<PAGE>   1
                       SECURITIES AND EXCHANGE COMMISSION

                             WASHINGTON, D.C. 20549

                                   FORM 10-QSB
(Mark One)

          [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE
                         SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended      March 31, 2000
                               -------------------------------------------------
                                                OR

          [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
                         SECURITIES EXCHANGE ACT OF 1934

For the transition period from                        to
                               ----------------------    -----------------------

Commission File Number              000-29795
                       ---------------------------------------------------------

                                 MegaWorld, Inc.
--------------------------------------------------------------------------------
        (Exact name of small business issuer as specified in its charter)

<TABLE>
<CAPTION>
<S>                                                              <C>
                        DELAWARE                                                     11-3118271
---------------------------------------------------------        --------------------------------------------------
             (State or other jurisdiction of                          (I.R.S. Employer Identification Number)
             incorporation or organization)

6250 North Houston Rosslyn Road, Houston, Texas                                         77091
---------------------------------------------------------        --------------------------------------------------
    (Address of principal executive offices)                                          (Zip Code)
</TABLE>

                                 (713) 462-6906
--------------------------------------------------------------------------------
                           (Issuer's telephone number)

--------------------------------------------------------------------------------
              (Former name, former address and former fiscal year,
                         if changed since last report)

         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  [X]     No  [ ]

         State the number of shares outstanding of each of the issuer's classes
of common equity, as of the latest practicable date: 40,335,706 shares
outstanding as of May 31, 2000.


<PAGE>   2
                                 MEGAWORLD, INC.

                                      INDEX
<TABLE>
<CAPTION>
PART I.  FINANCIAL INFORMATION                                                                         PAGE NO.
                                                                                                       --------
<S>                                                                                                    <C>
         Item 1. Financial Statement...................................................................... 3

                  Condensed Consolidated Balance Sheets (Unaudited)
                           March 31, 2000 and September 30, 1999...........................................3

                  Condensed Consolidated Statements of Operations (Unaudited)
                           Three Months and Six Months Ended
                           March 31, 2000 and 1999.........................................................4

                  Condensed Consolidated Statements of Cash Flows (Unaudited)
                           Six Months Ended
                           March 31, 2000 and 1999.........................................................5

                  Notes to Interim Financial Statements....................................................6

         Item 2.  Management's Discussion and
                           Analysis of Plan of Operation...................................................7

PART II..OTHER INFORMATION

         Item 1.  Legal Proceedings ......................................................................11

         Item 5.  Other Information ......................................................................12

         Item 6.  Exhibits and Reports on Form 8-K........................................................13
</TABLE>




                                       2
<PAGE>   3
PART I.  FINANCIAL INFORMATION
ITEM 1.  FINANCIAL STATEMENT
                        MEGAWORLD, INC. AND SUBSIDIARIES
                      CONDENSED CONSOLIDATED BALANCE SHEETS
                                 (IN THOUSANDS)
<TABLE>
<CAPTION>
                                                       MARCH 31,     SEPT 30,
                                                         2000          1999
                                                       --------    -----------
                                                      (unaudited)
<S>                                                    <C>         <C>
ASSETS
CURRENT ASSETS:
   Cash and cash equivalents .......................   $    72     $     37
   Receivables from related party ..................        15           15
   Other current assets ............................        29           29
   Discontinued operations .........................     3,766        3,969
                                                       -------     --------
       TOTAL CURRENT ASSETS ........................     3,892        4,050

Property and equipment, net ........................       417          347
Asset held for sale ................................       622          622
Other assets, net ..................................        53           27
                                                       -------     --------
       TOTAL ASSETS ................................   $ 4,974     $  5,046
                                                       =======     ========

LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
   Accounts payable ................................   $    98     $   --
   Accrued liabilities .............................       681          567
   Advance from investors ..........................       688          513
   Amounts due to stockholders and affiliates ......     1,947        1,449
   Discontinued operations .........................     6,638        6,397
                                                       -------     --------
       TOTAL CURRENT LIABILITIES ...................    10,052        8,926

