2004 Annual Report

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President's Message

Throughout 2004, two key trends continued in the online travel industry: growth and consolidation. More people than ever before are booking travel online and the percentage of online travel sales, compared to aggregate industry sales, is continuing to grow year over year. By the end of 2005, 26 % of total travel revenue, representing US $62 billion, is expected to be transacted online in the United States, and 8%, representing US$26.1 billion, is expected to be transacted online in Europe. Driven by the rapid growth of online travel sales, there was considerable consolidation within the travel industry in both North America and Europe in 2004. Over the past year, Cendant, one of the world's largest travel companies, acquired not only eBookers.com, one of the top five online travel companies in Europe, but also Orbitz.com, the third largest online travel company in North America. Both growth and consolidation trends are expected to continue throughout 2005 and well into the foreseeable future.

The consolidation occurring within the online travel industry has resulted in the top three online travel intermediaries (Expedia, Travelocity, and Orbitz), now accounting for roughly 16% of total online travel traffic, including air, hotel, cruise, car, and other travel services such as travel directions. As direct competition from suppliers, such as Hilton, Hyatt, and Inter Continental, continues to grow and the popularity of services offered by travel search companies such as Sidestep.com and Kayak.com continues to increase, online travel companies must not only find new ways to differentiate their services but they must also, in many cases, match new products and services offered by their competitors. With leading online brands such as Yahoo and AOL joining the fray, new companies emerging like Kayak, suppliers adopting aggressive marketing strategies, let alone the increasing competition between existing online travel companies, VRX's target market and it's overall market opportunity continues to grow.

With hoteliers becoming more aggressive with their online strategies, another new market opportunity is emerging for VRX. Hoteliers today are aggressively trying to recapture the sales, and the control of their inventory that they have lost to online travel intermediaries over the past three years. Their strategy, although slow to materialize, has been to improve the consumer appeal and functionality of their websites while offering lowest price guarantees. Hoteliers' aggressive move into the online business-to-consumer space has dramatically increased the demand for high quality, user-friendly visual content. To counteract the emerging competition from suppliers, online travel intermediaries are competing harder than ever for consumers' attention. Not surprisingly, online hotel bookings have grown faster than any other travel category and are forecast to have the greatest growth over the next few years.

In 2003 and 2004 VRX capitalized on opportunities in the lodging sector by providing exclusive production services to Expedia, Inc. While this experience afforded VRX a profitable opportunity and solidified VRX's global reputation, it was only a stepping stone in VRX's path to success. VRX's future does not lie in providing one-off service fee work exclusively to one client, it lies in providing an entire industry a highly sought after product that in turn creates a fully diversified, reoccurring, high margin, revenue stream for VRX. Creating a broad, comprehensive, rich media archive of VRX quality hotel content and making it available to all online travel companies, at a reasonable cost (VRX's new "Hotel Program"), will not only create an industry standard but will also help level the playing field between all online travel companies. The true power behind VRX's new Hotel Program is VRX's ownership of the underlying intellectual property - the content itself. Ownership creates more opportunities and maximizes future profit potential.

Launched in November 2004, VRX's Hotel Program offers hotels the ability to control their brand across all online distribution channels by creating high-quality, web-friendly, visual content that is syndicated, updated, and maintained from one central control point. Creating a master archive of hotel content and making it available to all travel intermediaries, ensures that the content viewed by consumers on both supplier's web sites and those of intermediaries is not only the same but it's always accurate and up to date. As part of the program, VRX creates extensive coverage of each hotel, creating 360° virtual tours, still images, descriptive text, and interactive maps of each amenity, facility, and room type offered by each hotel. To alleviate consumers' anxiety over the accuracy of content on the web, all of VRX's Hotel Content is certified by the associated hotel prior to syndication.

While the hotels seek to regain control of their inventory and pricing, they also recognize that a significant portion of theirbookings is generated through the online travel intermediaries, especially the big three: Expedia, Travelocity, and Orbitz. The intermediaries' popularity is rooted in their ability to allow customers to construct a vacation individually tailored to their preferences or simply select an all-inclusive preplanned vacation package. The flexibility and the depth of choices offered by the leading intermediaries attracts a large percentage of online travel consumers. To address consumers demand for high quality, web-ready, visual content of both hotels and destinations, VRX must meet the specific demands of both large and small travel intermediaries - as well as those of suppliers.

Based on the number of hotels that have signed up within the first three months of our Hotel Program and the interest that we are receiving from intermediaries and hoteliers alike, we are confident that our Hotel Program will be a success. The brands that have joined our Hotel Program in the first ninety days are truly industry leaders in their vision for the future of online travel. These companies are early adopters by all accounts and will reap the benefits of being the first to join our Program.

The "relentless pursuit of innovation" and "an uncompromising commitment to quality", two of VRX's core values, are espoused by everyone at VRX and drive us to continually improve our products and services. To further extend our competitive advantage and increase the value of our content, we upgraded all our photography and processing equipment in late 2004. As a result of these upgrades and further advances in the technology behind our viewer and delivery infrastructure, our new Hotel and Destination Content will yet again raise the bar for quality and functionality in our industry. Combined with our new Destination and Hotel Maps, we are confident that hotels and intermediaries will have a hard time resisting our offerings.

In addition to the launch of our new Hotel Program, VRX achieved a number of important milestones throughout 2004: We expanded our geographic reach by providing services and capturing both hotel and destination content not only in Europe but also in Asia and the South Pacific and we also launched a business-to-consumer division. These efforts have gained international recognition for VRX and we are levering this exposure with the launch of our new "Great Cities" and "Islands" campaigns (GreatCitiesOfEurope.com, GreatCities OfNorthAmerica.com, TropicalIslandsOfHawaii.com). These programs set the standard for web friendly, user-friendly interactive destination content and will serve as the template for all our destination content products going forward. To showcase our new Hotel Program, destination maps, and other new offerings, we recently launched a completely redesigned version of our website: www.vrxstudios.com. This redesign amalgamates both our VRX and MaxVR web sites into one user-friendly website that enables existing and potential customers to peruse and license all of our Destination and Hotel Content.

VRX's new business-to-consumer division, Xplore Travel Group ("Xplore"), was launched in early 2004. This new division is a culmination of the content and travel expertise that we've gained from working within the travel industry for the past five years. With the launch of media rich sites such as XploreLasVegas.com, XploreParis.com, XploreCancun.com, and XploreOahu.com, VRX has set a new standard for online destination marketing. Our goal in launching Xplore is to create destination specific, content rich, multimedia travel web sites for each of the world's top travel destinations. Each site, in addition to offering the most comprehensive content, will offer the same products and services as sites such as Travelocity and Orbitz. As online travel research and booking becomes the norm and broadband usage reaches the masses, consumers will search out sites that provide the most comprehensive, visually compelling, informative content. This trend bodes well for both VRX and Xplore Travel Group.

2004 was a year of change for VRX. Looking forward, we are determined to revolutionize and continually improve how content is created, distributed, updated, and applied within the online travel industry.

Thank you to all of our shareholders for their continued support and, like everyone at VRX, I look forward to an exciting 2005.

Regards,

David MacLaren