NEWGOLD INC, 10KSB, 2000-05-17

NEWGOLD INC
10KSB, 2000-05-17
AUTOMOTIVE REPAIR, SERVICES & PARKING

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U.S. Securities and Exchange Commission
Washington, D.C. 20549

FORM 10-KSB

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

For the Fiscal year ended January 31, 2000

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

For the transition period from __________ to __________

Commission file number 0-20722

NEWGOLD, INC.
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(Name of small business issuer in its charter)

Delaware 16-1400479
- ------------------------ --------------------
(State of other juris- (I.R.S. Employer
diction of incorporation Identification No.)
or organization)

14131 Midway Road, Suite 800, Addison, TX 75001 (972) 851-5434
- ----------------------------------------------- -------------------------
(Principal executive offices) (Zip code) Issuer's Telephone Number

Securities registered under Section 12(b) of the Exchange Act: None
----

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

Common Stock, par value $0.001 per share
----------------------------------------
(Title of Class)

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

Check if there is no disclosure of delinquent filers in response to
Item 405 of Regulation S-B is not contained in this form, and no disclosure will
be contained, to the best of the registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this Form 10-KSB
or any amendment to this Form 10-KSB [ ].

Issuer's revenues for its most recent fiscal year: $0.

Aggregate market value of the voting stock held by non-affiliates as of May 1,
2000: $42,942,703

Number of shares of Common Stock outstanding as of May 15, 2000: 42,942,703

Documents Incorporated by Reference: None.

Check whether the issuer has filed all documents and reports required
to be filed by Section 12, 13 or 15(d) of the Exchange Act after the
distribution of securities under a plan confirmed by a court. Yes No X
--- ---

Transitional Small Business Disclosure Format (check one): Yes No X
--- ---
<PAGE>

PART I

Item 1. Description of Business.

Statements contained herein that are not historical facts are
forward-looking statements as that term is defined by the Private Securities
Litigation Reform Act of 1995. The statements contain words such as "believes,"
"anticipates," "plans," "expects," "intends," "growth," "future,"
"opportunities," "goal," "strategy" and similar expressions and include
statements regarding the Company's strategy, investment opportunities, and
efforts to obtain funding commitments. Although the Company believes that the
expectations reflected in such forward-looking statements are reasonable, the
forward-looking statements are subject to risks and uncertainties that could
cause actual results to differ from those projected. The Company cautions
investors that any forward-looking statements made by the Company are not
guarantees of future performance and that actual results may differ materially
from those in the forward-looking statements. Factors that could cause actual
results to differ materially from those reflected in the forward-looking
statements include, but are not limited to, risks and uncertainties regarding
the performance of the Company's partner companies, the unproven nature of the
Company's business model, the risk that investment opportunities in target
companies meeting the Company's criteria may not be available upon terms
acceptable to the Company, if at all, the risk that the capital and other
resources that the Company will need to exploit its business model will not be
available, and the other risks discussed under Business--"Risk Factors" in this
report.

THE COMPANY

Newgold, Inc., a Delaware corporation (the "Company"), has been engaged
in the acquisition, development and exploration of gold-bearing properties in
the continental United States. The Company currently has placed its only
remaining property, the Relief Canyon Mine, located in Pershing County, Nevada,
on a care and maintenance status, and, on April 18, 2000, the Company executed a
contract for the sale of the remaining mining assets. The sale is expected to
close on or before June 15, 2000. See "Business--Recent Developments."

The Company no longer plans to pursue mine development operations. As
discussed further in this section and also under Item 6, Management's Discussion
and Analysis or Plan of Operation, Newgold, Inc. has recently embarked on a new
business strategy whereby the Company will become an Internet holding company
that invests in, and manages high-tech, Internet based, business-to-business,
supply-chain e-commerce companies. The Company's independent accountants have
included an explanatory paragraph in their report dated May 11, 2000, on the
Company's financial statements for the years ended January 31, 2000, indicating
substantial doubt about the Company's ability to continue as a going concern. If
the Company's new strategy is not successful, then the Company will have no
other recourse than to seek protection of the Federal Bankruptcy Courts.

The Company originally was incorporated as Newgold, Inc. under the laws of
Nevada on September 1, 1993. The Company began operations as Newgold, Inc., a
Delaware corporation, on November 21, 1996, on the effective date of a reverse
merger between itself and a company

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known as Warehouse Auto Centers. The Company's headquarters are located at 14131
Midway Road, Suite 800, Addison, TX 75001; and its telephone number is (972)
851-5434. All references to the "Company" refer to the merged entity operating
as Newgold, Inc.

For financial information regarding the Company, see "Item 7: Financial
Statements And Supplementary Data."

INTERNET INVESTMENT OPERATIONS

Newgold, Inc. has recently established itself as an Internet company
focused on investing in and developing business-to-business, or B2B, e-commerce
and application service providers, or ASPs, through the incubation of a
portfolio of what we call partner companies. Our goal is to become the premier
B2B e-commerce and ASP incubation company by creating an incubation environment
for a portfolio of partner companies that will enable them to emerge as
successful Internet firms withstanding the traditional tests for investment:
profitability and time. We believe that our sole focus on the B2B e-commerce
industry will allow us to capitalize rapidly on new opportunities and to attract
and develop leading B2B e-commerce companies

Our operating strategy is to integrate our partner companies into a
collaborative symbiotic business network providing partner companies core
services through the direct investment in companies and the creation of
strategic relationships. These key, functionally oriented core services are in
technology innovation and development; strategic sales and marketing; recruiting
and human resources; legal; and finance and accounting. The goal is to create an
incubation environment for portfolio companies that enables them to emerge in
the shortest time possible as successful Internet firms. We draw upon the
extensive management experience of Newgold's senior management team; the
expertise of our partner companies; and the talent provided by the members of
our Advisory Board. Current Advisory Board members come from such established
firms as Lycos, Nokia, EMC2, and Ernst and Young. We believe that building
successful B2B e-commerce companies enhances the ability of our collaborative
network to facilitate innovation and growth among our partner companies by
understanding the needs of each qualified start-up company.

B2B e-commerce is growing at a very rapid pace, thus creating
tremendous market opportunities for new emerging companies. Some recent examples
of B2B e-commerce growth projections include The Gartner Group's estimate that
United States e-commerce trade will grow to $3.9 trillion by 2003; Forrester
Research estimates such trade at $3.7 trillion, growing from a base of
approximately $50 billion as of 1998. As reported by Merrill Lynch, the number
of B2B exchanges supporting e-commerce has grown from 50 at December 1998 to 587
at February 2000. The number of B2B exchanges will continue to grow rapidly to
support the explosive growth in B2B e-commerce trade. We expect to focus on two
types of B2B e-commerce companies, which we call market makers and enabling
application service providers.

Market makers bring together corporations and dealers of products in
both buying and selling transactions, in a worldwide Internet marketplace. We
strive to find business solutions that reduce business process costs, enhance
productivity, and provide complete information on market

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availability and pricing for the global trading community. The end result for
all parties involved in the e-commerce transaction should be a more effective
and lower cost of commerce. Market makers can operate in a vertical manner,
typically in a specific industry or in a horizontal environment providing
specific goods and services across multiple industries.

Enabling application service providers sell software and services to
businesses engaged in e-commerce. Many businesses need assistance in designing
business practices to take advantage of the Internet and in building and
managing the technological infrastructure needed to support B2B e-commerce.

We have been very active since implementing our new business strategy
in February 2000. We have evaluated over 300 business plans and have generated
24 letters of intent. We have also moved our headquartered in the United States
from California to Dallas, Texas. We expect to continue to evaluate additional
acquisition opportunities in the United States. In addition, we plan to open
offices in London, England, Monaco and Singapore, which will focus on European
and Asia Pacific B2B e-commerce opportunities.

Prior to implementing our new strategy, we acquired an equity interest
in Business Web, Inc. (also known as Comercis.com.), an Internet company
specializing in the development of web sites for communities of like businesses
and the development of e-trade shows on the Internet for industries and
professional organizations. Our equity interest in Comercis consists of warrants
to purchase up to 3,132,794 shares of common stock of Comercis at a purchase
price of $3.00 per share. These warrants were acquired in connection with our
agreement to terminate a Plan of Reorganization and Merger Agreement entered
into with Comercis whereby Comercis was to be merged with our company.

Industry Overview

Business-to-business electronic commerce or B2B e-commerce refers to
that portion of electronic commerce that takes place between businesses. Unlike
B2C, or business-to-business-to-consumer e-commerce, B2B e-commerce emphasizes
supply chain integration, direct marketing over the web, and electronic
marketplaces. B2B e-commerce over the Internet can be as basic as a manufacturer
putting up a bare-bones Web site to let distributors securely order a handful of
products; it can be as complex as a distributor offering thousands of customers
company-specific pricing and content, complex product configuration tools and
near real-time access to inventory levels for its entire product line. Compared
with traditional electronic data interchange (EDI) systems that run across
private networks, Internet-based B2B e-commerce is seen as less of a challenge
to implement, especially for smaller customers and suppliers that cannot handle
EDI's cost and complexity.

In September 1999, Bear Stearns reported on which industries are
fertile territory for marketplaces to develop. Two of the characteristics they
identified were size and a fragmented supply chain. A marketplace needs to have
significant size to substantiate the effort required to build an e-commerce
business that aggregates data and facilitates transactions. A fragmented supply
chain is one where it is hard for buyers and sellers to find one another. An
intermediary

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conducting e-commerce can bring the two sides together and can help buyers
compare offerings. And when products, inventory levels and prices change
quickly, or product descriptions are complex, the intermediary can aggregate
such information and make it easier to search.

In another recent report, The Yankee Group indicated that on average,
companies are expected to purchase nearly 30 percent of goods and services
electronically by 2004. In certain industries, this figure is expected to move
as high as 50 percent.

Opportunities for Emerging B2B E-Commerce Companies

We believe that there are significant opportunities for companies that
can assist traditional businesses in using the Internet to create more efficient
markets and enable e-commerce. We focus on two types of B2B e-commerce
companies: market makers and enabling application service providers.

Market Makers. Market Makers bring together corporations and
dealers of products in both buying and selling transactions, in a
worldwide Internet marketplace. B2B e-commerce business solutions
reduce business process costs, enhance productivity, and provide
complete information on market availability and pricing for the global
trade community.

o Market makers enable more effective and lower cost commerce
for traditional businesses by providing access through the
Internet to a broader range of buyers and sellers. Market
makers typically operate in a specific industry or provide
specific goods and services across multiple industries. Market
makers tailor their business models to match a target market's
distinct characteristics. We refer to market makers operating
in a particular industry as vertical market makers, and to
market makers operating across multiple industries as
horizontal market makers.

o Business-to-business marketplaces earn money in a variety of
ways. Some sell advertising, although for many that is
becoming a less important piece of the revenue stream.
Matchmaking sites - those that gather requests for proposals
or requests for quotes - may charge sellers a finder's fee for
every buyer lead they pass on. Sites with a catalog component
take a markup on the items they sell, just as distributors do.
The typical range for markups in multivendor catalog sites is
5 percent to 15 percent, according to Bear, Stearns. Auction
and exchange sites typically charge buyers or sellers or both
a transaction fee.

Enabling Application Service Providers. Enabling application
service providers offer a new value proposition to customers, combining
packaged software applications, workflow management systems,
communications services, hardware, network infrastructure and IT
services which range from implementation to ongoing support services -
all in a single, bundled solution. ASPs are usually capable of
providing application solutions to customers at a lower cost than the
customers' internal resources. This is due in a large part to the
economies of scale they can primarily realize in lower

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labor management costs. Several characteristics make the overall ASP industry a
highly attractive investment environment:

o High Recurring Revenue Streams. Most ASPs that are
providing enterprise applications sign multi-year
contracts with customers. This inherently creates less
risk for an ASP to meet its revenue and earnings
forecasts.

o Sticky Customer Situations. Once deployed, a customer
becomes dependent on its ASP to configure, enhance,
manage and support both its enterprise applications and
corporate data. As a result a customer becomes
fundamentally entrenched with its ASP, making it
difficult for a customer switch to an internally managed
scenario or another ASP.

o ASPs Currently Have Significant Margin Expansion
Opportunities. Once a customer successfully deploys its
first application with an ASP and realizes the benefits
of the ASP model, ASPs will have a strong opportunity to
cross-sell additional application solutions to that
customer. Typically, sales and marketing costs of an
additional solution are a fraction of the original
solution; thus cross-selling produces both incremental
revenue and more profitable margin expansion. The second
margin expansion opportunity is the cross selling of
additional services. As customers evolve and grow their
businesses, a customer may require more bandwidth or
additional professional services. ASPs will also benefit
as their customers purchase additional seats or user
licenses. Finally, many ASPs are still early in their
lifecycle and have large fixed investments, such as
building data centers and client care organizations. As
ASPs experience rapid revenue growth over the next few
years, many ASPs will realize significant margin
expansion as they leverage their fixed cost structure.

o Expected Rapid Revenue Growth. The ASP industry continues
to be an early stage, rapid growth market. IDC expects
growth of the enterprise portion of the ASP market to
exceed 90% per annum over the next few years.

Our Solution and Strategy

Our strategy is to provide an incubation environment, designed to
nurture business-to-business, Internet-based start-ups from the conceptual stage
to an initial public offering or other liquidity event. Elements of our strategy
include:

o Focusing on investing in a portfolio of Internet start-up
companies engaged in the digital conversion of traditional
business supply chain models into global virtual trade
communities.

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o Optimizing the relationships between our partner companies by
creating a collaborative environment that focuses on
state-of-the-art technology, human capital, and the use of
innovative business solutions.

o Providing an investment medium that provides our strategic
partners with both funding and revenue opportunities.

We are business partners with each of our partner companies,
encouraging them to strive for success. We strive to understand the needs of
each the companies we invest in as a result of an extensive due diligence effort
that is performed for each investment. Our strategy is to provide operational
support in the following key, functionally oriented core services of technology
innovation and development; strategic sales and marketing; recruiting and human
resources; legal; and finance and accounting. We also intend to oversee the
business plan implementation of each partner company by providing a business
mentor who facilitates the implementation by use of the core services indicated
above.

Targeting Investment Opportunities

We currently utilize several methods to find or create potential
partner companies. Our expertise in the B2B e-commerce market has allowed us to
create and develop potential concepts on our own. We call such opportunities
"hatchings". We also receive many unsolicited requests of individuals or
companies regarding specific proposals for investment. Members of our Advisory
Board and our strategic partners also provide us potential investments that they
are specifically aware of from their daily business activities.

Acquiring Interests in Partner Companies

After we identify an attractive potential partner company, we negotiate
the acquisition of a significant interest in the company. As a condition to an
acquisition, we require representation on the company's board of directors to
ensure our ability to provide active guidance to the partner company. We
structure acquisitions to permit the partner company's management and key
personnel to retain an equity stake in the company. After acquiring interests in
partner companies, we frequently participate in their follow-on financings and
seek to increase our ownership positions.

Our team of senior internet and technology executives have leveraged
their 100+ years of combined experience to develop and implement a process by
which we can invest in the best business-to-business, e-commerce and application
service provider companies with the highest probability of success.

Our investment process is divided into several key sub-processes to
clearly focus on each individual component of what creates a successful
investment:

1. The Opportunity Discovery process:

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This process allows us to invest in companies that clearly
match our strategy and benefit our strategic pipeline partners'
business model and success.

2. The Assessment process:

With the optimal probability of a successful IPO or liquidity
event foremost on our mind, we apply a specific set of screening
criteria that assures a more educated and accurate choice for inclusion
into our portfolio.

3. The LOI/Term Sheet process:

The specific steps of this process insure the development of a
strong, mutual agreement between our company and the candidate team
and, more importantly, the agreement on the requirements to achieve
success.

4. The Due Diligence process:

Our Due Diligence process has been developed in a way that
creates a very collaborative environment, by which (1) supporting
information and documentation are shared without hesitation, and (2) a
detailed gap analysis of our partnership company is prepared to provide
a valuable roadmap for our partnership company in executing on their
business plan.

5. The Funding agreement process:

We have developed a unique funding process that eliminates the
roadblocks, which many times slows down or prevents the completion of
this agreement.

6. The Deployment process:

We dedicate a highly skilled and experienced managing director
(MD) to support each partnership company. The MD starts the company on
our unique Fast Start program, which accelerates the company's
execution of their business plan. The MD continually applies our
ongoing gap analysis process to judge progress, and leverages the
collaboration between portfolio partners to meet the ever-increasing
needs of a fast growing company.

Implementing the Strategy

In implementing our strategy, we leverage the collective knowledge and
experience of our partner companies, strategic partners and Advisory Board
members. Our Advisory Board will consist of more than 10 experienced executives
from various backgrounds who provide our network with strategic guidance, sales,
marketing and information technology expertise and industry contacts. Ideally,
we will own 40% or more of each of our partner companies, with management and
public shareholders owning the remaining interests; however, we believe that we

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can have significant influence at any ownership level.