Long-term debt .....................................       --          --

CONTINGENCIES (NOTE 2) .............................       --          --

STOCKHOLDERS' DEFICIT:
Common stock; $.0001 par value; 100,000,000 shares
authorized;
       40,220,706 and 40,180,706 shares issued and
outstanding in 2000 and 1999, respectively ......            4            4
   Additional paid-in capital .....................      8,516        7,999
   Accumulated deficit ............................    (13,598)     (11,883)
                                                      --------     --------
       TOTAL STOCKHOLDERS' DEFICIT ................     (5,078)      (3,880)
                                                      --------     --------
       TOTAL LIABILITIES AND STOCKHOLDERS' DEFICIT    $  4,974     $  5,046
                                                      ========     ========
</TABLE>


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


                                       3

<PAGE>   4
                        MEGAWORLD, INC. AND SUBSIDIARIES
                 CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
              (IN THOUSANDS, EXCEPT PER SHARE AMOUNTS - UNAUDITED)

<TABLE>
<CAPTION>
                                      THREE MONTHS              SIX MONTHS
                                      ENDED MARCH 31,          ENDED MAR 31,
                                 ----------------------   ---------------------
                                    2000        1999        2000        1999
                                 ----------   ---------   ---------   ---------
<S>                                <C>         <C>         <C>         <C>
REVENUE:
     Other .....................   $      4    $    --     $      6    $    --
                                   --------    --------    --------    --------
          Total revenue ........          4         --            6         --

COSTS AND EXPENSES:
     Selling and marketing
expenses .......................        100          12         192          12
     General and administrative
expenses .......................        903         190       1,090         315
                                   --------    --------    --------    --------
     Total costs and
expenses .......................      1,003         202       1,282         327
                                   --------    --------    --------    --------
LOSS BEFORE Discontinued
operations .....................       (999)       (202)     (1,275)       (327)

       Discontinued
operations .....................       (421)        129        (439)        186
                                   --------    --------    --------    --------
Net loss to common
shareholders ...................   $ (1,420)   $    (73)   $ (1,714)   $   (141)
                                   ========    ========    ========    ========
LOSS PER SHARE:
    Loss from continuing
      operations per common
      share:
           Basic and diluted ...      (0.02)      (0.01)      (0.03)      (0.01)

Loss from discontinued operations
per common share:
           Basic ...............      (0.01)        --        (0.01)        --

NET LOSS:
           Basic ...............      (0.03)        --        (0.04)      (0.01)

Weighted average shares -
basic ..........................     40,221      33,781      40,205      27,567
                                   --------    --------    --------    --------
</TABLE>

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


                                       4
<PAGE>   5
                        MEGAWORLD, INC. AND SUBSIDIARIES
                 CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
                           (IN THOUSANDS - UNAUDITED)

<TABLE>
<CAPTION>
                                                               SIX MONTHS
                                                               ENDED MAR 31,
                                                          ---------------------
                                                             2000         1999
                                                          ----------   --------
<S>                                                       <C>          <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss .............................................     $(1,714)     $  (141)
Adjustments to reconcile net loss to net cash
(used) provided by
    operating activities:

Non-cash compensation ................................         500           --

Changes in current assets and liabilities
        Receivables and advances .....................           5          (14)
        Other current assets .........................         (26)         (47)
        Accounts payable .............................         107          (11)
        Other current liabilities ....................         104          234
Discontinued operations ..............................         434          343
                                                           -------      -------
            Net cash (used) provided by
operating activities .................................        (585)         364

CASH FLOWS FROM INVESTING ACTIVITIES:

        Purchase property and equipment ..............         (70)        (346)
                                                           -------      -------
            Net cash used by investing
activities ...........................................         (70)        (346)

CASH FLOWS FROM FINANCING ACTIVITIES:
        Proceeds from sale of common stock ...........          16            3
        Proceeds from notes payable-shareholder ......          74
        Proceeds from notes payable  .................         600
                                                           -------      -------
            Net cash provided by financing
activities ...........................................         690            3
                                                           -------      -------

NET CHANGE IN CASH AND CASH EQUIVALENTS ..............          35           21

CASH AND CASH EQUIVALENTS:
        Beginning of period ..........................          37            0
                                                           -------      -------
        End of period ................................     $    72      $    21
                                                           =======      =======
</TABLE>


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



                                       5
<PAGE>   6
                        MEGAWORLD, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1.          BASIS OF PRESENTATION

         The consolidated financial statements reflect the accounts of
MegaWorld, Inc. and its majority and wholly owned subsidiaries ("MegaWorld" or
the "Company"), and the effect of discontinued operations. The Company's
consolidated statements of operations, which include the results of Total
Building Systems, Inc., have been adjusted to reflect TBS in discontinued
operations.

