------- -----------

Furniture and equipment:
Furniture and equipment 74,374 18,772
Accumulated depreciation (29,395) (4,948)
----------- -----------
Net furniture and equipment 44,979 13,824
----------- -----------

Other assets:
Goodwill, net of amortization of $236,392 1,759,953 --
Website development costs 254,855 --
----------- -----------
Total other assets 2,014,808 --
----------- -----------

$ 2,105,059 $ 21,903
=========== ===========

Liabilities and Stockholders' Equity (Deficit)

Current liabilities:
Bank overdraft $ -- $ 2,661
Accounts payable 342,286 93,731
Due to shareholders 138,700 203,241
----------- -----------
Total current liabilities 480,986 299,633
----------- -----------

Commitments and contingencies -- --

Stockholders' equity (deficit):
Preferred stock, $.01 par value, 500,000 shares authorized,
none issued and outstanding -- --
Common stock, $.001 par value, 100,000,000 shares authorized,
13,551,980 and 11,949,366 shares issued and outstanding 13,552 11,949
Additional paid-in capital 4,555,614 1,008,051
Accumulated deficit (2,927,875) (1,307,478)
Accumulated other comprehensive income (loss) (17,218) 9,748
----------- -----------
Total stockholders' equity (deficit) 1,624,073 (277,730)
----------- -----------
$ 2,105,059 $ 21,903
=========== ===========

See accompanying notes to consolidated financial statements.

F-3
</TABLE>
<PAGE>
<TABLE>
<CAPTION>

EWRX INTERNET SYSTEMS INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
For the Years Ended December 31, 1999 and 1998

1999 1998
------------ ------------

<S> <C> <C>
Revenue $ 98,736 $ --
------------ ------------

Expenses:
Loss from write-off of investment -- 342,532
Salaries and benefits 300,810 51,531
Consulting, management and professional fees 361,667 147,173
Marketing and promotion 267,056 35,548
Depreciation and amortization 241,829 4,165
General and administrative 547,771 301,920
------------ ------------
Total expenses (1,719,133) 882,869
------------ ------------

Net loss $ (1,620,397) $ (882,869)
============ ============

Basic net loss per share $ (0.12) $ (0.07)
============ ============

Weighted average common shares outstanding 13,019,114 11,856,316
============ ============

See accompanying notes to consolidated financial statements.

F-4

</TABLE>
<PAGE>
<TABLE>
<CAPTION>

EWRX INTERNET SYSTEMS INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIT)
For the Years Ended December 31, 1999 and 1998

Accumulated
Additional Other
Common Stock Paid-In Accumulated Comprehensive
Shares Amount Capital Deficit Income Total
------ ------ ------- ------- ------ -----
<S> <C> <C> <C> <C> <C> <C>
Balance, December 31, 1997 11,719,999 $ 11,720 $ 664,229 $ (404,609) $ -- $ 271,340

Sale of common stock for cash 229,367 229 343,822 -- -- 344,051

Net loss -- -- -- (902,869) -- (902,869)

Currency translation adjustment -- -- -- -- 9,748 9,748
-----------

Comprehensive income (loss) -- -- -- -- -- (893,121)
----------- ----------- ----------- ----------- ----------- -----------

Balance, December 31, 1998 11,949,366 11,949 1,008,051 (1,307,478) 9,748 (277,730)

Sale of common stock for cash 1,863,313 1,864 688,886 -- -- 690,750

(inclusive of 64,286 shares issued
as finder's fee)

Stock issued for finders' fees 130,000 130 (130) -- -- --

Stock issued on settlement of debt 664,010 664 198,539 -- -- 199,203

Stock options issued as compensation -- -- 161,189 -- -- 161,189

Reacquisition of shares (3,600,000) (3,600) 3,600 -- -- --

Acquisition of CCS and NFPG 1,600,000 1,600 1,758,400 -- -- 1,760,000

Sale of common stock for cash 870,291 870 673,404 -- -- 674,274

Stock issued for services 75,000 75 63,675 -- -- 63,750

Currency translation adjustment -- -- -- -- (26,966) (26,966)

Net loss -- -- -- (1,620,397) -- (1,620,397)
-----------

Comprehensive income (loss) -- -- -- -- -- (1,647,363)
----------- ----------- ----------- ----------- ----------- -----------

Balance, December 31, 1999 13,551,980 $ 13,552 $ 4,555,614 $(2,927,875) $ (17,218) $ 1,624,073
=========== =========== =========== =========== =========== ===========

See accompanying notes to consolidated financial statements.