Government Regulation

Our existing and future partner companies are and will be subject to
federal, state and local laws governing conduct of business on the Internet.
Legislative and regulatory proposals are under consideration that would regulate
certain aspects of the Internet, including online content, copyright
infringement, user privacy, taxation, access charges, liability for third-party
activities, and jurisdiction. In addition, various federal, state, local and
foreign governmental organizations are considering, and may consider in the
future, other legislative and regulatory proposals that would regulate certain
aspects of the Internet. For example, the U.S. Federal Trade Commission is
considering regulations regarding the collection and use of personal identifying
information obtained from individuals when accessing Web sites, with particular
emphasis on access by minors. The U.S. Congress is also considering legislation
that would address similar privacy issues. The European Union has recently
enacted several directives relating to the Internet, including directives that
regulate the distribution of certain prohibited materials, privacy, e-Commerce,
security, commercial piracy, consumer protection and taxation of transactions
completed over the Internet. Other areas of potential regulation include libel,
pricing, quality of products and services and intellectual property. The
continued growth and development of e-Commerce may prompt calls for more
stringent consumer protection laws that may impose additional burdens on those
companies conducting business online. The adoption of additional laws or
regulations may impair the growth of the Internet or create uncertainty in the
marketplace, which could result in a decrease the demand for our partner
companies' services and increase their cost of doing business.

A number of legislative proposals have been made in the United States
and by some European governments that would impose additional taxes on the sale
of goods and services over the Internet, and some states have taken measures to
tax Internet-related activities. Although the U.S. Congress recently placed a
three-year moratorium on state and local taxes on Internet access and
discriminatory taxes on electronic commerce, existing state or local laws were
expressly excepted from this moratorium. Once this moratorium is lifted, federal
or state taxes could be imposed on Internet commerce. This legislation, or other
attempts at regulating commerce over the Internet, could substantially increase
the costs incurred by our partner companies' customers when doing business over
the Internet, and as a result, materially adversely affect the demand for our
partner companies' services.

Competition

We may compete with our shareholders, partner companies, Advisory Board
members and strategic partners for Internet-related opportunities. These
shareholders, Advisory Board members and strategic partners may compete with us
to acquire interests in B2B e-commerce companies, which may give these companies
access to our business plan and knowledge about potential acquisitions. In
addition, we may compete with our partner companies to acquire interests in B2B
e-commerce companies, and our partner companies may compete with each other for
acquisitions or other B2B e-commerce opportunities. These elements of
competition may

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prevent potential investment companies from partnering with us and reduce our
ability to implement our Internet investment strategy.

We face competition from other capital providers including publicly
traded Internet companies, venture capital companies and large corporations.
Many of these competitors have greater financial resources and brand name
recognition than we do. These competitors may limit our opportunity to acquire
interests in new partner companies. If we cannot acquire interests in attractive
companies, our strategy to build a collaborative network of partner companies
may not succeed.

MINING OPERATIONS

The Relief Canyon Mine is an open-pit, heap leaching operation located
approximately 110 miles northeast of Reno, Nevada. The Company currently holds
50 unpatented mining claims. The mine is readily accessible by improved roads.
Water for mining and processing of operations is provided by two wells located
on the property in close proximity to the mine and processing facilities. Power
is provided by a local rural electric association and phone lines are present at
the mine site.

Background and History

The Relief Canyon gold deposit was discovered by Duval Corporation,
("Duval") in 1981. Lacana Mining, ("Lacana") purchased the property from Duval,
drilled additional holes to establish reserves, and commenced mining in 1984 as
an open-pit cyanide heap leach operation. In 1986, Pegasus Gold, Inc.
("Pegasus"), purchased the mine from Lacana, drilled additional holes for a
total of approximately 400 with approximately 120,000 linear feet to confirm
reserves, and mined a cumulative total of approximately 6.3 million tons of gold
ore containing an average of 0.035 ounces of gold per ton from 1986-1989.
Pegasus ceased mining activities in 1989 and began the reclamation process of
the mine site from 1990-1992.

In 1993, Pegasus sold the Relief Canyon Mine to its reclamation
contractor, J.D. Welsh & Associates ("Welsh"). Welsh continued to rinse the
heaps to detoxify them of their cyanide content and recovered minor amounts of
gold in the process. By December 1994, Welsh had completed detoxification of the
heaps and was required only to submit quarterly water quality reports to the
state of Nevada for the next five years.

On January 10, 1995, the Company purchased the mine from Welsh for
$500,000. The mine at that time consisted of 39 unpatented lode mining claims,
an empty building except for three carbon tanks and a boiler for carbon strip
solution, four detoxified leach pads, a preg pond for gold bearing solution, a
barren pond for solution from which gold had been removed, water rights, and
various permits. From acquisition through November 1997, the Company refurbished
the processing facilities by the purchase and installation of all equipment
required to process the gold bearing leach solution when the mine was returned
to production.

There also was a sub-lease (the "Santa Fe Lease") to fee simple real
property entered into

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between Welsh and Santa Fe Gold Company, which has merged with Newmont Gold
Company ("Santa Fe"). Welsh assigned the Santa Fe Lease to the Company at its
base annual lease payment of $12,500, plus an advance royalty payment of a
similar amount. The Santa Fe Lease required that Santa Fe consent to any
assignment. Santa Fe never consented formally to the assignment. Santa Fe
previously had accepted the Company's lease and royalty payments and it is the
Company's position that such acceptance constituted consent. Subsequent to the
signing of the contract for sale, the parties reduced the amount due Welsh to
$450,000 because of Welsh's inability to secure Santa Fe's acceptance of
assignment of the Santa Fe Lease.

On October 19, 1998, Santa Fe terminated the Welsh lease as a result of
the Company's inability to maintain the required insurance and the Company's
inability to post a reclamation bond for the property. The loss of the Santa Fe
property in no way adversely affects the Company's mining position.

If mining operations are not resumed, it is possible the Company may be
required to reclaim the mine. Reclamation consists of recontouring the four
heaps to a 3:1 slope, sale and removal of the building and its contents,
evaporation of all water in both ponds and burial of the building foundation and
floor within the ponds' liners under the soil contained in the pond birms.
Finally, native vegetation must be re-established in all areas of disturbance.
While it is the Company's position that sale of the building and its contents
will cover the costs of the remaining reclamation, it has established an
additional reserve of $50,500 for reclamation.

Repadre Capital Corporation ("Repadre") purchased a 3% NSR royalty,
that was allocated to two properties, from the Company for $500,000 during 1996
(the "Repadre royalty"). These funds were applied to the Company's ongoing
reserve confirmation and expansion program at the Relief Canyon Mine. Under the
terms of Repadre royalty, Repadre had the option to reallocate the Repadre
royalty to the Relief Canyon Mine. In 1997, Repadre purchased a 1% NSR royalty
on the Relief Canyon mine by payment of $300,000 to the Company. The Company has
recorded the total payyments received of $800,000 as deferred revenue.

Insurance

The business of gold mining is subject to certain types of risks,
including environmental hazards, industrial accidents, and theft. Prior to
suspending operations, the Company carried insurance against certain property
damage loss (including business interruption) and comprehensive general
liability insurance. While the Company maintained insurance consistent with
industry practice, it is not possible to insure against all risks associated
with the mining business, or prudent to assume that insurance will continue to
be available at a reasonable cost. The Company has not obtained environmental
liability insurance because such coverage is not considered by management to be
cost effective. The Company currently carries no insurance on any of its
properties due to the current status of the mine and the Company's current
financial condition.

Government Controls and Regulations

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As long as the Company retains control and has not divested itself of
the Relief Canyon Mine and any liability related thereto, the Company is subject
to extensive governmental controls and regulations that are subject to amendment
from time to time. The Company is unable to predict what additional legislation
or amendments may be proposed that might affect care and maintenance of the mine
or the time at which any such proposals, if enacted, might become effective.
Such legislation or amendments, however, could require increased capital and
operating expenditures and could prevent or delay divesture of the mine by the
Company.

Outlined below are some of the more significant aspects of governmental
controls and regulations that materially affect the Company's interests in the
mine.

Regulation of Mining Activity

The Relief Canyon Mine, including care and maintenance, exploration,
development and production activities, is subject to environmental laws,
policies and regulations. These laws, policies and regulations regulate, among
other matters, emissions to the air, discharges to water, management of waste,
management of hazardous substances, protection of natural resources, protection
of endangered species, protection of antiquities and reclamation of land. The
mine also is subject to numerous other federal, state and local laws and
regulations. At the federal level, the mine is subject to inspection and
regulation by the Division of Mine Safety and Health Administration of the
Department of Labor ("MSHA") under provisions of the Federal Mine Safety and
Health Act of 1977. The Occupation and Safety Health Administration ("OSHA")
also has jurisdiction over certain safety and health standards not covered by
MSHA. Mining operations and all future exploration and development will require
a variety of permits. Although the Company believes the permits can be obtained
in a timely fashion, permitting procedures are complex, costly, time consuming
and subject to potential regulatory delay. The Company does not believe that
existing permitting requirements or other environmental protection laws and
regulations would have a material adverse effect on its ability to dispose of
the mine. However, the Company cannot be certain that future changes in laws and
regulations would not result in significant additional expenses, capital
expenditures, restrictions or delays associated with the divestiture of the
Company's property. The Company cannot predict whether it will be able to renew
its existing permits or whether material changes in existing permit conditions
will be imposed. Non-renewal of existing permits or the imposition of additional
conditions could have a material adverse effect on the Company's ability to
dispose of Relief Canyon.

The State of Nevada, where the Company's mine property is located,
adopted the Mined Land Reclamation Act (the "Nevada Act") in 1989 which
established design, operation, monitoring and closure requirements for all
mining facilities. The Nevada Act has increased the cost of designing,
operating, monitoring and closing mining facilities and could affect the cost of
operating; monitoring and closing existing mine facilities. The State of Nevada
also has adopted reclamation regulations pursuant to which reclamation plans
have been prepared and financial assurances established for existing facilities.

Environmental Regulations

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Legislation and implementation of regulations adopted or proposed by
the United States Environmental Protection Agency ("EPA"), the BLM and by
comparable agencies in various states directly and indirectly affect the mining
industry in the United States. These laws and regulations address the
environmental impact of mining and mineral processing, including potential
contamination of soil and water from tailings discharges and other wastes
generated by mining companies. In particular, legislation such as the Clean
Water Act, the Clean Air Act, the Federal Resource Conservation and Recovery Act
("RCRA"), the Environmental Response, Compensation and Liability Act and the
National Environmental Policy Act require analysis and/or impose effluent
standards, new source performance standards, air quality antimycin standards and
other design or operational requirements for various components of mining and
mineral processing, including gold-ore mining and processing. Such statutes also
may impose liability on the Company for remediation of waste it has disposed.

Gold mining and processing operations by another entity would generate
large quantities of solid waste, which is subject to regulation under the RCRA
and similar state laws. The majority of the waste, which was produced by such
operations, is "extraction" waste that EPA has determined not to regulate under
RCRA's "hazardous waste" program. Instead, the EPA is developing a solid waste
regulatory program specific to mining operations under the RCRA. Of particular
concern to the mining industry is a proposal by the EPA entitled "Recommendation
for a Regulatory Program for Mining Waste and Materials Under Subtitle D of the
Resource Conservation and Recovery Act" ("Strawman II") which, if implemented,
would create a system of comprehensive Federal regulation of the entire mine
site. Many of these requirements would be duplicates of existing state
regulations. Strawman II as currently proposed would regulate not only mine and
mill wastes but also numerous production facilities and processes which could
limit internal flexibility in operating a mine. To implement Strawman II the EPA
must seek additional statutory authority, which is expected to be requested in
connection with Congress' reauthorization of RCRA.

The Company also is subject to regulations under (i) the Comprehensive
Environmental Response, Compensation and Liability Act of 1980 ("CERCLA" or
"Superfund") which regulates and establishes liability for the release of
hazardous substances and (ii) the Endangered Species Act ("ESA") which
identifies endangered species of plants and animals and regulates activities to
protect these species and their habitats. Congress is considering revisions to
"CERCLA" and "ESA"; the impact of these revisions on the Company is not clear at
this time.

Moreover, the Clean Air Act, as recently amended, mandates the
establishment of a fderal air permitting program, identifies a list of hazardous
air pollutants, including various metals and cyanide, and establishes new
enforcement authority. The EPA has published final regulations establishing the
minimum elements of state operating permit programs. The states had until
November 15, 1993 to submit their permit programs to the EPA for review and
approval. Until the state regulations are promulgated and approved by the EPA,
the full impact of the new regulations on the Company cannot accurately be
predicted.

In addition, the Company is required to mitigate long-term
environmental impacts by stabilizing, contouring, resloping, and revegetating
various portions of a site. While a portion of

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<PAGE>

the required work was performed concurrently with prior operations, completion
of the environmental mitigation occurs once removal of all facilities has been
completed. These reclamation efforts are conducted in accordance with detailed
plans which have been reviewed and approved by the appropriate regulatory
agencies. The Company has posted security bonds and has made provision to cover
the estimated costs of such reclamation as required by permit.

The Company believes that its care and maintenance operation, as it
exists today, is in substantial compliance with federal and state regulations
and that no further significant capital expenditures for environmental control
facilities will be required.

Competition

The Company has competed with other mining companies in connection with
the acquisition of capital, mining claims and leases on precious metal
properties. There is significant competition for the limited number of precious
metals acquisition opportunities in the continental United States. As a result
of this competition, much of which is with companies with greater financial
resources, the Company is unable to continue to acquire attractive mining
properties and capital on terms it considers acceptable.

EMPLOYEES

As of May 15, 2000, the Company had a total of 7 full-time employees.
None of the Company's employees are subject to any collective bargaining
agreements or union affiliations. Relations between management and employees are
considered to be good.

RISK FACTORS

We have no relevant Internet operating history upon which you may
evaluate us.

Although we were formed in September 1993, we have only recently
adopted our new business strategy of investing in, and managing high-tech,
Internet based, business-to-business, supply-chain e-commerce companies.
Accordingly, we have no operating history upon which you may evaluate our new
business and prospects. The partner companies that we intend to invest in are
among the many companies that have entered into the emerging
business-to-business e-commerce market. Many of those companies are in the early
stages of their development. Our business and prospects must be considered in
light of the risk, expense and difficulties frequently encountered by companies
in early stages of development, particularly companies in new and rapidly
evolving markets such as business-to-business e-commerce. If we are unable to
effectively allocate our resources to acquire and help grow those companies, our
stock price may be adversely affected and we may be unable to execute our
strategy of developing a collaborative network of partner companies.

The success of our Internet business will depend upon the performance
of our partner companies, which is uncertain.

Economic, governmental, industry and internal company factors outside
our control will

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affect each of our future partner companies. If those companies do not succeed,
the value of our assets and the price of our common stock could decline. The
material risks relating to our future partner companies include any future lack
of the widespread commercial use of the Internet, which may prevent those
companies from succeeding; and intensifying competition for the products and
services e-commerce companies offer, which could lead to the failure of some of
those companies.

Our Internet business model is unproven.

Our strategy is based on an unproven business model. Our business model
depends on the willingness of companies to join our collaborative network and
the ability of the collaborative network to assist our partner companies. Our
business model depends on our ability to share information within our network of
partner companies. If competition develops among our partner companies, we may
be unable to fully benefit from the sharing of information within our network of
partner companies. If we cannot convince companies of the value of our business
model, our ability to attract new companies will be adversely affected and our
strategy of building a collaborative network may not succeed.

We face competition from other potential acquirers of
business-to-business e-commerce companies.

We face competition from other capital providers including publicly
traded Internet companies, venture capital companies and large corporations.
Many of these competitors have greater financial resources and brand name
recognition than we do. These competitors may limit our opportunity to acquire
interests in new partner companies. If we cannot acquire interests in attractive
companies on reasonable terms, our strategy to build a collaborative network of
partner companies may not succeed.

We have incurred significant operating losses and have a large
accumulated deficit.

We have incurred significant operating losses from our mining business
in each fiscal quarter since our inception. For the years ended January 31, 1999
and 2000, our operating losses were $661,667 and $770,680, respectively, and, at
January 31, 2000, we had an accumulated deficit of $10,535,717. These losses are
continuing, though at a higher rate, and will likely continue in the near
future. Even though we have changed the focus of our business, we will continue
to carry this accumulated deficit and can offer you no assurances that we will
ever be able to achieve profitable operations.

We may have difficulty raising the money we need in the future.

We will likely be required to obtain additional financing in both the
short term and the long term to successfully carry out our new business plan. We
currently have no committed sources of additional capital. We can offer no
assurances that additional funds can be raised. In addition, even if we find
outside funding sources, we may be required to issue to such outside sources
securities with greater rights than those currently possessed by holders of our
common stock. We may also be required to take other actions that may lessen the
value of our common

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stock, including borrowing money on terms that are not favorable to us.

Our strategy of expanding our business through acquisitions of other
businesses and technologies presents special risks.

