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                                 UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549

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


                                 FORM 10-KSB/A


             AMENDED ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)

                     OF THE SECURITIES EXCHANGE ACT OF 1934

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

For the year ended December 31, 1999                 Commission File No. 0-24833

                                FUTURELINK CORP.
             (EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)

<TABLE>
<S>                                            <C>
                  DELAWARE                                      95-4763404
(STATE OR OTHER JURISDICTION OF INCORPORATION      (I.R.S. EMPLOYER IDENTIFICATION NO.)
              OR ORGANIZATION)
</TABLE>

                              6 MORGAN, SUITE 100
                            IRVINE, CALIFORNIA 92618
                                 (949) 837-8252
  (ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE, OF
                   REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)

          SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT:
                                      None

          SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT:
                    Common Stock, par value $.0001 per share

     Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 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 [ ]

     Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-B is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-KSB or any amendment to
this Form 10-K. [ ]

Revenue for most recent fiscal year: $13.6 million

<TABLE>
<S>                                                           <C>
Aggregate market value of voting stock held by
  non-affiliates of the registrant as of December 31,
  1999......................................................  $808,573,064
Number of shares of common stock outstanding as of December
  31, 1999..................................................    52,743,169
</TABLE>

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                                FUTURELINK CORP.


                                 FORM 10-KSB/A

                      FOR THE YEAR ENDED DECEMBER 31, 1999

                                     INDEX


<TABLE>
<CAPTION>
                                                                        PAGE
                                                                        ----
<S>       <C>                                                           <C>
PART I

Item 1.   Description of Business.....................................    1
Item 2.   Description of Property.....................................   16
Item 3.   Legal Proceedings...........................................   17
Item 4.   Submission of Matters to a Vote of Security Holders.........   18

PART II

Item 5.   Market for Common Equity and Related Stockholder Matters....   19
Item 6.   Management's Discussion and Analysis of Financial Condition
          and Results of Operations...................................   24
Item 7.   Financial Statements........................................   30
Item 8.   Changes in and Disagreements with Accountants on Accounting
          and Financial Disclosure....................................   30

PART III

Item 9.   Directors, Executive Officers, Promoters and Control
          Persons; Compliance with Section 16(a) of the Exchange
          Act.........................................................   31
Item 10.  Executive Compensation......................................   36
Item 11.  Security Ownership of Certain Beneficial Owners and
          Management..................................................   41
Item 12.  Certain Relationships and Related Transactions..............   42
Item 13.  Exhibits and Reports on Form 8-K............................   44
Signatures............................................................   49
</TABLE>


                                        i
<PAGE>   3

                                     PART I

ITEM 1. DESCRIPTION OF BUSINESS

     Except for historical information, the following description of our
business contains forward-looking statements based on current expectations which
involve risks and uncertainties. Our actual results could differ materially from
those set forth in these forward-looking statements as a result of a number of
factors, including those set forth in this Annual Report under the heading
"Additional Factors That May Affect Future Results." Unless specified otherwise
as used herein, the terms "we," "us" or "our" refer to FutureLink Corp. and its
wholly owned subsidiaries.

OUR COMPANY

     We provide server-based computing services and are an application service
provider, or ASP. Our services enable software applications to be deployed,
managed, supported and upgraded from centrally located data centers, rather than
on individual desktop computers. For our server-based computing customers, we
install and integrate software applications on our customers' servers. For our
ASP customers, we host applications on our servers at our data centers, and rent
computing services to our customers for a monthly fee. Our ASP customers connect
to our facilities over the Internet, through a dedicated telecommunications line
or by wireless connection. Our goal is to provide our ASP services with the
speed, simplicity and reliability of a utility service. We introduced our ASP
services in March 1999 and our goal is to make our ASP services a much larger
portion of our overall business.

     We are the largest integrator in North America of server-based computing
systems using Citrix software. Citrix software is one of the leading
technologies for delivering software applications from remote locations. Both
for our internal use and for our customers, we typically install Citrix software
and Windows NT Terminal Server software from Microsoft. Customers for our
server-based computing services have included Cisco Systems, The Walt Disney
Company, Allied Signal, General Motors, Ford Motor Company, Bank of America,
Apple Computer and Delta Airlines. We are building upon our server-based
computing expertise to develop our ASP services.

     We believe that through our experience in the server-based computing
business, we have developed a number of strengths that position us to
successfully grow our ASP business, including:

     - a recognizable customer base, lending credibility to our ASP services,

     - technical expertise in enabling a variety of software applications to
       operate in a server-based computing environment, and

     - relationships with sales channels, including software vendors and
       software application integrators.

     In addition to our operations in the United States, we currently conduct
business in Canada and the United Kingdom. A material part of our growth
strategy is based on expanding our operations internationally. We anticipate
that Canadian and European sales will account for a significant amount of our
future revenue.

     There are certain risks inherent in doing business in international
markets, such as:

     - different telecommunications access fees,

     - different technology standards,

     - different liability standards,

     - less protective intellectual property laws,

     - changes in political conditions,

     - changes in regulatory requirements,

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     - increased expenses due to tariffs and other trade barriers,

     - fluctuations in currency exchange rates,

     - restrictions on currency transfers,

     - potentially adverse tax consequences, and

     - difficulties in managing or overseeing foreign operations.

     Any of these risks may have a material adverse effect on our current or
future international operations and, consequently, on our business, results of
operations and financial condition.


OUR MARKET OPPORTUNITY



     Both the ASP and the server-based computing markets are growing. According
to Forrester Research, Inc., the size of the ASP market in 1999 was less than
$1.0 billion. Forrester Research, Inc. projects this market to grow to over
$11.0 billion in 2003 and that 22% of all U.S.-based application revenue will
flow through ASPs' such as us. In 1999, server-based computing accounted for
substantially all of our revenues. Our business strategy is to leverage our
server-based computing business to grow our ASP business into a larger portion
of our business.



     We believe the growth of the server-based computing and ASP services
markets is being driven by the following factors:



     - Software Complexity.  Software applications are increasingly more complex
       and need to be continually upgraded, integrated and supported. This is
       beyond the expertise of many companies.



     - Shortage of Information Technology Professionals.  According to
       International Data Corporation, by 2002 there will be a shortage of
       850,000 information technology professionals in the United States and an
       even greater shortage of one million information technology personnel in
       Europe. Companies are finding it increasingly more difficult and
       expensive to maintain their information technology departments.



     - Telecommunication Costs Have Been Declining.  The greater availability of
       telecommunications capacity and declining costs over the last several
       years have made the use of centralized computing more economical to
       businesses.



     - Increasing Demand for Remote and Shared Access to Software
       Applications.  Many companies require that their employees be able to
       access software applications both from their desktops and from locations
       away from their offices. These companies are using server-based computing
       and ASP solutions to meet these requirements.


OUR SOLUTIONS

     Our solutions offer the following key benefits:

     - Reliable service. By offering service level agreements and utilizing the
       latest technology, we are able to provide increased levels of service
       which our customers cannot easily replicate.

     - Reduce dependency on information technology staff. The maintenance of a
       complete, professionally-managed information technology team necessary to
       effectively manage complex software and information technology
       infrastructures is increasingly expensive and difficult. By outsourcing
       all or part of their information technology needs, our customers are able
       to reduce their information technology staff and can focus on their core
       competencies.

     - Lower costs. By spreading information technology costs among many
       customers, we are able to achieve economies of scale not possible for our
       target customers and as a result offer our customers significant cost
       savings. Customers of our server-based computing services are able to
       reduce their information technology costs. Our ASP customers realize the
       same benefits, and are able to forecast

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       and budget their ongoing information technology costs and reduce their
       upfront information technology investment.

     - Rapid deployment. By having their software applications hosted at central
       locations, our customers are able to rapidly deploy and quickly upgrade
       their software, allowing them to more rapidly realize returns on their
       information technology expenditures. For our ASP customers, we are able
       to offer applications installed at our servers to customers almost
       immediately.

     - Ability to run on a variety of hardware systems. We can integrate
       different computer systems and devices, including a company's existing
       personal computer terminals, without the need for significant hardware
       upgrades. This allows our customers to implement our solutions without
       replacing existing computer hardware, extending the useful life of their
       existing computer systems.


     - Flexibility. We are not committed to any particular software package or
       linked to any single software manufacturer. Instead, we seek to deliver
       software applications best suited for our customers. We can accommodate
       virtually any software application. Our customers have the flexibility to
       host some or all of their software applications on our servers.


OUR STRATEGY

     We seek to build a global ASP and continue to develop our server-based
computing business by:

     - Leveraging our existing server-based computing capabilities to build our
       ASP business. Our expertise in providing server-based computing solutions
       makes us well-positioned to provide ASP services. Through our
       acquisitions, we have built a strong base of technical experts. We plan
       to continue to build this base, and to transition technical professionals
       from server-based computing services to ASP services in order to
       implement our business plan.

     - Rapidly penetrating the market through our third-party distribution
       channels. We market our ASP services primarily through third-party
       distribution channels, including software application and system
       integrators. We believe these distribution channels will allow us to
       rapidly increase our market penetration without incurring significant
       capital expenditures. This should also allow us to shorten the sales
       cycle for our service offerings by targeting the customer closer to the
       time of the customer's decision to purchase software. We also believe
       this strategy gives us access to market leading products and technology
       and allows us to focus on service delivery rather than software
       development. We currently maintain relationships with over 60 software
       applications and systems integrators.

     - Broadening our relationships with software vendors. We have established
       relationships with software application vendors in key application areas,
       including Microsoft, Great Plains Software, Onyx Software and SalesLogix.
       Our agreements with software application providers generally enable us to
       deploy software applications for a monthly fee, without the need to
       establish a separate licensing arrangement for each customer. Our
       relationships with these providers also enable us to provide our
       customers with an economically attractive service offering, and afford us
       co-marketing and co-branding opportunities. We plan to enter into
       relationships with other software application providers. This will enable
       us to expand our portfolio of software applications and reduce our
       reliance on any one software application provider.

     - Expanding through acquisitions. We intend to expand our business through
       both internal growth and strategic acquisitions in the United States and
       abroad. Our acquisitions allow us to accelerate our penetration of key
       geographical markets, broaden our service offerings, and expand our
       trained technical staff and our sales force.

                                        3
<PAGE>   6

OUR SERVICE OFFERINGS

Server-Based Computing Services

     Our server-based computing services are aimed at customers who have or wish
to install their own data centers and operate these with their own information
technology staff, but need expertise to assist in addressing certain aspects of
their information technology needs. For the year ended December 31, 1999, our
server-based computing services accounted for a substantial portion of our
revenues and we expect these services to account for a substantial portion of
our revenues for the year ending December 31, 2000. We currently serve customers
which range from small organizations to Fortune 100 companies. Our server-based
computing services include the following:

     - installing and integrating software applications on our customers'
       servers using Citrix server-based computing software;

     - maintaining, onsite and remotely, our customers' server-based computing
       environments; and

     - training information technology professionals to use Citrix and Microsoft
       operating software.

     Our typical contract for server-based computing services provides for the
installation of one or more servers to deliver software applications to our
customers' desktops through their own local area network and the integration of
software at their servers. Depending on the type and length of the project,
pricing for these services is based on an hourly rate, at a daily rate, on a
project by project basis, on a monthly price per consultant or on a monthly fee
per employee or user. We also offer maintenance services and training.
Maintenance services are typically charged on a fixed fee basis or on an hourly
rate for employees who maintain the system. Our direct sales force sells our
server-based computing services.

ASP Services

     Our ASP services involve deploying, managing and supporting software
applications hosted at our data centers for our customers. Our ASP services are
designed so that our customers can choose the combination of software
applications that best meet their business requirements, technical needs and
financial resources. Depending on the requirements of our software providers, we
sometimes enter into sublicensing agreements with our customers granting the
right to use certain software applications.

     Most of our ASP customers are small to mid-sized businesses having 5 to 200
employees. Our customers are primarily in the oil and gas and in the financial
services industries. We typically enter into three year agreements with our
customers and charge them a flat monthly fee depending on the software
applications we host for them. Our customers pay for our ASP services on a
monthly basis. Our prices are based on the number of users, types of
applications hosted and number of support services that our customers use.

     Growth in the demand for our ASP services is dependent upon the following
factors:

     - the compatability between our ASP services and technology that our
       customers use,

     - our ability to reliably deliver ASP services to our customers,

     - other ASP providers providing quality services so as not to diminish
       consumer confidence in ASP services,

     - mitigating the effects of defects in software applications delivered from
       our data centers that are beyond our control,

     - our ability to strengthen awareness of our brand and differentiate the
       services we offer from those of our competitors,

     - our ability to market our services in a cost-effective manner to new
       customers, and

     - satisfying customer concerns over data security and user privacy.

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Other Services

     We provide video conferencing for our European customers. We also provide
consulting and other complementary services to our customers, usually as a
supplementary service to our server-based computing and ASP offerings.

SOFTWARE APPLICATIONS

     We have assisted our server-based computing customers with the hosting and
delivery of the following software applications, among others:


<TABLE>
<CAPTION>
    SOFTWARE APPLICATION
          PROVIDER                        PRODUCT                    TYPE OF SOFTWARE APPLICATION
    --------------------                  -------                    ----------------------------
<S>                           <C>                              <C>
Microsoft                     Exchange                         Messaging
                              FoxPro                           Database
                              Microsoft Office                 Office productivity suite
                              Microsoft Publisher              Desktop publishing
Adobe Systems                 Adobe Acrobat Reader             PDF reader
                              Adobe PageMaker                  Desktop publishing
Autodesk                      AutoCAD                          Computer aided design
Clarify                       Clarify Client 5.0               Customer relationship management
Epicor                        Platinum                         Accounting
Great Plains                  Dynamics                         Accounting
Hyperion                      Enterprise                       Financial reporting
JD Edwards                    One World                        Enterprise resource planning
Lotus                         Lotus Notes                      Messaging
NetObjects                    Fusion                           Web design
Oracle                        Oracle Financials                Financial and enterprise resource
                                                               planning
PeopleSoft                    PeopleSoft Financials            Financial reporting
                              PeopleSoft HR                    Enterprise resource planning
Sage                          Mas 90                           Accounting
SAP                           R/3                              Enterprise resource planning
Solomon                       Solomon IV                       Accounting
Wall Data                     Rhumba                           Terminal emulation
</TABLE>


     Our experience in delivering a variety of software applications to our
server-based computing customers gives us the expertise to host such software
applications for our ASP customers. Among the software applications already
offered for delivery as part of our ASP services are the following:


<TABLE>
<CAPTION>
    SOFTWARE APPLICATION
          PROVIDER                        PRODUCT                    TYPE OF SOFTWARE APPLICATION
    --------------------                  -------                    ----------------------------
<S>                           <C>                              <C>
Microsoft                     Office 2000,                     Office productivity software, including
                              Exchange Project,                  word processing, e-mail, project
                              SQL, Visio                         management, data base and charting
Corel                         WordPerfect, QuattroPro, Corel   Word processing, spreadsheet, graphics
                              Draw                               and other office productivity tools
Great Plains                  Dynamics, e Enterprise           Integrated accounting software
Onyx                          Customer Center 5.0              Customer relationship management
Pivotal                       eRelationship 2                  Customer relationship management
SalesLogix                    4.0                              Integrated customer contact management
Epicor                        Clientelle                       Integrated accounting software, customer
                              Era                                relationship management, manufacturing
                              Vantage                            and resource planning
</TABLE>


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KEY RELATIONSHIPS

     In implementing our growth strategy, we have developed important commercial
relationships with the following:


     CITRIX. Citrix Systems, Inc. provides technology that enables users to
access software applications from virtually any computing device, including
desktops, mobile computers, network computers, terminals, information
appliances, palmtops or other devices, across virtually any network. Citrix
provides what we believe is the most advanced technology for delivering software
applications to remote users as well as the most scalable and flexible tools for
server-based computing. Citrix's software is designed to work within a
Microsoft's Windows NT-compatible server environment, allowing virtually any
computer terminal to access standard Windows applications running on the server.
We are the largest integrator of server-based computing solutions using Citrix
technology in North America.


     COMPAQ. In the fourth quarter of 1999, Compaq Computer Corporation invested
$2.2 million in our company and extended us a $20 million lease line of credit
to provide our data centers with Compaq servers on an exclusive basis. We have
deployed Compaq's products in our Irvine and Calgary data centers. Compaq's
equity investment will be used for joint marketing efforts to promote our ASP
services featuring Compaq hardware. These promotions will principally occur
through our joint participation at industry trade shows, the publication and
distribution of marketing materials and the advertisement of these products in
trade journals and other media. We also indicate in our product materials that
our internal data centers operate on Compaq servers. We believe our joint
marketing programs will allow us to align the strengths of our respective sales
and distribution channels.

     SOFTWARE APPLICATION PROVIDERS. We have significant commercial
relationships with a variety of leading software providers, including Microsoft,
Citrix, Onyx Software, SalesLogix and Great Plains. We believe our ability to
deliver a broad array of applications is a significant competitive advantage.
Our agreements with these software suppliers allow us to deploy applications on
a monthly subscription basis without the need to establish a separate licensing
arrangement for each customer. The agreements also generally include
co-marketing, specialized product training and preferred pricing on the licenses
to the software.