F-5
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
EWRX INTERNET SYSTEMS INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the Years Ended December 31, 1999 and 1998

1999 1998
----------- -----------
<S> <C> <C>
Net loss $(1,620,397) $ (882,869)
Adjustments to reconcile net loss to net
cash provided by (used in) operating activities:
Depreciation and amortization 241,829 4,165
Write-off of investment in joint venture -- 342,532
Stock issued for services 63,750 --
Stock options compensation 161,189 --
Changes in assets and liabilities:
Receivables (19,392) (6,821)
Prepaid expenses (821) 4,617
Incorporation costs -- 3,876
Accounts payable 230,069 84,454
----------- -----------
Net cash used in operating activities (943,773) (450,046)
----------- -----------

Cash flows from investing activities:
Investment in mineral venture -- (64,000)
Advances to mineral venture -- (342,532)
Acquisition of CCS and NFPG, net of cash
acquired (192,325) --
Purchase of furniture and equipment (36,163) (1,983)
Website development costs (254,855) --
----------- -----------
Net cash used in investing activities (483,343) (408,515)
----------- -----------

Cash flows from financing activities:
Bank overdraft (2,661) 2,661
Advances from shareholders 96,933 208,630
Common stock sold for cash 1,365,024 344,051
----------- -----------
Net cash provided by financing activities 1,459,296 555,342
----------- -----------
Effect of exchange rate changes on cash (26,966) 237
----------- -----------
Net increase (decrease) in cash 5,214 (302,982)

Cash at beginning of year -- 302,982
----------- -----------

Cash at end of year $ 5,214 $ --
=========== ===========

Noncash activities:

During the year ended December 31, 1999, the Company converted $199,203 of
debt into 664,010 shares of common stock.
During the year ended December 31, 1999, the Company reacquired a total of
3,600,000 shares of common stock and returned them to authorized and
unissued common stock.
During the year ended December 31, 1999, the Company issued 1,600,000
shares as partial consideration for the acquisitions of CCS and NFPG
(see Note 3).
During the year ended December 31, 1999, the Company issued 75,000 shares
for services.

See accompanying notes to consolidated financial statements.

F-6
</TABLE>
<PAGE>

EWRX INTERNET SYSTEMS INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements
December 31, 1999 and 1998

1. Summary of Significant Accounting Policies

Description of Business
-----------------------

The Company was incorporated on June 25, 1997 in the State of Nevada. The
consolidated financial statements include the accounts of the Company and
its wholly-owned subsidiaries, EWRX Internet Systems (Canada), Inc., a
company incorporated in British Columbia, Classic Car Source, Incorporated
("CCS") and North Fork Publishing Group, Inc. ("NFPG") (Note 3). Until its
acquisition of CCS and NFPG in June 1999, the Company was in the
development stage of its existence, devoting its efforts primarily to
raising capital, developing an industrial mineral project in Ukraine,
exploring investment opportunities, and administrative functions. CCS was
established to create a source of on-line publishing of information and
entertainment for classic vehicle collectors. NFPG was established to
provide Internet marketing, design and internet database services on a
contract basis to selected clients.

In 1999, the Company changed its name from Europa Resources, Inc. to EWRX
Internet Systems Inc.

Going Concern

The Company's financial statements have been presented on the basis that it
is a going concern, which contemplates the realization of assets and the
satisfaction of liabilities in the normal course of business. The financial
statements do not include any adjustments that might result from the
outcome of this uncertainty. The Company has reported cumulative net losses
since inception of $2,927,875 as of December 31, 1999.

The Company has had preliminary discussions with third parties to raise up
to $5,000,000 using a combination of shares and warrants at the market
price at the time of any subscription. Proceeds from the proposed sale of
Common Stock will be used to pay offering costs and to expand the brand
recognition of the Company's websites through advertising and marketing and
to fund website redesign that will in turn enhance the commercial value of
Websites as previously discussed. Proceeds will also be used for general
working capital, and general and administrative purposes.

The number of shares that are issued as part of any sale of Common Stock is
dependent upon market prices. The Company has been and remains dependent
upon its ability to raise capital by selling equity securities to finance
its operations and development activities. During the year ended December
31, 1999, $1,365,024 was raised by way of private placement and subsequent
to year end, an additional $1,223,000 was raised by way of private
placement. Refer to Note 6.