         The accompanying unaudited condensed consolidated financial statements
have been prepared in accordance with Rule 310 of Regulation S-B for interim
financial statements required to be filed with the Securities and Exchange
Commission and do not include all information and footnotes required by
generally accepted accounting principles. However, in the opinion of management,
the information furnished reflects all adjustments, consisting of normal
recurring adjustments, which are necessary to make a fair presentation of
financial position and operating results for the interim periods. The
accompanying condensed consolidated financial statements should be read in
conjunction with the audited consolidated financial statements for the fiscal
period ended September 30, 1999. The results of operations for the three months
and six months ended March 31, 2000, are not necessarily indicative of the
results to be expected for the full year.

         Amounts in the March 31, 1999 condensed consolidated financial
statements have been reclassified whenever necessary to conform with the current
period's presentation.

2.          SIGNIFICANT DEVELOPMENTS

Foreclosure on TBS assets and Discontinuance of the Modular Building Operation

         In March 2000, the Company's primary lender initiated foreclosure
proceedings on the land and buildings, used in the modular building operation,
which secured the outstanding bank debt. The Company is in current negotiations
to finalize the terms of the settlement arrangement on the foreclosure. In May
2000, the Company adopted a plan to sell its assets utilized in the modular
building manufacturing operation of the business. The completion of the sale of
such assets is expected to occur during the fourth quarter of fiscal 2000.
Management does not anticipate recognizing a loss on disposal in connection with
the discontinued operation.

Employment Agreement Termination

         In March 2000, the Company negotiated termination of an employment
agreement. Under the terms, the Company would reduce the option price to the
former employee to $0.0001 from the original exercise price which approximated
fair value of the stock at the grant date. This re-pricing of 400,000 options
created $500,000 compensation expense to the Company as the options had
previously vested.



                                       6
<PAGE>   7
ITEM 2.  MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION

         In accordance with the "safe-harbor" provisions of the Private
Securities Litigation Reform Act of 1995, the Company notes that certain
statements in this Form 10-QSB which are forward-looking involve risks and
uncertainties that may impact the Company's results of operations. When used
herein, the words "believe", "anticipate", "estimate", "expect", "should" and
similar expressions are intended to identify such forward-looking statements.
While these forward-looking statements are made in good faith, no statement
should be relied upon as predictions of future events. In addition, future
operating markets, the ability to obtain new licensing/development fees,
competition, legal and other conditions could cause actual results to differ
materially from those in the forward-looking statements.

         The primary objective of MegaWorld is to provide telecom, Internet and
data network communications services from the United States to international and
domestic destinations. The business objectives of MegaWorld include providing
high-speed Internet access to domestic Internet service providers ("ISPs"), long
distance connections to international telephone carriers, and Voice over
Internet Protocol ("VoIP") transportation of voice, data and multimedia services
from the United States to select global destinations.

         The Company's communications services are based on various methods of
transmitting data through telephone lines ("circuit-switched") and by dividing
the information into small "packets" that are individually routed primarily
through Internet connectors ("packet-switched"). The Company intends to
integrate circuit-switched data transmissions with packet-switched technologies
and currently markets these products and services to domestic and international
wholesale communication providers, Internet service providers and telephone
companies. To date no significant revenues have been generated from its
operations.

         The Company has designed a core network of operations to accommodate
not only circuit-switched telecommunications but also "real-time" (i.e., the
operation of virtually simultaneous input and response) Internet communications
and other packet-switched communications. In designing its core network, the
Company incorporated what it believes to be the most advanced data network
technology available, including ATM core network packet switches that can
support up to 2.5 gigabytes of data transfer per second, IP (Internet Protocol)
Routers, fiber optic cables, and satellite communication networks. The Company
currently purchases its network servers from Sun Microsystems, Inc., its system
software from Oracle Corp. and its data network provider services from Level 3
Communications, Inc. ("Level 3"). The Company maintains its network servers and
much of its other network equipment under co-location agreements with Level 3,
which provides worldwide telecommunications access for the Company. In
connection with these agreements, the Company maintains a direct fiber optic
connection to Level 3, enabling the Company to provide the same type of service
as Level 3 and making the Company a "Tier I" Internet access provider.

