2001 Annual Report

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President's Message

2001 was a year of challenge. A year that saw technology stocks give back two years of gains in the first two months. A year that saw interest rates cut to historic lows in an effort to invigorate dormant economies. A year that proved to be an uphill battle for all technology companies – including VRX. In the face of these challenges, the management of VRX made some hard decisions and embarked on a number of cost cutting initiatives that included the rationalization of our workforce. These decisions and cost cutting initiatives enabled VRX to survive a very challenging year. With a lot of dedication and hard work, we overcame the challenges of 2001 and move into 2002 with enthusiasm and heightened expectations.

The economic challenges of 2001 have forced most companies to be more aggressive in marketing their goods and services. Going forward, our enthusiasm is driven by our belief in our ability to provide innovative content solutions to the most successful e-commerce sector - online travel. In 2001, online travel sales accounted for nearly thirty six percent of all e-commerce sales – an increase of twelve percent over the previous year. This growth is exceptional given travel is largely a discretionary expenditure, and like all discretionary expenditures, is susceptible to a slowing economy. The economic challenges faced by many in 2001 were compounded by the horrendous acts of September 11th. On that day, fear surpassed economics and became the single greatest impediment to travel. As a result, leisure and business travel virtually ground to a halt and the US and Canadian governments were forced to spend hundreds of millions of dollars to keep the airline industries in both countries aloft.

In spite of the challenges of 2001, online travel sales have continued to grow at a rapid pace.With the traveling public returning to the skies and online travel sales increasing, competition within the online travel sector has increased significantly. For VRX, the increased competition has created new opportunities, as travel agents, suppliers, wholesalers, tour operators, hotels, and airlines have been forced to increase their marketing efforts, just to maintain their existing market share.

Our original business plan recognized the incredible growth potential of the online travel industry and focused on marketing to smaller online travel companies. Our goal was to help level the playing field between small travel companies and the industry giants.

Before VRX was founded in early 2000, interactive content such as ours was only available to very large, well funded, travel companies. Unfortunately, shortly after launching our first our first product line in late 2000, the economy began to slow and the small travel companies that we were targeting were the first to bear the brunt of declining sales and commissions. Large conglomerates took advantage of the economic climate, buying many of the successful smaller travel companies. Those not purchased, saw their marketing budgets shrink dramatically. Recognizing these challenges, we shifted our focus away from the small independent travel companies towards industry leaders. To meet the demands of these companies we needed to adapt our offerings. We answered the challenge with a new generation of products and services that included the re-pricing and repackaging of our existing products and the formation of a new Interactive Services Division.

Late in 2001, in conjunction with Virgin Holidays, we launched an aggressive marketing campaign promoting our new interactive services to Virgin's top hospitality partners throughout the Caribbean. As a result of this innovative campaign, VRX has provided content solutions to many of the top hospitality brand names in the Caribbean including Hilton, Hyatt, and Sandals. By all measures, the campaign was and continues to be a tremendous success.

Subsequent to year-end, we launched a similar campaign with Expedia, Inc - the largest online travel company in the world. In addition to licensing a customized version of the interactive maps and virtual tours for use on its various international websites, Expedia engaged VRX to provide custom content solutions to its hospitality partners. In the first quarter of 2002, we began fulfilling our commitments to Expedia and we are already seeing the effects on both our corporate profile and bottom line.

Today, VRX is a stronger, more focused company. Our list of clients continues to grow and now includes some of the largest and most prominent companies within the travel industry. Our content solutions, along with our branding, now appears on the websites of companies such as Cendant Corporation, the American Automobile Association (AAA), Virgin Holidays, Intrawest Resort Ownership Corp., The Bermuda Department of Tourism, The Visitor and Convention Bureau of Hawaii, and Expedia, Inc.

Looking forward, we see our customers constantly seeking fresh new content solutions to maintain their competitive advantage. Our strategy to maintain our position as the leading provider of online interactive travel content is to meet these increasing demands by constantly developing new products and services and maintaining the high level of quality of our products. As our visibility increases through exposure on our clients websites, we have every reason to believe our market share and revenue will follow suit.

As we move forward into the second quarter of 2002 it is important to note that we have achieved a number of important milestones: we have experienced strong sequential growth in our reoccurring licensing revenues; we have refined and proven our business model; and, most importantly, we are now cash flow positive – putting VRX in very exclusive company amongst its TSX Venture Exchange peers. Our financial position and dominance over our market niche puts us in a position of strength. This strength makes it unlikely the Company will need to endure further dilutive financings to develop our core business model.

Our primary task in the coming months is to increase shareholder value. Although we have only just turned the corner towards profitability, as our corporate visibility increases along with our revenues, we will work harder than ever to make the investment community take note of our accomplishments and potential.

On behalf of the management and employees of VRX, I would like to thank our many shareholders for their ongoing support. I truly believe 2002 will be the year VRX joins the exclusive ranks of profitable companies. All of us look forward to 2002 with great anticipation and enthusiasm.

Yours truly,
David MacLaren
President & CEO