F-7
<PAGE>

EWRX INTERNET SYSTEMS INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

1. Summary of Significant Accounting Policies

Going Concern (Continued)

The Company's monthly general and administrative costs (e.g. salaries,
rent, corporate expenses) are approximately $200,000. The Company also
expects to spend approximately $1.3 million during the next twelve months
towards the continued development and enhancement of its Websites. The
Company anticipates, subject to adequate financing, that by mid-2002, there
will be sufficient revenue from the operations of its websites to pay for
these costs and related sales and marketing costs.

The Company is dependent upon the proceeds of its proposed offering of
Common Stock or other securities to implement its business plan and to
finance its working capital requirements. Should the Company's plans or its
assumptions change or prove to be inaccurate or offering proceeds are
insufficient to fund the Company's operations, the Company would be
required to seek additional financing sooner than anticipated. The Company
may determine, depending upon available opportunities, to seek debt or
additional equity financing to fund the cost of continuing expansion or
other acquisitions. To the extent that the Company incurs indebtedness or
issues debt securities, it will be subject to risks associated with such
indebtedness, including interest rate fluctuations, collateral arrangements
and the possibility that cash flows may prove inadequate to repay such
indebtedness. The Company has no current arrangements with respect to, or
sources of, additional financing.

There can be no assurances given that the Company will be successful in
generating sufficient revenues from its planned activities or that it can
raise sufficient capital to allow it to continue as going concern which
contemplates the realization of assets and the satisfaction of liabilities
in the normal course of business. These factors can affect the ability of
the Company to implement its general business plan including specific plans
to re-design websites, to develop an on-line Specialty Automotive
Aftermarket equipment catalog, to implement a banner advertising sales
program, to implement other sales programs and to implement a premium
membership for its website visitors, the principal means of revenue
generation for the Company's Internet markets.

F-8
<PAGE>

EWRX INTERNET SYSTEMS INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

1. Summary of Significant Accounting Policies (Continued)

Principles of Consolidation

The consolidated financial statements include the accounts of the Company
and its subsidiaries. All significant intercompany balances and
transactions are eliminated in consolidation.

Use of Estimates and Assumptions

Preparation of the Company's financial statements in conformity with
generally accepted accounting principles requires management to make
estimates and assumptions that affect certain reported amounts and
disclosures. Accordingly, actual results could differ from those estimates.

Cash and Cash Equivalents

The Company considers all liquid investments, with an original maturity of
three months or less when purchased, to be cash equivalents.

Furniture and Equipment

Furniture and equipment are stated at cost. Depreciation is computed
principally by the straight-line method based on the estimated useful lives
of five to seven years.

Goodwill

The company amortizes goodwill on a straight-line basis over five years.

Website Development Costs

The company capitalizes all direct costs relating to the development of new
websites in accordance with SOP 98-1. Ongoing costs for maintenance and
enhancement are expensed as incurred. Capitalized costs will be amortized
on a straight-line basis over five years commencing upon substantial
completion and commercialization of the website.

F-9
<PAGE>

EWRX INTERNET SYSTEMS INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

Foreign Currency Translation

The financial statements are presented in United States dollars. In
accordance with Statement of Financial Accounting Standards No. 52,
"Foreign Currency Translation," foreign denominated monetary assets and
liabilities are translated to their United States dollar equivalents using
foreign exchange rates which prevailed at the balance sheet date. Revenue
and expenses are translated at average rates of exchange during the year.
Related translation adjustments are reported as a separate component of
stockholders' equity, whereas gains or losses resulting from foreign
currency transactions are included in results of operations.

Net Loss Per Common Share

In March 1997, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 128, Earnings Per Share ("SFAS 128").
SFAS 128 provides a different method of calculating earnings per share than
was formerly used in APB Opinion 15. SFAS 128 provides for the calculation
of basic and diluted earnings per share. Basic earnings per share includes
no dilution and is computed by dividing income available to common
stockholders by the weighted average number of common shares outstanding
for the period. Dilutive earnings per share reflects the potential dilution
of securities that could share in the earnings of the Company. The Company
was required to adopt this standard in the fourth quarter of calendar 1997.
Because the Company's potential dilutive securities are antidilutive, the
accompanying presentation is only of basic loss per share.