         The Company believes that most telecommunications providers and
virtually all wireless communications providers operate under Signaling System
number 7 software ("SS7"), which controls the dialing and routing of
connections. The Company's network also uses servers with SS7 technology, which
enables the Company to effectively communicate with both traditional cable and
wireless network systems. This allows the Company's network to integrate with
the communications networks of other telecommunications providers and to take
advantage of the same network efficiencies as the large


                                       7
<PAGE>   8

network providers, thus reducing access time and costs. Moreover, the Company is
developing new software, which will enable it to offer Internet access which
management believes to be more efficient and higher speed than is currently
available in the marketplace. The Company plans to begin beta testing of this
new software during June 2000 with two or three test sites. The Company intends
to complete the beta testing and launch the system to Internet service providers
and other service providers, such as telephone companies, on or about July 1,
2000.

         During prior periods, the Company operated Total Building Systems, Inc.
which was classified as discontinued operations as of March 31, 2000. TBS is a
five-year-old company that operated two manufacturing facilities in Houston,
Texas, for the production of modular structures, primarily for customers in the
oil and gas industry. As a result of a significant sustained downturn in the oil
and gas industry, management discontinued all TBS operations in May 2000 and has
made plans to dispose of all TBS assets.

         The second quarter produced a loss from continuing operations of
$999,000. However, significant progress was made during the quarter in
completing the infrastructure required for certain telecommunications products
and services to be offered by the Company. Although revenues were not recognized
from these projects in the second quarter, continuing revenue streams from these
projects are expected to begin in succeeding quarters.

QUARTER ENDED MARCH 31, 2000 COMPARED TO QUARTER ENDED MARCH 31, 1999

         Revenue totaling $4,000 was recognized for the three months ended March
31, 2000, with no revenue recognized for the three months ended March 31, 1999.
Revenues were derived from the communications division.

         The costs related to revenue generation were minimal and had no impact
on the income statement for either period compared.

         Selling and marketing expenses increased $88,000, or 733%, to $100,000
from $12,000 for the quarter ended March 31, 2000 compared to the quarter ended
March 31, 1999. The quarter ended March 31, 2000 reflects hiring additional
sales personnel, benefit expenses, and additional related expenses to support
the sales functions. The March 31, 1999 figure includes personnel on a
consulting basis only.

         General and administrative expenses were higher for the three months
ended March 31, 2000 over the three months ended March 31, 1999 by $713,000. Of
the total increase, $107,000 and $20,000 were attributable to higher legal fees
and accounting fees respectively compared to the same period in 1999. These fees
were incurred, in part, to meet the reporting requirements associated with being
a public company. The additional $500,000 increase relates to non-cash
compensation expense (see note 2 to the condensed consolidated financial
statements).




                                       8
<PAGE>   9
SIX MONTHS ENDED MARCH 31, 2000 COMPARED TO SIX MONTHS ENDED MARCH 31, 1999

         Revenue increased $6,000 from no revenue recognized for the six months
ended March 31, 1999, to $6,000 for the six months ended March 31, 2000. All
revenue was generated in the communications division.

         The costs related to revenue generated were minimal and had no impact
on the income statement for either period compared.

         Selling and marketing expenses increased $179,000, to $191,000 for the
six months ended March 31, 2000 as compared to $12,000 for the prior year
period. The increase is a result of hiring permanent sales personnel, benefit
expenses and related expenses to support the sales function. The prior
comparable period only recognized consulting personnel.

         General and administrative expenses increased by $774,000, or 245%, for
the six months ended March 31, 2000 as compared to the same period in 1999.
Salary and benefit expense was higher by $45,000, comparing $188,000 and
$143,000 for the six months ended March 31, 2000 and March 31, 1999
respectively. The six months ended March 31, 2000 represents a full six months,
whereas the compared prior period reflected expenses from the date of
acquisition, November 11, 1998. Accounting and legal fees increased $59,000 and
$111,000 respectively for the six months ended March 31, 2000 as compared to the
same period in 1999. These increased costs, in part, are a result of required
audit and related fees for fulfilling the reporting requirements of being a
public company. Equipment rental increased by $8,000 for the March 31, 2000
period, as compared to March 31, 1999, from $3,000 to $11,000. The increase
results from purchases to support the communications division. The additional
$500,000 increase relates to non-cash compensation expense (see note 2 to the
condensed consolidated financial statements).