We intend to expand through the acquisition of businesses,
technologies, products and services from other businesses. Acquisitions involve
a number of special problems, including:

o Difficulty integrating acquired technologies, operations, and
operational resources as personnel with our existing management
tries to oversee business; larger operations;

o Strain on our managerial and operational resources as our
management tries to oversee larger operations;

o Diversion of our management's attention in connection with
negotiating the acquisitions and integrating the assets;

o Exposure to unforeseen liabilities of acquired companies;

o The requirement to record additional future operating costs for
the amortization of good will and other intangible assets, which
amounts could be significant;

o Potential issuance of securities in connection with acquisitions,
which securities dilute the holders of our currently outstanding
securities; and

o The need to incur additional debt.

We may not be able to successfully address these problems. Moreover,
our future operating results will depend to a significant degree on its ability
to successfully manage growth and integrate acquisitions. In addition, many of
our investments are in early-stage companies with limited operating histories
and limited or no revenues. We may not be able to successfully develop these
young companies.

We may not have opportunities to acquire interests in additional
companies.

We may be unable to identify companies that complement our strategy,
and even if we identify a company that complements our strategy, we may be
unable to acquire an interest in the company for many reasons, including:

o A failure to agree on the terms of the acquisition, such as the amount or
price of our acquired interest.

o Incompatibility between us and management of the company;

o Competition from other acquirors of business to business
e-commerce companies.

o A lack of capital to acquire an interest in the company.

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<PAGE>

o The unwillingness of the company to partner with us.

If we cannot acquire interests in attractive companies, our strategy to
build a collaborative network of partner companies may not succeed.

Our resources and our ability to manage newly acquired partner
companies may be strained as we acquire more business-to-business e-commerce
companies.

We plan to acquire significant interests in business-to-business
e-commerce companies that complement our business strategy. These acquisitions
may place a significant strain on our resources, ability to manage such
companies and ability to integrate them into our collaborative network. Future
acquisitions are subject to the following risks:

o Our acquisitions may cause a disruption in our ongoing support of
our partner companies, distract our management and other resources
and make it difficult to maintain our standards, controls and
procedures.

o We may acquire interests in companies in business-to-business
e-commerce markets in which we have little experience.

o We may not be able to facilitate collaboration between all of the
companies that we acquire.

o To fund future acquisitions we may be required to incur debt or
issue equity securities, which may be dilutive to existing
shareholders.

We may have to incur the time and expense of registration under the
Investment Company Act of 1940 or take significant steps to avoid becoming
subject to regulation under that Act.

Our business plan is to actively engage in the business of
business-to-business e-commerce through a network of majority-owned subsidiaries
and companies that we will be considered to "control." Under the Investment
Company Act, a company is considered to control another company if it owns more
than 25% of that company's voting securities. A company may be required to
register as an investment company if more than 45% of its total assets consists
of, and more than 45% of its income/loss and revenue attributable to it over the
last four quarters is derived from, ownership interests in companies it does not
control. Because many of our future partner companies may not be majority-owned
subsidiaries, and because we may own 25% or less of the voting securities of
some of our future partner companies, we may become subject to regulation under
the Investment Company Act unless we take precautionary steps. For example, in
order to avoid having excessive income from "non- controlled" interests, we may
not sell minority interests we would otherwise want to sell or we may have to
generate non-investment income by selling interests in partner companies that we
are considered to control. We may also need to ensure that we retain more than
25% ownership interests in our future partner companies after any equity
offerings. In addition, we may have to acquire additional income or loss
generating majority-owned or controlled interests that we might not otherwise
have acquired or

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<PAGE>

may not be able to acquire "non- controlling" interests in companies that we
would otherwise want to acquire.

We depend on certain important employees, and the loss of any of those
employees may harm our business.

Our performance will be substantially dependent on the performance of
our executive officers and other key employees, in particular, Jamie Cutburth,
our chairman, president and chief executive officer, Jes Engelmann, our chief
operating officer, and Jim Kluber, our chief financial officer. The familiarity
of these individuals with the Internet industry makes them especially critical
to our success. In addition, our success is dependent on its ability to attract,
train, retain and motivate high quality personnel, especially for our management
team. The loss of the services of any of our executive officers or key employees
may harm our business. Our success also depends on its continuing ability to
attract, train, retain, and motivate other highly qualified technical and
managerial personnel. Competition for such personnel is intense.

The success of some of our future partner companies will also depend on
their having highly trained technical and marketing personnel. Our partner
companies will need to continue to hire additional personnel as their businesses
grow. A shortage in the number of trained technical and marketing personnel
could limit the ability of our partner companies to increase sales of their
existing products and services and launch new product offerings.

Our growth could be impaired by limitations on our and our partner
companies' access to the capital markets.

We are dependent on the capital markets for access to funds for
acquisitions and other purposes. Our future partner companies will also be
dependent on the capital markets to raise capital for their own purposes. To
date, there have been a substantial number of Internet-related initial public
offerings and additional offerings are expected to be made in the future. If the
market for Internet-related companies and initial public offerings were to
weaken for an extended period of time, our ability and the ability of our
partner companies to grow and access the capital markets will be impaired.

We may be unable to obtain maximum value for our future partner company
interests.

We expect to acquire significant positions in our partner companies.
While we generally do not anticipate selling our interests in those companies,
if we were to divest all or part of an interest in a partner company, we may not
receive maximum value for this position. If we elect to sell an interest in
partner companies with publicly traded stock, we may be unable to sell our
interest at then-quoted market prices. Furthermore, for those partner companies
that do not have publicly-traded stock, the realizable value of our interests
may ultimately prove to be lower than the carrying value currently reflected in
our consolidated financial statements.

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<PAGE>

The success of our partner companies will depend on the development of
the business-to-business e- commerce market, which is uncertain.

Many of our future partner companies will rely on the Internet for the
success of their businesses. The development of the e-commerce market is in its
early stages. If widespread commercial use of the Internet does not develop, or
if the Internet does not develop as an effective medium for providing products
and services, our partner companies may not succeed.

Our long-term success depends on widespread market-acceptance of
business-to-business e- commerce. A number of factors could prevent such
acceptance, including the following:

o The unwillingness of businesses to shift from traditional
processes to business to business e-commerce processes;

o The necessary network infrastructure for substantial growth in
usage of business to business e-commerce may not be adequately
developed;

o Increased government regulation or taxation may adversely affect
the viability of business to business e-commerce;

o Insufficient availability of telecommunication services or changes
in telecommunication services could result in slower response
times for the users of business to business e-commerce; and

o Concern and adverse publicity about the security of business to
business e-commerce transactions.

Concerns regarding security of transactions and transmitting
confidential information over the Internet may have an adverse impact on our
business.

We believe that concern regarding the security of confidential
information transmitted over the Internet prevents many potential customers from
engaging in online transactions. If we invest in partner companies that depend
on such transactions but do not add sufficient security features to their
product releases, those partner companies' products may not gain market
acceptance or there may be additional legal exposure to them.

Despite the measures some of our partner companies may take, the
infrastructure of each of them will be potentially vulnerable to physical or
electronic break-ins, viruses or similar problems. If a person circumvents the
security measures imposed by any one of those companies, he or she could
misappropriate proprietary information or cause interruption in operations of
the company. Security breaches that result in access to confidential information
could damage the reputation of any one of our future partner companies and
expose the company affected to a risk of loss or liability. Some companies may
be required to make significant investments and efforts to protect against or
remedy security breaches. Additionally, as e-commerce becomes more widespread,
our future partner companies' customers will become more concerned about
security. If our future partner companies are unable to adequately address these
concerns, they may be unable to sell their goods and services.

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<PAGE>

Rapid technological changes may prevent our partner companies from
remaining current with their technical resources and maintaining competitive
product and service offerings.

The markets in which our future partner companies will operate are
characterized by rapid technological change, frequent new product and service
introductions and evolving industry standards. Significant technological changes
could render their existing Web site technology or other products and services
obsolete. The e-commerce market's growth and intense competition exacerbate
these conditions. If our future partner companies are unable to successfully
respond to these developments or do not respond in a cost-effective way, our
business, financial condition and operating results will be adversely affected.
To be successful, those companies must adapt to their rapidly changing markets
by continually improving the responsiveness, services and features of their
products and services and by developing new features to meet the needs of their
customers. Our success will depend, in part, on our partner companies' ability
to license leading technologies useful in their businesses, enhance their
existing products and services and develop new offerings and technology that
address the needs of their customers. Our partner companies will also need to
respond to technological advances and emerging industry standards in a cost-
effective and timely manner.

Government regulations and legal uncertainties may place financial
burdens on our business and the businesses of our partner companies.

As of the date of this filing, there were few laws or regulations
directed specifically at e-commerce. However, because of the Internet's
popularity and increasing use, new laws and regulations may be adopted. These
laws and regulations may cover issues such as the collection and use of data
from Web site visitors and related privacy issues, pricing, content, copyrights,
online gambling, distribution and quality of goods and services. The enactment
of any additional laws or regulations may impede the growth of the Internet and
business-to-business e-commerce, which could decrease the revenue of our partner
companies and place additional financial burdens on our business and the
businesses of our future partner companies.

Laws and regulations directly applicable to e-commerce or Internet
communications are becoming more prevalent. For example, the United States
Congress recently enacted laws regarding online copyright infringement and the
protection of information collected online from children. Although these laws
may not have a direct adverse effect on our business or those of our partner
companies, they add to the legal and regulatory burden faced by
business-to-business e-commerce companies.

We may issue securities, which may dilute current shareholders'
ownership interest.

In the future, we may issue securities to raise cash for acquisitions,
and we may also pay for interests in additional partner companies by using a
combination of cash and our common stock, or just our common stock. Any of these
events may dilute our shareholders' ownership interest in us.

Our common stock price may become highly volatile.

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<PAGE>

The trading prices of many technology and Internet-related company
stocks have experienced significant price and volume fluctuations in recent
months. These fluctuations often have been unrelated or disproportionate to the
operating performance of these companies. Any negative change in the public's
perception of the prospects of Internet or e-commerce companies could depress
our stock price regardless of our results.

The following factors will add to our common stock price's volatility:

o Actual or anticipated variations in our quarterly results and
those of our future partner companies;

o New sales formats or new products or services offered by us, our
future partner companies and their competitors;

o Changes in our financial estimates and those of our future partner
companies by securities analysts;

o Changes in the size, form or rate of our acquisitions;

o Conditions or trends in the Internet industry in general and the
business to business e-commerce industry in particular;

o Announcements by our future partner companies and their
competitors of technological innovations;

o Announcements by us or our partner companies or our competitors of
significant acquisitions, strategic partnerships or joint
ventures;

o Changes in the market valuations of our future partner companies
and other Internet companies;

o Our capital commitments;

o Negative changes in the public's perception of the prospects of
e-commerce companies; o General economic conditions such as a
recession, or interest rate or currency rate fluctuations;

o Additions or departures of our key personnel and key personnel of
our future partner companies; and

o Additional sales of our securities.

Many of these factors are beyond our control. These factors may
decrease the market price of our common stock, regardless of our operating
performance. In the past, securities class action litigation has often been
brought against a company following periods of volatility in the

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<PAGE>

market price of its securities. We may in the future be the target of similar
litigation. Securities litigation could result in substantial costs and divert
management's attention and resources, which could have a material adverse effect
on our business, operating results and financial condition.

A significant number of our shares that are not currently eligible for
sale in the market will become eligible in the future and may impact the market
price of our common stock.

There are 42,942,703 shares of our common stock issued and outstanding
as of the date of this filing. Of these shares, approximately 17,000,000 shares
are freely tradable without restriction. The balance of the shares is restricted
from resale, and none of these restricted shares may currently be sold under SEC
Rule 144. These shares may become eligible for sale at such time as may be
permitted under the provisions of Rule 144. We can make no prediction as to the
effect, if any, that future sales of additional shares of common stock or the
availability of additional shares for sale will have on the market price of the
common stock. Nevertheless, the possibility that substantial amounts of our
common stock may be sold in the public market may adversely affect prevailing
market prices for the common stock.

FORWARD LOOKING STATEMENTS. A number of the matters and subject areas discussed
in the foregoing "Risk Factors" section and elsewhere in this Annual Report that
are not historical or current facts deal with potential future circumstances and
developments. The discussion of such matters and subject areas is qualified by
the inherent risks and uncertainties surrounding future expectations generally,
and also may materially differ from the Company's actual future experience
involving any one or more of such matters and subject areas. The Company has
attempted to identify, in context, certain of the factors that it currently
believes may cause actual future experience and results to differ from the
Company's current expectations regarding the relevant matter or subject area.
The operation and results of the Company's business also may be subject to the
effect of other risks and uncertainties in addition to the relevant qualifying
factors identified elsewhere in the foregoing "Risk Factors" section, including,
but not limited to, general economic conditions in the Internet industry, access
to sufficient debt or equity capital to meet the Company's operating and
financing needs, and other risks and uncertainties described from time to time
in the Company's reports filed with the Securities and Exchange Commission.

RECENT DEVELOPMENTS

In April 2000, the Company announced that it has entered into an
agreement for the sale of its Relief Canyon Mining Project to an entity owned by
A. Scott Dockter, a former officer and director of the Company and a current
significant shareholder of the Company, in exchange for the payment of $960,000
and the surrender of $960,000 worth of the Company's Common Stock based on the
average closing bid price of the Company's Common Stock during the 10-day period
prior to closing. The sale is expected to close in June 2000. A separate
independent valuation of the Company's Relief Canyon assets will be performed to
insure that at minimum a fair market value is received.

Item 2. Description of Properties.

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The Company's corporate office is located at 14131 Midway Road, Suite
800, Addison, Texas. The Company leases an aggregate of 3,000 square feet of
office space at this address at a monthly rental of approximately $10,000 per
month. The rental rate includes phone, receptionist and other general office
services in the monthly rent.

The Company also owns the Relief Canyon Mine. See "Business--Mining
Operations."

Item 3. Legal Proceedings.

On December 3, 1996, plaintiff Roy Christiansen filed a breach of
contract action against the Company in the Second Judicial District, Washoe
County, Reno, Nevada. Plaintiff alleged that he was owed $250,000 relating to
recovery of his investment in a property subsequently acquired by the Company.
It was discovered during the pendancy of this action that a former
Secretary-Treasurer of Newgold, Inc., (prior to the Company going public through
its merger with Warehouse Auto) signed a contract in 1994 which obligated the
Company, Newgold, Inc. (the Delaware Corporation) to pay $250,000 to
Christiansen, a former developer of the Golden Asset project which Newgold
purchased and is located in Helena Montana. This obligation was unknown to the
current principals of the Company. During the course of litigation, Plaintiff
moved the court for summary judgment based on this signed agreement; this motion
was granted and a judgment for $250,000 was entered against the Company.
Subsequent to January 31, 2000, the Company paid this judgment through the
issuance of 350,000 shares of Common Stock to a shareholder that acquired an
interest in this judgment.

On May 7, 1997 a judgment was entered against the Company on behalf of
the plaintiff, Roger Primm, in the Second Judicial District, Washoe County,
Reno, Nevada. The underlying lawsuit sought repayment of a loan made by the
plaintiff to the Company; loan proceeds were used for development purposes at
the Company's mining properties. Subsequent to January 31, 2000, the Company
paid this judgment through the issuance of 300,000 shares of Common Stock to a
shareholder that acquired the interest in this judgment.

On June 24, 1998 the Company's former Reno landlord, Bedford
Properties, initiated an unlawful detainer action against the Company for rents
owed with regard to the Company's offices in Reno, Nevada. The parties
stipulated to a judgment of $40,000 for all past and future rents owed and this
judgment was entered against the Company on October 23, 1998 in the Second
Judicial District, Washoe County, Reno, Nevada.

On March 11, 1998, one of the Company's former consulting firms, JBR
Consultants, instituted a suit against the Company for sums due under a
consultant engineering contract. On August 19, 1998 the court for the Second
Judicial District, Washoe County, Reno, Nevada, entered a default judgment
against the Company for $28,815. During the fiscal year ended January 31, 2000,
the outstanding balance of the judgment was paid down to approximately $815.

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

None.

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PART II

Item 5. Market for Common Equity and Related Stockholder Matters.

The Company's Common Stock is listed on the NASD Electronic Bulletin
Board and trades under the symbol "NGLD." As of May 15, 2000, there were 889
holders of record of the Common Stock

The following table sets forth the high and low bid prices for the
Common Stock, as reported by the NASD's Electronic Bulletin Board for the
quarters indicated. The prices set forth represent quotes between dealers and do
not include commissions, mark-ups or mark-downs, and may not represent actual
transactions.

High Bid Low Bid
-------- -------
Fiscal Quarter Ended:
---------------------

April 30, 1998 0.375 0.375
July 31, 1998 0.125 0.125
October 31, 1998 N/A N/A
January 31, 1999 0.07 0.07
April 30, 1999 0.46 0.46
July 31, 1999* 0.70 0.64
October 31, 1999 0.67 0.24
January 31, 2000 0.44 0.115

*After the effect of a 3 for 2 stock split.