Stock-Based Compensation

The Company has issued stock options and employee share purchase warrants
(Refer to Note 6). Compensation costs arising from such options and
warrants will be recorded as an expense. The measurement date for
determining compensation costs is the date of the grant. Compensation cost
is the excess, if any, of the market value of the stock at date of grant
over the amount the employee must pay to acquire the stock. The Company
measures compensation costs using the intrinsic value based method of
accounting for stock issued to employees.

Income taxes

The Company accounts for income taxes in accordance with Statement of
Financial Accounting Standards No. 109, "Accounting for Income Taxes"
("SFAS 109"). The objective of the asset and liability method is to
establish deferred tax assets and liabilities for the temporary differences
between the financial reporting basis and the tax basis of the Company's
assets and liabilities at enacted tax rates expected to be in effect when
such amounts are realized or settled. Under SFAS 109, the effect on
deferred tax assets and liabilities of a change in tax rates is recognized
in income in the period that includes the enactment date.

F-10
<PAGE>

EWRX INTERNET SYSTEMS INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

2. Investment in Joint Venture

In July 1997, the Company agreed in principle to acquire a 49% interest in
the Granat Joint Venture ("Granat"), a Ukrainian-Canadian joint venture
between the Company and Ivaniv Special Quarry ("ISQ"), an open joint-stock
company of the Ukraine. The Granat interest was purchased from Aurora
Pacific Consulting & Development Corp. ("Aurora"). The individual who
controlled Aurora later became a director of the Company. Granat was formed
for the purposes of mining, production and marketing of industrial garnets
and related products in the Ukraine.

The Company finalized its purchase pursuant to a Purchase Agreement dated
October 7, 1997 whereby the Company agreed to pay $300,000 in installments
and issued 2,000,000 restricted common shares. The common shares were
valued at $.01 per share, the price for which the shares were being sold at
the time the Company negotiated the terms of the agreement. The Company
paid $40,000 in 1997 and $64,000 in 1998 towards the 300,000 obligation.
The Company has been released from any further obligation as discussed
below. From October to December 1997, the Company also acquired control
over 25% of the shares of ISQ for $204,000 and funded $12,000 in 1997 and
$342,532 in 1998 for development.

Due to the lack of adequate financial accountability from Granat and ISQ,
the Company was unable to control the operations of the entity. As a result
of the inability of the Company to obtain reliable financial information
with which to account for its investment, the Company has written off the
investment in each year as payments were made. Coincidentally, during this
period the Ukrainian and Russian economies experienced a significant
downturn. These factors caused the Company to relinquish its interest in
Granat and ISQ to Aurora in return for the 2,000,000 restricted common
shares and a release from any ongoing obligations under the original
Purchase Agreement, including the remaining unpaid purchase price of
$196,000. The director of the Company who controlled Aurora resigned as a
director.

During 1998 and 1997, the Company issued stock and made cash payments
toward the purchase of its interest in Granat, the purchase of ISQ shares
and advances to Granat as follows:

2,000,000 common shares issued $ 20,000
Expenditures made and liabilities
recognized during 1997 320,000
========
Written off in 1997 340,000
========

Expenditures incurred and written off in 1998 $342,532
========

F-11
<PAGE>

EWRX INTERNET SYSTEMS INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

3. Acquisitions

The Company entered into an agreement dated April 11, 1999, to acquire all
the issued and outstanding shares of CCS and NFPG. CCS is a privately held,
state of Washington-based company which owns two websites, Classicar.com
and Classictruckshop.com, both of which are destination class websites on
the Internet. NFPG is an affiliated, privately held, state of
Washington-based company which provides website design and Internet
consulting services. The Company paid $133,333 cash plus 1,000,000
restricted common shares for CCS and $66,667 cash plus 450,000 restricted
common shares for NFPG and 150,000 common shares as a finder's fee. The
above transactions closed on June 15, 1999.