     Certain important relationships with software application providers are
described below.

     - Microsoft. We have been selected to participate in Microsoft
       Corporation's Back Office software pilot program to host its Back Office
       software for delivery to ASP customers. We have been approved to host
       Microsoft Office 2000 at our data centers as part of Microsoft's new
       service offering, Microsoft Office Online. In addition, we are a
       participant in Microsoft's Complete Commerce program which showcases our
       ASP offerings for Great Plains and Pivotal offerings. The term of our
       agreement with Microsoft expires June 30, 2001. Either party may
       terminate the agreement for cause by giving the other party 30 days
       written notice.

     - Citrix. We are a participant in Citrix's ASP license program. This allows
       us to use Citrix technology in our data centers to deliver applications
       to our ASP customers. We are the largest integrator of server-based
       computing solutions using Citrix technology in North America. Our
       subsidiaries are parties to several agreements with Citrix covering
       different territories within North America. These agreements typically
       have a one year term and may be terminated by either party for any reason
       by giving the other party 30 days written notice.

     - Onyx Software Corp. We have entered into a strategic relationship with
       Onyx Software. Onyx has agreed to provide us with ASP customers
       purchasing a minimum of $25,000 per month of our ASP services. We have
       agreed to spend $300,000 on joint marketing and advertising promoting
       Onyx products and our ASP services. The agreement may be terminated by
       either party on 30 days notice if the other party materially breaches the
       agreement.

     - SalesLogix. We have been approved to host SalesLogix software
       applications. Our agreement with SalesLogix terminates when either party
       gives the other party written notice of termination at least

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       60 days prior to November 1 of the then current year, in which case, the
       agreement terminates on November 1 of such year.

     - Great Plains. We have been approved to host Great Plains software
       applications. Our agreement with Great Plains may be terminated by either
       party for any reason by giving the other party 180 days notice.

     SOFTWARE APPLICATION INTEGRATORS. Many companies rely on software
application integrators with expertise in business software applications to
evaluate, install, integrate, modify and customize software applications for
them. We have developed significant commercial relationships with software
integrators to provide us with an additional sales channel without requiring us
to make a significant capital investment to develop an extensive direct sales
force. Software application integrators desire to work with us so that they can
expand their sales offerings.

SALES AND MARKETING


     We offer our services through our direct sales force, the sales forces of
software application providers, and independent software distributors and
application integrators. We are initially targeting our ASP services to small-
to medium-sized businesses, which we believe represent a strong market
opportunity, and market these services through our independent software
distribution sales channel. We plan to expand our marketing to larger businesses
in the future. We currently have strategic relationships with over 10 software
application providers and over 60 independent resellers, software distributors
and applications integrators. Our direct sales force consists of over 70
professionals, who are focused on offering our server-based computing services
and ASP services to existing and new customers in the small- and medium-sized
business markets. In 1999, we allocated $1.5 million for our advertising and
promotional strategies. In 2000, we currently plan to increase this amount to
approximately $8 million to build our brand name and create market awareness. As
part of our efforts to continue end user and channel education about the ASP
concept, we will be initiating a $2.0 million print advertising campaign in the
United States and Canada in several major business publications (Business Week,
The Wall Street Journal, Wired Magazine, Industry Standard and others) targeting
chief executive officers, chief technology officers, chief information officers
and chief financial officers. This campaign will extend from June to December of
this year. Our strategy is to educate our channel sales partners while
simultaneously generating end user demand. To service that demand effectively,
we are investing in building a call center and lead management process. We are
also developing new ASP and server-based computing sales tools for both out
direct sales force and our channel sales partners to support them throughout the
sales process, as well as allocating over $1.0 million to our continued
participation in end user and channel-focused tradeshows. We will continue our
strategy to develop our channel sales through cooperative seminars and events
with out independent software vendor and channel sales partners. We are
leveraging our relationships with brand name partners such as Microsoft, Citrix
and Compaq as well as our independent software vendor partners in co-marketing
arrangements to extend the reach and effectiveness of our marketing efforts.


OUR ASP DELIVERY SYSTEM

     We have developed a secure, reliable and high-performance system for
delivering software applications to multiple users, which we believe provides us
with a significant competitive advantage. Our personnel in Irvine, California
monitor our system on a continual basis. We combine internally created
technology innovations with technologies from leading software and hardware
providers, including, among others, Citrix delivery software, Compaq, IBM and
Sun MicroSystems computer servers, Cisco Systems routers and firewall protection
software, and EMC(2) storage devices. To address the diverse requirements of our
customers, we offer our ASP services on all of the leading operating systems and
computing platforms including Solaris, which operates on a Sun MicroSystems,
Inc. platform, and Microsoft Windows NT Terminal Server software, which operates
on an Intel personal computer platform. Our delivery system is scalable,
allowing servers to be added to support additional users without disrupting
other servers that are concurrently running software applications.

                                        7
<PAGE>   10


     We operate state-of-the-art data centers in Irvine, California, Calgary,
Canada and Newbury, United Kingdom from which we deliver our ASP services. Each
facility features separate, back-up network and power connections, cooling
systems and on-site back-up diesel generators to ensure continuous power supply.
We employ several security measures including:


     - 24-hour security guards,

     - electronic surveillance,

     - limited access electronic card key measures,

     - the physical separation of servers from administrative workstations, and

     - firewalls at each entry point to our data center.

     We offer connectivity to our systems from virtually anywhere in the world,
providing customers with global access to software applications. Customers can
access us:

     - via the Internet,

     - through high speed connections in more than 105 countries,

     - over Frame Relay through AT&T Corp., Sprint Corporation and MCI Worldcom,
       Inc., or over dedicated, private lines.

     We have designed our network to minimize the effect of any interruptions.
We monitor the performance and security of our entire infrastructure. We have
also implemented security measures to identify potential sources of failure or
interruption. Although we have attempted to build complete back-up into our
network and hosting facilities, our delivery system is currently subject to
several single points of failure, and a problem with one of our servers, routers
or switches could cause an interruption in the services we provide to some of
our customers.

     The design of our data centers enables systems administrators and support
staff to be promptly alerted to problems and rapidly resolve any technical
issues.

     Our success depends upon our ability to increase the capacity of our data
centers and related communications systems in a timely and cost-effective
manner. Expanding our delivery system significantly and rapidly in response to
any increased demand for our ASP services will place additional stress upon our
hardware, traffic management systems and hosting facilities as well as our
financial, operational and management resources. We may be unable to manage our
growth successfully, in which case our business, financial condition and results
of operation could be materially adversely affected.

COMPETITION

     The markets for our services are extremely competitive. The tremendous
growth and potential size of these markets have attracted many start-ups, as
well as extensions of existing businesses from different industries. The
principal competitive factors in this market include:

     - quality of service, including performance, scalability, reliability and
       functionality,

     - customer service and support,

     - variety of services offered,

     - price,

     - name recognition, and

     - network security.

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<PAGE>   11

     Our current and prospective competitors include other ASPs, systems
integrators, Internet service providers, hardware and software suppliers and
telecommunications companies.

     ASPS. We compete with other companies whose core business is providing ASP
services. These competitors include, among others, USinternetworking, Corio,
Interliant, Breakaway Solutions, and Telecomputing. Many of these competitors
are targeting the same small and medium-sized enterprises that we are initially
targeting.

     SYSTEMS INTEGRATORS. We compete with commercial systems integrators who
bundle their services with software and hardware providers and perform an
outsourcing role for the customer. Examples of these competitors include EDS,
Andersen Consulting, PricewaterhouseCoopers and MCI Systemhouse, among others.
These companies provide professional consulting services in the use and
integration of software applications in single-project customer engagements.
Systems integrators may establish strategic relationships with software
application providers to offer services similar to our ASP offerings. Their
strengths include local customer awareness and relationships with hardware and
software companies. Additionally, regional systems integrators may align
themselves with Internet service providers to offer complex website management
combined with professional implementation services.

     INTERNET SERVICE PROVIDERS AND WEBSITE HOSTING COMPANIES. Our current
competitors include business-focused Internet service providers and website
hosting companies with a significant national presence, such as, among others,
UUNet Technologies, GTE Internetworking, PSINet, Concentric, DIGEX, Frontier and
Exodus Communications. These companies intend to expand their service offerings
by bundling their Internet access and website hosting service offerings with the
delivery of software applications on a subscription basis.

     HARDWARE AND SOFTWARE COMPANIES. We compete with hardware and software
companies in providing software application solutions as well as delivery system
infrastructure. In order to build market share, both hardware and software
providers may establish strategic relationships to enhance their service
offerings. IBM Solutions currently provides applications outsourcing of its
Lotus Notes products and delivers the service via the IBM network
infrastructure. J.D. Edwards & Company, a developer of enterprise resource
planning software, has announced that it will offer its software in an
outsourced model. SAP Aktiengesellschaft has formed an outsourcing organization
to develop key partnerships with leading consulting firms with the intent of
offering SAP software and PeopleSoft and Oracle have announced an ASP strategy.
We believe that additional hardware and software providers, potentially
including our current software partners, may enter the outsourcing market in the
future.

     TELECOMMUNICATIONS COMPANIES. Many long distance companies, regional Bell
operating companies and competitive local exchange carriers offer Internet
access services. In order to address the Internet connectivity requirements of
their current business customers, we believe that there is a move towards
horizontal integration through acquisitions of, joint ventures with, and
purchasing connectivity from, Internet service providers. Accordingly, we expect
that we will experience increased competition from the traditional
telecommunications carriers. Many of these telecommunications carriers, in
addition to their substantially greater network coverage, market presence, and
financial, technical and personnel resources, also have large existing
commercial customer bases. We believe that our local presence, our strong
technical and data-oriented sales force and our offering a single source
computing solution are important features distinguishing us from the
telecommunications companies.

     OTHER POTENTIAL COMPETITORS. It is possible that new competitors or
alliances may emerge and gain market share. Such competitors could materially
affect our ability to obtain new contracts. Further, competitive pressure could
require us to reduce the price of our products and services thus affecting our
business, financial condition and results from operations.

     Many of our competitors have substantially greater financial, technical and
marketing resources, larger customer bases, longer operating histories, greater
name recognition and more established relationships in the industry than we do.
As a result, certain of these competitors may be able to develop and expand
their

                                        9
<PAGE>   12

service offerings more rapidly, adapt to new or emerging technologies and
changes in customer requirements more quickly, take advantage of acquisition and
other opportunities more readily, devote greater resources to the marketing and
sale of their services and adopt more aggressive pricing policies than we can.

INTELLECTUAL PROPERTY

     Our intellectual property is important to our business. We rely on a
combination of copyright, trademark, and trade secret laws, confidentiality
procedures and contractual provisions to protect our intellectual property. We
have no patented technology, and patented technology is not material to our
business.

     We enter into agreements with many of our employees giving us proprietary
rights to certain technology these employees develop while we employ them. We
cannot assure you that a court will enforce these agreements. In addition, we
may be inadequately protected against the use of technology employees develop
who have not entered into such agreements.


     We have applied for federal trademark or service mark registration of the
names "FutureLink," "Flink," "FutureServe," "Wide Area Thin Client Hook-up,"
"W.A.T.C.H.," "Your Way Ahead," "The World's First Computer Utility Company,"
"ApplicationPortal," "The Computer Utility Company," "Computer Utility" and "The
Application Utility Company" for our various logos in the United States, Canada
and the United Kingdom. In addition, we may seek further trademarks and may in
the future take other steps, such as seeking copyrights or patents on some of
our intellectual property. We are aware of other companies using the
"FutureLink" name, and are in the process of investigating the rights, if any,
others may have in the name. If any such company engaged in businesses in our
industry can establish prior use to such name and damages caused by our use of
the name, we may incur liability and be forced to cease using the name.



     Our efforts to protect our intellectual property may not be adequate. We
may need to commence lawsuits from time to time to protect our intellectual
property.


     Our competitors may independently develop similar technology or duplicate
our products or services. Unauthorized parties may infringe upon or
misappropriate our products, services or proprietary information. In the future,
litigation may be necessary to enforce our intellectual property rights or to
determine the validity and scope of the proprietary rights of others. Any such
litigation could be time-consuming and costly.

     In order to safeguard the flow of personal information over the Internet,
we intend to offer our customers various forms of encryption technology. The
United States government regulates the export of this technology and may require
a license or other authorization. There is no guarantee that we will be able to
obtain such a license. In addition, many other countries regulate the export,
import, or use of encryption technology. There is no guarantee that we will be
able to obtain the necessary permission to engage in our contemplated
activities.

EMPLOYEES

     As of December 31, 1999, we employed a total of 321 persons, including 156
information technicians, 66 sales and marketing personnel and 99 administration
and management staff. We have never experienced work stoppages, and we are not a
party to any collective bargaining agreement. We believe our employee
relationships to be generally good.

                                       10
<PAGE>   13

ADDITIONAL FACTORS THAT MAY AFFECT FUTURE RESULTS

     An investment in our common stock involves a high degree of risk. You
should read the following risk factors carefully before purchasing our common
stock. The risks and uncertainties described below are not the only ones we
face. Other risks and uncertainties, including those that we do not currently
consider material, may impair our business. If any of the risks discussed below
actually occur, our business, financial condition, operating results or cash
flows could be materially adversely affected. This could cause the trading price
of our common stock to decline.

BECAUSE WE HAVE A LIMITED OPERATING HISTORY AND OUR BUSINESS MODEL IS STILL
EVOLVING, WE MAY NOT BE ABLE TO SUCCESSFULLY MANAGE OUR BUSINESS OR ACHIEVE
PROFITABILITY.

     Our business is new, evolving and unproven, and our range of services
continues to change. As a new business in order to achieve our business plan we
must:

     - increase awareness and market penetration of our brand,

     - attract, retain and motivate qualified personnel,

     - maintain our existing, and develop new, relationships with software
       providers and vendors,

     - raise additional capital, and

     - convince customers that we can provide reliable and cost-effective
       services.

     Our management team faces the challenge of successfully implementing
company-wide administrative and operating systems and managing our newly
acquired companies as well as companies we may acquire in the future. We may not
be able to successfully manage our business to achieve or maintain
profitability.

     Because we have limited operating history and our business model is
evolving, investors will have difficulty evaluating us and our prospects.

     We commenced selling our current server-based services in September 1998
and since that time have grown our business rapidly through acquisitions.
Because we have grown through acquisitions, our pro forma financial results
cover periods when we did not control or manage our subsidiaries and may not be
indicative of our future financial results.

WE HAVE A HISTORY OF SUBSTANTIAL LOSSES AND NEGATIVE CASH FLOWS. WE EXPECT THESE
LOSSES AND NEGATIVE CASH FLOWS TO CONTINUE AND INCREASE IN THE FUTURE. IF WE ARE
UNABLE TO MAKE A PROFIT, WE MAY NOT BE ABLE TO CONTINUE TO OPERATE OUR BUSINESS.


     We have experienced net losses and negative cash flows since we began
implementing our current business plan. We expect that the ongoing
implementation of our current business plan will increase our net losses and our
negative cash flows used in operating and investing activities for the
foreseeable future as we invest in personnel, technology and other assets to
support our expected growth. In addition, our business plan includes expansion
through acquisitions. These acquisitions are likely to increase our cash needs.
As of December 31, 1999, we had $186.9 million in goodwill which we must
amortize over the next five years as a result of our acquisitions. We may not be
able to operate profitably in the future or generate positive cash flows. If we
cannot operate profitably or generate positive cash flows, we may be unable to
continue to operate our business.


THE GROWTH IN DEMAND FOR OUR ASP SERVICES IS HIGHLY UNCERTAIN. THE ASP MARKET
MAY NOT DEVELOP AS WE ANTICIPATE AND, ACCORDINGLY, WE MAY NOT BE ABLE TO EXPAND
OUR BUSINESS OR OPERATE IT PROFITABLY.

     The market for ASP services has only recently begun to develop and is
evolving rapidly. Future demand for these services is highly uncertain. We
believe that many of our potential customers are not

                                       11
<PAGE>   14


fully aware of the benefits of ASP services. We must educate potential customers
regarding these benefits and convince them of our ability to provide complete
and reliable services. The market for ASP services may never become viable or
grow further. If the market for our ASP services does not grow or grows more
slowly than we currently anticipate, our business, financial condition and
operating results would be materially adversely affected.


IF WE ARE UNABLE TO HIRE AND RETAIN QUALIFIED EMPLOYEES AT ALL LEVELS OF OUR
BUSINESS, WE WILL NOT BE ABLE TO GROW OUR BUSINESS AND MEET OUR BUSINESS PLAN.
IF WE FAIL TO ACHIEVE OUR BUSINESS PLAN WE WILL NOT BE ABLE TO CONTINUE TO
OPERATE OUR BUSINESS.