The Company has paid no cash dividends to date on its Common Stock. The
Company anticipates for the foreseeable future its earnings, if any, will be
retained for use in its business and that no cash dividends will be paid on the
Common Stock.

Item 6. Management's Discussion and Analysis or Plan of Operation.

The following discussion should be read in conjunction with, and is
qualified by reference in its entirety by, the financial statements and notes
thereto included elsewhere in this report.

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<PAGE>

of future performance and that actual results may differ materially from those
in the forward-looking statements. Factors that could cause actual results to
differ materially from those reflected in the forward-looking statements
include, but are not limited to, risks and uncertainties regarding the
performance of the Company's partner companies, the unproven nature of the
Company's business model, the risk that investment opportunities in target
companies meeting the Company's criteria may not be available upon terms
acceptable to the Company, if at all, the risk that the capital and other
resources that the Company will need to exploit its business model will not be
available, and the other risks discussed under Business--"Risk Factors" in this
report.

The Company was engaged primarily in the exploration and development of
mining properties. The Company is the result of a merger between a Chapter 11
bankrupt shell, Warehouse Auto Centers, Inc. (WAC) and Newgold, Inc., a Nevada
Corporation, (NGNV) pursuant to a Plan of reorganization approved by the U.S.
Bankruptcy Court as of November 21, 1996. For accounting purposes, under the
terms of the Merger, NGNV was treated as the acquirer. Accordingly, the
historical financial statements prior to November 21, 1996 are those of NGNV and
do not reflect any financial information of WAC as a separate entity. In
addition, under the terms of the Merger, NGNV's fiscal year was changed from
December 31 to January 31. Hence, the comparative financial information is for
thirteen months ended January 31, 1997 and 12 months for the years ended January
31, 1999 and January 31, 2000.

The Company was engaged in the business of acquiring dormant, potential
gold producing properties located in the continental United States and of
developing such properties into commercial gold mining operations. Considering
the present depressed gold market, the Company's Board of Directors has approved
plans for the Company to sell its remaining gold mining assets.

Newgold, Inc. has recently embarked on a new business strategy whereby
the Company will become an Internet holding company that invests in, and manages
high-tech, Internet based, business-to-business, supply-chain e-commerce
companies.

Plan of Operation

Subsequent to January 31, 2000, the Company began to implement its new
business strategy . Accordingly, the Company has begun to hire executives and
professional staff familiar with such companies. While no specific transactions
have closed as of the date of this filing, the operating expenses of the Company
have increased substantially since January 31, 2000 and are expected to continue
to increase in order to implement its new business strategy.

The new business strategy will require additional capital to be raised,
as current working capital is not sufficient to fund operations for the
remainder of the current fiscal year. Each new investment that the Company makes
will generally require additional capital from $500,000 to $5,000,000; such
amounts would typically be funded in the respective investment over a one to two
year period.

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The Company does not conduct research and development per se, but does
expend considerable effort to source viable investment opportunities. Currently
most employees are utilized in this effort. As investments are made, some of the
current management employees will become actively involved with overseeing our
investments in partner companies. Current plans are for the company to have
between 20 and 30 employees; the timing of the hiring of any additional
employees is dependent on how successful we are at finding qualified
investments.

Funding will be required for investments and to cover operating
expenses. Subsequent to January 31, 2000 the Company has raised $1.1 million in
this regard. Additional funding is currently required to continue to implement
the Internet investment strategy.

As of the date of this filing, the Company has derived no significant
revenue from its operations. As a mine owner, and until the mining assets are
sold, the Company's capital requirements have been and will continue to be
significant. The Company has been dependent primarily on the private placements
of its securities as its sole source of funding its operations.

Financial Condition of the Company as of January 31, 2000

As of January 31, 2000, the Company had $2,163 in cash and a negative
working capital of $1,354,924. If the Company were to attempt to continue
pursuing mining operations, the Company would require approximately $2.5 million
in additional working capital above the current working capital deficiency to
bring the mine into full production. Since January 1998, the Company had pursued
several possible funding opportunities including the sales of royalties on other
gold properties and on industrial minerals. As the Company has been unable to
obtain additional financing, it was required to curtail its development plans in
November 1997 and cease operations except for care and maintenance of the Relief
Canyon Mine. The Company is no longer continuing its efforts to obtain funding
for its mining operations.

Currently the Company is attempting to obtain funding for its Internet
investment operations. Subsequent to January 31, 2000, the Company raised
approximately $1.1 million based on its new operating strategy and is continuing
efforts to raise additional capital for future investments and to fund current
operating expenses. There can be no assurance that any of such opportunities
will result in actual funding or that additional financing will be available
when needed, on commercially reasonable terms, or at all. The Company's
independent accountants have included an explanatory paragraph in their report
on the Company's financial statements for the year ended January 31, 2000,
indicating substantial doubt about the Company's ability to continue as a going
concern.

26
<PAGE>

Results of Operations

For the year ended January 31, 2000, operating expenses, which consist
of general and administrative expenses, exploration costs and other operating
charges were approximately $770,700 as compared to approximately $661,700 for
the year ended January 31, 1999.

Exploration and evaluation expenses for the year ended January 31, 2000
were approximately $45,000 as compared to exploration expenses of approximately
$153,000 for year ended January 31, 1999. A credit of $25,000 for the
reclamation reserve for Washington Gulch Mine, which was sold in July 1998,
partially offset expense recorded for options and geological surveys of other
mining properties of $92,800. This expense amount included $55,000 for an option
payment on a bentonite mine that was recorded in exchange for 125,000 shares of
Company common stock.

General and administrative expenses were approximately $714,300 for the
year ended January 31, 2000 versus approximately $508,600 for the year ended
January 31, 1999. Officer salaries for the year ended January 31, 2000 were
$247,250 versus $265,750 for the year ended January 31, 1999. Legal and
professional expenses for the year ended January 31, 2000 were $275,324, and
included $12,155 related to the audits and SEC filings of the Company. Legal and
professional expenses for the year ended January 31, 1999 were $19,238 and
included $13,060 related to the audits and SEC filings for the Company.

Liquidity and Capital Resources

The Company has financed most of its operations principally through
private placements of the Company's common stock.

In April 1998 the Company issued 5,616,977 shares to investors and
brokers who had contributed $548,000 from a Regulation S offering at $.10 per
share. Funds of approximately $229,000 were distributed by the investment banker
directly to lien holders of Relief Canyon Mine and approximately $62,000 was
distributed in commissions and fees. The balance of approximately $257,000 was
remitted to the Company for operating expenses.

27
<PAGE>

On August 31, 1995, the Company granted to Edward Mackay ("Mackay") a
one-year option (the "Option") to purchase 40% of NGNV in exchange for a $50,000
option payment (the "Option Payment") and the contribution of the Washington
Gulch Mine located in Montana. On January 1, 1996, in exchange for Mackay
arranging a $350,000 debt financing for the Company, the Option was amended (the
"Amendment") and exercised whereby the $50,000 Option Payment was converted into
a promissory note granted to Mackay and Mackay would receive 3.8 million shares
of Common Stock of the Company in exchange for the contribution of the
Washington Gulch Mine ("WGM") by Mackay. Mackay was an officer and director of
the Company; however, he was not an officer or director at the execution of the
Option or the Amendment.

WGM, at the time of transfer from Mackay in January 1996, was recorded
at its net value of $181,000. Certain elements of the operation, such as the
plant and equipment on site, were offered for sale, after which the property
would be reclaimed and the Company would request return of its $206,000 bond
that was being held by the State of Montana. The equipment on site had not been
given any value nor reported on the financial statements. The property,
equipment and bond were sold in July 1998 for $185,000.

The Company declared a 3:2 stock dividend as of June 17, 1999 to
shareholders of record as of June 10, 1999.

On January 31, 2000 the Company converted $1,282,271 of debt owed to
certain shareholders in exchange for 3,205,674 shares of stock. The debt was
converted at a price of $0.40 per share.

Item 7. Financial Statements.

See pages F-1 through F-16.

Item 8. Changes In and Disagreements With Accountants on Accounting and
Financial Disclosure.

On September 3, 1998, the Company's auditors KPMG Peat Marwick withdrew
as the auditors for the Company. No reason was given the Company for their
decision to withdraw.

On April 28, 1999, the Company appointed the firm of Burnett + Company
LLP as the Company's new auditors.
PART III

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

Listed below are the names and ages, as of May 15, 2000, of each of the
present directors and executive officers of the Company together with the

28
<PAGE>

principal positions and offices with the Company held by each. Executive
officers are appointed annually by the Board of Directors to serve for the
ensuing year or until their successors have been appointed. No officer is
related to any other by blood, marriage or adoption.

Name Age Position(s)
- ---- --- -----------
James H. Cutburth 49 President, CEO and Director

Jes Engelmann 43 COO and Director

James W. Kluber 49 CFO and Director

John Mackay 50 Secretary and Director

Pat Dane 50 Director

Michael J. Morrison 53 Director

Background Information of Officers and Directors

James H. Cutburth has been Chairman of the Board since April 2000, a
director since March 2000 and CEO and President of the Company since February
2000. He had most recently been the Chief Operating Officer of Business Web Inc.
(Comercis.com), a Dallas based business-to-business e-commerce and ASP company
in which Newgold, Inc. has a significant interest. Cutburth has also served in
senior management positions with Rockwell International 1998-1999; Diamond
Multimedia 1996-1998; 3Com/US Robotics Corporation 1995-1996; and Intel
Corporation 1990 -1995. Cutburth brings experience in operations, brand and
channel development, sales and product marketing in the Internet,
Telecommunications, and PC industries.

Jes Engelmann has been a director since April 2000 and Executive Vice
President and Chief Operating Officer of the Company since February 2000. Mr.
Engelmann previously served as Managing Director of Eastern European operations
for AT&T Lucent. After leaving AT&T Lucent, Engelmann held various senior
executive positions in several Internet related companies, including Paradyne,
Cisco and Paragon Networks, and most recently served as General Manager and
Chief Operating Officer of Comercis International.

James W. Kluber has been a director since April 2000 and Executive Vice
President and Chief Operating Officer of the Company since February 2000. From
1996 through 1999 he was the Senior Vice President and Chief Financial Officer
at RealPage, Inc., a provider of business software and Internet services to the
multi-family real estate industry. From 1993 to 1996 he was the Vice President
of Financial Operations for first, ProLogis Trust and next, Archstone
Properties; both NYSE listed companies organized by Security Capital Group. Mr.
Kluber has extensive experience in raising capital as well as creating finance
organizations for high growth companies.

John Mackay has been a director since November 1998 and is the
Corporate Secretary and Corporate Counsel to the Company. He is an attorney at
law and is admitted to practice in the State of California and has specialized
in real estate and insurance litigation for the last fifteen

29
<PAGE>

years. Mr. Mackay has been engaged by lenders as an independent contractor since
1985 to present to develop plans for the effective utilization of real estate
and to manage recoveries of large portfolios of non-performing real estate
loans. He holds MBA and JD degrees from the University of Southern California.

Pat Dane has been a director of the Company since April 2000. He is the
founder and President of Dane Interactive, which advises start-up Internet
companies on a variety of issues. Mr. Dane has over 20 years of technology
experience having spent 15 years in sales and marketing at Xerox and having
served as CEO and President of SoftNet, the company that created FaxWorks. Mr.
Dane was also responsible for founding several successful Internet companies
including Tuneup.com and Cybermovers.net.

Michael J. Morrison has been a director of the Company since November
1996 and has been a practicing attorney in Reno, Nevada for 20 years
specializing in the areas of corporate, business and securities law.

Board of Directors

Directors of the Company are elected to serve until the next annual
meeting of the stockholders or until their earlier resignation or removal.

Director Compensation

Each non-employee director is reimbursed for all out-of-pocket expenses
incurred by the director in attending Board meetings and performing other duties
on behalf of the Company. Directors do not receive any additional compensation.

Section 16(a) Beneficial Ownership Reporting Compliance

Section 16(a) of the Securities and Exchange Act of 1934, as amended
(the "Exchange Act"), requires the Company's executive officers and directors
and persons who own more than ten percent of a registered class of the Company's
equity securities registered under the Exchange Act, to file initial reports of
ownership and reports indicating changes in ownership with the Securities and
Exchange Commission (the "SEC") and each exchange in which its securities are
traded. Executive officers and directors and greater than ten percent
stockholders are required by SEC regulations to furnish the Company with copies
of all Section 16(a) forms they file.

A. Scott Dockter, a former officer and director of the Company and
current holder of more than ten percent of the Company's Common Stock, failed to
timely file two reports on Form 4 with respect to transactions that occurred
during the Company's fiscal year ended January 31, 2000. To the Company's
knowledge, based solely on its review of the copies of such reports furnished to
the Company, all other Section 16(a) filing requirements applicable to its
officers, directors and greater than ten percent beneficial owners were complied
with during the fiscal year ended January 31, 2000.

30
<PAGE>

Item 10. Executive Compensation

The following table sets forth the compensation paid by the Company for
services performed on the Company's behalf during each of the last three
completed fiscal years with respect to the Company's Chief Executive Officer and
each of the Company's other executive officers whose annual compensation during
the last fiscal year exceeded $100,000 (the "Named Executive Officers"):

<TABLE>
<CAPTION>
Summary Compensation Table

Other Annual All Other
Name and Period Salary Bonus Compen- Options Compen-
Principal Position Ended ($) ($) sation($) (In shares) sation($)
------------------------ -------- ------- ------- --------- ----------- ---------
<S> <C> <C> <C> <C> <C> <C>
Arthur Scott Dockter 1/31/00 150,000 -- -- -- --
Chief Executive 1/31/99 122,500 -- -- -- --
Officer, President 1/31/98 102,500 22,666 -- -- --

</TABLE>
Item 11. Security Ownership of Certain Beneficial Owners and Management

The table below sets forth certain information as of April 30, 2000 (the
"Reference Date") with respect to the beneficial ownership of (i) each person
who beneficially owns more than 5% of the outstanding shares of Common Stock,
(ii) each director, (iii) each Named Executive Officer, and (iv) all officers
and directors as a group. Except as otherwise indicated below, the address for
each such person is: c/o Newgold, Inc., 14131Midway Road, Suite 800, Addison,
Texas 75001.

Number of Shares of Percent of Common
Name of Beneficial Owner Common Stock Stock Outstanding(1)
- ------------------------ ------------ --------------------

James H. Cutburth 27,000 *

Jes Engelmann -- *

James W. Kluber -- *

John Mackay 230,790 *

Pat Dane -- --

Michael J. Morrison 18,750 *

A. Scott Dockter 9,276,537 24.50%

All Officers and Directors
as a Group (6 persons) 276,540 *

31
<PAGE>

* Less than 1%

(1) Percentage figures based on 42,942,703 shares of Common Stock
outstanding on the Reference Date.

Item 12. Certain Relationships and Related Transactions

On June 30, 1995, the Company purchased machinery and equipment from
Riverfront Development Corporation, a company for which Arthur Scott Dockter, a
former officer and director of the Company, is president and sole shareholder
for the purchase price of $250,000. All amounts outstanding were repaid by the
Company effective as of January 31, 2000, by converting such debt into shares of
the Company's Common Stock.

On April 2, 1997, Mr. Dockter loaned $100,000 to the Company at 8% per
annum, due and payable on demand. This loan was subsequently repaid.

On April 17, 1997, Mr. Dockter loaned $50,000 to the Company at 8% per
annum, due and payable on demand. This loan was subsequently repaid effective as
of January 31, 2000, by converting the debt into shares of the Company's Common
Stock.

On April 30, 1997, Mr. Dockter loaned $20,000 to the Company at 8% per
annum, due and payable on demand. This loan was subsequently repaid effective as
of January 31, 2000, by converting the debt into shares of the Company's Common
Stock.

On May 30, 1997, Mr. Dockter loaned $35,000 to the Company at 8% per
annum, due and payable on demand. This loan was subsequently repaid effective as
of January 31, 2000, by converting the debt into shares of the Company's Common
Stock.

On December 24, 1998, Mr. Dockter loaned $24,000 to the Company at 8%
per annum, due and payable on demand. This loan was subsequently repaid
effective as of January 31, 2000, by converting the debt into shares of the
Company's Common Stock.

The Company has entered into an agreement for the sale of its Relief
Canyon Mining Project to an entity owned by Mr. Dockter in exchange for the
payment of $960,000 and the surrender of $960,000 worth of the Company's Common
Stock based on the average closing bid price of the Company's Common Stock
during the 10-day period prior to closing. The sale is expected to close in June
2000.

On January 31, 2000, Mr. John Mackey, an officer and director of the
Company, was owed $125,000 for an advance made on behalf of the Company to
settle amounts owed to Business Web Inc. in connection with the proposed merger
between the two companies. This advance was repaid as of January 31, 2000 by
converting the debt into shares of the Company's Common Stock.