The transaction was accounted for as a purchase. Accordingly, the Company's
financial statements for the year ended December 31, 1999 include the
operations of CCS and NFPG from the date of acquisition (June 15, 1999).
Under purchase accounting, the total purchase price was allocated to the
tangible and intangible assets and liabilities of the acquirees based upon
their respective estimated fair values as of the closing date. The excess
purchase price over the identifiable assets and liabilities has been
allocated entirely to goodwill as the Company was unable to obtain
meaningful valuations for other intangible assets. The estimated purchase
price and adjustments to the historical book value of the acquirees was as
follows:

Purchase Price, based on value
of common stock issued plus cash paid $1,960,000
Fair value of net liabilities acquired 17,345
----------

Purchase price in excess of net liabilities acquired $1,977,345
==========

Goodwill $1,977,345
==========

The common stock issued was valued based on the market price of the
securities over a reasonable period of time before and after the companies
reached an agreement on the purchase price and the proposed transaction was
announced in June 1999. The market price was discounted by 20% due to the
restrictions (Rule 144) on the securities and their thin market.

Goodwill is being amortized over five years. Amortization for the year
amounted to $230,692.

The following unaudited pro forma consolidated information for the year
ended December 31, 1999 and 1998 gives effect to the transaction as if it
had occurred at the beginning of each period. The unaudited pro forma
consolidated information is presented for informational purposes only and
is not necessarily indicative of the results of operations that would have
been achieved had the transaction been completed as of the beginning of
that year, nor are they indicative of the Company's future results of
operations.

Year Ended
Period Ended December 31,
June 30, 1999 1998
------------- -----------

Revenues $ 168,519 $ 241,184
Net Loss $(1,941,914) $(1,420,743)
Net loss per common share $ (0.14) $ (0.11)

F-12
<PAGE>

EWRX INTERNET SYSTEMS INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

4. Related Party Transactions NOT COMPLETE

As of December 31, 1999 and 1998, $138,700 and $203,241, respectively, had
been advanced to the Company by certain shareholders.

During the years ended December 31, 1999 and 1998, the following amounts
were paid to directors and former directors of the Company.

December 31,
1999 1998
-------- --------
Management fees and salaries $152,232 $ 52,057
Consulting fees 61,407 21,208
Expense reimbursements 50,279 22,139
-------- --------
$263,918 $ 95,404
======== ========

5. Income Taxes

There were no temporary differences between the Company's tax and financial
bases, except for the Company's net operating loss carryforwards amounting
to approximately $3,000,000 and $1,250,000 at December 31, 1999 and 1998,
respectively. These carryforwards will expire, if not utilized, in
2012-2015.

The Company has deferred tax assets amounting to approximately 1,020,000
and 425,000 at December 31, 1999 and 1998, respectively, related to the net
operating loss carryovers. The realization of the benefits from these
deferred tax assets appears uncertain due to recurring net losses.
Accordingly, a valuation allowance has been recorded which offsets the
deferred tax assets at the end of each period.

6. Capital Stock

During 1999, the 2,000,000 shares previously issued to Aurora (Note 2) were
reacquired by the Company. An additional 1,600,000 shares issued to
individuals in 1997 for cash ($.01 per share) and for future services were
also reacquired by the Company during 1999. All of these shares were
returned to authorized and unissued common stock.

In connection with the acquisitions of CCS and NFPG (Note 3), the Company
issued 1,600,000 common shares at a price of $1.10 per share.

During 1999, the Company issued 130,000 common shares to two individuals
for their assistance in raising funds in a private placement of shares.

During 1999, the Company issued 75,000 shares, valued at $.85 per share for
advertising costs.

The Company also completed the following financings during 1999:

299,999 common shares at a price of $0.30 per share for total proceeds
of $90,000,
281,428 common shares at a price of $0.70 per share for total proceeds
of $197,000,
1,281,886 common shares (including 64,286 shares issued as a finders'
fee) at a price of $0.35 per share for total proceeds of $403,750,
870,291 common shares at a price of $0.85 per share for total proceeds
of $674,274 net of finders' fees of $13,600, and
664,010 common shares at $0.30 per share on settlement of debts
(including 552,653 common shares issued to related parties).

F-13
<PAGE>

EWRX INTERNET SYSTEMS INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

As of February 29, 2000, the Company completed a private placement of
1,277,600 units, each unit consisting of one common share and one
non-transferable warrant exercisable at $1.00 for two years from the date
of the subscription. The Company realized net cash proceeds in the amount
of $1,198,000 and was relieved from $25,000 of liabilities as a result of
this private placement. Of the total units issued, 54,600 units were issued
to various broker/dealers as payment for commissions payable in connection
with this capital raise. The private placement increased the number of
fully diluted common shares by 1,277,600 shares.