     Our success also depends in significant part on the continued services of
our key officers. Losing one or more of our key personnel will seriously impair
our ability or could cause us to fail to successfully implement our business
plan. This will have a material adverse effect on our business, results of
operations and financial condition.

OUR INTERNAL ACCOUNTING AND FINANCIAL CONTROLS HAVE WEAKNESSES RESULTING
PRIMARILY FROM THE GROWTH OF OUR BUSINESS. IF WE ARE UNABLE TO RECRUIT AND
RETAIN QUALIFIED ACCOUNTING AND FINANCIAL STAFF, WE MAY CONTINUE TO EXPERIENCE
WEAKNESSES IN THESE MANAGEMENT SYSTEMS.


     When auditing our consolidated financial statements for the year ended
December 31, 1999, our independent auditors reported to us conditions they
believed to be material weaknesses in our system of internal accounting and
financial controls related to the financial statement close process and the
reconciliation and analysis of general ledger account balances. In response to
this report, in early 2000 we hired a new vice president controller, financial
reporting manager, assistant controller, and additional subsidiary accounting
personnel. We have begun to identify measures to improve our system of internal
controls, implement more rigorous internal accounting policies, procedures and
controls, and conduct accounting systems training. However, these measures may
not be successful in correcting the noted deficiencies and we may experience
similar or other deficiencies in the future as we continue to further expand our
operations. If we are unable to establish and maintain effective internal
accounting and financial controls, we will not be able to timely and accurately
account for and monitor the operations of our business and we therefore may not
be able to properly execute our business plan, which could materially adversely
affect our business, results of operations and financial condition.



WE ARE INVOLVED AND MAY BECOME INVOLVED IN LEGAL PROCEEDINGS WITH FORMER
EMPLOYEES, CONSULTANTS AND SERVICE PROVIDERS WHICH, IF DETERMINED AGAINST US,
COULD CAUSE US TO ISSUE A SIGNIFICANT AMOUNT OF OUR SHARES OF COMMON STOCK AND
PAY A SIGNIFICANT AMOUNT OF DAMAGES. THE ISSUANCE OF A SIGNIFICANT NUMBER OF
SHARES OF OUR COMMON STOCK ESPECIALLY IF AT A LARGE DISCOUNT TO THE THEN CURRENT
MARKET PRICE, WILL DILUTE OUR STOCKHOLDERS AND THE PAYMENT OF SIGNIFICANT
DAMAGES WILL MATERIALLY ADVERSELY AFFECT OUR FINANCIAL CONDITION AND THEREFORE
OUR ABILITY TO ACHIEVE OUR BUSINESS PLAN.



     We are party to two lawsuits from individuals. In one case, the plaintiff
was employed by us, and in another case, the plaintiff provided managerial
services on a contractual basis to us. These persons seek damages of more than
$2.0 million which includes approximately 50,000 stock options and monetary
damages. We are currently aware of other former employees, consultants and
service providers who may make claims against us relating to the payment for
past services that represent, in the aggregate, $1.5 million in damages which
includes approximately 95,000 stock options and monetary damages.



     In the past, we have entered into contracts with third parties in the
normal course of business and with advisors and consultants based on business
plans that we are no longer pursuing. We believe that those contracts are no
longer effective. However, it is possible that the other parties to those
contracts could claim that we did not fulfill our obligations under the
contracts. If a court found that we are obligated under any of those contracts
we could be liable for an undeterminable amount of compensation.


                                       12
<PAGE>   15


     Our stockholders may suffer material dilution if a material number of
options or other securities are awarded. If awarded, the options or securities
may have a strike price that is at a significant discount to the current market
price. All of these litigations are likely to be expensive for us. If such suits
are determined against us and a court awards a material amount of cash damages,
our business, results of operations and financial condition will be materially
adversely affected. In addition, any such litigation could divert management's
attention and resources.



PERSONS FORMERLY ASSOCIATED WITH OUR BUSINESS MAY HAVE ENGAGED IN UNLAWFUL
ACTIVITIES DESIGNED TO MANIPULATE OUR STOCK. WE MAY BE SUBJECT TO CRIMINAL AND
CIVIL SANCTIONS, FINES AND PENALTIES BECAUSE OF THEIR ACTIONS. IF WE ARE FOUND
TO HAVE LIABILITY RELATING TO THE ACTIVITIES OF THESE PERSONS, WE MAY HAVE TO
PAY SIGNIFICANT MONETARY FINES AND PENALTIES AND WE COULD BE SUBJECT TO MATERIAL
SANCTIONS THAT WOULD BOTH MATERIALLY ADVERSELY AFFECT OUR STOCK AND OUR ABILITY
TO OPERATE OUR BUSINESS.



     In the past, persons formerly associated with us, which may include some of
our former officers and directors, may have engaged in activities as part of an
effort to profit from unlawful trading activity in our stock. As a result, we
may be subject to civil or criminal actions, fines or penalties. If any
proceedings are commenced against us, we will need to spend significant money
and management time in our defense. If a court determined that we participated
in these activities, we could be liable for damages or penalties that would have
a material adverse effect on our financial condition.



WE HAVE GROWN AND PLAN TO CONTINUE TO GROW, IN PART, THROUGH THE ACQUISITION OF
OTHER COMPANIES. HOWEVER, WE MAY NOT BE ABLE TO SUCCESSFULLY INTEGRATE THE
COMPLETED AND PENDING ACQUISITIONS OR IDENTIFY, ACQUIRE AND SUCCESSFULLY
INTEGRATE FUTURE ACQUISITIONS INTO OUR OWN OPERATIONS, WHICH MAY MATERIALLY
ADVERSELY AFFECT OUR GROWTH AND OUR OPERATING RESULTS.



     We have made a number of significant acquisitions within the last six
months. These acquisitions have increased our revenue from $2.4 million for the
year ended December 31, 1998 to $13.6 million for the year ended December 31,
1999. We have not yet fully integrated any of these companies. We may not be
able to successfully integrate these acquisitions into our business. Our failure
to acquire suitable companies or to successfully integrate any acquired
companies into our operations could have a material adverse effect upon our
business, operating results and financial condition.



OUR INDUSTRY IS CHARACTERIZED BY RAPIDLY CHANGING TECHNOLOGY WITH CONTINUOUS
IMPROVEMENTS IN BOTH COMPUTER HARDWARE AND SOFTWARE. IF WE DO NOT RESPOND
EFFECTIVELY AND ON A TIMELY BASIS TO RAPID TECHNOLOGICAL CHANGE IN OUR INDUSTRY,
WE WILL NOT BE ABLE TO EFFECTIVELY SELL OUR SERVICES AND OUR SALES WILL
MATERIALLY DECLINE.



     We must continually buy new computer hardware and license new computer
software systems to effectively compete in our industry. In addition, our
software delivery applications must be able to support changes in the underlying
software applications that are delivered to our customers. The rapid development
of new technologies increases the risk that current or new competitors could
develop products or services that would reduce the competitiveness of our
products or services. We rely on software providers to produce software
applications that keep pace with our customers' demands.



     We may not successfully develop or adopt new technologies, introduce new
services or enhance our existing services on a timely basis and new
technologies, new services or enhancements we use or develop may never achieve
market acceptance. If we fail to address these developments, we will lose sales
to our competitors and our business, operating results and financial condition
will be materially adversely affected.


                                       13
<PAGE>   16


OUR CURRENT DATA CENTERS ARE LOCATED IN ONLY THREE LOCATIONS, IRVINE,
CALIFORNIA, CALGARY, CANADA, AND NEWBURY, UNITED KINGDOM, WHICH LEAVES US
VULNERABLE TO DISRUPTIONS THAT AFFECT OUR DATA CENTERS. IF OUR DATA CENTERS ARE
DISRUPTED, WE COULD LOSE OUR CUSTOMERS AND FAIL TO ATTRACT NEW CUSTOMERS, WHICH
COULD MATERIALLY ADVERSELY AFFECT OUR BUSINESS, RESULTS OF OPERATIONS AND
FINANCIAL CONDITION.



     Our ASP business strategy depends on the consistent performance of our
three data centers located in Irvine, California, Calgary, Canada and Newbury,
United Kingdom. We offer back-up storage of data for customers in the United
States and Canada that elect this service, but do not yet offer this service for
European customers. We plan to develop additional data centers in the eastern
United States and in Europe. However, our current data centers are vulnerable to
interruption from fire, earthquake, flood, power loss, telecommunications
failure, break-ins and other events beyond our control. If a data center is
damaged, a customer storing its data on that data center may lose its data if it
is not backed up. If our Irvine or Calgary data center were damaged, the loss of
data may affect a significant portion of our customers. We have experienced
periodic systems disruptions in the past and anticipate that such disruptions
will occur in the future. In the event that we experience significant
disruptions that affect our data centers, we could lose customers and fail to
attract new customers, and our business, results of operations and financial
condition would be materially adversely affected.



WE RELY ON SOFTWARE AND SOFTWARE SYSTEMS INTEGRATION COMPANIES TO REFER MANY OF
OUR CLIENTS TO US. ANY FAILURE BY THESE THIRD PARTIES TO PROVIDE US WITH THESE
REFERRALS WILL CAUSE OUR SALES TO MATERIALLY DECLINE.



     We rely on referrals from software application and technology integrators
for a portion of our business. These software application and software
integrators refer their customers to us because we can provide an array of
services which complement the products and services they offer. However, these
software application and software integrators may stop or substantially diminish
referring business to us or they may decide to cooperate with our competitors
and thereby adversely impact or eliminate the amount of referrals made to us. If
these third-party referrals cease or materially decline, our sales will
materially decline and our business, results of operations and financial
condition will be materially adversely affected.


WE MUST LICENSE THE SOFTWARE APPLICATIONS WE PROVIDE TO OUR CUSTOMERS FROM THIRD
PARTIES. IF WE CANNOT OBTAIN THESE SOFTWARE APPLICATIONS WE WILL NOT BE ABLE TO
OFFER ASP SERVICES.

     We depend on third-party software manufacturers agreeing to allow their
software applications to be hosted or run at our data centers and provided to
our customers. We have entered into non-exclusive agreements with Microsoft,
Onyx, Great Plains, SalesLogix and others that allow us to host some of their
software applications at our data centers or re-license their software
applications to our customers. Under most of these agreements, the software
manufacturer can terminate its relationship with us for any reason by giving us
as little as 30 days notice. In these instances, the software manufacturer is
not liable to us or our customers for any damages resulting from termination. If
our relationships with these software manufacturers are terminated or if these
or other software manufacturers do not allow our customers to obtain a license
to operate the software application on our data centers, our business, operating
results and financial condition could be materially adversely affected.

IF WE ARE UNABLE TO OBTAIN CITRIX OR MICROSOFT PRODUCTS, AS WELL AS OTHER KEY
HARDWARE COMPONENTS AND SOFTWARE APPLICATIONS FROM OTHER VENDORS, WE WOULD BE
UNABLE TO DELIVER OUR SERVICES, AND UNTIL WE REPLACE THESE PRODUCTS, OUR
BUSINESS WOULD BE MATERIALLY ADVERSELY AFFECTED.

     We depend on third-party suppliers to provide us with key hardware
components and software applications for our infrastructure and with sufficient
communications lines to allow our customers to access their software
applications. Some components or applications are only available from limited
sources. Citrix Systems, Inc. and Microsoft Corporation are our key suppliers of
software that we utilize to connect our customers to software applications.
Although there are other competing software applications on the market, we
believe that Citrix software, deployed with Windows NT Terminal Server software
from

                                       14
<PAGE>   17


Microsoft, is currently best suited to serve this function. If we are unable to
obtain these products or services such as telecommunications services in a
timely manner, at an acceptable cost or at all, we would be unable to deliver
our services. Until we replace these products, our business, results from
operations and financial condition will be materially adversely affected.


IF THE SOFTWARE WE UTILIZE CONTAINS DEFECTS, OUR CUSTOMERS' SERVICE COULD BE
DISRUPTED AND THEIR DATA COULD BE LOST. THIS COULD RESULT IN OUR INCURRING
LIABILITY AND LOSING CUSTOMERS FOR OUR SERVICES, WHICH WOULD HAVE A MATERIAL
ADVERSE EFFECT ON OUR OPERATIONS.

     Our service offerings depend on complex software which may contain defects,
particularly when first introduced or when new versions are released. Although
we test software applications prior to deployment, we may not discover software
defects that affect our new or current services or enhancements until after they
are deployed. These defects could cause service interruptions or data loss which
could damage our reputation or increase our service costs, cause us to lose
revenue, delay market acceptance or divert our development resources. Any
software modifications we perform as part of our integration services could
cause problems in application delivery. Also, because we offer a one-source
solution to our customers, they are likely to hold us accountable for any
problems associated with their software, even if the problem results from
software defects the manufacturer causes. Typically, software manufacturers
disclaim liability for any damages suffered as a result of software defects or
provide only limited warranties. As a result, we may have no recourse against
the providers of defective software applications.

BREACHES OF OUR SECURITY COULD DISRUPT THE OPERATION OF OUR DATA CENTERS AND
JEOPARDIZE OUR SECURE TRANSMISSION OF CONFIDENTIAL INFORMATION. THESE BREACHES
COULD CAUSE OUR CUSTOMERS TO LOSE CONFIDENCE IN OUR SERVICES AND CANCEL THEIR
CONTRACTS WITH US OR PROSPECTIVE CUSTOMERS NOT TO PURCHASE OUR SERVICES.

     The growth of our business depends upon our ability to securely transmit
confidential information to and from our data centers or the servers of our
customers. Despite our design and implementation of a variety of delivery system
security measures, unauthorized access, computer viruses and accidental or
intentional disturbances could occur. We may need to devote substantial capital
and resources to protect against the threat of unauthorized penetration of our
delivery system or to remedy any problems that the penetration of our delivery
system security creates. The occurrence of any of these events could cause us to
lose customers and expose us to liability, all of which could have a material
adverse effect on us.

MANY OF OUR CONSULTING CONTRACTS HAVE FIXED PRICES, WHICH EXPOSE US TO COST
OVERRUNS. IF WE ARE NOT ABLE TO CONTROL COST OVERRUNS, OUR OPERATING RESULTS
COULD BE MATERIALLY ADVERSELY AFFECTED.

     We undertake certain consulting projects on a fixed-price basis rather than
billing on a time and materials basis or on a per employee or user basis. The
failure to complete such projects without cost overruns would cause our expenses
to increase and materially adversely affect our business, operating results and
financial condition.

OUR ASP SERVICE CONTRACTS GUARANTEE CERTAIN SERVICE LEVELS. IF WE DO NOT MEET
SUCH SERVICE LEVELS, WE MAY BE REQUIRED TO GIVE OUR CUSTOMERS CREDIT FOR FREE
SERVICE AND OUR CUSTOMERS MAY BE ENTITLED TO CANCEL THEIR ASP SERVICE CONTRACTS,
WHICH COULD MATERIALLY ADVERSELY AFFECT OUR BUSINESS.

     Our ASP contracts contain service level guarantees which obligate us to
provide our hosted applications at a guaranteed level of performance. To the
extent we fail to meet those service levels, we may be obligated to provide our
customers credit for free service. If we continue to fail to meet these service
levels, our ASP customers have the right to cancel their contracts with us.
These credits or cancellations will cost us money, damage our reputation with
our customers and prospective customers and could materially adversely affect
our business, results of operations and financial condition.

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<PAGE>   18

WE OPERATE IN AN INDUSTRY WHERE IT IS DIFFICULT TO ATTRACT AND RETAIN QUALIFIED
PERSONNEL. IF WE ARE UNABLE TO ATTRACT AND RETAIN QUALIFIED PERSONNEL, OUR
OPERATIONS WOULD SUFFER AND WE COULD LOSE OUR CUSTOMERS OR FAIL TO ATTRACT NEW
CUSTOMERS.


     Our business is labor-intensive, and our success depends in large part upon
our ability to attract, develop, motivate and retain highly skilled personnel.
We are currently experiencing rapid growth in personnel and intend to continue
expanding. We have grown from over 100 employees as of December 31, 1998 to
approximately 570 employees as of March 31, 2000. We believe that we will need
to hire a significant number of additional personnel. Qualified technical
employees are in great demand and are likely to remain a limited resource for
the foreseeable future. We may not be able to engage the services of such
personnel or retain our current personnel. If we do not succeed in attracting
new, qualified personnel or successfully retain our current personnel, our
business could suffer.



MANY COMPANIES USE THE NAME "FUTURELINK." INTELLECTUAL PROPERTY INFRINGEMENT
CLAIMS AGAINST US FOR THE USE OF THE "FUTURELINK" NAME, EVEN IF WITHOUT MERIT,
COULD BE EXPENSIVE TO DEFEND AND DIVERT MANAGEMENT'S ATTENTION FROM OUR
BUSINESS. IF A CLAIM TO STOP US FROM USING OUR NAME IS SUCCESSFUL, WE WILL HAVE
TO EITHER BUY THE RIGHT TO USE OUR NAME OR CHANGE OUR NAME, WHICH IN EITHER CASE
MAY BE EXPENSIVE.