32
<PAGE>

On January 31, 2000 Mr. Calvin Lim, a director of the Company as of that
date, was owed $203,733 for advances made to the Company to cover operating
expenses. This advance was repaid as of January 31, 2000 by converting the debt
into shares of the Company's Common Stock.

Item 13. Exhibits and Reports on Form 8-K

(a) Exhibits. The following exhibits are filed herewith:
--------

Exhibit
No. Description of Exhibit
------- ----------------------

2.1 Plan of Reorganization and Merger Agreement, dated as of July
23, 1999, between the Registrant and Business Web, Inc. (4)

2.2 First Amendment to Plan of Reorganization and Merger
Agreement, dated as of October 31, 1999, between the
Registrant and Business Web, Inc.

2.3 Termination Agreement, dated as of December 27, 1999, between
the Registrant and Business Web, Inc.

3.1 Certificate of Incorporation of the Registrant.(2)

3.2 Certificate of Amendment to Certificate of Incorporation of
the Registrant.(1)

3.3 Bylaws of the Registrant.(2)

10.1 Promissory Note between the Company and A. Scott Dockter,
dated April 2, 1997, for the principal amount of $100,000. (3)

10.2 Promissory Note between the Company and A. Scott Dockter,
dated April 17, 1997, for the principal amount of $50,000. (3)

10.3 Promissory Note between the Company and A. Scott Dockter,
dated April 30, 1997, for the principal amount of $20,000. (3)

10.4 Promissory Note between the Company and A. Scott Dockter,
dated May 30, 1997, for the principal amount of $35,000. (3)

33
<PAGE>

10.5 Promissory Note between the Company and A. Scott Dockter,
dated December 24, 1998, for the principal amount of $24,000.
(5)

10.6 Warrant to Purchase shares of Common Stock of Business Web,
Inc.

27 Financial Data Schedule
- ----------

(1) Incorporated by reference to the Registrant's Annual Report on
Form 10-KSB for the fiscal year ended January 31, 1996 filed
with the Commission on January 22, 1997.

(2) Incorporated by reference to the Registrant's Registration
Statement on Form SB-2 (File No. 33-49920) filed with the
Commission on October 14, 1993.

(3) Incorporated by reference to the Registrant Annual Report on
Form 10-KSB for the fiscal year ended January 31, 1997 filed
with the Commission on June 30, 1997.

(4) Incorporated by reference to the Registrant's Annual Report on
Form 10-KSB for the fiscal year ended January 31, 1999, filed
with the Commission on October 1, 1999.

(5) Incorporated by reference to the Registrant's First Amendment
to Annual Report on Form 10-KSB for the fiscal year ended
January 31, 1999, filed with the Commission on October 20,
1999.

(b) Reports on Form 8-K
-------------------

(1) The Registrant filed a Form 8-K with the Commission on
March 19, 1997 reporting merger of Newgold, Inc. with
Warehouse Auto Centers through the U.S. Bankruptcy Court,
Western District of New York.
(2) The Registrant filed a Form 8-K with the Commission on
August 28, 1998 reporting the issuance of a Letter of
Intent of Newgold, Inc. with Vauquelin Mines Ltd. Of
Montreal, Canada.
(3) The Registrant filed a Form 8-K with the Commission on
September 17, 1998 reporting the resignation of KPMG, LLP
as the Company's independent accountants.
(4) The Registrant filed a Form 8-K with the Commission on
June 8, 1999 reporting a 3:2 stock split required by a
pending merger between the Company and Business Web Inc.
(5) The Registrant filed a Form 8-K with the Commission on
July 27, 1999 reporting the signing of the definitive
merger agreement on July 26, 1999 between the Company and
Business Web Inc.
(6) The Registrant filed a Form 8-K with the Commission on
November 2, 1999 reporting the extension of the expiration
date to February 1, 2000 of the Plan of Reorganization and
Merger Agreement, dated as of July 23, 1999, between the
Registrant and Business Web, Inc. relating to the proposed
and ultimately abandoned merger between the Registrant and
Business Web, Inc.

34
<PAGE>

SIGNATURES

In accordance with Section 13 or 15(d) of the Exchange Act, the
registrant has caused this report to be signed on its behalf by the undersigned;
thereunto duly authorized, on May 16, 2000.

NEWGOLD, INC.

By: /s/James W. Kluber
------------------
James W. Kluber,
Executive Vice President and Chief Financial
Officer

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

Signature Title Date
--------- ----- ----

/s/ James H. Cutburth Chief Executive Officer, May 16, 2000
- --------------------------- President, and
James Cutburth Director

/s/James W. Kluber Chief Financial Officer, May 16, 2000
- ------------------ Executive Vice President, and
James W. Kluber Director (Principal Financial
Officer)

/s/ Jes Engelmann Chief Operating Officer, May 16, 2000
- ----------------------- Executive Vice President, and
Jes Engelmann Director

/s/ John Mackay Secretary and Director May 16, 2000
- ------------------------
John Mackay

/s/ Pat Dane Director May 16, 2000
- ------------------
Pat Dane
<PAGE>

INDEX TO EXHIBITS

Exhibit
No. Description of Exhibit
------- ----------------------

2.1 Plan of Reorganization and Merger Agreement, dated as of July
23, 1999, between the Registrant and Business Web, Inc. (4)

2.2 First Amendment to Plan of Reorganization and Merger
Agreement, dated as of October 31, 1999, between the
Registrant and Business Web, Inc.

2.3 Termination Agreement, dated as of December 27, 1999, between
the Registrant and Business Web, Inc.

3.1 Certificate of Incorporation of the Registrant.(2)

3.2 Certificate of Amendment to Certificate of Incorporation of
the Registrant.(1)

3.3 Bylaws of the Registrant.(2)

10.1 Promissory Note between the Company and A. Scott Dockter,
dated April 2, 1997, for the principal amount of $100,000. (3)

10.2 Promissory Note between the Company and A. Scott Dockter,
dated April 17, 1997, for the principal amount of $50,000. (3)

10.3 Promissory Note between the Company and A. Scott Dockter,
dated April 30, 1997, for the principal amount of $20,000. (3)

10.4 Promissory Note between the Company and A. Scott Dockter,
dated May 30, 1997, for the principal amount of $35,000. (3)

10.5 Promissory Note between the Company and A. Scott Dockter,
dated December 24, 1998, for the principal amount of $24,000.
(5)

10.6 Warrant to Purchase shares of Common Stock of Business Web,
Inc.

27 Financial Data Schedule
- -------------------------------------
(1) Incorporated by reference to the Registrant's Annual Report on
Form 10-KSB for the fiscal year ended January 31, 1996 filed
with the Commission on January 22, 1997.

(2) Incorporated by reference to the Registrant's Registration
Statement on Form SB-2 (File No. 33-49920) filed with the
Commission on October 14, 1993.

<PAGE>

(3) Incorporated by reference to the Registrant Annual Report on
Form 10-KSB for the fiscal year ended January 31, 1997 filed
with the Commission on June 30, 1997.

(4) Incorporated by reference to the Registrant's Annual Report on
Form 10-KSB for the fiscal year ended January 31, 1999, filed
with the Commission on October 1, 1999.

(5) Incorporated by reference to the Registrant's First Amendment
to Annual Report on Form 10-KSB for the fiscal year ended
January 31, 1999, filed with the Commission on October 20,
1999.

INDEX TO FINANCIAL STATEMENTS

<S> <C>
Report of Burnett + Company LLP..................................................... F-1

Balance Sheet as of January 31, 2000................................................ F-2

Statements of Operations for the years ended January 31, 1999 and 2000 ............. F-3

Statements of Stockholders' Deficit for the years ended January 31, 1999 and 2000 .. F-4

Statements of Cash Flows for the years ended January 31, 1999 and 2000 ............. F-5

Notes to Financial Statements....................................................... F-6 to F-16
</TABLE>

<PAGE>
To the Board of Directors
NEWGOLD, INC.
Addison, Texas

INDEPENDENT AUDITORS' REPORT
----------------------------

We have audited the accompanying balance sheet of NEWGOLD, INC. as of January
31, 2000 and the related statements of operations, stockholders' deficit and
cash flows for the years ended January 31, 2000 and 1999. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these 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 financial statements referred to above present fairly, in
all material respects, the financial position of NEWGOLD, INC. as of January 31,
2000, and the results of its operations and cash flows for the years ended
January 31, 2000 and 1999 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 has been dependent primarily upon cash
proceeds from private placement of its common stock. The Company anticipates
that current working capital and anticipated revenues will not be sufficient to
satisfy its future cash needs, and accordingly, the Company will need to raise
additional capital in the near term. Currently, the Company has no commitments
for additional funding. Management's plans in regard to these matters are also
described in Note 1. These matters raise substantial doubt about the Company's
ability to continue as a going concern. The financial statements do not include
any adjustments that might result from the outcome of this uncertainty.

Rancho Cordova, California
May 11, 2000

F-1
<PAGE>

NEWGOLD, INC.

BALANCE SHEET

January 31, 2000

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

ASSETS

CURRENT ASSETS
Cash $ 2,163
Prepaid expenses 4,500
------------

Total current assets 6,663

PROPERTY, PLANT AND EQUIPMENT, including undeveloped
mineral properties of $827,105, net of $18,385 of
accumulated depreciation 808,720

OTHER ASSETS
Reclamation bonds 50,500
Investment in common stock warrants -0-
------------

Total assets $ 865,883
============

LIABILITIES AND STOCKHOLDERS' DEFICIT

CURRENT LIABILITIES
Account payable $ 373,228
Accrued expenses 442,867
Accrued reclamation costs 50,500
Notes payable to individuals and related parties 494,992
------------

Total current liabilities 1,361,587

DEFERRED REVENUE 800,000
------------

Total liabilities 2,161,587

STOCKHOLDERS' DEFICIT
Common stock, $.001 par value,
50,000,000 shares authorized,
41,122,703 shares issued and outstanding 41,122
Additional paid in capital 9,198,891
Accumulated deficit (10,535,717)
------------

Total stockholders' deficit (1,295,704)
------------

Total liabilities and stockholders' deficit $ 865,883
============

The accompanying notes are an integral part of the financial statements.

F-2
<PAGE>

NEWGOLD, INC.

STATEMENTS OF OPERATIONS

For the Years Ended January 31, 2000 and January 31, 1999

- --------------------------------------------------------------------------------
Year Ended Year Ended
January 31, January 31,
2000 1999
------------- -------------

SALES
Net sales -0- -0-
Cost of sales -0- -0-
------------- -------------

Gross margin -0- -0-

OPERATING EXPENSES
General and administrative expenses 714,287 508,603
Impairment of assets 11,371 -0-
Exploration costs 45,022 153,064
------------- -------------

Total operating expenses 770,680 661,667
------------- -------------

Loss from operations (770,680) (661,667)

OTHER INCOME (EXPENSE)
Interest income 2 15
Other expense -0- (3,000)
Interest expense (131,698) (67,567)
Loss on disposal of property, plant and equipment (17,359) -0-
Loss on disposal of bond -0- (21,000)
------------- -------------
(149,055) (91,552)
------------- -------------

NET LOSS $ (919,735) $ (753,219)
============= =============

LOSS PER SHARE (after giving effect to the
Three-for-two stock split declared on
June 8, 1999 - See Note 7) (.02) (.02)
------------- -------------

WEIGHTED AVERAGE NUMBER OF SHARES
OUTSTANDING (after giving effect to the
Three-for-two stock split declared on June 8,
1999 - See Note 7) 38,138,200 36,275,997
============= =============

The accompanying notes are an integral part of the financial statements.

F-3
<PAGE>
<TABLE>
NEWGOLD, INC.

STATEMENTS OF STOCKHOLDERS' DEFICIT

For the Years Ended January 31, 2000 and January 31, 1999
- --------------------------------------------------------------------------------

Common Common Additional Total
Stock Stock Paid in Accumulated Shareholders'
Shares $ Capital Deficit Deficit
---------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Balances, January 31, 1998 19,462,611 $ 19,463 $ 7,328,779 $ (8,862,763) $(1,514,521)

Shares issued in exchange for
rent 15,000 15 5,985 -0- 6,000

Shares issued to IBK 5,616,977 5,617 542,383 -0- 548,000

Shares issued in exchange for
property 150,000 150 55,350 -0- 55,500

Net loss for period from February
1,1998 to January 31, 1999 -0- -0- -0- (753,219) (753,219)
----------- ----------- ----------- ----------- -----------

Balances, January 31, 1999 25,244,588 25,245 7,932,497 (9,615,982) (1,658,240)
=========== =========== =========== =========== ===========

Three-for-two stock split 12,672,441 12,671 (12,671) -0- -0-

Shares issued in exchange
for debt conversion 3,205,674 3,206 1,279,065 -0- 1,282,271

Net loss for period from February
1, 1999 to January 31, 2000 -0- -0- -0- (919,735) (919,735)
----------- ----------- ----------- ----------- -----------

Balances, January 31, 2000 41,122,703 $ 41,122 $ 9,198,891 $(10,535,717) $(1,295,704)
=========== =========== =========== =========== ===========
</TABLE>

The accompanying notes are an integral part of the financial statements.

F-4

<PAGE>

NEWGOLD, INC.

STATEMENTS OF CASH FLOWS

For the Years Ended January 31, 2000 and January 31, 1999

Year Ended Year Ended
January 31, January 31,
2000 1999
------------- -------------
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss $ (919,735) $ (753,219)
Adjustments to reconcile net loss to net cash
used in operating activities:
Depreciation and amortization 15,852 17,709
Loss on disposal of property, plant and
equipment 17,359 -0-
Impairment in value of property, plant and
equipment 11,371 -0-
Assigned value of common stock -0- 61,500
Loss on disposal of bond -0- 21,000
Gain on write off of note payable -0- (7,000)
Changes in operating assets and liabilities:
Prepaid expenses (2,900) -0-
Reclamation bonds -0- 185,000
Other assets -0- (621)
Accounts payable (42,500) (250,847)
Accrued expenses (51,036) 223,234
Accrued reclamation costs -0- (25,000)
------------- -------------

Net cash used in operating activities (971,589) (528,244)
------------- -------------

CASH FLOWS FROM FINANCING ACTIVITIES
Repayment of advances -0- (38,140)
Proceeds from issuance of notes payable 1,222,118 62,321
Payments on notes payable (249,252) (45,361)
Proceeds from issuance of common stock 548,000
------------- -------------

Net cash provided by financing activities 972,866 526,820
------------- -------------

NET DECREASE IN CASH 1,277 (1,424)

CASH, beginning of year 886 2,310
------------- -------------

CASH, end of year $ 2,163 $ 886
============= =============

SUPPLEMENTAL DISCLOSURES REGARDING CASH FLOWS
Cash paid for interest $ 49,000 $ 3,215
============= =============
Cash paid for income taxes $ -0- $ -0-
============= =============

The accompanying notes are an integral part of the financial statements.

F-5

<PAGE>
NEWGOLD, INC.

NOTES TO THE FINANCIAL STATEMENTS

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

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Company's Activities - NEWGOLD, INC. ("the Company") was formerly in the
business of acquiring, exploring, developing, and producing gold properties. The
Company had rights to mine properties in Nevada and Montana. Its primary focus
was on the Relief Canyon Mine located near Lovelock, Nevada, where it has
performed development and exploratory drilling and was in the process of
obtaining permits to allow operation of the Relief Canyon Mine. In December
1997, the Company placed the Relief Canyon Mine on care and maintenance status.
The Company also conducted exploration at its Washington Gulch Mine property in
Montana. Subsequent to January 31, 2000 the Company has entered into a contract
to sell its assets and leasehold interests in the Relief Canyon Mine. This sale
would bring an end to all of the Company's prior gold mining activities (See
Note 11).

In February 2000 the Company began to implement an entirely new business model
of investing in Internet companies. Specifically, the Company is now actively
engaged in the investment in and incubation of business-to-business, e-commerce,
and application service provider companies, described as partner or portfolio
companies. The Company will provide partner companies core services through
direct investment and the creation of strategic relationships. These key,
functionally oriented core services are in technology innovation and
development, strategic sales and marketing, recruiting and human resources,
legal, and finance and accounting. The goal is to create an incubation
environment for portfolio companies that enables them to emerge in the shortest
time possible as successful Internet firms withstanding the traditional tests
for investment: profitability and time.

Basis for Presentation - The accompanying financial statements have been
prepared assuming the Company will continue as a going concern. The Company's
current plans are to suspend development and operation of the Relief Canyon Mine
and to keep the mine on care and maintenance status until the Company receives
additional funding. Currently, the Company's plans indicate that it will be
unable to continue operating unless it receives significant additional funding.
Management is exploring various means of raising additional capital. Strategic
alternatives being considered include: (i) entering into an agreement to merge
with another company, (ii) the sale of Company assets, (iii) the sale of Relief
Canyon Mine to another entity to develop the mine, and (iv) conversion of
certain debt to equity. There can be no assurance that the Company will be
successful in its attempts to consummate one or more of these strategic
alternatives. Failure to do so will necessitate that the Company curtail its
plans and cease its operations. (See Note 11).