The Company has issued compensatory stock options and share purchase
warrants to certain directors, officers, key employees and consultants. The
following is a summary of the status of the stock options and share
purchase warrants:

Year Ended December 31, 1999 Year Ended December 31, 1998
---------------------------- ----------------------------
Weighted Average Weighted Average
shares Exercise Price shares Exercise Price
------ -------------- ------ --------------
<S> <C> <C> <C> <C>
Outstanding, beginning of year 500,000 $ 0.25 500,000 $ 0.25
Options granted 1,100,000 $ 0.57 -- --
Warrants granted 545,000 $ 1.00 -- --
Exercised -- -- -- --
Forfeited / expired -- -- -- --
-------------------------------------------------

Outstanding, end of year 2,145,000 $ 0.60 500,000 $ 0.25
=================================================

Exercisable, end of year 2,145,000 $ 0.60 500,000 $ 0.25
=================================================
</TABLE>

Fair value for the stock underlying stock options and share purchase
warrants was determined using information available from other stock sale
transactions at or near the grant date. In management's opinion, these
transactions between willing parties included the best information
available at the time of grant to estimate the market value of the common
stock of the Company. These fair values were used to determine the
compensatory components of the stock options granted during the year ended
December 31, 1999.

Compensation costs for employee options and warrants are recognized as an
expense in an amount equal to the excess of the fair market value of the
stock at the date of measurement over the amount the employee must pay. The
measurement date is generally the grant date. Under this method,
compensation expense amounted to $119,250 for the year ended December 31,
1999. There is no future compensation expense to be recorded in subsequent
periods as of December 31, 1999. Using the fair value method, the fair
value of each option and warrant granted is estimated on the date of grant
using the Black-Scholes option pricing model with the following
weighted-average assumptions used for grants in 1999: dividend yield of 0.0
percent; expected volatility of 145 percent; risk free interest rates of
4.5 percent; expected lives of one year. The Company recorded an additional
$41,939 in compensation expense during the year ended December 31, 1999
under FASB Statement 123 for options and warrants issued to non-employees.
Using the fair value method of FASB Statement 123, net loss and net loss
per common share for year ended December 31, 1999 would have been
$(2,048,415) and $(.16), respectively.

F-14
<PAGE>

EWRX INTERNET SYSTEMS INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

7. Commitments and Contingencies

Lease Commitments

The Company leases office space under operating leases, one of which has
been continued on a month to month basis since the expiry of its original
term on December 31, 1999. The Company has entered into an operating
agreement for office space which agreement will become effective in April
2000. Annual rental commitments under the office space lease amount to
approximately $112,000 until May 2002.

Rent expense for the years ended December 31, 1999 and 1998 amounted to
$30,550 and $43,542, respectively.

Concentration of Credit Risk

The Company invests its cash and certificates of deposit primarily in
deposits with major banks. Certain deposits, at times, are in excess of
federally insured limits. The Company has not incurred losses related to
its cash.

Fair Value of Financial Instruments

The following disclosure of the estimated fair value of financial
instruments is made in accordance with the requirements of SFAS No. 107,
Disclosures about Fair Value of Financial Instruments. The estimated fair
value amounts have been determined by the Company, using available market
information and appropriate valuation methodologies. The fair value of
financial instruments classified as current assets or liabilities including
cash and cash equivalents and notes and accounts payable approximate
carrying value due to the short-term maturity of the instruments.

Uncertainty Due to the Year 2000 Issue

The Company did not and does not expect to encounter any significant matter
which will effect its operations arising from the so called Y2K or Year
2000 problem.

Employment Agreements

The Company has employment agreements with two officers. Each agreement is
for three years beginning May 4, 1999 and contains certain non-compete
clauses, benefits, and termination clauses. The agreements provide for
aggregate salaries for the two officers of $160,000 annually.

Subsequent to December 1999, the Company has also agreed to enter into an
employment agreement with Mr. Ron Davis, CEO and a shareholder of the
Company. The terms of the agreement are expected to confirm to the
employment agreements set out above except Mr. Davis' annual salary will be
$120,000.