     We are aware that other companies have claimed prior use of the name
"FutureLink" for products or services similar to our own. We are in the process
of investigating the rights, if any, others may have to the name. In addition,
we are attempting to register "FutureLink" as a service mark in the United
States, Canada and the United Kingdom. However, we may not be able to obtain
proprietary rights to the use of this name. We will incur expenses if called to
defend our use of the "FutureLink" name. Any litigation, even if without merit,
may be time consuming and expensive to defend. It also could divert management's
attention and resources and require us to enter into costly royalty or licensing
agreements. In addition, if any company in our industry is able to establish a
use of the "FutureLink" name that is prior to our use, we could be liable for
damages and could be forced to stop using the name unless we are able to buy the
right to use the name. If we are unable to buy the right to use our name after
we lose an infringement claim, we would have to change our name, which may
require us to spend money to build new brand recognition and incur other costs.
Third parties may assert other infringement claims against us. Any of these
events could have a material adverse effect on our business, financial condition
and results of operations.



WE ARE A TECHNOLOGY COMPANY. HOWEVER, OUR PREVIOUS BUSINESS ACTIVITIES INCLUDED
NATURAL RESOURCE MINING AND EXPLORATION. AS A RESULT WE MAY BE EXPOSED TO
UNKNOWN ENVIRONMENTAL LIABILITY THAT COULD REQUIRE US TO EXPEND OUR FINANCIAL
RESOURCES AND MATERIALLY ADVERSELY AFFECT OUR FINANCIAL CONDITION.



     We merged with a publicly-traded company that prior to 1992 was engaged in
the natural resource exploration and development business, including mining and
oil and gas. The mining, mineral processing and oil and gas industries are
subject to extensive governmental regulations for the protection of the
environment, including regulations relating to air and water quality, site
reclamation, solid and hazardous waste handling and disposal and the promotion
of occupational safety. We could be held responsible for any liabilities
relating to our previous involvement in mining or oil and gas exploration and
development, which liabilities would result in our spending our cash resources
and could have a material adverse effect on our business, financial condition
and results of operations.


ITEM 2.  DESCRIPTION OF PROPERTY


     In late 1999 we recently relocated our headquarters from Calgary, Canada to
Irvine, California, where we currently lease approximately 35,000 square feet of
office space. We also lease approximately 1,000 square feet at another facility
in Irvine, which serves as our primary data center. We also lease office
facilities in Los Angeles and Pleasanton, California; Phoenix, Arizona; Atlanta,
Georgia; Ft. Lauderdale,


                                       16
<PAGE>   19


Florida; Walled Lake, Michigan; Cincinnati and Columbus, Ohio; Pittsburgh,
Pennsylvania; Beltsville, Maryland; and Chantilly and Richmond, Virginia. In
addition, we lease a 2,500 square foot training facility in Pleasanton,
California. In Canada, we lease a facility that is approximately 31,500 square
feet and contains both our offices and our Calgary data center. We also lease
9,000 square feet of office space in Newbury, United Kingdom. Our leases have
expiration dates ranging from 2000 to 2004. We believe our facilities are
adequate for our current operations and that we can obtain additional leased
space if needed.



ITEM 3.  LEGAL PROCEEDINGS



     From time to time we are a defendant or plaintiff in litigation arising in
the ordinary course of our business. To date, other than litigation SmallCaps
OnLine Group LLC brought and the subsequent settlement of that action, no
litigation has had a material effect on us and, as of the date of this
prospectus, we are not a party to any material litigation except as described
below.



     In the past, persons formerly associated with us, which may include one or
more of our former executive officers and directors, may have engaged in
activities as part of an effort to profit from unlawful trading activity in our
stock. We are aware that in October 1998, the SEC announced the filing of an
enforcement action against the publisher of an Internet newsletter called The
Future Superstock, written by Jeffrey Bruss. According to the SEC's litigation
release, the SEC's complaint alleged that The Future Superstock recommended to
the newsletter's more than 100,000 subscribers and to visitors to the
newsletter's website the purchase of approximately 25 microcap stocks which it
predicted to double or triple in the next three to twelve months. According to
the SEC's release, in most instances, the prices of recommended securities
increased for a short period of time after The Future Superstock newsletter made
a recommendation, after which the prices of those stocks dropped substantially.
The SEC alleged that in making its recommendations, the Internet newsletter:



     - failed to adequately disclose compensation it had received from profiled
       companies,



     - failed to disclose that it had sold stock in many of the issuers it
       recommended shortly after disseminating such recommendation,



     - had conducted little, if any, research into companies it recommended, and



     - made false and misleading statements about the success of certain prior
       stock picks.



According to press reports, Jeffrey C. Bruss claimed that he received $300,000
from us to promote our stock. The SEC sought civil penalties against the
publisher of the newsletter. The SEC did not bring any action against us. We
believe that we made no payments to Mr. Bruss, but one or more persons who were
associated with our predecessor company prior to 1998 may have made payments. We
are unable to determine whether, as a result of the alleged activities of Mr.
Bruss, any stockholder suffered any losses for which we might be liable.



     In addition, we recently received a subpoena from the SEC requesting any
documentation in our possession with respect to a confidential investigation
regarding Internet newsletters. This investigation regards the use of the
Internet to engage in fraudulent transactions with respect to the offer,
purchase and sale of securities. We have responded to the SEC's request for
documents.



     As a result of these activities, we may be subject to civil or criminal
actions, fines or penalties. If any proceedings are commenced against us, we
will need to spend significant money and management time on our defense. If we
participated in these activities, we could be liable for damages or penalties
that would have a material adverse effect on our financial condition, results of
operations and liquidity. See "Risk Factors -- Persons formerly associated with
our business may have engaged in activities designed to manipulate our stock."



     SmallCaps OnLine Group LLC, previously known as Bridge Technology Group
LLC, sued us on January 12, 2000 in the New York County Supreme Court to recover
fees we allegedly owed for advisory


                                       17
<PAGE>   20


and investor relations services. SmallCaps' complaint requested compensation for
fees totaling $5.1 million, as well as warrants to purchase an aggregate of
3,289,689 shares of our common stock at exercise prices ranging from $1.00 to
$8.50 per share. The total value of the damages SmallCaps claimed was $110.0
million. On February 11, 2000, we settled SmallCaps' complaint by agreeing to
pay SmallCaps $5.0 million on or before March 14, 2000, and to issue to
SmallCaps warrants to purchase an aggregate of 3,000,000 shares of our common
stock at exercise prices ranging from $8.50 to $22.50 per share, subject to
anti-dilution protection. Since the issuance of these warrants, their exercise
prices have been adjusted and now range from $8.33 to $22.05 per share. We
issued the warrants to SmallCaps on March 1, 2000 and paid SmallCaps the $5.0
million on March 14, 2000. The total value of the settlement on February 11,
2000 was $65.0 million which has been recorded in our financial statements as a
charge to paid-in capital.



     On November 6, 1998, our former Chief Executive Officer and a director, Mr.
Cameron Chell, entered into a Settlement Agreement with The Alberta Stock
Exchange to resolve a pending investigation into Mr. Chell's alleged breaches of
Alberta Stock Exchange rules and by-laws. As part of the Settlement Agreement,
Mr. Chell acknowledged that he had breached certain duties of supervision,
disclosure, or compliance relating to various offers and sales of securities,
and Mr. Chell was prohibited from receiving Alberta Stock Exchange approval in
any capacity for a five year period, subjected to a CDN$25,000 fine and a three
year period of enhanced supervision. We cannot be certain that the Settlement
Agreement with the Alberta Stock Exchange ends all proceedings with regard to
these matters.



     On January 20, 2000, we commenced a proceeding in Canada against Mr. Chell,
various other former employees of and consultants to our company and various
other defendants alleging that these defendants misappropriated a corporate
opportunity in breach of fiduciary and contractual obligations. Most of these
defendants made counterclaims against us seeking, among other things, damages
for interference with their economic interests and for severance compensation in
the form of cash and stock options. We entered into a settlement agreement with
the defendants effective April 26, 2000 that has the following key terms:



     - Mr. Chell will be entitled to exercise options to acquire 175,000 shares
       of common stock that were scheduled to vest June 1, 2000,



     - Mr. Chell or his nominee shall pay to us $400,000 in settlement of a
       related party debt that involved Mr. Chell, and



     - All other claims will be dropped by all parties, who have provided mutual
       releases, with the claim and counterclaims to be discontinued.



     On January 7, 2000, Tony Bryson, an individual who had previously been
employed by us, filed a lawsuit against us seeking $180,000 for the value of
lost stock options, salary and benefits we allegedly promised him, and other
damages he allegedly sustained as a result of our alleged actions. This lawsuit
has been filed under Canadian law. Canadian law provides for severance pay to
any employee of our Canadian operations in an amount that is appropriate based
on, among other things, the nature of the position held by the employee and the
length of time the employee worked for the company, unless the employer can
establish that the termination was for just cause. The exact amount of severance
pay is often disputed between employers and employees in Canada. Accordingly,
there is a risk that in addition to this lawsuit, one or more other former
employees will make claims for cash severance pay as well as options.



     On January 26, 2000, Michael Chan filed a suit in the Court of Queen's
Bench of Alberta, Judicial District of Calgary alleging that FutureLink Alberta
breached its contract to deliver him options to purchase 250,000 Class "A"
common shares of FutureLink Alberta at $1.00 per share. Mr. Chan seeks 50,000
shares of our common stock or, alternatively, damages of approximately $1.5
million in cash, general damages of approximately $200,000 and punitive damages
of approximately $200,000. We have filed a Statement of Defense in this action
refuting Mr. Chan's claims.



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



     No matters were submitted for a vote of stockholders of the Company during
the fourth quarter of the year ended December 31, 1999.


                                       18
<PAGE>   21

                                    PART II

ITEM 5. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS

  MARKET INFORMATION

     On January 4, 2000, our common stock began trading on the Nasdaq National
Market under the trading symbol "FTRL." Before our listing on the Nasdaq
National Market, our common stock traded on the OTC Bulletin Board under the
trading symbol "FLNK" from 1998 through 1999 and under the trading symbol "CVNK"
from 1995 to 1998. Trading activity in our common stock has been limited,
sporadic and highly volatile. The high and low closing sales prices, as adjusted
to reflect the one-for-five reverse stock split effected June 1, 1999, are as
follows:

<TABLE>
<CAPTION>
                                                              HIGH      LOW
                                                             ------    ------
<S>                                                          <C>       <C>
1999
4th Quarter................................................  $35.75    $ 8.50
3rd Quarter................................................  $ 9.31    $ 6.06
2nd Quarter................................................  $ 8.69    $ 1.35
1st Quarter................................................  $ 2.60    $ 1.45

1998
4th Quarter................................................  $ 4.00    $ 1.25
3rd Quarter................................................  $ 8.45    $ 1.95
2nd Quarter................................................  $21.10    $ 3.30
1st Quarter................................................  $21.25    $ 7.50
</TABLE>

  HOLDERS

     As of December 31, 1999 there were approximately 700 holders of record of
the common stock.

  DIVIDENDS

     We currently intend to retain all of our future earnings, if any, for use
in our business and therefore we do not anticipate paying any cash dividends on
our common stock in the foreseeable future. Any future determination to pay cash
dividends will be at the discretion of our board of directors and will depend
upon our financial condition, operating results, capital requirements,
restrictions contained in our agreements and other factors which our board of
directors deems relevant.

  RECENT SALES OF UNREGISTERED SECURITIES

     Since January 1, 1999, we have issued the following securities without
registration under the Securities Act. Each of the disclosures take into account
the stock splits referred to in the prospectus.

1. On February 22, 1999, we issued a $150,620.62 convertible debenture to two
   non-U.S. residents, and granted to each of these persons warrants to purchase
   up to 75,310 shares of common stock. The issuances were made in exchange for
   the satisfaction of the principal and interest due on loans of $144,632 that
   each purchaser had made to us on August 11, 1998. On August 18, 1999, we
   issued 27,431 shares to one of the purchasers on conversion of the remaining
   $54,862 of debenture principal outstanding. During February 2000, we issued
   144,742 shares to these purchasers upon the exercise of their warrants. We
   issued these securities under an exemption provided by Rule 903 of Regulation
   S under the Securities Act Rules. We made no directed selling efforts of
   these securities within the United States. The purchasers of the securities
   certified that they are not U.S. persons, were not acquiring the securities
   for the account or benefit of any U.S. person and would not resell the
   securities

                                       19
<PAGE>   22

   in the U.S. for at least one year. The securities issued by us were
   appropriately legended to reflect these restrictions and we have the right to
   refuse to register any transfer of these securities not made in accordance
   with Regulation S.

 2. On February 26, 1999, we issued an aggregate of 23,500 shares of our common
    stock to the remaining 12 minority shareholders of FutureLink Alberta, all
    of whom are non-US residents. In exchange for the issuances, we received the
    final 107,500 Class A Common Voting Shares of FutureLink Alberta which we
    did not already own. We issued these securities under an exemption provided
    by Rule 903 of Regulation S under the Securities Act Rules. We made no
    directed selling efforts of these securities within the United States. The
    purchasers of the securities certified that they were not U.S. persons, were
    not acquiring the securities for the account or benefit of any U.S. person
    and would not resell the securities in the U.S. for at least one year. The
    securities issued by us were appropriately legended to reflect these
    restrictions and we have the right to refuse to register any transfer of
    these securities not made in accordance with Regulation S.

 3. On March 2, 1999, we issued an aggregate of $500,000 in 8% convertible
    debentures, and warrants to purchase up to 26,553 shares of common stock to
    a U.S.-based entity. In exchange for this issuance, we received total
    consideration of $500,000. In August 1999, we issued 355,836 shares to such
    entity upon conversion of the principal amount of the debenture together
    with interest and penalties. In December 1999, this entity it exercised its
    warrants to acquire 26,553 shares of common stock. We issued these
    securities under an exemption provided by Rule 506 of Regulation D under the
    Securities Act Rules. The purchaser of these securities certified that it
    was an "accredited investor" as defined in Rule 501 of Regulation D, was
    acquiring the securities as an investment and not with a view to
    distribution, and would not resell the securities unless they became
    registered or another exemption from registration was available. The
    securities issued by us were appropriately legended to reflect these
    restrictions.


 4. Between April 29 and May 7, 1999, we issued 8% Senior Subordinated
    Convertible Notes totaling $8,038,500 to various investors, including
    $433,000 in notes to certain members of management. We also issued warrants
    to acquire up to 3,802,750 shares of common stock to the various investors
    and warrants to purchase 216,500 shares to members of our management.
    Commonwealth Associates, L.P. acted as our placement agent and advisor in
    the offering in exchange for $723,465 (9% of the gross proceeds of the
    offering) and 4,000,001 agent's warrants. Between August 23, 1999 and
    November 8, 1999 we issued 8,579,020 shares upon the conversion of
    $7,418,000 of principal outstanding on the notes. We also issued 7,329,782
    shares upon the exercise of 7,709,001 warrants and agent's warrants.
    Effective April 29, 2000, the remaining $620,500 of notes converted into
    676,408 shares of our common stock. Between May 1 and May 12, 2000, 20,704
    shares of common stock were issued upon the exercise of a further 22,500
    warrants. These securities were issued by us pursuant to an exemption from
    registration requirements provided by Rule 506 of Regulation D under the
    Securities Act Rules. The purchasers of these securities certified that they
    were "accredited investors" as defined in Rule 501 of Regulation D, were
    acquiring the securities as an investment and not with a view to
    distribution, and would not resell the securities unless they became
    registered or another exemption from registration was available. The
    securities issued by us were appropriately legended to reflect these
    restrictions.



 5. On May 7, 1999, we issued a 10% convertible debenture in the amount of
    $278,160 and a warrant to purchase up to 44,505 shares of common stock to a
    non-U.S. entity. We made these issuances in satisfaction of a debt in the
    amount of $278,160 owed to that entity. On March 30, 2000, this entity
    elected to convert $200,000 of the principal amount of its convertible
    debenture plus accrued interest into 189,160 shares of common stock. We
    issued these securities pursuant to an exemption provided by Rule 903 of
    Regulation S under the Securities Act Rules. We made no directed selling
    efforts of these securities within the United States. The purchaser of the
    securities certified that it is not a U.S. person, was not acquiring the
    securities for the account or benefit of any U.S. person and would not
    resell the securities in the U.S. for at least one year. The securities
    issued by us were appropriately


                                       20
<PAGE>   23

    legended to reflect these restrictions and we have the right to refuse to
    register any transfer of these securities not made in accordance with
    Regulation S.

 6. On June 1, 1999, we effected a one-for-five reverse stock split. We issued
    227 new shares to round fractional shares up to the nearest whole share as
    directed by the Securities and Exchange Commission.