F-6
<PAGE>

NEWGOLD, INC.

NOTES TO THE FINANCIAL STATEMENTS

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

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, Continued
Currency - The Company presents its financial statement information in United
States dollars as all of its assets and operations are located in the United
States.

Cash and Cash Equivalents - For financial statement purposes, the Company
considers all highly liquid instruments with original maturities of 90 days or
less to be cash equivalents.

Property Plant, and Equipment - Depreciation, depletion and amortization of
mining properties, mine development costs and major plant facilities will be
computed principally by the units-of-production method based on estimated proven
and probable ore reserves. Proven and probable ore reserves reflect estimated
quantities of ore which can be economically recovered in the future from known
mineral deposits. Such estimates are based on current and projected costs and
prices. Other equipment is depreciated using the straight-line method
principally over the estimated useful life of seven years.

Exploration Costs - Exploration costs are expensed as incurred. All costs
related to property acquisitions are capitalized.

Mine Development Costs - Mine development costs consist of all costs associated
with bringing mines into production, to develop new ore bodies and to develop
mine areas substantially in advance of current production. The decision to
develop a mine is based on assessment of the commercial viability of the
property and the availability of financing. Once the decision to proceed to
development is made, development and other expenditures relating to the project
will be deferred and carried at cost with the intention that these will be
depleted by charges against earnings from future mining operations. No
depreciation will be charged against the property until commercial production
commences. After a mine has been brought into commercial production, any
additional work on that property will be expensed as incurred, except for large
development programs, which will be deferred and depleted.

Financing Costs - Financing costs, including interest, are capitalized when they
arise from indebtedness incurred to finance development and construction
activities on properties that are not yet subject to depreciation or depletion.
Financing costs are charged against earnings from the time that mining
operations commence. Capitalization is based upon the actual interest on debt
specifically incurred or on the average borrowing rate for all other debt except
where shares are issued to fund the cost of the project. As of January 31, 2000,
an aggregate of $45,441 of interest has been capitalized.

F-7
<PAGE>

NEWGOLD, INC.

NOTES TO THE FINANCIAL STATEMENTS

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

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, Continued
Depreciation, Depletion and Amortization - Assets other than mining properties
and mineral rights are depreciated using the straight-line method over their
estimated useful lives. Capitalized development costs are amortized on the units
of production method considering proven and probable reserves. Depreciation and
depletion rates are subject to periodic review to ensure that asset costs are
amortized over their useful lives.

Impairment - Mining projects and properties are reviewed for impairment whenever
events or changes in circumstances indicate that the carrying amount of these
assets may not be recoverable. If estimated future cash flows expected to result
from the use of the mining project or property and its eventual disposition are
less than the carrying amount, an impairment is recognized based on the
estimated fair market value of the mining project or property. Fair value
generally is based on the present value of estimated future net cash flows for
each mining project or property, calculated using estimates of proven and
probable mineable reserves, geological resources, future prices, operating
costs, capital requirements and reclamation costs. A provision for impairment in
valuation of development costs and property, plant and equipment amounted to
$3,311,672 for the year ended January 31, 1998 and was charged to operating
expense. The remaining book value of the mine after the impairment write-down
approximates the amount of deferred revenue recognized upon the sale of the net
smelter return royalty. A provision for impairment in valuation of development
costs and property, plant and equipment amounted to $11,371 for the year ended
January 31, 2000 and was charged to operating expense.

Management's estimates of future cash flows are subject to risks and
uncertainties. Therefore, it is reasonably possible that changes could occur
which may affect the recoverability of the Company's investment in mineral
properties.

Reclamation Costs - Reclamation costs and related accrued liabilities, which are
based on the Company's interpretation of current environmental and regulatory
requirements, are accrued and expensed, upon determination.

Based on current environmental regulations and known reclamation requirements,
management has included its best estimates of these obligations in its
reclamation accruals. However, it is reasonably possible that the Company's best
estimates of its ultimate reclamation liabilities could change as a result of
changes in regulations or cost estimates.

Revenue Recognition - Revenues will be recognized when deliveries of gold are
made. Deferred revenue represents non-refundable cash received in exchange for
royalties on net smelter returns on the Relief Canyon Mine. Deferred revenue
will be amortized to earnings based on estimated production in accordance with
the royalty agreement (See Note 9).

F-8

<PAGE>

NOTES TO THE FINANCIAL STATEMENTS

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

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, Continued
Income Taxes - The Company accounts for income taxes using the liability method,
which requires recognition of deferred tax liabilities and assets for the
expected future tax consequences of events that have been included in the
financial statements or tax returns. Deferred tax assets and liabilities are
determined based on the difference between the financial statements and tax
bases of assets and liabilities using enacted tax rates in effect for the year
in which the deferred tax assets are recorded to the extent management estimates
that the future benefit will be realized. Significant differences include
deferred revenue and valuation allowances recorded on property, plant and
eqipment.

Loss Per Share - Loss per share is calculated based on the weighted average
number of common shares outstanding during each period.

Estimates, Risks and Uncertainties - The preparation of financial statements in
conformity with generally accepted accounting principles requires management to
make estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent liabilities at the date of the
financial statements, as well as the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those estimates.

Fair Vale 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, receivables and accounts
payable approximate carrying value due to the short-term maturity of the
instruments. The fair value of notes payable approximates carrying value based
on their effective interest rates compared to current market rates.

F-9

<PAGE>

NEWGOLD, INC.

NOTES TO THE FINANCIAL STATEMENTS

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

2. PROPERTY, PLANT AND EQUIPMENT
A summary of changes in property, plant and equipment and related accumulated
depreciation accounts is as follows:
<TABLE>
Machinery
& Development Capitalized
Buildings Equipment Costs Interest Total
------------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
Cost:
Balances at January 31, 1999 $ 215,510 $ 376,070 $ 261,742 $ 45,441 $ 898,763
Additions -0- -0- -0- -0- -0-
Disposals, retirements and
reclassifications -0- (71,658) -0- -0- (71,658)
------------- ----------- ----------- ----------- -----------

Balances at January 31, 2000 215,510 304,412 261,742 45,441 827,105
============= =========== =========== =========== ===========
Accumulated depreciation:
Balances at January 31, 1999 -0- 45,461 -0- -0- 45,461
Depreciation and amortization -0- 15,852 -0- -0- 15,852
Disposals, retirements and
reclassifications -0- (42,928) -0- -0- (42,928)
------------- ----------- ----------- ----------- -----------

Balances at January 31, 2000 -0- 18,385 -0- -0- 18,385
============= =========== =========== =========== ===========

Property, plant and equipment,
net, January 31, 2000:
Relief Canyon Mine 215,510 277,307 261,742 45,441 800,000
Other -0- 8,720 -0- -0- 8,720
------------- ----------- ----------- ----------- -----------

Total Company $ 215,510 $ 286,027 $ 261,742 $ 45,441 $ 808,720
============= =========== =========== =========== ===========
</TABLE>

3. INVESTMENT IN COMMON STOCK WARRANTS
The Company received warrants to purchase 3,132,794 shares of Business Web, Inc.
common stock as a merger termination fee upon the decision of Business Web, Inc.
not to proceed with their proposed merger with the Company. These warrants have
an exercise price of $3 per share and expire one year after the closing of an
underwritten initial public offering of Business Web, Inc. common stock. The
Company has recorded this investment at $0 as the value of the warrants is not
determinable as Business Web, Inc. is a privately held company with no ready
market for their common stock or warrants.

F-10

<PAGE>

NEWGOLD, INC.

NOTES TO THE FINANCIAL STATEMENTS

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

4. NOTES PAYABLE TO INDIVIDUALS AND RELATED PARTIES
Unsecured notes payable to individuals and related parties consist of the
following at January 31, 2000:

Loan from individual. The note bears interest at 10% per year.
The note is currently due. The Company is in default with
respect to this loan. $ 200,000

A judgment payable to an individual was rendered on
October 23, 1997. The judgment accrues interest at 10%
per year until paid. The Company is in default with respect
to this judgment. 250,000

Other non-interest bearing advances 44,992
-------------

Total notes payable to individuals and related parties $ 494,992
=============

The Company recorded $96,646 of interest expense in the current period. No
interest was capitalized during the years ended January 31, 2000 and 1999.

5. LEASES
Except for the advance royalty and rent payments noted below, the Company is not
obligated under any capital leases or noncancelable operating lease with initial
or remaining lease terms in excess of one year as of January 31, 2000. However,
minimum annual royalty payments are required to retain the lease rights to the
Company's properties.

Relief Canyon Mine - The Company purchased the Relief Canyon Mine from J.D.
Welsh Associates (Welsh) in January 1995. The mine consisted of 39 claims and a
lease for access to an additional 800 acres contiguous to the claims. During
1997, the Company staked an additional 402 claims. Subsequent to January 31,
1998, the Company reduced the total claims to 50 (approximately 1,000 acres). As
part of the original purchase of Relief Canyon Mine, Welsh assigned the lease
from Santa Fe Gold Corporation (Santa Fe) to the Company. The lease granted
Santa Fe the sole right of approval of transfer to any subsequent owner of the
Relief Canyon Mine. Santa Fe had accepted lease and minimum royalty payments
from the Company, but has declined to approve the transfer. Due to Welsh's
inability to transfer the Santa Fe lease, the original purchase price of
$500,000 for Relief Canyon Mine was reduced by $50,000 in 1996 to $450,000.

During 1998, the lease was terminated by Santa Fe covering a portion of the
claims at Relief Canyon. Management believes loss of the Santa Fe lease will
have no material adverse affect on the remaining operations of the mine
operation or the financial position of the Company.

F-11

<PAGE>

NEWGOLD, INC.

NOTES TO THE FINANCIAL STATEMENTS

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

6. INCOME TAXES
As of January 31, 2000 and 1999, the Company had net operating loss
carryforwards of approximately $5,470,000 and $4,550,000 available to reduce
future Federal taxable income which, if not used, will expire at various dates
through January 31, 2020. Due to changes in the ownership of the Company, the
utilization of these loss carryforwards may be subject to substantial annual
limitations. Deferred tax assets (liabilities) are comprised of the following at
January 31, 2000 and 1999:
January 31, January 31,
2000 1999
------------- -------------
Deferred tax assets:
Net operating loss carryforwards $ 1,863,000 $ 1,550,000
Deferred revenue 280,000 280,000
Impairment of value on Relief Canyon Mine 1,120,000 1,120,000
Valuation allowance for deferred tax assets (3,263,000) (2,950,000)
------------- -------------

Net deferred tax assets $ -0- $ -0-
============= =============

The net change in the total valuation allowance for the years ended January 31,
2000 and 1999 was $313,000 and $220,000, respectively. The valuation allowance
is provided to reduce the deferred tax asset to a level which, more likely than
not, will be realized.

The expected Federal income tax benefit, computed based on the Company's pre-tax
losses at January 31, 2000 and 1999 and the statutory Federal income tax rate,
is reconciled to the actual tax benefit reflected in the accompanying financial
statements as follows:

January 31, January 31,
2000 1999
------------- -------------
Expected tax benefit at statutory rates $ 313,000 $ 256,000

Decrease resulting from valuation allowance
for benefits from net operating loss
carryforwards and other (313,000) (256,000)
------------- -------------

Total $ -0- $ -0-
============= =============

Previous to June 21, 1996, the stockholder of the Company elected under Internal
Revenue Code Section 1362 to have the Company taxed as an S Corporation. As
such, all Federal and substantially all State income tax attributes passed
through the Company directly to the stockholder until that date.

F-12

<PAGE>

NEWGOLD, INC.

NOTES TO THE FINANCIAL STATEMENTS

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

7. STOCKHOLDERS' EQUITY
The following common stock transactions occurred during the years ended January
31, 2000 and 1999:

At a January 2000 meeting of the Board of Directors, it was agreed that various
creditors of the Company would settle their debt through conversion of the debt
into equity by issuing stock at a price of $0.40 per share. In total, $1,282,271
of debt was converted into 3,205,674 shares of stock. $477,977 or 1,194,943
shares were for amounts owed to the Chairman of the Company; $328,733 or 821,833
shares were for amounts owed to two directors and $475,561 or 1,188,898 shares
were for amounts owed to other shareholders (See Note 9).

On June 8, 1999 the Board of Directors approved a three-for-two stock split,
effected in the form of a 50% stock dividend, payable to stockholders of record
on June 10, 1999. The weighted average shares outstanding and the loss per share
for the years ended January 31, 2000 and 1999 have been presented giving effect
to this stock split.

The employment contract for the corporate counsel stipulated the Company would
pay the rent for a law office. In March 1998, the Company issued 15,000 shares
in lieu of cash for six months rent. General and administrative expense was
charged $6,000 for the rent. The corporate counsel's office was subsequently
relocated to the Company's headquarters.

In April 1998, the Company closed a Regulation S offering for 5,480,000 shares
to raise $548,000 at $.10 per share. In connection with this offering 136,977
shares were issued as commission to brokers.

As an alternative to gold mining, the Board of Directors approved an exploration
program for a calcium bentonite mine located in southern California. In payment
for a purchase option on the mine, the Company issued 150,000 shares of stock to
the mine owner in May 1998. The Company charged $55,500 to exploration expense
for the option. After completing the due diligence on the mine property, the
Company abandoned development of the mine in August 1998.

F-13

<PAGE>

NEWGOLD, INC.

NOTES TO THE FINANCIAL STATEMENTS

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

8. COMMITMENTS, CONTINGENCIES AND UNCERTAINTIES
Environmental Obligations - The Company's mining and exploration activities are
subject to various federal and state laws and regulations governing the
protection of the environment. These laws and regulations are continually
changing and are generally becoming more restrictive. The Company strives to
conduct its operations so as to protect the public health and environment and
believes its operations are in compliance with all applicable laws and
regulations. The Company has made, and expects to make in the future,
expenditures to comply with such laws and regulations.

Reclamation Costs - The ultimate amount of reclamation obligations to be
incurred is uncertain. However, as of January 31, 1998, the Company has accrued
$50,500 for Relief Canyon Mine and $25,000 for its Washington Gulch site. Relief
Canyon Mine and Washington Gulch are bonded for $50,500 and $206,000,
respectively. At January 31, 1999, the Company had accrued reclamation cost of
$50,500. There can be no assurances given that the above estimate accurately
reflects the actual costs of all reclamation activities that may be required. In
July 1998, the Company sold its interest in the Washington Gulch Mine and
related reclamation bond for $185,000. The Company was also relieved of any
future liability in connection with the Washington Gulch Mine.

Legal - The Company is involved in various other claims and legal actions
arising in the ordinary course of business. In the opinion of management, the
ultimate dispositions of these matters will not have a material adverse effect
on the Company's financial position, results or operations or liquidity.

9. RELATED PARTY TRANSACTIONS
Advances from Stockholder - As of January 31, 1999, A. Scott Dockter, President
and Chairman of the Company, loaned the Company an aggregate of $229,100 and was
repaid $111,988. During the year ended January 31, 2000, A. Scott Dockter loaned
the Company $73,103 and was repaid $98,869. As of January 31, 2000 the net
balance owing to A. Scott Dockter was $108,081, including accrued interest of
$34,489, this was converted into 270,202 shares of stock issued to him during
January 2000.

As of January 31, 2000 the net balance owing to two relatives of A. Scott
Dockter was $26,028, including accrued interest of $2,028, this was converted
into 65,067 shares of stock issued to them during January 2000.

Accrued Payroll to Stockholder - As of January 31, 2000 the Company owed A.
Scott Dockter $277,722 for back wages and accrued interest thereon, this was
converted into 694,305 shares of stock issued to him during January 2000.

Due to Affiliate - As of January 31, 2000 the Company owed $92,174 to Riverfront
Development, Inc. for equipment purchases. Riverfront Development, Inc. is a
related entity owned by A. Scott Dockter, this was converted into 230,436 shares
of stock issued to him during January 2000.

F-14

<PAGE>

NEWGOLD, INC.

NOTES TO THE FINANCIAL STATEMENTS

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

9. RELATED PARTY TRANSACTIONS, Continued
Note Payable to Stockholder - During the year ended January 31, 2000, Calvin
Lim, a stockholder and board member, advanced the Company $201,000 and was
repaid $150,000. At January 31, 2000 the Company owed Mr. Lim $203,733
(including accrued interest of $47,733), this was converted into 509,333 shares
of stock issued to him during January 2000.

Note Payable to Stockholder - At January 31, 2000 the Company owed Edward
Mackay, a stockholder and board member, $49,533 (including accrued interest of
$6,942), this was converted into 123,831 shares of stock issued to him during
January 2000.

Advances from Stockholders - During the year ended January 31, 2000, four
stockholders repaid a note payable to Business Web, Inc. in the amount of
$525,000. At January 31, 2000 the Company issued these stockholders 1,312,500
shares of stock in exchange for the debt repayment during January 2000.