F-15
<PAGE>

EWRX INTERNET SYSTEMS INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

8. New Accounting Pronouncements

SFAS 130

In June 1997, the Financial Accounting Standards Board issued two new
disclosure standards. Results of operations and financial position are
unaffected by implementation of these new standard Statement of Financial
Accounting Standards (SFAS) 130, "Reporting Comprehensive Income",
establishes standards for reporting and display of comprehensive income,
its components and accumulated balances. Comprehensive income is defined to
include all changes in equity except those resulting from investments by
owners and distributions to owners. Among other disclosures, SFAS 130
requires that all items that are required to be recognized under current
accounting standards as components of comprehensive income be reported in a
financial statement that is displayed with the same prominence as other
financial statements. The Company has reflected its foreign currency
translation adjustment as other comprehensive income in the accompanying
consolidated statement of changes in stockholders' equity.

SFAS 131

SFAS 131, "Disclosure about Segments of a Business Enterprise", establishes
standards for the way that public enterprises report information about
operating segments in annual financial statements and requires reporting of
selected information about operating segments in interim financial
statements issued to the public. It also establishes standards for
disclosures regarding products and services, geographic areas and major
customers. SFAS 131 defines operating segments as components of an
enterprise about which separate financial information is available that is
evaluated regularly by the chief operating decision maker in deciding how
to allocate resources and in assessing performance. This accounting
pronouncement has had no effect on the Company's financial statements for
the periods presented. The Company will consider its effect on the
consolidated financial statements in the future as a result of the
acquisitions described in Note 3.

SFAS 132

Statement of Financial Accounting Standards (SFAS) 132, "Employers'
Disclosure about Pensions and Other Postretirement Benefits," revises
standards for disclosures regarding pensions and other postretirement
benefits. It also requires additional information on changes in the benefit
obligations and fair values of plan assets that will facilitate financial
analysis. This statement does not change the measurement or recognition of
the pension and other postretirement plans. The financial statements are
unaffected by implementation of this new standard.

SFAS 133

Statement of Financial Accounting Standards (SFAS) 133, "Accounting for
Derivative Instruments and Hedging Activities," establishes accounting and
reporting standards for derivative instruments, including certain
derivative instruments embedded in other contracts, (collectively referred
to as derivatives) and for hedging activities. It requires that an entity
recognize all derivatives as either assets or liabilities in the statement
of financial position and measure those instruments at fair value. If
certain conditions are met, a derivative may be specifically designated as
(a) a hedge of the exposure to changes in the fair value of a recognized
asset or liability or an unrecognized firm commitment, (b) a hedge of the
exposure to variable cash flows of a forecasted transaction, or (c) a hedge
of the foreign currency exposure of a net investment in a foreign
operation, an unrecognized firm commitment, an available-for sale security,
or a foreign-currency-denominated forecasted transaction. Because the
Company has no derivatives, this accounting pronouncement has no effect on
the Company's financial statements.

F-16

BOARD OF DIRECTORS AND MANAGEMENT
<S> <C>
Directors Corporate Headquarters

Ronald C. Davis 455 - 755 Burrard Street
Richard P. Ott Vancouver, British Columbia
William R. Wilson Canada V6Z 1X6
Dan Jondron (604) 669-6079 FAX: (604) 669-6042
Email: [email protected]

Executive Management Annual Meeting

Ronald C. Davis The Annual Meeting of the Company's
Chief Executive Officer and President stockholders is scheduled to be held
on Wednesday, June 14, 2000 at
William R. Wilson 2:00 p.m. at the Westin Bayshore,
Secretary 1601 West Georgia Street
Vancouver, British Columbia
Richard P. Ott Canada Y6G 3V4
Treasurer
Investor Relations Contacts at EWRX
Market Listing
Grant Farkes: [email protected]
The Company's common stock trades Peter Holt: [email protected]
on the OTCBB under the symbol (604) 669-6079
EWRX

Independent Auditors Transfer Agent & Registrar

Jackson & Rhodes P.C. Signature Stock Transfer, Inc.
8150 North Central Expressway Office in the Park
Suite 1700 14675 Midway Road, Suite 221
Dallas, TX 75206 Addison, Texas 75001

Legal Counsel

Moye, Giles, O'Keefe, Vermeire & For more information regarding the
Gorrell LLP Company, please visit our website at
1225 17th Street, 29th Floor EWRX.com
Denver, CO 80202

Holmes/Greenslade
Barristers & Solicitors
1440-1066 West Hastings Street
Vancouver, British Columbia
Canada V6E 3X1
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EWRX Internet Systems Inc.
#440-755 Burrard Street
Vancouver BC Canada V6Z 1X6
Tel: 604-669-6079
Fax: 604-669-6042