LIQUIDITY AND CAPITAL RESOURCES

         At March 31, 2000 the Company had cash and cash equivalents of $72,000
representing an increase of $51,000 since March 31, 1999. Net cash used by
operating activities was $585,000 for the six months ended March 31, 2000,
compared to cash generated from operations of $364,000 for the six months ended
March 31, 1999. The $949,000 increase in cash used by operations primarily
reflects the operating loss of $1,214,000 for the six months ended March 31,
2000.

         Limited access to working capital and long-term capital, to date, has
effectively controlled the speed in which the Company has been able to implement
its business plan. The business plan has been and will continue to be
implemented as fast as funding is available and on a business opportunity or
project basis. The net effect has been reduced gross revenues, profits and
returns to investors. The Company's principal cash requirements to date have
been to fund working capital and to service its debts. Because revenue from
operations has been inadequate to completely fund these requirements, the
Company has supplemented its revenue from operations with proceeds from its
private offerings of securities, loans from the Chairman and extensions of
credit from vendors in order to meet its working capital requirements.




                                       9
<PAGE>   10

         The Company has made arrangements to meet a significant portion of its
future capital requirements, and the Company is involved in discussions with
other potential sources to satisfy its remaining future capital needs. The
Company anticipates that within a few months after the infrastructure for the
Communications Division has been implemented and commercial service initiated,
the Company will be able to satisfy its funding requirements for operations from
such revenue.

         CURRENT ARRANGEMENTS AND PRIOR PERIODS

         On August 10, 1998, Charles D. McPhail and JoyVer Investments, LLC
entered into a term promissory note with Compass Bank providing for a loan of
$3,765,000 secured by a deed of trust with security agreement and assignment of
rents and leases on TBS's Northwest Houston modular manufacturing facility. The
loan provided for an interest rate of 8.5 % per annum to be paid in 180 monthly
installments, with the last payment due on August 10, 2013. This note was
assumed by the Company in the Merger. In May 2000, the Company reached an
agreement with Compass Bank whereby the Bank would foreclose on the mortgage and
apply the proceeds of the sale of the facility to the mortgage and to the
balance due on the Revolving Loan between the Company and Compass Bank. The
Company estimates that after the foreclosure, it will owe approximately $785,000
to Compass Bank.

         Effective March 12, 1998, the Company entered into an agreement with
Compass Bank under with MegaWorld could request revolving loans from time to
time in an aggregate amount not to exceed $1,000,000 (the "Revolving Loan"),
with Charles D. McPhail as guarantor. The Revolving Loan provided for an
interest rate of prime rate plus one-half percent per annum and was
collateralized by the Company's accounts, general intangibles, inventory and all
proceeds, products, additions and substitutions thereof. The Revolving Loan was
due on August 31, 1999. In connection with the Revolving Loan, the Company and
Charles D. McPhail agreed to subordinate a $397,610 note held by Charles D.
McPhail as lender to the Company. As of December 31, 1999, the Company had
borrowed $1,000,000 under the Revolving Loan and was not in compliance with its
covenant to maintain a minimum tangible net worth of at least $1,500,000 under
the Revolving Loan agreement. In May, 2000, the Company reached an agreement
with Compass Bank whereby the Bank would foreclose on certain property on which
it held a mortgage, consolidate all outstanding loans owed by the Company and
apply the proceeds of the sale of the property to the consolidated loans. The
Company estimates that after the foreclosure, it will owe approximately $785,000
to Compass Bank on a note at 9.5% annual interest with monthly payments of
interest due and the balance due on November 1, 2000.

         The Company entered into seven 12% convertible promissory notes which
are due on various dates between April 29, 2000 and June 30, 2000. The Company
is currently in default on 6 of these notes, totaling $263,000, and may default
on the remaining note which is due on June 30, 2000. The Company is currently
negotiating with the noteholders to extend the due date of the notes or to
encourage conversion of the notes into shares of Common Stock of the Company.