 7. On July 27, 1999, we issued $15 million in units, consisting of 8% senior
    subordinated convertible notes and warrants to purchase up to 2,250,000
    shares of common stock, to various investors. In exchange for those
    issuances, we received gross proceeds of $15 million. Commonwealth
    Associates, L.P. acted as our placement agent and advisor in the offering in
    exchange for commissions and placement fees equal to $1,350,000 (9% of the
    gross proceeds of the offering) and 225,000 agent's warrants. In October
    1999, we issued 2,727,172 shares and warrants to purchase an additional
    727,042 shares of common stock upon the automatic conversion of the notes.
    We issued these securities under an exemption provided by Rule 506 of
    Regulation D under the Securities Act Rules. The purchaser of these
    securities certified that they were "accredited investors" as defined in
    Rule 501 of Regulation D, were acquiring the securities as an investment and
    not with a view to distribution, and would not resell the securities unless
    they became registered or another exemption from registration was available.
    The securities issued by us were appropriately legended to reflect these
    restrictions.


 8. On August 1, 1999, we issued 232,829 shares of common stock to Vincent L.
    Romano and delivered such shares to an escrow account. In exchange for the
    issuance, Mr. Romano agreed to serve as our Executive Vice President of
    Sales and Marketing. We issued these securities to Mr. Romano under an
    exemption provided by Rule 506 of Regulation D under the Securities Act
    Rules. Mr. Romano certified that he was an "accredited investor" as defined
    in Rule 501 of Regulation D, was acquiring the securities as an investment
    and not with a view to distribution, and would not resell the securities
    unless they became registered or another exemption from registration was
    available. The securities issued by us were appropriately legended to
    reflect these restrictions.

 9. Effective August 7, 1999, we issued 53,552 shares of common stock and 33,467
    warrants to purchase shares of common stock to a U.S. entity. In exchange
    for the issuances and certain other consideration, we retained that entity
    to provide us with marketing and advertising services. We issued these
    securities under an exemption provided by Rule 506 of Regulation D under the
    Securities Act Rules. The purchaser of these securities certified that it
    was an "accredited investor" as defined in Rule 501 of Regulation D, was
    acquiring the securities as an investment and not with a view to
    distribution, and would not resell the securities unless they became
    registered or another exemption from registration was available. The
    securities issued by us were appropriately legended to reflect these
    restrictions.


10. On October 15, 1999, we issued 7,200,000 shares of common stock to the
    Holmes Trust, a trust formed pursuant to the laws of California. In exchange
    for this issuance and certain other consideration, we acquired all of the
    outstanding shares of Executive LAN Management, Inc., doing business as
    Micro Visions. Pursuant to our agreement to acquire Micro Visions, on April
    14, 2000 we issued a further 1,200,000 shares of common stock to the Holmes
    Trust. We issued these securities under an exemption provided by Rule 506 of
    Regulation D under the Securities Act Rules. The Holmes Trust certified that
    it was an "accredited investor" as defined in Rule 501 of Regulation D, was
    acquiring the securities as an investment and not with a view to
    distribution, and would not resell the securities unless they became
    registered or another exemption from registration was available. The
    securities issued by us were appropriately legended to reflect these
    restrictions.


11. On October 15, 1999, we issued 9,090,909 shares of common stock and warrants
    to purchase up to 2,372,727 shares of common stock to various U.S.-based
    investment funds. In exchange for the issuances, we received total
    consideration of $50 million. During February 2000, we issued 2,401,041
    shares of common stock to such investment funds upon the conversion of these
    warrants, which gives effect to antidilution since their issuance. Gerard
    Klauer Mattison & Co., Inc. acted as our placement

                                       21
<PAGE>   24


    agent in the offering and received commissions and placement fees equal to
    $3 million (6% of the gross proceeds of the offering) and agent's warrants
    to acquire 928,551 shares of common stock. We issued these securities under
    an exemption provided by Rule 506 of Regulation D under the Securities Act
    Rules. Each purchaser of these securities certified that it was an
    "accredited investor" as defined in Rule 501 of Regulation D, was acquiring
    the securities as an investment and not with a view to distribution, and
    would not resell the securities unless they became registered or another
    exemption from registration was available. The securities issued by us were
    appropriately legended to reflect these restrictions.


12. On November 3, 1999, we issued warrants to purchase up to 29,413 shares of
    our common stock to TBCC Funding Trust. The issuance was made at the same
    time as a lease financing arrangement with Transamerica Business Credit
    Corporation. We issued these securities under an exemption provided by Rule
    506 of Regulation D under the Securities Act Rules. TBCC Funding Trust
    certified that it was an "accredited investor" as defined in Rule 501 of
    Regulation D, was acquiring the securities as an investment and not with a
    view to distribution, and would not resell the securities unless they became
    registered or another exemption from registration was available. The
    securities issued by us were appropriately legended to reflect these
    restrictions.

13. On November 5, 1999, we issued 1,181,816 shares of our common stock to the
    11 former shareholders of CN Networks, Inc. In exchange for the issuances
    and certain other consideration, we acquired all of CN Networks, Inc.'s
    outstanding shares. We issued these securities under an exemption provided
    by Rule 506 of Regulation D under the Securities Act Rules. Of the selling
    shareholders, all of whom reside in California, one was accredited and 10
    were non-accredited. The non-accredited investors were furnished with
    information on our company in compliance with the provisions of Rule 502(b)
    of Regulation D. The single accredited investor certified to us that it is
    an "accredited investor" as defined in Rule 501 of Regulation D. All of the
    former shareholders of CN Networks, Inc. certified that they were acquiring
    the securities as an investment and not with a view to distribution and
    would not resell the securities unless they became registered or another
    exemption from registration was available. The securities issued by us were
    appropriately legended to reflect these restrictions.


14. On November 26, 1999, we issued 1,298,705 shares of our common stock to the
    16 former shareholders of Async Technologies, Inc. In exchange for the
    issuances and certain other consideration, we acquired all of the
    outstanding shares of Async Technologies, Inc. Pursuant to our agreement to
    acquire Async Technologies, Inc., on April 7, 2000 we issued a further
    439,850 shares of common stock to certain former shareholders of Async
    Technologies, Inc. We issued these securities under an exemption provided by
    Rule 506 of Regulation D under the Securities Act Rules of the selling
    shareholders, all of whom reside in Michigan, two were accredited and 14
    were non-accredited. The non-accredited investors were furnished with
    information on our company in compliance with the provisions of Rule 502(b)
    of Regulation D. The accredited investors certified to us that they fit
    within the definition of "accredited investor" as defined in Rule 501 of
    Regulation D. All of the former shareholders of Async Technologies, Inc.
    certified that they were acquiring the securities as an investment and not
    with a view to distribution and would not resell the securities unless they
    became registered or another exemption from registration was available. The
    securities issued by us were appropriately legended to reflect these
    restrictions.


15. On December 12, 1999, we issued 112,590 shares of common stock to a U.S.
    entity. In exchange for the issuance, we received total consideration of
    $2.2 million. We issued these securities under an exemption provided by Rule
    506 of Regulation D under the Securities Act Rules. The purchaser of these
    securities certified that it was an "accredited investor" as defined in Rule
    501 of Regulation D, was acquiring the securities as an investment and not
    with a view to distribution, and would not resell the securities unless they
    became registered or another exemption from registration was available. The
    securities issued by us were appropriately legended to reflect these
    restrictions.

                                       22
<PAGE>   25

16. On December 16, 1999, we issued a warrant to acquire up to 13,140 shares of
    common stock to EMC(2) Corporation. The issuance was made as partial
    consideration for an equipment financing arrangement. We issued these
    securities under an exemption provided by Rule 506 of Regulation D under the
    Securities Act Rules. EMC(2) Corporation certified that it was an
    "accredited investor" as defined in Rule 501 of Regulation D, was acquiring
    the securities as an investment and not with a view to distribution, and
    would not resell the securities unless they became registered or another
    exemption from registration was available. The securities issued by us were
    appropriately legended to reflect these restrictions.

17. On December 22, 1999, we issued 2,160,307 shares of common stock to the
    selling shareholders of KNS Holdings Limited, a foreign entity, all of such
    selling shareholders being non-U.S. residents or entities. In exchange for
    the issuances and certain other consideration, we acquired all of the
    outstanding shares of KNS Holdings Limited. We issued these securities under
    an exemption provided by Rule 903 of Regulation S under the Securities Act
    Rules. We made no directed selling efforts of these securities within the
    United States. The purchasers of the securities certified that they were not
    U.S. persons, were not acquiring the securities for the account or benefit
    of any U.S. person and would not resell the securities in the U.S. for at
    least one year. The securities issued by us were appropriately legended to
    reflect these restrictions and we have the right to refuse to register any
    transfer of these securities not made in accordance with Regulation S.

18. On January 31, 2000, we issued 1,026,316 shares of common stock to the 2
    selling shareholders of Vertical Software, Inc. d.b.a VSI Technology
    Solutions. In exchange for the issuances and certain other consideration, we
    acquired all of the outstanding shares of VSI Technology Solutions. We
    issued these securities under an exemption provided by Rule 506 of
    Regulation D under the Securities Act Rules both selling shareholders were
    accredited investors and certified to us that they complied with Rule 501 of
    Regulation D. These former shareholders of Vertical Software, Inc. certified
    that they were acquiring the securities as an investment and not with a view
    to distribution and would not resell the securities unless they became
    registered or another exemption from registration was available. The
    securities issued by us were appropriately legended to reflect these
    restrictions.

19.  On February 29, 2000, we issued 1,975,170 shares of common stock to the 4
     selling shareholders of MicroLAN Systems, Inc., doing business as Madison
     Technology Group, Madison Consulting Resources, Inc. and Madison Consulting
     Resources NJ, Inc. to acquire all of the outstanding shares of such
     companies. We issued these securities pursuant to an exemption provided by
     Rule 506 of Regulation D under the Securities Act Rules. All 4 selling
     shareholders certified to us that they are "accredited investors" as
     defined in Rule 501 of Regulation D. All of the former shareholders of
     these companies also certified that they were acquiring the securities as
     an investment and not with a view to distribution and would not resell the
     securities unless they became registered or another exemption from
     registration was available. The securities issued by us were appropriately
     legended to reflect these restrictions.


20. Between June 29, 1998 and May 12, 2000, we issued an aggregate of 9,644,300
    stock options to directors, officers and employees at various exercises
    prices of which 4,000,000 underlying shares were registered by our
    registration statement on Form S-8 filed August 6, 1999 and 4,500,000
    underlying shares were registered by our registration statement on Form S-8
    filed February 29, 2000. We issued these securities under Rule 701 of
    Regulation E under the Securities Act Rules.


21. On February 11, 2000 we agreed to, and on March 1, 2000 did issue, warrants
    to acquire, in the aggregate, up to 3,000,000 shares of common stock to a
    U.S. entity to settle litigation commenced against us by such entity
    claiming fees for financial advisory services. We issued these securities
    under an exemption provided for Rule 506 of Regulation D under the
    Securities Act Rules. The party to whom we issued these securities is an
    "accredited investor" as defined in Rule 501 of Regulation D, acquired the
    securities as an investment and not with a view to distribution, and has
    agreed to not

                                       23
<PAGE>   26

    resell the securities unless they became registered or another exemption
    from registration was available. The securities issued by us were
    appropriately legended to reflect these restrictions.

22. On February 3, 2000 we entered into a definitive agreement to acquire all of
    the outstanding shares of Charon Systems Inc., a foreign entity, from its 14
    current shareholders, all of whom being non-US residents or entities. At
    closing, we intend to issue 1,072,940 shares of common stock as part of the
    consideration payable to these non-U.S. selling shareholders pursuant to an
    exemption provided by Rule 903 of Regulation S under the Securities Act
    Rules. The selling shareholders will be required to certify that they are
    not U.S. persons, that they are not acquiring the securities for the account
    or benefit of any U.S. person and that they will not resell the securities
    in the U.S. for at least one year. When we issue these securities, we intend
    to appropriately legend the certificates representing these securities to
    reflect these restrictions and we will retain the right to refuse to
    register any transfer of these securities not made in accordance with
    Regulation S.


23. On April 28, 2000, we issued 1,746,704 shares of common stock and warrants
    to purchase up to 441,176 shares of common stock to two U.S.-based
    investment funds. In exchange for the issuances, we received total
    approximate consideration of $15 million. We issued these securities under
    an exemption provided by Rule 506 of Regulation D under the Securities Act
    Rules. Each purchaser of these securities certified that it was an
    "accredited investor" as defined in Rule 501 of Regulation D, was acquiring
    the securities as an investment and not with a view to distribution, and
    would not resell the securities unless they became registered or another
    exemption from registration was available. The securities issued by us were
    appropriately legended to reflect these restrictions.


     Except as otherwise set forth above, no underwriters were engaged in the
     sales of securities described above.

ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
        OF OPERATIONS

     The following discussion of our financial condition and results of
operations should be read in conjunction with the consolidated financial
statements and the related notes included elsewhere in this report. This
discussion contains forward-looking statements the accuracy of which involves
risks and uncertainties. Our actual results could differ materially from those
anticipated in the forward-looking statements for many reasons including, but
not limited to, those discussed in "Additional Factors That May Affect Future
Results" and elsewhere in this report. We disclaim any obligation to update
information contained in any forward-looking statement.

OVERVIEW

     We provide server-based computing services and are an application service
provider, or ASP. Our services enable software applications to be deployed,
managed, supported and upgraded from centrally located servers, rather than on
individual desktop computers. For our server-based computing customers, we
install and integrate software applications on our customers' servers. For our
ASP customers, we host software applications on our servers at our data centers,
and rent computing services to our customers for a monthly fee. Our ASP
customers connect to our facilities over the Internet, through a dedicated
telecommunications line or by wireless connection. Our goal is to provide our
ASP services with the speed, simplicity and reliability of a utility service.

     We had no significant active operations in 1997.

     On January 20, 1998, we acquired a 46% interest in FutureLink Distribution
Corp., a private Alberta corporation, which we refer to as FutureLink Alberta,
and changed our name from Core Ventures, Inc. to FutureLink Distribution Corp.
Effective November 23, 1998, we acquired a further 50.4% interest in FutureLink
Alberta, bringing our total ownership to 96.4%. FutureLink Alberta focused on
providing ASP

                                       24
<PAGE>   27


services to mid-sized businesses. We accounted for our investment in FutureLink
Alberta for the period January 20, 1998 to November 23, 1998 using the equity
method of accounting for investments. As such, results from operations for our
46% ownership percentage of FutureLink Alberta's losses is included in our
statement of operations under the caption "Equity in loss of investee."
Subsequent to November 23, 1998, FutureLink Alberta's results are consolidated
into our results. On February 26, 1999, FutureLink Alberta became our wholly
owned subsidiary when we acquired the remaining 3.6% minority shares.


     Effective August 24, 1998, we acquired all of the outstanding shares of
Riverview Management Corporation, which we renamed FutureLink/SysGold Ltd. This
company was a western Canadian information technology services company focused
on outsourcing information technology services to mid-sized companies in the oil
and gas sector. We consolidated the results of operations of FutureLink/ SysGold
Ltd. into our results of operations upon our acquisition of FutureLink/SysGold
Ltd. on August 24, 1998.

     On August 1, 1999, we merged FutureLink Alberta and FutureLink/SysGold Ltd.
into a single operating subsidiary continuing under the FutureLink Alberta name.


     We introduced our ASP services in March 1999 and launched our sales program
for ASP services in July 1999. We have built our server-based computing business
through six acquisitions that we closed between October 15, 1999, and February
29, 2000 as follows:


     - On October 15, 1999, we acquired Executive LAN Management, Inc. for total
       consideration of $86.0 million.

     - On November 5, 1999, we acquired CN Networks, Inc. for total
       consideration of $19.9 million.

     - On November 26, 1999, we acquired Async Technologies, Inc. for total
       consideration of $35.0 million.

     - On December 22, 1999, we acquired KNS Holdings Limited, for total
       consideration of $44.0 million.

     - On January 31, 2000, we acquired Vertical Software, Inc. for total
       consideration of $27.6 million.

     - On February 29, 2000, we acquired MicroLAN Systems, Inc., doing business
       as Madison Technology Group, Madison Consulting Resources, Inc. and
       Madison Consulting Resources N.J., Inc. for total consideration of $57.5
       million.


     In addition, we have agreed to acquire Charon Systems Inc. for
approximately $6.9 million in cash and 1,072,940 shares of our common stock.



     Our acquisitions reflect our strategy to rapidly expand our market
penetration and our ability to deliver our server-based computing and ASP
services. All of the companies we have acquired to date, and Charon Systems
Inc., who we have agreed to acquire, offer their customers information
technology services, specializing in server-based applications relying on
software from Citrix Systems, Inc., which interacts with Windows NT Terminal
Server software from Microsoft, the same software used by us to run our ASP
servers. The acquisitions have allowed us to enter other major markets through
an established market participant, with local sales and marketing teams and
technical staff now able to offer both server-based integration and outsourcing
services and ASP.