Advances from Stockholder - Included in notes payable to individuals and related
parties is $32,492 advanced by the former Chief Financial Officer during the
year ended January 31, 2000 to pay operating expenses.

Relief Canyon Mine - During 1996, Repadre Capital Corporation ("Repadre")
purchased for $500,000 a net smelter return royalty (Repadre Royalty). Repadre
was to receive a 1.5% royalty from production at each of the Relief Canyon Mine
and Mission Mines. In July 1997, an additional $300,000 was paid by Repadre for
and additional 1% royalty from the Relief Canyon Mine. In October, 1997, when
the Mission Mine lease was terminated, Repadre exercised its option to transfer
the Repadre Royalty solely to the Relief Canyon Mine resulting in a total 4%
royalty. The total amount received of $800,000 has been recorded as deferred
revenue in the accompanying financial statements.

10. SUPPLEMENTAL CASH FLOWS
Non-cash transactions for the year ended January 31, 2000 consist of the
issuance of 3,205,674 share of common stock as settlement of notes, advances and
accrued expenses payable totaling $1,282,271 (Note 7). The Company also received
warrants to purchase common stock in Business Web, Inc. as a merger termination
fee (Note 3).

Non-cash transactions for the year ended January 31, 1999 consist of the
assigned value of common stock issued and returned in the amount of $61,500,
which consists of 15,000 shares issued for $6,000 of rent and 150,000 shares
issued for $55,500 in exploration costs.

F-15
<PAGE>

NEWGOLD, INC.

NOTES TO THE FINANCIAL STATEMENTS

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

11. SUBSEQUENT EVENTS
In February 2000, the Company closed a private placement offering for 1,200,000
shares to raise $600,000 at $.50 per share. Additionally, a warrant was issued
with each share to purchase an additional share of common stock at $1 per share.
The warrants expire four years from the original date of closing. In connection
with this offering $60,000 were paid as commission to brokers.

In April 2000, the Chairman of the Board of Directors and another board member
resigned from the Board. As permitted by the by-laws of the Company the
remaining directors elected a new Chairman, and three additional directors were
elected at that time.

In April 2000, the Company announced that it has signed a contract for the sale
of its Relief Canyon Mining Project including all mining assets, leaseholds and
subject to the related net smelter return royalty due to Repadre (see Note 9).
The sale is expected to close in June 2000 and will be sold to an affiliate of
the former Chairman of the Company. The sales price is $960,000 and the Company
will receive an equivalent amount of it shares based on the most recent 10-day
average closing bid price of its stock prior to closing. A separate independent
valuation of the Company's Relief Canyon assets will be performed to insure that
at minimum a fair market value is received. See Notes 2, 5, 8 and 9.

In April 2000, the Company closed a private placement offering for 500,000
shares to raise $500,000 at $1.00 per share. Additionally, a warrant was issued
with each share to purchase an additional share of common stock at $1 per share.
The warrants expire four years from the original date of closing. In connection
with this offering $45,000 were paid and 50,000 warrants issued with the same
terms as those above as commission to brokers.

In April 2000, the $200,000 note payable and the $250,000 judgment payable (see
Note 4) were settled and paid off in full by a shareholder of the company. The
total balances due including interest and legal fees had grown to approximately
$650,000 at the time of settlement. The shareholder has received an additional
650,000 shares of stock as reimbursement for the payment of these amounts on
behalf of the Company.

F-16

Exhibit 2.2

FIRST AMENDMENT
---------------

PLAN OF REORGANIZATION AND MERGER AGREEMENT

This First Amendment (the "First Amendment") dated effective as of
October 31, 1999, to the Plan of Reorganization and Merger Agreement dated
effective as of July 23, 1999 (the "Agreement"), is made and entered into by and
between NEWGOLD, INC., a Delaware corporation (the "Company") and BUSINESS WEB,
INC., a Texas corporation doing business as "Comercis, Inc." ("BWI"), and amends
the Agreement as set forth herein. All capitalized terms used but not otherwise
defined herein shall have the respective meanings that are assigned to such
terms in the Agreement.

WITNESSETH:

WHEREAS, pursuant to Article XIV of the Agreement, the Agreement will
terminate automatically if the Merger shall not become effective on or prior to
October 31, 1999, unless the parties hereto, acting pursuant to the authority of
their respective boards of directors, shall have otherwise agreed in writing on
or prior to that date to extend such date;

WHEREAS, pursuant to Section 6.04 of the Agreement, on or before July
23, 1999, the Company was required to file with the SEC an application on Form
S-4 seeking the registration of newly issued shares of Company Stock;

WHEREAS, pursuant to Section 6.05 of the Agreement, on or before July
23, 1999, the Company was required to (a) prepare a notice of special meeting of
stockholders and proxy statement in connection therewith seeking approval of,
among other things, the Merger; and (b) deliver a copy of the notice of special
meeting and proxy statement to BWI for its review and comment;

WHEREAS, the Company was delayed in performing its obligations under
Sections 6.04 and 6.05 for reasons that are justifiable and acceptable to BWI;

WHEREAS, the Company and BWI acknowledge that the Merger will not
become effective on or before October 31, 1999;

WHEREAS, the Company expects to perform its obligations under Section
6.04 and 6.05 on or before December 1, 1999;

WHEREAS, the Company and BWI mutually desire to continue with the
Merger;

1
<PAGE>

WHEREAS, the Company and BWI therefore mutually desire to extend (a)
the periods in which the Company is obligated to perform its obligations under
Sections 6.04 and 6.05; and (b) the date before which the Merger must become
effective;

WHEREAS, the Agreement has not yet been submitted to the shareholders
of either the Company or BWI for their approval; and

WHEREAS, pursuant to Article XIII, the boards of directors of the
Company and BWI may amend the Agreement without seeking shareholder approval if
the Agreement has not theretofore been approved by the shareholders of the
respective companies;

NOW, THEREFORE, in consideration of the foregoing premises and of the
mutual covenants and undertakings contained herein, and for such other good and
valuable consideration the receipt and sufficiency of which are hereby
acknowledged, the parties to this First Amendment hereby agree as follows:

ARTICLE I

AMENDMENTS

1.01. Obligations of the Company. Sections 6.04 and 6.05 are hereby
amended by deleting the date July 23, 1999, wherever it appears and by
substituting in each such place the date December 1, 1999.

1.02. Effective Date of Merger. Article XIV is hereby amended by
deleting the date October 31, 1999, and by substituting in its place the date
January 1, 2000.

1.03. Other Provisions Not Affected. No other provision, term,
representation, warranty, obligation, or condition of the Agreement shall be
affected as a result of this First Amendment, and the parties hereby mutually
affirm and ratify the Agreement as amended by this First Amendment.

[The remainder of this page left intentionally blank]

2
<PAGE>

IN WITNESS WHEREOF, the duly authorized officers of the parties hereto
have caused this First Amendment to be executed as of the date first written
above.

BUSINESS WEB, INC.
(Doing Business As Comercis, Inc.)

------------------------------------
Mr. Chris M. Meaux, President and CEO

------------------------------------
Mr. Robert W. Gallagher, CFO

NEWGOLD, INC.

------------------------------------
Mr. A. Scott Dockter, President and CEO

------------------------------------
Mr. Robert W. Morris, CFO

Exhibit 2.3

TERMINATION AGREEMENT

This Termination Agreement (this "Agreement") is entered into as of
December 27, 1999 (the "Effective Date"), by and between NewGold, Inc., a
Delaware corporation ("NewGold"), and Business Web, Inc., a Texas corporation
doing business as "Comercis, Inc." ("Comercis"). (NewGold and Comercis are each
sometimes referred to herein as a "Party" and collectively as the "Parties").

RECITALS
--------

A. WHEREAS, NewGold and Comercis have entered into a Plan of Reorganization
and Merger Agreement, dated as of July 23, 1999, a copy of which is attached as
Exhibit A hereto (the "Merger Agreement"), pursuant to which Comercis was to be
merged with and into NewGold upon the terms and conditions set forth therein
(the "Merger");

B. WHEREAS, NewGold and Comercis have entered into that certain First
Amendment to Plan of Reorganization and Merger Agreement, dated as of October
30, 1999, a copy of which is attached as Exhibit B hereto (the "First
Amendment"), pursuant to which certain time periods relating to the Merger were
extended upon the terms and conditions set forth therein;

C. WHEREAS, the Parties desire to terminate the Merger Agreement and the
First Amendment upon the terms and conditions set forth in this Agreement;

D. WHEREAS, the respective Boards of Directors of the Parties have approved
the execution, delivery and performance of this Agreement and the termination of
the Merger Agreement and the First Amendment upon the terms and conditions set
forth herein; and

E. WHEREAS, Comercis has loaned to NewGold an aggregate of $435,000 (the
"Comercis Loan") and has agreed to pay on behalf of NewGold an aggregate of
$98,796 in attorneys' fees and costs incurred by NewGold in connection with the
Merger Agreement and the transactions contemplated thereby (the "NewGold
Attorneys' Fees");

NOW, THEREFORE, in consideration of the mutual covenants herein and for
other good and valuable consideration, the receipt of which is hereby
acknowledged, the Parties agree as follows:

AGREEMENT
---------

1. Termination. The Merger Agreement and the First Amendment are each
hereby terminated as of the Effective Date of this Agreement (the "Termination
Date"), subject to the terms and conditions of this Agreement. The Parties
hereby release each other of and shall not hereafter owe any obligations to each
other under the Merger Agreement and the First Amendment except as specifically
set forth herein.

<PAGE>
2. Waiver of Post-Termination Rights. Effective upon the Termination Date,
the Parties hereby waive any rights they may have pursuant to the terms of the
Merger Agreement and the First Amendment after the termination thereof,
provided, however, that any obligations of confidentiality set forth in the
Merger Agreement, the First Amendment or any other agreement between the Parties
shall survive the Termination Date.

3. Issuance of Warrant. As partial consideration for the execution and
delivery of this Agreement, Comercis shall, contemporaneously with the execution
and delivery of this Agreement, execute and deliver to NewGold a warrant (the
"Warrant") to purchase an aggregate of 3,132,794 shares of Common Stock of
Comercis at a purchase price of $3.00 per share. The Warrant shall, at the sole
option of NewGold, be transferable in whole or in part, subject to compliance
with applicable federal and state securities laws. The Warrant shall have such
other terms and conditions substantially as set forth in the form of Warrant
attached as Exhibit C hereto.

4. Secured Promissory Note. As full repayment of the Comercis Loan and the
payment by Comercis of the NewGold Attorneys' Fees, NewGold shall,
contemporaneously with the execution and delivery of this Agreement, issue to
Comercis a Promissory Note in the principal amount of $525,000 substantially in
the form of Exhibit D attached hereto (the "NewGold Note").

5. Mutual General Releases. Each Party, on its own behalf and on behalf of
its successors or assigns, hereby releases and forever discharges the other
Party and the other Party's officers, directors, employees, agents, attorneys,
successors and assigns, from all debts, demands, actions, causes of action,
suits, accounts, covenants, contracts, agreements (except for the provisions of
this Agreement and except as set forth in Section 2 hereof), damages, and any
and all claims, demands and liabilities whatsoever, in law or in equity, whether
now known or unknown, suspected or unsuspected, that such Party has or ever had
until the Termination Date, insofar as such debts, demands, actions, causes of
action, suits, accounts, covenants, contracts, agreements or damages relate to
or arise from the Merger Agreement and/or the First Amendment (collectively, the
"Released Matters"). In connection with such waiver and relinquishment, each of
the Parties acknowledges that it is aware that it or its attorneys or
accountants or other agents may hereafter discover claims or facts in addition
to or different from those which it now knows or believes to exist with respect
to the subject matter of the Merger Agreement and the First Amendment or the
other Parties, but that it intends fully, finally and forever to settle and
release all of the Released Matters. In furtherance of this intention, the
release given herein shall be and remain in effect as a full and complete
release notwithstanding the discovery or existence of any additional or
different claims or facts.

6. Further Assurances. Each of the Parties agrees, without the need for
additional consideration, that it will take such further actions and execute
upon request any further documents as may be reasonably required to fully
effectuate the terms, conditions and intent of this Agreement and to fully vest
in the other Party(ies) the rights and other benefits provided to such other
Party hereunder.

7. Transfer of Obligations. This Agreement shall be binding upon the
Parties and their respective heirs, legal representatives, successors and
assigns.

2
<PAGE>
8. Severability. In the event that any provision of this Agreement shall be
held unenforceable or invalid, such provision shall be amended and interpreted
so as to best accomplish the economic objectives of the original provision. The
other parts of the Agreement shall remain in full force and effect.

9. Governing Law. This Agreement shall be governed in all respects by the
laws of the State of Texas.

10. Amendments. This Agreement shall not be modified or amended in any
manner except in a writing signed by both Parties.

11. Counterparts. This Agreement may be executed in any number of
counterparts and each executed counterpart shall have the same force and effect
as an original instrument.

12. Entire Agreement. This Agreement constitutes and expresses the entire
agreement of the Parties with respect to the subject matter hereof, and all
prior or collateral discussions, proposals, negotiations and representations,
are merged into and superseded by this Agreement.

[SIGNATURES ON FOLLOWING PAGE]

3
<PAGE>

IN WITNESS WHEREOF, the Parties have caused their duly authorized
individuals to execute this Agreement.

NEWGOLD, INC.

By:
-----------------------------------
Name: A. Scott Dockter
Title: President

BUSINESS WEB, INC.

By:
-----------------------------------
Name: Chris Meaux
Title: Chief Executive Officer

4
<PAGE>

EXHIBIT A

MERGER AGREEMENT

[attached]

<PAGE>

EXHIBIT B

FIRST AMENDMENT

[attached]

<PAGE>

EXHIBIT C

FORM OF WARRANT

[attached]

<PAGE>

EXHIBIT D

NEWGOLD NOTE

[attached]

Exhibit 10.6

THE SECURITIES EVIDENCED BY THIS WARRANT HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED, AND MAY NOT BE SOLD, TRANSFERRED, ASSIGNED
OR HYPOTHECATED UNLESS THERE IS AN EFFECTIVE REGISTRATION STATEMENT UNDER SUCH
ACT COVERING SUCH SECURITIES, THE SALE IS MADE IN ACCORDANCE WITH RULE 144 UNDER
THE ACT, OR THE COMPANY RECEIVES AN OPINION OF COUNSEL FOR THE HOLDER OF SUCH
SECURITIES REASONABLY SATISFACTORY TO THE COMPANY STATING THAT SUCH SALE,
TRANSFER, ASSIGNMENT OR HYPOTHECATION IS EXEMPT FROM THE REGISTRATION AND
PROSPECTUS DELIVERY REQUIREMENTS OF SUCH ACT.

No. December 27, 1999
---------------

WARRANT TO PURCHASE COMMON STOCK

BUSINESS WEB, INC.

1. Number of Shares Subject to Warrant. FOR VALUE RECEIVED, on and after
the date of this Warrant, and subject to the terms and conditions herein set
forth, Holder (as defined below) is entitled to purchase from Business Web,
Inc., a Texas corporation doing business as "Comercis, Inc." (the "Company"), at
any time before 5:00 p.m., California time, on the Termination Date (as defined
below), at a price per share equal to the Warrant Price (as defined below), the
Warrant Stock (as defined below and subject to adjustments as described below)
upon exercise of this Warrant pursuant to Section 6 hereof.

2. Definitions. As used in this Warrant, the following terms shall have the
definitions ascribed to them below:

(a) "Holder" shall mean NewGold, Inc., a Delaware corporation, and its
assigns.

(b) "Securities" shall mean the Common Stock of the Company, together
with such other securities or property that may become issuable upon exercise of
this Warrant as described in Section 3 below.

(c) "Termination Date" shall mean the date that is one (1) year after
the closing of an underwritten initial public offering of shares of Common Stock
of the Company.

(d) "Warrant Price" shall be equal to $3.00 per share, subject to
adjustment as described in Section 3 below.

(e) "Warrant Stock" shall mean the 3,132,794 shares of Securities
purchasable upon exercise of this Warrant, subject to adjustment as described in
Section 3 below.

<PAGE>

3. Adjustments and Notices. The Warrant Price and the number of shares of
Warrant Stock shall be subject to adjustment from time to time in accordance
with the following provisions:

(a) Subdivision, Stock Dividends or Combinations. In case the Company
shall at any time subdivide the outstanding shares of the Securities or shall
issue a dividend in the form of Securities with respect to the Securities, the
Warrant Price in effect immediately prior to such subdivision or the issuance of
such dividend shall be proportionately decreased, and the number of shares of
Warrant Stock purchasable immediately prior to such subdivision or issuance of
dividend shall be proportionately increased, and in case the Company shall at
any time combine the outstanding shares of the Securities, the Warrant Price in
effect immediately prior to such combination shall be proportionately increased,
and the number of Warrant Stock purchasable immediately prior to such
combination shall be proportionately decreased, effective at the close of
business on the date of such subdivision, dividend or combination, as the case
may be.