         The Company has entered into revolving loan agreements with Mr. McPhail
dated as of December 15, 1998, and with JoyVer Investments, LLC dated as of
December 15, 1998, each provided for loans to the Company from time to time of
up to $600,000. As of December 31, 1999, the outstanding balance on each loan
was $40,250 and $594,738, respectively. In addition, Mr. Giamalvo has submitted
claims for expense reimbursements in the aggregate amount of $185,000 which are


                                       10
<PAGE>   11

disputed, in part, by the Company. See "Legal Proceedings." TBS entered into
another revolving loan agreement with Mr. McPhail providing for up to $600,000
from time to time with an outstanding balance of $297,419 as of December 31,
1999. Each of these loans is payable on demand and carries an interest rate of
6%. The Company is not in default on any of these notes. Although Mr. McPhail
has indicated that he currently does not intend to demand payment at any time in
the foreseeable future, he has not waived any rights in connection with such
indebtedness and he may elect to demand payment at any time. The Company is
attempting to negotiate a settlement with respect to all claims against the
Company by Mr. Giamalvo. See "Legal Proceedings."


         FUTURE NEEDS

         The Company anticipates that it will require between $5 and $6 million
per year over a two year period to develop the infrastructure required to
implement its business plan and initiate the delivery of commercial services in
each of the categories contained in its business plan. However, the
international telecommunications industry is highly regulated. There can be no
assurance that the Company's business plan can be implemented for the
anticipated cost or within the anticipated period.

         The Company has taken several steps to address its capital needs and
liquidity requirements. In March and April, 2000, the Company agreed to
discharge $624,707 (49.8%) of TBS' outstanding trade payables in exchange for
common stock of the Company. In May 2000, the Company received $205,200 in
consideration for the issuance and sale of 135,000 shares of its common stock.
On June 9, 2000 MegaWorld entered into a contract with Cabletron Systems, Inc.
("Cabletron"), a leading supplier of telecommunications equipment, for the
issuance of 1,500,000 shares of MegaWorld common stock in consideration for
$250,000 in cash and telecommunications equipment valued at $2,250,000. In
addition, Cabletron has agreed to purchase an additional 166,666 shares of
common stock for $250,000 in cash when MegaWorld has collected an aggregate of
$2 million in revenue from its service provider business and Cabletron has
agreed to make another such purchase when MegaWorld has collected an aggregate
of $4 million from its service provider business.

         The Company anticipates that it will address the remainder of its
liquidity and capital requirements through a private placement of its common
stock. There can be no assurance, however, that such private placement will be
successful or that the Company will otherwise be successful in obtaining
sufficient funds to meet its capital and liquidity needs.

PART II. OTHER INFORMATION

ITEM 1.  LEGAL PROCEEDINGS

         Effective May 1, 2000, certain stockholders of MegaWorld removed
Michael Giamalvo as a director of the Company through action by written consent,
however, Mr. Giamalvo remains President of MLI and is a stockholder of the
Company. After removal of Mr. Giamalvo as a director of the Company, the Company
began negotiations to rescind the still uncompleted transaction in which the
Company had entered into an agreement to acquire all outstanding shares of
Castello Ratti Enterprises



                                       11
<PAGE>   12

Srl (the "Castle Acquisition Agreement"), a company whose principal asset is its
40-year leasehold interest in a 1,000-year-old Italian castle. The Company also
(i) sought to recover common stock issued to Mr. Giamalvo to extend the
Company's deferred payment obligations under the Castle Acquisition Agreement
and (ii) attempted to settle a dispute with Mr. Giamalvo concerning cash amounts
due under his employment agreement with respect to base salary and his
reimbursement for payment of business-related expenses. On May 19, 2000, the
Company filed a demand for arbitration with the American Arbitration Association
in Houston, Texas and also filed a lawsuit in Harris County District Court (Case
No. 2000-25344) to resolve these issues. On June 1, 2000, Mr. Giamalvo filed a
demand for arbitration with the American Arbitration Association in New York
City, New York, claiming (i) $472,500 due under the Castle Acquisition Agreement
and (ii) amounts to be determined after a full accounting with respect to that
certain Castle Funding Agreement dated November 11, 1998 between the Company and
Mr. Giamalvo pursuant to which the Company agreed to extend its deferred payment
obligations and to make arrangements for such deferred payments. The situation
may result in extended arbitration or litigation, which may consume substantial
amounts of the Company's financial and managerial resources.