     The acquisitions completed during 1999 resulted in approximately $186.8
million of purchase price in excess of net assets acquired that we have
allocated to goodwill. Our acquisition plan during 1999 was to acquire leading
Citrix resellers in several geographic areas that enable us to gain the market
presence, technical expertise, and superior management capabilities of
implementing this software that enables us to connect customers to our software
applications hosted in centrally managed data centers. Citrix is one of the
leading technologies for delivering software applications from remote locations
and is an integral part of allowing us to create the remote access server-based
computing environment that is the technical

                                       25
<PAGE>   28

foundation of our ASP business. We believe that we will be able to realize the
value of the goodwill acquired through the overall expansion of our ASP business
based on our strategic business plan. We will periodically evaluate the goodwill
based upon the future undiscounted cash flows using the forecasts in our
strategic business plan. If our estimate of future undiscounted cash flow should
change or our strategic business plan is not achieved, future analyses may
indicate insufficient future undiscounted cash flows to recover the carrying
value the goodwill, in which case the goodwill would be written down to fair
value.

     Our historical financial statements as of and for the year ended December
31, 1998 reflect FutureLink's historical Canadian consulting business and
Canadian ASP operations and only reflect the results of FutureLink Alberta and
FutureLink/SysGold Ltd. for the periods after our acquisition of them. Our
historical financial statements as of and for the two years ended December 31,
1999 do not reflect any United States server-based computing, ASP business or
server-based computing distribution business until the effective dates of the
acquisitions listed above. These acquired businesses now represent a significant
portion of our revenue, operations and employees.

     Our analysis of operations for the years ended December 31, 1998 and 1999
follows. We have omitted a comparison of operations from year to year as our
significant acquisition activity during 1999 distorts the comparison.

     We have and expect to continue to experience significant fluctuations in
our operating results because of a variety of factors, many of which are outside
of our control, including:

     - size and timing of customer installations and related payments,

     - fluctuations in data and voice communications costs,

     - timing and magnitude of capital expenditures,

     - costs relating to the expansion of operations,

     - costs and revenue fluctuations due to acquisitions,

     - the timing of delivery of services under new ASP contracts,

     - customer discounts and credits,

     - changes in our pricing policies or those of our competitors, and

     - economic conditions specific to our industry, as well as general economic
       conditions.

     Our revenues are subject to further variations from period to period
because a large portion of our current revenues are non-recurring. For these and
other reasons, in some future periods, our results of operations may fluctuate
and fall below the expectations of securities analysts or investors, which could
materially adversely affect the market price of our common stock.


RESULTS OF OPERATIONS


Revenue

     The components of our revenue for the years ending December 31, 1998 and
1999 were as follows (dollars in millions):

<TABLE>
<CAPTION>
                                                             DECEMBER 31,    DECEMBER 31,
                                                                 1998            1999
                                                             ------------    ------------
<S>                                                          <C>             <C>
Information technology outsourcing, consulting and other...      $1.4           $ 6.9
Sale of hardware/software..................................       1.0             6.7
                                                                 ----           -----
                                                                 $2.4           $13.6
                                                                 ====           =====
</TABLE>

     Revenue for the year ended December 31, 1998 consisted of $1.4 million of
information technology outsourcing and business consulting revenue, and $1.0
million of hardware and software sales. The revenue for this period reflects the
operations of our FutureLink/SysGold Ltd. subsidiary, which we acquired on

                                       26
<PAGE>   29


August 24, 1998, and our FutureLink Alberta subsidiary for the period November
23, 1998 to December 31, 1998. Prior to that date, we only held a 46% interest
in FutureLink Alberta, and we accounted for those results under the equity
method of accounting and reflected those results in equity in loss of investee.


     Revenue for the year ended December 31, 1999 consisted of $1.7 million of
information technology, outsourcing and ASP service revenue generated by the
United States companies that we acquired during the year, and $5.2 million of
information technology outsourcing and consulting services that our Canadian
companies generated, which they provided to mostly oil and gas industry
customers. We also purchase and resell hardware and software to our customers as
part of our services, which accounted for $6.7 million of revenue in 1999, of
which $4.7 million related to revenues generated by the acquired companies.


Cost of Goods Sold


     Cost of goods sold reflects costs of hardware and software purchased for
resale to customers. Cost of goods sold for the year ended December 31, 1998 was
$0.9, or 91% of hardware and software sales.

     Our cost of goods sold for the year ended December 31, 1999 was $7.0
million, or 103% of related hardware and software sales. The cost of sales for
the year ended December 31, 1999 exceeded related revenue primarily because we
wrote off $232,000 of inventory during the period that existed on the books of
the companies we acquired.


Cost of Service Delivery



     Our cost of service delivery for the year ended December 31, 1998 was $1.5
million. This includes amounts related to the cost of service delivery of
information technology outsourcing and the direct cost related to the
development of our ASP services, including operating a "beta test" data center
for early customers. The costs of service delivery for this period reflects
costs resulting from the operations of our FutureLink/SysGold Ltd. subsidiary,
which we acquired on August 24, 1998, and from Futurelink Alberta for the period
November 23, 1998 to December 31, 1998. Prior to that date, we only held a 46%
interest in FutureLink Alberta, and we accounted for those results under the
equity method of accounting and reflected those results in equity in loss of
investee.



     Our cost of service delivery for the year ended December 31, 1999 was $10.5
million. Our cost of service delivery reflects payroll and benefit costs for our
outsourcing consultants who support the information technology activities of our
clients and payroll, benefit, and operational costs related to testing and
operating our data center and installing and supporting software applications
related to our ASP and information technology outsourcing businesses.


Selling, General and Administrative


     Our selling, general and administrative expenses for the year ended
December 31, 1998 were $3.1 million and included selling, general and
administrative costs resulting from the operations of our FutureLink/SysGold
Ltd. subsidiary, which we acquired on August 24, 1998. The 1998 amount includes
selling, general and administrative costs from our FutureLink Alberta subsidiary
for the period November 23, 1998 to December 31, 1998. Prior to that date, we
only held a 46% interest in FutureLink Alberta, and we accounted for those
results under the equity method of accounting and reflected those results in
equity in loss of investee. The 1998 amount also includes $2.1 million of
non-cash compensation charges relating to the issuance of our common stock,
options and warrants.


     Our selling, general and administrative expenses include travel, payroll,
operations, advertising, and marketing expenses to secure customers and to
develop business partnerships, as well as for meeting and developing
relationships with industry analysts and financiers. Selling, general and
administrative expenses for the year ended December 31, 1999 increased $9.5
million to $12.6 million, from $3.1 million in the comparable period in 1998.
The increase in such costs results from the expansion of our ASP business

                                       27
<PAGE>   30

which resulted in increased payroll and operating costs, additional costs to our
financing and marketing activities, and $4.6 million additional selling, general
and administrative costs of the subsidiaries that we acquired during the year.
The 1999 amount also includes $3.3 million of non-cash compensation charges
relating to the issuance of our common stock, options and warrants.

Interest Expense

     Our 1998 interest expense of $1.3 million includes a non-cash charge
related to amortization of deferred financing fees of $1.2 million.

     Our interest expense, including amortization of deferred financing fees and
debt discount, of $12.1 million for the year ended December 31, 1999, reflects
non-cash charges of $11.1 million related to, among other factors, the
difference between the market value of the debt conversion features on the date
of the debt agreement and the price of conversion. The cash interest expense of
$1.0 million relates to interest on bank indebtedness and lines of credit,
capital lease obligations and convertible debt and promissory notes outstanding
during the year.


Amortization of Goodwill and Other Intangible Assets and Depreciation


     Our depreciation and amortization costs for the years ended December 31,
1998 and 1999 are comprised of the following (dollars in millions):


<TABLE>
<CAPTION>
                                                              1998    1999
                                                              ----    ----
<S>                                                           <C>     <C>
Amortization of goodwill and other intangible assets........   0.7     5.0
Depreciation and amortization...............................  $0.2    $1.7
                                                              ----    ----
                                                              $0.9    $6.7
                                                              ====    ====
</TABLE>


     Our amortization of intangible assets for the year ending December 31, 1998
relates to the amortization of the assembled workforce that we acquired during
1998.

     Our depreciation for the year ended December 31, 1999 includes depreciation
on the expansion of our Canadian data center, software user licenses, and office
and leasehold improvements. Our amortization of intangible assets for the year
ending December 31, 1999 relates to the amortization of goodwill on the
acquisitions made during the year and from the assembled workforce acquired
during the year ended December 31, 1998.

Equity in Loss of Investee


     On January 20, 1998, we acquired a 46% interest in FutureLink Alberta.
Effective November 23, 1998, we acquired a further 50.4% interest in FutureLink
Alberta, bringing our total ownership to 96.4%. We accounted for our investment
in FutureLink Alberta for the period January 20, 1998 to November 23, 1998 using
the equity method of accounting for investments, and included 46% of FutureLink
Alberta's net loss on our statement of operations as "Equity in loss of
investee." Upon the November 24, 1998 acquisition of the additional 50.4%
interest, we consolidated FutureLink Alberta's results of operations into our
results of operations. In 1999, we consolidated FutureLink Alberta's operations
with our operations for the full year.


Extraordinary Item

     During the year ended December 31, 1999, we renegotiated the terms of our
10% convertible debentures having an original aggregate principal amount of $6.0
million. We issued additional warrants to holders of our convertible debentures
and also retired a portion of the principal amount of these convertible
debentures at a premium. As a result of this series of transactions, we recorded
an extraordinary loss of $0.8 million.

                                       28
<PAGE>   31

LIQUIDITY AND CAPITAL RESOURCES

     During the year ended December 31, 1999, we had net cash outflows from
operating activities of $16.4 million and utilized another $28.4 million for
acquisitions. These outflows related to the expansion of our ASP business,
expansion into the United States and significant acquisition activity. In
addition, during 1999 we invested $3.2 million in property and equipment, mostly
in building a new Canadian data center, and for the acquisition of software,
hardware and other infrastructure costs necessary to host our ASP customers.
These net cash outflows are significantly greater than net cash outflows for the
same period in 1998.

     During the year ended December 31, 1999, we acquired four companies, and
have since acquired two more. The total consideration for these acquisitions was
$270.0 million consisting of $41.5 million cash; 16,482,164 shares of common
stock valued at $197.3 million; 1,475,000 options to acquire shares of common
stock valued at $17.2 million; and notes payable of $13.9 million, which are all
due in 2000.


     We used the following sources of financing to fund operations, our
acquisitions, expansion of our ASP business, expansion into the United States,
investments in property and equipment, and for the acquisition of software,
hardware and other infrastructure costs necessary to host our ASP customers:



     Issuance of common stock and warrants -- During 1999, we completed a
private placement of $50.0 million of common equity with institutional private
equity investors and received net proceeds of approximately $46.1 million after
deducting commissions and fees. As part of this placement, we issued warrants
which allowed their holders to acquire 2,401,041 shares of common stock to the
investors and the placement agent. The holders exercised these warrants in
February 2000, resulting in net proceeds to the Company of $18.0 million. On
April 28, 2000, we completed a private placement of common equity to
institutional private investors from which we received approximately $15
million. As part of this placement, we issued to the investors 1,764,704 shares
of common stock and warrants to purchase 441,176 shares of common stock at an
exercise price of $9.25 per share.


     Issuance of convertible debt and promissory notes -- During the year we
completed a number of convertible debt offerings as follows:

     - in the first quarter of 1999, we issued $3.3 million aggregate principal
       amount of our 10% convertible debenture financing, bringing the total
       outstanding principal amount of these notes to $5.5 million. In April
       1999, we repaid $1.5 million of these 10% convertible debentures, and
       holders converted the balance into 4,170,759 shares of common stock;

     - in April and May 1999, we issued $8.0 million aggregate principal amount
       of our 8% senior subordinated convertible promissory notes. The net cash
       proceeds of this issuance, after fees and expenses, were $7.3 million.
       Holders converted substantially all of these notes into 8,579,019 shares
       of our common stock in the second half of the year; and

     - in July 1999, we issued $15.0 million aggregate principal amount of our
       8% senior subordinated convertible promissory notes. The net cash
       proceeds of this issuance of securities were $13.6 million after fees and
       expenses. In October 1999, holders converted these convertible notes into
       2,727,172 shares of our common stock plus warrants.

     Lease Financing -- During the year ended December 31, 1999, we obtained
several capital asset lease lines with financial lenders and computer hardware
vendors. These lines allow us to lease up to $22.5 million of computer hardware
and related infrastructure. As of December 31, 1999, we have used $3.1 million
of these lines. Aggregate monthly payments under these lines are currently
$195,000, including interest implicit in the lease at rates ranging from 9% to
14% per annum. We have available borrowings of $19.4 million under the various
lease lines as of December 31, 1999. These lines have been partially used to
build the Irvine data center and expand and refinance the Canadian data center.

                                       29
<PAGE>   32


     Bank Financing -- We have various lines of credit with banks and financial
institutions that allow us to borrow up to $6.1 million. As of December 31,
1999, we had aggregate borrowings outstanding of $1.7 million under the various
lines. The lines bear interest at various rates ranging from prime plus 1% to
prime plus 3% per annum, and mature at various intervals ending November 30,
2000. The prime rate was 8.5% at December 31, 1999. Certificates of deposit
aggregating $1.1 million, receivables and other assets of certain of our
subsidiaries secure these lines. We currently have available borrowings of $5.1
million under the various lines of credit.



     We may need additional capital to fund our operations and our expansion.
This financing may involve incurring debt or selling equity securities. We
cannot assure you that additional financing will be available to us on
commercially reasonable terms or at all. If we incur debt, the risks associated
with our business and with owning our common stock could increase. If we raise
capital through the sale of equity securities, the percentage ownership of our
shareholders would be diluted. In addition, any new equity securities may have
rights, preferences or privileges senior to those of our common stock. If we are
unable to obtain additional financing, our ability to fund our operations and
meet our current plans for expansion could be materially adversely affected.


Foreign Currency Translation and Hedging

     We are exposed to foreign currency fluctuations through our operations in
Canada and the United Kingdom. At December 31, 1999, approximately 53% of our
revenue and 14% of our receivables are in Canadian dollars and approximately 2%
of our revenue and 40% of our receivables are in British pounds. We do not enter
into forward exchange contracts or any derivative financial investments for
trading purposes. Thus, we do not currently hedge our foreign currency exposure.

ITEM 7. FINANCIAL STATEMENTS

     The information required by this item is included in pages F-1 through F-26
attached hereto and incorporated herein by reference. The index to the
consolidated financial statements can be found at F-1.

ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
        FINANCIAL DISCLOSURE

     None.

                                       30
<PAGE>   33

                                    PART III

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

     Our executive officers, key employees and directors are as follows:


<TABLE>
<CAPTION>
                NAME                   AGE                           POSITION
                ----                   ---                           --------
<S>                                    <C>   <C>
Philip R. Ladouceur..................  59    Chairman, Chief Executive Officer and Director
Glen C. Holmes.......................  43    President, Chief Operating Officer and Director
Raghu N. Kilambi.....................  34    Executive Vice President, Chief Financial Officer and
                                             Director
Vincent L. Romano, Jr................  54    Executive Vice President, Special Projects
William R. Botti.....................  49    Senior Vice President, Application Service Provision
James C. Harvey......................  40    Senior Vice President, Server-Based Computing
Solveig Whittle......................  36    Senior Vice President, Marketing
Roger J. Gallego.....................  31    Senior Vice President, Operations Strategy
Michael R. Krieger...................  49    Senior Vice President, Strategic Planning and Corporate
                                             Development
James A. Smith, Jr...................  51    Senior Vice President, Operations
Richard M. White.....................  56    Senior Vice President, Administration
Yuri M. Pasea........................  38    Managing Director (Europe)
William V. Arnett....................  45    Senior Vice President and Chief Operating Officer
                                             (Canada)
Kyle B.A. Scott......................  35    Vice President, Secretary and General Counsel
F. Bryson Farrill....................  71    Director
Michael S. Falk......................  38    Director
Timothy P. Flynn.....................  49    Director
Gerald A. Poch.......................  53    Director
James P. McNiel......................  37    Director
</TABLE>


     MR. LADOUCEUR has served as our Chairman since June 1999, Chief Executive
Officer since August 1999 and as a director since August 1998. From October 1996
to April 1998, Mr. Ladouceur was President, Chairman and Chief Executive Officer
of MetroNet Communications Corp. and served as MetroNet's Executive Chairman
until its merger with AT&T Canada in June, 1999. From February 1995 to October
1996, Mr. Ladouceur was Executive Vice President of Operations at Bell Canada
International Inc. From October 1992 to February 1995, Mr. Ladouceur was the
founding President and Chief Executive Officer of ISM Information Systems
Management (Alberta) Ltd., a computer and network management outsourcing company
which IBM Global Services acquired. Mr. Ladouceur founded, and from June 1990 to
October 1992, was the Managing Director of HDL Capital Corporation, a private
merchant bank specializing in business turnarounds, management buyouts and
financing for companies in the telecommunications, technology, software and
retail sectors. From 1986 to 1989, Mr. Ladouceur was Senior Vice President,
Finance, Chief Financial Officer and a director of Rogers Communications Inc.,
one of the largest cable, cellular and broadcasting companies in North America.
Mr. Ladouceur currently serves as a director of AT&T Canada, Cell-Loc Inc., Plan
B Communications and Intellispan, Inc.