(b) Reclassification, Exchange, Substitute, In-Kind Distribution. Upon
any reclassifications, exchange, substitution or other event that results in a
change of the number and/or class of the securities issuable upon exercise or
conversion of this Warrant or upon the payment of a dividend in securities or
property other than Securities, the Holder shall be entitled to receive, upon
exercise or conversion of this Warrant, the number and kind of securities and
property that Holder would have received if this Warrant had been exercised
immediately before the record date for such reclassification, exchange,
substitution or other event or immediately prior to the record date for such
dividend. The Company or its successor shall promptly issue to Holder a new
Warrant for such new securities or other property. The new Warrant shall provide
for adjustments which shall be as nearly equivalent as may be practicable to the
adjustments provided for in this Section 3 including, without limitation,
adjustments to the Warrant Price and to the number of securities or property
issuable upon exercise of the new Warrant. The provisions of this Section 3(b)
shall similarly apply to successive reclassifications, exchanges, substitutions
or other events and successive dividends.

(c) Reorganization, Merger, etc. In case of any (i) merger or
consolidation of the Company into or with another corporation, (ii) sale,
transfer or lease (but not including a transfer or lease by pledge or mortgage
to a bona fide lender) of all or substantially all of the assets of the Company,
or (iii) sale by the Company's shareholders of 50% or more of the Company's
outstanding securities in one or more related transactions, the Company, or such
successor or purchasing corporation, as the case may be, shall, as a condition
to the consummation of any such reorganization, merger or sale, duly execute and
deliver to the Holder hereof a new warrant such that the Holder shall have the
right to receive, in lieu of the shares of the Securities theretofore issuable
upon exercise of this Warrant, the kind and amount of shares of stock, other
securities, money and property to which such Holder would have been entitled
upon such consummation if such Holder had exercised this Warrant immediately
prior to the consummation of such reorganization, merger, or sale. Such new
warrant shall provide for adjustments that shall be as nearly equivalent as may
be practicable to the adjustments provided for in this Section 3. The provisions
of this subparagraph (c) shall similarly apply to successive reorganizations,
mergers and sales.

2
<PAGE>
(d) No Impairment. The Company shall not, by amendment of its Articles
or Certificate of Incorporation or through a reorganization, transfer of assets,
consolidation, merger, dissolution, issue or sale of securities or any other
voluntary action, avoid or seek to avoid the observance or performance of any of
the terms to be observed or performed under this Warrant by the Company, but
shall at all times in good faith assist in carrying out of all the provisions of
this Section 3 and in taking all such action as may be necessary or appropriate
to protect the Holder's rights under this Section 3 against impairment.

(e) Notice. Upon any adjustment of the Warrant Price and any increase or
decrease in the number of shares of the Securities purchasable upon the exercise
or conversion of this Warrant, then, and in each such case, the Company, within
thirty (30) days thereafter, shall give written notice thereof to the Holder of
this Warrant at the address of such Holder as shown on the books of the Company
which notice shall state the Warrant Price as adjusted and the increased or
decreased number of shares purchasable upon the exercise or conversion of this
Warrant, setting forth in reasonable detail the method of calculation of each.
The Company further agrees to notify the Holder of this Warrant in writing of a
reorganization, merger or sale in accordance with Section 3(c) hereof at least
forty-five (45) days prior to the effective date thereof. The Company also
agrees to notify the Holder of this Warrant in writing of a proposed public
offering at least thirty (30) days prior to the effective date thereof.

(f) Fractional Shares. No fractional shares shall be issuable upon
exercise or conversion of the Warrant and the number of shares to be issued
shall be rounded down to the nearest whole share. If a fractional share interest
arises upon any exercise or conversion of the Warrant, the Company shall
eliminate such fractional share interest by paying the Holder an amount computed
by multiplying the fractional interest by the fair market value of a full share.

4. No Shareholder Rights. This Warrant, by itself, as distinguished from
any shares purchased hereunder, shall not entitle its Holder to any of the
rights of a shareholder of the Company.

5. Representations of the Company and Reservation of Stock. This Warrant
has been duly and validly authorized, executed and delivered by the Company and
constitutes a valid and binding agreement of the Company enforceable against the
Company in accordance with its terms. All Securities which may be issued upon
the exercise or conversion of this Warrant shall, upon issuance in accordance
with the terms hereof, be duly authorized, validly issued, fully paid and
nonassessable, and free of any liens and encumbrances, except for restrictions
on transfer provided for herein or under applicable federal and state securities
laws. On and after the date of this Warrant, the Company will reserve from its
authorized and unissued Securities a sufficient number of shares to provide for
the issuance of Warrant Stock upon the exercise or conversion of this Warrant.
Issuance of this Warrant shall constitute full authority to the Company's
officers who are charged with the duty of executing stock certificates to
execute and issue the necessary certificates for shares of Warrant Stock
issuable upon the exercise or conversion of this Warrant.

6. Exercise of Warrant. This Warrant may be exercised in whole or part by
the Holder subsequent to the date hereof and on or before the Termination Date
by the surrender of this Warrant, together with the Notice of Exercise and
Investment Representation Statement in the forms attached hereto as Attachments
1 and 2, respectively, duly completed and executed at

3
<PAGE>
the principal office of the Company, specifying the portion of the Warrant to be
exercised and accompanied by payment in full of the Warrant Price in cash, check
or wire transfer with respect to the shares of Warrant Stock being purchased.
This Warrant shall be deemed to have been exercised immediately prior to the
close of business on the date of its surrender for exercise as provided above,
and the person entitled to receive the shares of Warrant Stock issuable upon
such exercise shall be treated for all purposes as Holder of such shares of
record as of the close of business on such date. As promptly as practicable
after such date, but in any event within ten (10) business days thereafter, the
Company shall issue and deliver to the person or persons entitled to receive the
same a certificate or certificates for the number of full shares of Warrant
Stock issuable upon such exercise. If the Warrant shall be exercised for less
than the total number of shares of Warrant Stock then issuable upon exercise,
promptly after surrender of the Warrant upon such exercise, the Company will
execute and deliver a new Warrant, dated the date hereof, evidencing the right
of the Holder to the balance of the Warrant Stock purchasable hereunder upon the
same terms and conditions set forth herein.

7. Conversion. In lieu of exercising this Warrant or any portion hereof,
the Holder hereof shall have the right to convert this Warrant or any portion
hereof into Securities by executing and delivering to the Company at its
principal office the written Notice of Conversion and Investment Representation
Statement in the forms attached hereto as Attachments 2 and 3, specifying the
portion of the Warrant to be converted, and accompanied by this Warrant. The
number of shares of Securities to be issued to Holder upon such conversion shall
be computed using the following formula:

X = (P)(Y)(A-B)/A

where X = the number of shares of Securities to be
issued to the Holder for the portion of the
Warrant being converted.

P = the portion of the Warrant being
converted expressed as a decimal fraction.

Y = the total number of shares of Securities
issuable upon exercise of the Warrant in
full.

A = the fair market value of one share of
Securities, which shall mean (i) the fair
market value of one share of Securities as
of the last business day immediately prior
to the date the notice of conversion is
received by the Company, as determined in
good faith by the Company's Board of
Directors, provided that in the event the
Holder disagrees with the Board's good
faith determination, the valuation shall be
determined by a mutually agreeable
valuation firm, or (ii) if this Warrant is
being converted in conjunction with a
public offering of Securities, the price to
the public per share in such offering, or
(iii) if the Securities are publicly traded
on a stock exchange or national market
system, the average closing price for the
ten (10)

4
<PAGE>
trading day period immediately prior to the
date of conversion.

B = the Warrant Price on the date of conversion.

Any portion of this Warrant that is converted shall be immediately canceled.
This Warrant or any portion hereof shall be deemed to have been converted
immediately prior to the close of business on the date of its surrender for
conversion as provided above, and the person entitled to receive the shares of
Warrant Stock issuable upon such conversion shall be treated for all purposes as
Holder of such shares of record as of the close of business on such date. As
promptly as practicable after such date, but in any event within ten (10)
business days thereafter, the Company shall issue and deliver to the person or
persons entitled to receive the same a certificate or certificates for the
number of full shares of Warrant Stock issuable upon such conversion. If the
Warrant shall be converted for less than the total number of shares of Warrant
Stock then issuable upon conversion, promptly after surrender of the Warrant
upon such conversion, the Company will execute and deliver a new Warrant, dated
the date hereof, evidencing the right of the Holder to the balance of the
Warrant Stock purchasable hereunder upon the same terms and conditions set forth
herein.

8. Transfer of Warrant. This Warrant may be transferred or assigned by the
Holder hereof, in whole or in part, provided that such transfer is effected in
compliance with all applicable state and federal securities laws.

9. Piggyback Registration Rights.

(a) Corporate Obligation. If the Company shall determine to register any
of the Securities either for its own account or the account of a shareholder(s)
exercising demand registration rights, other than a registration relating solely
to employee benefit plans, or a registration relating solely to a transaction
pursuant to Rule 145 promulgated under the Securities Act of 1933, as amended
(the "Act"), or a registration on any registration form which does not permit
secondary sales or does not include substantially the same information as would
be required to be included in a registration statement covering the sale of the
Warrant Stock, the Company will promptly give to the Holder written notice
thereof and include in such registration (and any related qualification under
blue sky laws), and in any underwriting involved therein, the number of shares
of Warrant Stock specified in a written request made by the Holder within
fifteen (15) days after receipt of such written notice from the Company, except
as set forth in Section 9(b) below.

(b) Underwritten Public Offering. If the registration for which the
Company gives notice is for a registered public offering involving an
underwriting, the right of the Holder to registration shall be conditioned upon
the Holder's participation in such underwriting and the inclusion of the
Holder's Warrant Stock in the underwriting pursuant to an underwriting agreement
in customary form with the underwriter or underwriters selected by the Company.
Notwithstanding any other provision of this Section, if the underwriter
reasonably determines that marketing factors require a limitation on the number
of shares to be underwritten the underwriter may exclude some or all of the
Warrant Stock with the number of shares that may be included in the registration
and underwriting being allocated among the Holder and all other shareholders
entitled to have securities included in such registration in proportion, as
nearly as

5
<PAGE>
practicable, to the respective amounts of securities which they had requested to
be included in such registration (provided, however, that if the registration is
for the account of shareholders exercising demand registration rights, the
number of shares that may be included by the Holder shall be cut back entirely
before any limitation on the number of shares that may be included by such
shareholders).

(c) Expenses. All expenses of the registration shall be borne by the
Company, except underwriting discounts and selling commissions applicable to the
sale of any shares of Warrant Stock and any other securities of the Company
being sold in the same registration by other shareholders, which shall be borne
by the Holder and such other shareholders pro rata on the basis of the number of
shares registered.

10. "Market Stand-Off" Agreement. The Holder hereby agrees that it shall
not, to the extent reasonably requested by the Company and an underwriter of
Common Stock of the Company, sell or otherwise transfer or dispose (other than
to donees who agree to be similarly bound) of any Common Stock of the Company
during the one hundred eighty (180)-day period following the effective date of
an underwritten initial public offering of the Company, provided that all
officers and directors of the Company enter into similar agreements. Such
agreement shall be in writing in a form satisfactory to the Company and such
underwriter.

11. Miscellaneous. This Warrant shall be governed by the laws of the
State of California, as such laws are applied to contracts to be entered into
and performed entirely in California by California residents. The headings in
this Warrant are for purposes of convenience and reference only, and shall not
be deemed to constitute a part hereof. Neither this Warrant nor any term hereof
may be changed or waived orally, but only by an instrument in writing signed by
the Company and the Holder of this Warrant. All notices and other communications
from the Company to the Holder of this Warrant shall be delivered personally or
mailed by first class mail, postage prepaid, to the address furnished to the
Company in writing by the last Holder of this Warrant who shall have furnished
an address to the Company in writing, and if mailed shall be deemed given three
days after deposit in the United States mail.

ISSUED: December 27, 1999

BUSINESS WEB, INC.

By:
----------------------------------
Name: Chris Meaux
Title: Chief Executive Officer

6
<PAGE>
Attachment 1

NOTICE OF EXERCISE

TO: BUSINESS WEB, INC.

1. The undersigned hereby elects to purchase ______________shares of the
Warrant Stock of Business Web, Inc. pursuant to the terms of the attached
Warrant, and tenders herewith payment of the purchase price in full.

2. Please issue a certificate or certificates representing said shares
of Warrant Stock in the name of the undersigned or in such other name as is
specified below:

-----------------------------------
(Name)

-----------------------------------
(Address)

- ----------------------------------- ---------------------------------------
(Date) (Name of Warrant Holder)

By:
----------------------------------------

Title:
-------------------------------------
(Title and signature of authorized person)

<PAGE>

Attachment 2

INVESTMENT REPRESENTATION STATEMENT

Shares of the Securities
(as defined in the attached Warrant) of
BUSINESS WEB, INC.

In connection with the purchase of the above-listed securities, the
undersigned hereby represents to Business Web, Inc. (the "Company") as follows:

(a) The securities to be received upon the exercise of the Warrant (the
"Securities") will be acquired for investment for its own account, not as a
nominee or agent, and not with a view to the sale or distribution of any part
thereof, and the undersigned has no present intention of selling, granting
participation in or otherwise distributing the same, but subject, nevertheless,
to any requirement of law that the disposition of its property shall at all
times be within its control.

(b) The undersigned understands that the Securities issuable upon exercise
of the Warrant at the time of issuance may not be registered under the
Securities Act of 1933, as amended (the "Act"), and applicable state securities
laws, on the ground that the issuance of such securities is exempt pursuant to
Section 4(2) of the Act and state law exemptions relating to offers and sales
not by means of a public offering, and that the Company's reliance on such
exemptions is predicated on the undersigned's representations set forth herein.

(c) The undersigned agrees that in no event will it make a disposition of
any Securities acquired upon the exercise of the Warrant unless and until (i) it
shall have notified the Company of the proposed disposition and shall have
furnished the Company with a statement of the circumstances surrounding the
proposed disposition, and (ii) it shall have furnished the Company with an
opinion of counsel reasonably satisfactory to the Company and Company's counsel
to the effect that (A) appropriate action necessary for compliance with the Act
and any applicable state securities laws has been taken or an exemption from the
registration requirements of the Act and such laws is available, and (B) the
proposed transfer will not violate any of said laws.

(d) The undersigned acknowledges that an investment in the Company is
highly speculative and represents that it is able to fend for itself in the
transactions contemplated by this Statement, has such knowledge and experience
in financial and business matters as to be capable of evaluating the merits and
risks of its investments, and has the ability to bear the economic risks
(including the risk of a total loss) of its investment. The undersigned
represents that it has had the opportunity to ask questions of the Company
concerning the Company's business and assets and to obtain any additional
information which it considered necessary, and has had all questions which have
been asked by it satisfactorily answered by the Company.

(e) The undersigned acknowledges that the Securities issuable upon exercise
of the Warrant must be held indefinitely unless subsequently registered under
the Act or an exemption

<PAGE>
from such registration is available. The undersigned is aware of the provisions
of Rule 144 promulgated under the Act which permit limited resale of shares
purchased in a private placement subject to the satisfaction of certain
conditions, including, among other things, the existence of a public market for
the shares, the availability of certain current public information about the
Company, the resale occurring not less than one (1) year after a party has
purchased and paid for the security to be sold, the sale being through a
"broker's transaction" or in transactions directly with a "market makers" (as
provided by Rule 144(f)) and the number of shares being sold during any
three-month period not exceeding specified limitations.

Dated:
-------------------------

-------------------------------------------
(Typed or Printed Name)

By:
----------------------------------------
(Signature)

Title:
-------------------------------------

<PAGE>
Attachment 3

NOTICE OF CONVERSION

TO: BUSINESS WEB, INC.

1. The undersigned hereby elects to acquire__________ shares of the
Securities of Business Web, Inc. pursuant to the terms of the attached Warrant,
by conversion of percent (__ %) of the Warrant.

2. Please issue a certificate or certificates representing said shares of
Securities in the name of the undersigned or in such other name as is specified
below:

-----------------------------------
(Name)

-----------------------------------
(Address)

- ----------------------------------- ---------------------------------------
(Date) (Name of Warrant Holder)

By:
----------------------------------------

Title:
-------------------------------------
(Title and signature of authorized person)

<ARTICLE> 5

<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> JAN-31-2000
<PERIOD-END> JAN-31-2000
<CASH> 2,163
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 6,663
<PP&E> 827,105
<DEPRECIATION> 18,385
<TOTAL-ASSETS> 865,883
<CURRENT-LIABILITIES> 1,361,587
<BONDS> 0
0
0
<COMMON> 41,122
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 865,883
<SALES> 0
<TOTAL-REVENUES> 0
<CGS> 0
<TOTAL-COSTS> 770,680
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 131,698
<INCOME-PRETAX> (919,735)
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> (919,735)
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (919,735)
<EPS-BASIC> (0.02)
<EPS-DILUTED> (0.02)

</TABLE>