ITEM 5.  OTHER INFORMATION

         The Company's principal historic revenue generating activities have
been associated with is construction and fabrication of modular structures,
primarily for the energy, transportation and telecommunications industries,
through its Total Building Systems, Inc. subsidiary ("TBS"). As a result of (i)
a sustained downturn in the domestic energy services industry, (ii) TBS'
inability to develop sufficient product lines that were not oil and gas
dependent and (iii) management's belief that the MegaWorld's telecommunications
business was likely to yield a higher return on investment than TBS, management
discontinued all TBS operations in May 2000 and made plans to dispose of all TBS
assets.

         The modular manufacturing facility of TBS was located in Northwest
Houston and was subject to a mortgage which secured the principal amount of
$3,765,000, and advances pursuant to a $1,000,000 revolving credit promissory
note, each held by Compass Bank. In May 2000, the Company reached an agreement
with Compass Bank whereby the Bank foreclosed on the mortgage and agreed to
apply the proceeds of the sale of the facility to the mortgage and amounts
outstanding pursuant to the revolving credit loan agreement between the Company
and Compass Bank. In connection with this agreement, the Company granted to
Compass Bank a security interest in all the personal property of TBS and agreed
to sell all TBS personal property on or before July 31, 2000. Pursuant to the
agreement, the Company owes a deficiency of $784,615 to Compass Bank. This
amount is to be paid in monthly installments of interest with the balance due on
November 10, 2000 and bears interest at a rate of 9.5% per annum. MegaWorld and
TBS have agreed to guaranty repayment of the deficiency for the benefit of
Compass Bank.

         On May 19, 2000, management entered into an agreement with Machinery
Acquisition, Inc. ("MAI") whereby MAI purchased all of the tangible personal
property of TBS for $265,000, except certain items considered to be a part of
the real property located at TBS' Northwest Houston facility described above. In
early to mid-July, 2000, Plant Machinery, Inc. ("PMI"), an affiliate of of MAI,
will auction the assets of TBS. From the proceeds of the auction, MAI will
recover a total of $315,000, which equals $50,000 in expenses and the $265,000
in cash paid to the Company. Any additional proceeds from the auction will be
paid 65% to the Company and 35% to MAI.

         Finally, the Company holds a lease to the heavy fabrication/single-lift
facility of TBS, located in


                                       12
<PAGE>   13

East Houston, and is currently negotiating the termination of the lease.

ITEM 6.  EXHIBITS AND REPORTS ON FORM 8-K

         (a)      Exhibits:

                  10.1     Letter Agreement, dated May 19, 2000, between the
                           Company and Machinery Acquisitions International,
                           Inc. and Plant & Machinery, Inc.

                  10.2     Settlement and Deficiency Agreement, dated as of
                           March 28, 2000, between Total Building Systems, Inc.,
                           JoyVer Investments, LLC and Charles D. McPhail and
                           Compass Bank.

                  10.3     Guaranty of TBS and the Company with respect to the
                           Deficiency for the benefit of Compass Bank.

                  27       Financial Data Schedule

         (b)      Reports of Form 8-K:

                  None




                                       13
<PAGE>   14
                                    SIGNATURE


Pursuant to the requirement of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.



                                               MEGAWORLD, INC.

                                               /s/ CHARLES D. McPHAIL
Date: June 15, 2000                            ---------------------------------
                                               Charles D. McPhail,
                                               President and Treasurer






                                       14
<PAGE>   15
                                 EXHIBIT INDEX

EXHIBIT
NUMBER                            DESCRIPTION
------                            -----------

 10.1          Letter Agreement, dated May 19, 2000, between the
               Company and Machinery Acquisitions International,
               Inc. and Plant & Machinery, Inc.

 10.2          Settlement and Deficiency Agreement, dated as of
               March 28, 2000, between Total Building Systems, Inc.,
               JoyVer Investments, LLC and Charles D. McPhail and
               Compass Bank.

 10.3          Guaranty of TBS and the Company with respect to the
               Deficiency for the benefit of Compass Bank.

 27            Financial Data Schedule