     MR. HOLMES was elected to our Board of Directors and has served as our
President and Chief Operating Officer since September 1999. Mr. Holmes is the
founder of Micro Visions, a leading server-based computing integrator, and
served as its Chairman and President from 1987 until our acquisition of Micro
Visions in October 1999.

     MR. KILAMBI has served as our Executive Vice President since October 1999,
our Chief Financial Officer since March 1998 and as a director since June 1998.
From November 1995 to March 1998, Mr. Kilambi invested in and arranged equity
financing for high technology companies as President of New Economy Capital
Inc., a merchant banking firm. From May 1993 to November 1995, Mr. Kilambi was
an

                                       31
<PAGE>   34

independent corporate finance consultant to public and private technology
companies. From October 1990 until May 1993, Mr. Kilambi was the Director,
Financial Services and Taxation and Corporate Secretary for Canada Starch
Company Inc., a subsidiary of CPC International, now known as Bestfoods. From
November 1989 to July 1990, Mr. Kilambi was Chief Accountant of Morgan Financial
Corporation. From June 1987 to November 1989, Mr. Kilambi was an accountant with
Touche Ross & Co., now a part of Deloitte & Touche. Mr. Kilambi is a Chartered
Accountant (Canada).


     MR. ROMANO has served as our Executive Vice President, Special Projects
since May 2000, and served as our Executive Vice President, Application Service
Provision between December 1999 and May 2000. Prior to that, Mr. Romano served
as our Executive Vice President, Sales and Marketing, from August 1999. From
July 1998 to August 1999, Mr. Romano was Senior Vice President of World-Wide
Sales at USinternetworking, Inc. From March 1989 to July 1998, Mr. Romano was
Vice President and Director of Worldwide Sales Operations for Motorola's
Computer Group.



     MR. BOTTI has served as our Senior Vice President, Application Service
Provision since May 2000, and served as our Senior Vice President, Server-Based
Computing, between November 1999 and May 2000. Mr. Botti founded CN Networks,
Inc. in November 1991, and, until we acquired that company in November 1999, he
served as its President and Chief Executive Officer and as a director.



     MR. HARVEY has served as our Senior Vice President, Server-Based Computing,
since May 2000, and between February 2000 and May 2000, he served as our
Southeastern Regional Director. Mr. Harvey founded Vertical Solutions, Inc. in
1989, and, until we acquired that company in January 2000, he served as its Vice
President.


     MS. WHITTLE has served as our Senior Vice President, Marketing since
January 2000. From October 1999 to December 1999, Ms. Whittle was a consultant
with Duke Communications. From April 1992 until October 1999, Ms. Whittle served
as Product Manager at Microsoft Corporation where she helped formulate
Microsoft's ASP products strategy, and also served as Lead Product Manager for
Microsoft's Terminal Server product line and as Product Manager for the Windows
NT product line. From 1984 to 1992, Ms. Whittle held various technical and
marketing positions at AT&T Bell Laboratories.

     MR. GALLEGO has served as our Senior Vice President, Strategic Business
Unit, since October 1999. Between June 1992 and October 1999, he served in a
variety of roles with Micro Visions, including Executive Vice President.


     MR. KRIEGER has served as our Senior Vice President, Strategic Planning and
Corporate Development since February 2000. Previously, from December 1996 to
October 1999, he served as Vice President, PC Servers for Hitachi Data Systems.
From May 1996 to December 1996, Mr. Krieger served as Senior Vice President,
Business Development for J & L ChatCom, Inc. and from January 1996 to May 1996
he served as President and Chief Executive Officer of CommVision Corporation.
From June 1995 to December 1995 he was Vice President, Marketing for CommVision
Corporation and from May 1993 to May 1995 he was a Director for Ziff-Davis
Magazine Networks.


     MR. SMITH has served as our Senior Vice President, Operations since the
beginning of February 2000. From May 1998 until joining us, Mr. Smith was the
Senior Vice President of Operations for AT&T Canada, which was formerly MetroNet
Communications Corp. From October 1996 until May 1998, Mr. Smith was Senior Vice
President of West Coast Operations and Senior Vice President of Long Distance
Operations for Brooks Fiber Communications Inc. From October 1985 to October
1996, Mr. Smith served as the President of Execuline Inc., a long distance
telephone company.


     MR. WHITE has served as our Senior Vice President, Administration since May
2000 and served as our Vice President, Administration between January 2000 and
May 2000. From August 1997 to January 2000, he served as Vice President
Administration -- Telecommunications for AT&T Canada, which was formerly
MetroNet Communications Corp. Between October 1995 and August 1997, he served as
Executive Vice President and Chief Financial Officer for American Louver of
Canada. From April 1994 to September


                                       32
<PAGE>   35

1995, he was a partner of Core Plus International. Mr. White is a Chartered
Accountant (Canada) and was previously a partner with KPMG.


     MR. PASEA has served as the Managing Director of our European Operations
since December 1999. Between March 1998 and December 1999, he served as Director
for KNS Holdings, Limited. From January 1992 to February 1998, Mr. Pasea served
as Associate Director for Kerridge Computer Company.



     MR. ARNETT has served as our Senior Vice President and Chief Operating
Officer (Canada) since March 1999. Mr. Arnett served as Vice President of
Operations for FutureLink Alberta from August 1998 through March 1999. He served
as Vice President for SysGold Ltd. from August 1996 through August 1998, when
FutureLink acquired it. From January 1995 to August 1996, Mr. Arnett served as
Manager, Information Technology, for Numac Energy Inc.


     MR. SCOTT has served as Vice President since October 1999 and as our
Secretary and General Counsel since March 1999. From April 1998 to February
1999, Mr. Scott was an associate with the law firm of Howard Mackie, now Borden
Ladner Gervais LLP., specializing in corporate and securities law. From April
1997 to March 1998, Mr. Scott served with the Listings Department of The Alberta
Stock Exchange, now the Canadian Venture Exchange. From September 1996 to
February 1997, Mr. Scott served as Associate (Corporate Finance) with Oxbow
Capital Corporation, a venture capital company. From September 1993 to August
1996, Mr. Scott served as General Counsel for Kedon Waste Services.

     MR. FARRILL has been a director since January 1998. Since April 1989, Mr.
Farrill has been a consultant and advisor to various companies unrelated to us.
Since May 1996, Mr. Farrill has served as a director for Devine Entertainment,
LTD. From January 1978 until March 1989, Mr. Farrill held various positions with
Scotia McLeod and McLeod Young Weir, including acting as Chairman of Scotia
McLeod (USA) Inc. and McLeod Young Weir Ltd. Since July 1997, Mr. Farrill has
held the position of President and Chairman of Solar Pharmaceuticals Ltd. Mr.
Farrill is currently a director of Power Technology, Inc., Devine Entertainment
Inc. and Home Life Inc.

     MR. FALK has been a director since May 1999. Mr. Falk is the co-founder of
Commonwealth Associates, a New York-based merchant bank and investment bank
established in May 1988 that specializes in early stage investments in Internet,
technology and telecommunications businesses. Mr. Falk has served as
Commonwealth Associate's Chairman and Chief Executive Officer since 1995. Mr.
Falk currently serves as a director of Intellispan Inc.

     MR. FLYNN has been a director since May 1999. Since August 1996, Mr. Flynn
has been a principal at Flynn Corporation. Previously, Mr. Flynn co-founded and
served as a director of Valujet Airlines from June 1993 until November 1996. Mr.
Flynn also co-founded WestAir Holdings, Inc., a company which owned WestAir, a
California-based commuter airline that operated as a United Express affiliate of
United Airlines. Mr. Flynn served as an executive officer and a director of
WestAir until its merger with Mesa Airlines in May 1992, and served as a
director of Mesa Airlines until March 1993. Mr. Flynn currently serves on the
board of directors of Mpower Communications Corp.

     MR. POCH has been a director since October 1999. Since August 1998, Mr.
Poch has been a Manager Director/Portfolio Manager of Pequot Capital Management,
Inc. From August 1996 to August 1998, Mr. Poch acted as Chairman and President
of GE Capital Information Technology Solutions. From September 1992 to August
1998, Mr. Poch was President of AmeriData Technologies, Inc. Mr. Poch is
co-chairman and director of MessageMedia, Inc. and serves as a director of Brite
Smile, Inc. Channel Health, Inc., Elastic Networks, NewRiver Communications,
Lucent Digital Radio, Everest Broadband Networks, Online Retail Partners,
WatchMark and HomeSpace.com.

     MR. MCNIEL has been a director since October 1999. Since July 1999, Mr.
McNiel has been a Senior Vice President at Pequot Capital Management. From May
1997 until joining Pequot, Mr. McNeil was President of McNeil Group Ltd., a
technology consulting and investment firm. From March 1990 until May 1997, Mr.
McNeil served at Cheyenne Software, initially as Vice President of Business

                                       33
<PAGE>   36

Development, then as Executive Vice President of Business Development and
ultimately as Executive Vice President of Corporate Development. Mr. McNeil is a
member of the board of directors for Netegrity, Inc. and Asia Online.

APPOINTMENT OF DIRECTORS


     In an Agency Agreement we entered into with Commonwealth Associates L.P. on
April 14, 1999, we granted Commonwealth Associates L.P. the right, until April
2001, to appoint one person to serve on our board of directors.


     In a Securities Purchase Agreement we entered into with Pequot Private
Equity Fund II, L.P. and certain other investors on October 15, 1999 relating to
a private placement of equity securities, we granted Pequot Private Equity Fund
II, L.P. and the other investors in such financing the right to appoint two
directors as long as they hold 50% or more of the common stock purchased in the
private placement. Pequot Private Equity Fund II, L.P. and these investors will
lose the right to appoint two directors if their ownership falls below 50% of
the common stock purchased in the private placement. In such instance, Pequot
Private Equity Fund II, L.P. and these investors will retain the right to
appoint one director as long as they hold 25% or more of the common stock
purchased in the private placement. Pequot Private Equity Fund II, L.P. and
these investors can transfer these rights to other investors that purchased our
common stock from us under the Securities Purchase Agreement of October 15,
1999.


     In the Agreement and Plan of Reorganization and Merger dated June 2, 1999,
between us, The Holmes Trust and various other parties relating to our
acquisition of Executive LAN Management, Inc., doing business as Micro Visions,
we agreed to elect to the board one director that The Holmes Trust designates to
serve until the next annual meeting of shareholders or until a successor is
appointed or elected.


COMMITTEES OF OUR BOARD OF DIRECTORS

     Our board of directors currently has three committees: an audit committee,
a compensation committee and an executive committee.

     The audit committee consists of Timothy P. Flynn, who serves as Chairman,
and Gerald A. Poch. The audit committee has the authority to review our
financial reporting and financial statements and to sign quarterly and annual
financial statements on behalf of the board of directors. The audit committee
acts on and reports to the board of directors with respect to various auditing
and accounting matters, including the engagement of our auditors, the scope of
the annual audits, the reasonableness of fees to be paid to the auditors, the
performance of our independent auditors and our accounting practices.

     The compensation committee consists of F. Bryson Farrill,who serves as
Chairman, James P. McNiel and Timothy P. Flynn. The compensation committee has
the authority to review and approve executive compensation, make recommendations
for the appointment of executive officers and to act as the plan administrator
of our stock option plan.

     The executive committee consists of Gerald A. Poch, who serves as Chairman,
Philip R. Ladouceur, Glen C. Holmes and Michael S. Falk. The executive committee
has the authority to approve:

     - our daily operational matters,

     - our corporate policies and strategy, and

     - our contractual commitments, payments of funds or issuances of securities
       up to a level of $1.0 million.

                                       34
<PAGE>   37

COMPENSATION OF OUR DIRECTORS

     The Company's outside directors currently receive compensation of $25,000
per year plus $5,000 for each committee of our board of directors on which they
serve, payable in stock. They also receive $500 for each meeting of the board of
directors or board committee they attend in person, and $250 for each meeting
attended by telephone. We also reimburse our outside directors for their
expenses in attending board of directors and committee meetings.

     At the time Mr. Ladouceur joined our board of directors he entered into an
agreement dated July 16, 1998. Under the terms of this agreement, we paid
Mardale Investments Ltd., of which Mr. Ladouceur is a principal, a fee of
$68,000 and we granted Mr. Ladouceur options to purchase 100,000 shares of our
common stock at an exercise price of $3.80 per share.

     We have granted options to each of the outside directors of the Company
upon their election to our board of directors. We granted Mr. Falk, Mr. Farrill,
Mr. Flynn, Mr. Poch and Mr. McNeil options to purchase 100,000 shares of common
stock with exercise prices ranging from $3.15 to $8.97 per share. We expect to
grant additional options to outside directors upon their joining the board of
directors for the first time and their subsequent re-election as a director.

SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE

     Each of the following persons was either a director, officer or beneficial
owner of more than ten percent (10%) of a class of our equity securities
registered pursuant to Section 12 of the Exchange Act, and, failed to file on a
timely basis one or more reports required by Section 16(a) of the Exchange Act
during 1999 or years prior thereto, as described below:

        Robert J. Kubbernus filed a Form 4 on July 15, 1999 reporting a
        securities transaction which took place in May 1999.

        Philip R. Ladouceur filed a Form 4 on December 24, 1999 reporting a
        grant of stock options made to Mr. Ladouceur in August 1999.

        Gerald A. Poch filed a Form 5 on March 23, 2000 reporting a grant of
        stock options made to Mr. Poch in October 1999.

        James P. McNiel filed a Form 5 on March 23, 2000 reporting a grant of
        stock options made to Mr. McNiel in October 1999.

                                       35
<PAGE>   38

ITEM 10.  EXECUTIVE COMPENSATION

SUMMARY OF CASH AND CERTAIN OTHER COMPENSATION

     The following table summarizes the compensation earned by or paid to our
chief executive officers and the other four most highly compensated executive
officers whose total salary and bonuses exceeded $100,000 for services rendered
in all capacities to us and our subsidiaries during 1999. We refer to these
individuals as our named executive officers in other parts of this report.

                           SUMMARY COMPENSATION TABLE


<TABLE>
<CAPTION>
                                                                                              LONG-TERM
                                                                                            COMPENSATION
                                                                                               AWARDS
                                            ANNUAL COMPENSATION                           -----------------
                                     ----------------------------------    OTHER ANNUAL   SHARES UNDERLYING
    NAME AND PRINCIPAL POSITION      FISCAL YEAR   SALARY($)   BONUS($)    COMPENSATION      OPTIONS(#)
    ---------------------------      -----------   ---------   --------    ------------   -----------------
<S>                                  <C>           <C>         <C>         <C>            <C>
Cameron B. Chell(1)................     1999       $149,658          --            --           350,000(2)
  Former Chairman, President and        1998       $ 84,291          --      $  7,000           100,000
  Chief Executive Officer
Philip R. Ladouceur................     1999       $110,000    $200,000(3)         --         1,300,000
  Executive Chairman and Chief
  Executive Officer
Glen C. Holmes.....................     1999       $ 64,412    $ 90,000(4)         --           100,000
  President and Chief Operating
  Officer
Raghu N. Kilambi...................     1999       $146,771    $ 90,000(5)         --           500,000
  Executive Vice President and          1998       $ 67,433          --      $  4,700           100,000
  Chief Financial Officer
Vincent L. Romano, Jr..............     1999       $ 75,000    $185,000(6)   $278,359           250,000
  Executive Vice President,
  Application Service Provision
</TABLE>


-------------------------
 (1) Mr. Chell served as Chief Executive Officer from April 1998 through August
     1999 and was our President from March 1999 through August 1999. We no
     longer employ him in any capacity. Other annual compensation for 1998
     includes consulting fees. On March 13, 2000, Mr. Chell exercised 275,000
     vested stock options.


 (2) Excludes 350,000 shares underlying options granted in 1999 which expired
     under our Stock Option Plan when Mr. Chell's employment with us terminated.


 (3) Accrued in 1999 but paid in 2000.

 (4) Includes $50,000 accrued in 1999 but paid in 2000.

 (5) Accrued in 1999 but paid in 2000.

 (6) Includes $90,000 accrued in 1999 but paid in 2000.

OPTION GRANTS IN LAST FISCAL YEAR


     The following table provides information related to options granted to our
named executive officers during fiscal year ended December 31, 1999. The
information in this table reflects options granted under our Amended and
Restated Stock Option Plan. We granted options to purchase 6,559,000 shares of
our common stock to our employees and directors in 1999. We granted all options
at an exercise price equal to the fair market value of our common stock on the
date of grant as determined based on the closing price of our common stock on
the day preceding the grant, except options granted to Mr. Holmes on May 14,
1999, which grant has an exercise price based on the average closing bid and ask
prices for the ten trading days prior to the grant date. The options granted on
May 14, 1999 have an exercise price that is 74% of the market value of the
common stock on such date, on which date the average of the closing bid and ask


                                       36
<PAGE>   39


prices was $6.72. Options granted to our named executive officers during the
1999 fiscal year vest in either three or four yearly increments and expire
between March 2000 and June 2004.



<TABLE>
<CAPTION>
                                       OPTIONS GRANTED IN LAST FISCAL YEAR
                         ----------------------------------------------------------------   POTENTIAL REALIZABLE
                                              PERCENT OF                                      VALUE AT ASSUMED
                                                TOTAL                                           ANNUAL RATES
                                               OPTIONS                                         OF STOCK PRICE
                             NUMBER OF        GRANTED TO                                      APPRECIATION FOR
                             SECURITIES       EMPLOYEES    EXERCISE                              OPTION TERM
                         UNDERLYING OPTIONS   IN FISCAL    PRICE PER                        ---------------------
         NAME                 GRANTED            YEAR        SHARE      EXPIRATION DATE        5%         10%
         ----            ------------------   ----------   ---------   ------------------   --------   ----------
<S>                      <C>                  <C>          <C>         <C>                  <C>        <C>
Cameron B. Chell.......       350,000(1)          3.0%       $3.15     September 15, 2000   $ 55,125   $  110,250
Philip R. Ladouceur....       700,000            12.1%       $3.15           June 1, 2004   $609,242   $1,346,153
                              600,000            10.3%       $7.56        August 31, 2003   $977,508   $2,105,158
Glen C. Holmes.........       100,000             1.7%       $5.00           June 1, 2004   $357,674   $  582,256
Raghu N. Kilambi.......       500,000             8.6%       $3.15           June 1, 2004   $435,172   $  961,538
Vincent L. Romano,
  Jr. .................       250,000(2)          4.3%       $6.08          June 30, 2004   $419,976   $  927,960
</TABLE>


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

(1) 350,000 of the options granted to Mr. Chell in 1999 expired under the Stock
    Option Plan when Mr. Chell's employment with us terminated. On March 13,
    2000, Mr. Chell exercised 275,000 stock options.


(2) Mr. Romano exercised options to purchase 62,500 shares of common stock in
    early January 2000.

     The potential realizable values in the table above represent amounts, net
of exercise price before taxes, that may be realized upon exercise of the
options immediately prior to the expiration of their terms assuming appreciation
of 5% and 10% over the option term. The 5% and 10% are calculated based on SEC
rules and do not reflect our estimate of future stock price growth. The actual
value realized may be greater or less than the potential realizable value set
forth in the table.

AGGREGATED OPTION EXERCISES IN 1999 AND LAST FISCAL YEAR-END OPTION VALUES

     The following table shows the number of shares our named executive officers
acquired upon exercise of stock options during 1999, the aggregate value
received from those exercises, the number of shares underlying both exercisable
and unexercisable options as of December 31, 1999 and the year-end value of
exercisable and unexercisable options as of December 31, 1999.

     The value of unexercised in-the-money options at December 31, 1999, is
based on a year-end stock price of $26.00, the last reported trade of our common
stock on the OTC Bulletin Board on December 31, 1999.


<TABLE>
<CAPTION>
                                                          NUMBER OF SECURITIES
                                                         UNDERLYING UNEXERCISED         VALUE OF UNEXERCISED
                                NUMBER                         OPTIONS AT              IN-THE-MONEY OPTIONS AT
                                SHARES                      DECEMBER 31, 1999             DECEMBER 31, 1999
                               ACQUIRED      VALUE     ---------------------------   ---------------------------
            NAME              ON EXERCISE   REALIZED   EXERCISABLE   UNEXERCISABLE   EXERCISABLE   UNEXERCISABLE
            ----              -----------   --------   -----------   -------------   -----------   -------------
<S>                           <C>           <C>        <C>           <C>             <C>           <C>
Cameron B. Chell............    0            0           275,000        175,000(1)   $ 6,283,750    $3,998,750
Philip R. Ladouceur.........    0            0           950,000        450,000      $20,981,000    $8,298,000
Glen C. Holmes..............    0            0            50,000         50,000      $ 1,050,000    $1,050,000
Raghu N. Kilambi............    0            0           225,000        375,000      $ 5,076,250    $8,568,750
Vincent L. Romano, Jr.(2)...    0            0            62,500        187,500      $ 1,245,000    $3,735,000
</TABLE>


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

(1) During 1999, Mr. Chell held an additional 350,000 options that expired under
    the terms of our Stock Option Plan when Mr. Chell's employment with us
    terminated.


(2) Mr. Romano exercised options to purchase 62,500 shares of common stock in
    early January 2000.

                                       37
<PAGE>   40

EMPLOYMENT AGREEMENTS

     We have entered into employment agreements with each of our named executive
officers. Each agreement provides for a fixed base salary and an annual
performance bonus that our compensation committee or the board of directors
determines.

     Our employment agreements with Mr. Ladouceur and Mr. Kilambi are at-will
and either party can terminate the agreement at any time. Mr. Romano's agreement
has a three-year term which expires on August 1, 2002. Mr. Ladouceur's and Mr.
Kilambi's employment agreements provide that if there is a change in our
control, and either of them is terminated without just cause within six months
of a change in our control, his level of responsibility or compensation is
reduced and he elects within six months of such change in control to treat his
employment as terminated, or he elects within three months of such change in
control to terminate his employment, we must pay him an amount equal to one
year's salary, his most recent performance bonus, and one year's premium
contributions to our employee benefit plan paid on his behalf, provide up to
$10,000 in relocation and financial consulting services, or, at his option, pay
him $10,000, and cause his unvested stock options to accelerate and become
exercisable for three months. If we terminate either Mr. Ladouceur's or Mr.
Kilambi's employment without just cause or change his level of responsibility,
and he elects to terminate, we must pay him an amount equal to one year's
salary, his most recent performance bonus, and one year's premium contributions
to our employee benefit plan paid on his behalf, and provide him with up to
$10,000 in relocation and financial consulting services or, at his option, pay
him $10,000.

     Mr. Ladouceur's employment agreement provides for an annual base salary of
$200,000, and he is eligible to earn an annual performance bonus of up to
$400,000.

     Mr. Holmes' employment agreement provides for an annual base salary of
$200,000. Mr. Holmes is also entitled to receive a minimum bonus of $50,000 each
quarter and is eligible to receive a discretionary bonus to be determined by the
board of directors. His agreement also provides for 18 months severance pay
(including the minimum bonus for such period), if we terminate Mr. Holmes
without cause, his employment is terminated within 18 months of a change of our
control, or Mr. Holmes voluntarily terminates because we materially reduce his
duties or his compensation, or we move his place of business out of Orange
County, California.


     Mr. Kilambi's employment agreement provides for an annual base salary of
$180,000, and he is eligible to earn an annual bonus of up to $180,000.


     Mr. Romano's employment agreement provides for an annual base salary of
$180,000. He is eligible to earn an annual bonus of up to $180,000. Upon
commencement of his employment, Mr. Romano received a signing bonus of $95,000,
a one time payment of $5,000 to cover certain fees relating to his joining us,
and 250,000 stock options. His employment agreement provides for a separate loan
agreement between us and Mr. Romano under which we loaned Mr. Romano $2.0
million at an annual interest rate of 5.625% to purchase 232,829 shares of our
common stock. The loan is forgiven in quarterly installments of $250,000. In
October 1999, we forgave the first installment of $250,000 of this loan,
comprising most of Mr. Romano's "other compensation" in 1999.

STOCK OPTION PLAN

     Our Stock Option Plan became effective on June 29, 1998, and we amended it
on each of November 30, 1998, September 23, 1999, November 17, 1999 and December
10, 1999. Our Stock Option Plan provides for the issuance of incentive and
non-qualified stock options. The aggregate number of shares which may be issued
upon the exercise of options under the Stock Option Plan may not exceed twenty
percent of our shares of common stock issued and outstanding on a fully diluted
basis. Our board of directors recently fixed the maximum number of shares which
may be issued upon the exercise of options at 11,000,000.

                                       38
<PAGE>   41

     Our board of directors administers our Stock Option Plan. Generally, our
board may amend or terminate our Stock Option Plan if it does not cause any
adverse affect on any then outstanding options or unexercised portions of any
then outstanding options. Our board of directors must obtain the consent of the
stockholders to increase the number of shares that the Stock Option Plan covers,
to change the class of persons eligible to receive options, or to extend the
term of the Stock Option Plan beyond 10 years. Our board of directors sets the
consideration for each option award. All options must generally have an exercise
price equal to at least 85% of the fair market value of the underlying common
stock on the date of the grant. Incentive stock options must have an exercise
price equal to at least 100% of the fair market value of the underlying common
stock on the date of the grant, and options granted to a person who owns more
than 10% of the voting power of our outstanding stock and any outstanding stock
of our subsidiaries must have an exercise price equal to at least 110% of the
fair market value of the underlying common stock on the date of the grant.

     Options granted under the Stock Option Plan are non-transferable except
through will or the laws of descent and distribution upon the death of the
option holder. If we liquidate, reorganize, merge or consolidate and we are not
the surviving entity, each outstanding stock option shall become exercisable
prior to such event unless the options are assumed in a merger.

401(k) PLAN


     We assumed several 401(k) plans as a result of our acquisitions in 1999,
all of which have been rolled into one plan. The 401(k) plans covers our
full-time U.S. employees. It is intended to qualify under Section 401(k) of the
Internal Revenue Code of 1986 so that we can deduct any contributions that we
make to the plan at the time they are made. The plan provides that employees may
elect to reduce their current compensation by up to the statutorily prescribed
annual limit and have the amount of such reduction contributed to the plan. The
plan permits us, but does not require us to make, additional matching
contributions on behalf of all participants in the plan. Although we have not
made any contributions to the plan to date, we have instituted an employee
contribution plan under which we shall match 100% of the amounts each employee
contributes to the plan, up to 5% of the employee's annual compensation. We also
operate a defined contribution pension plan on behalf of our directors and
employees in the United Kingdom.


LIMITATIONS OF LIABILITY AND INDEMNIFICATION MATTERS

     Our certificate of incorporation provides that, to the fullest extent the
Delaware General Corporation Law permits, our directors shall not be personally
liable to us or our stockholders for monetary damages for breach of fiduciary
duty as a director. Under Delaware law, the directors have a fiduciary duty to
us that this provision of our certificate does not eliminate and, in appropriate
circumstances, equitable remedies such as injunctive or other forms of
non-monetary relief will remain available. In addition, each director will
continue to be subject to liability under Delaware law for breach of the
director's duty of loyalty to us for acts or omissions which a court of
competent jurisdiction finds to be not in good faith or that involve intentional
misconduct, or knowing violations of law, for actions leading to improper
personal benefit to the director, and for payment of dividends or approval of
stock repurchases or redemptions that Delaware law prohibits. This provision
also does not affect the director's responsibilities under any other laws, such
as federal securities laws.

                                       39
<PAGE>   42

     Section 145 of the Delaware General Corporation Law empowers a corporation
to indemnify its directors and officers and to purchase insurance with respect
to liability arising out of their capacity or status as directors and officers,
provided that this provision shall not eliminate or limit the liability of a
director:

     - for any breach of the director's duty of loyalty to a corporation or its
       stockholders,

     - for acts or omissions not in good faith or which involve intentional
       misconduct or a knowing violation of law,

     - arising under Section 174 of the Delaware General Corporation Law as a
       result of unlawful payments of dividends or stock purchases or
       redemptions, or

     - for any transaction from which the director derived an improper personal
       benefit.


     Delaware law provides further that the indemnification that Delaware law
permits is not exclusive of any other rights to which the directors and officers
may be entitled under a corporation's bylaws, any agreement, a vote of
stockholders or otherwise. Our bylaws provide that we shall indemnify, to the
maximum extent and in the manner the Delaware General Corporation Law permits,
any person against expenses, including attorneys' fees, judgments, fines and
amounts paid in settlement actually and reasonably incurred as a result of any
threatened, pending or completed action, suit or proceeding in which such person
was or is a party or is threatened to be made a party by reason of the fact that
such person is or was our director or officer, or is or was serving at our
request as a director or officer of another corporation, partnership, joint
venture, trust or other enterprise, or is or was a director or officer of a
corporation which was our predecessor corporation or of another enterprise at
the request of such predecessor corporation.


     We have insured our directors, officers, employees and agents and persons
serving at our request as a director, officer, employee or agent of another
corporation, partnership, joint venture, trust or other enterprise against any
liability asserted against such person and incurred by such person in any such
capacity or arising out of such person's status as such, regardless of whether
indemnification would be permitted under Delaware law.

CERTAIN PROVISIONS OF DELAWARE LAW

     We are a Delaware corporation, and the provisions of Section 203 of the
Delaware General Corporation Law, an anti-takeover law, apply to us. In general,
the statute prohibits a publicly held Delaware corporation from engaging in a
business combination with an interested stockholder for a period of three years
after the date of the transaction by which that person became an interested
stockholder, unless the business combination is approved in a prescribed manner.
For purposes of Section 203, a business combination includes a merger, asset
sale or other transaction resulting in a financial benefit to the interested
stockholder, and an interested stockholder is a person who, together with
affiliates and associates, owns, or within three years prior, did own 15% or
more of our voting stock.

                                       40
<PAGE>   43

ITEM 11.  SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT


     The following table sets forth specified information with respect to the
beneficial ownership of our common stock as of May 12, 2000 by:



     - each person or group of affiliated persons that we know beneficially owns
       5% or more of our outstanding shares of common stock,



     - each of our directors,



     - each of our named executive officers, and



     - all of our directors and executive officers as a group.



     The number and percentage of shares beneficially owned are based on
61,496,355 shares of common stock outstanding as of May 12, 2000; 2,627,242
shares of common stock issuable upon the exercise of options exercisable within
60 days of May 12, 2000; 8,205,491 shares issuable upon the exercise of warrants
exercisable within 60 days of May 12, 2000 and 67,965 shares issuable upon the
conversion of convertible debentures convertible within 60 days of May 12, 2000.
Beneficial ownership is determined in accordance with the rules of the SEC. In
general, a person who has voting power or investment power with respect to
securities is treated as a beneficial owner of those securities. These rules
treat the person holding any options, warrants or rights of the beneficial owner
of the shares underlying these options, warrants or rights currently exercisable
or exercisable within 60 days of May 12, 2000 as the beneficial owner. We
believe the persons named in the table below have sole voting and investment
power with respect to all shares beneficially owned unless otherwise indicated
and except as otherwise may be affected by community property laws.



<TABLE>
<CAPTION>
                                                                SECURITIES OWNERSHIP
                                                                ---------------------
            NAME AND ADDRESS OF BENEFICIAL OWNER                  NUMBER      PERCENT
            ------------------------------------                ----------    -------
<S>                                                             <C>           <C>
The Holmes Trust(1).........................................     8,400,000     13.7%
Glen C. Holmes(1)(2)........................................     8,475,000     13.8%
Pequot Capital Management, Inc.(3)..........................    10,247,656     16.6%
Philip R. Ladouceur(4)......................................       998,000      1.6%
Raghu N. Kilambi(5).........................................       570,563      0.9%
F. Bryson Farrill(6)........................................       120,000      0.2%
Michael S. Falk(7)..........................................     3,602,146      5.8%
Timothy P. Flynn(8).........................................       775,133      1.3%
Gerald A. Poch(3)(9)........................................    10,272,656     16.6%
James P. McNiel(3)(10)......................................    10,272,656     16.6%
Vincent Romano, Jr. ........................................       345,408      0.6%
Cameron Chell...............................................       929,733      1.5%
Robert Priddy(11)...........................................     3,495,885      5.7%
All directors and executive officers as a group
  (20 persons)(12)..........................................    29,203,757     45.1%
</TABLE>


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

 (1) The business address of Glen C. Holmes, the trustee of The Holmes Trust, is
     6 Morgan, Suite 100, Irvine, California 92618.



 (2) Includes 75,000 shares issuable upon the exercise of stock options
     exercisable within 60 days of May 12, 2000. Also includes 8,400,000 shares
     of common stock held by The Holmes Trust as a result of Mr. Holmes' power
     to control The Holmes Trust.



 (3) Includes 441,176 shares issuable upon the exercise of currently exercisable
     warrants held by Pequot Private Equity Fund II, L.P. and Pequot Endowment
     Fund, L.P. The address of Pequot Capital Management, Inc., Gerald A. Poch
     and James P. McNiel is 500 Nyala Farm Road, Westport, Connecticut 06880.


                                       41
<PAGE>   44


 (4) Includes 950,000 shares issuable upon the exercise of currently exercisable
     stock options and 48,000 shares attributable to Mr. Ladouceur as a result
     of his power to control Mardale Investments Ltd.



 (5) Includes 350,000 shares issuable upon the exercise of stock options
     exercisable within 60 days of May 12, 2000.



 (6) Includes 75,000 shares issuable upon the exercise of stock options
     exercisable within 60 days of May 12, 2000.



 (7) Includes 50,000 shares issuable upon the exercise of stock options which
     are exercisable within 60 days of May 12, 2000. Also includes 82,574 shares
     attributable to Mr. Falk as a result of his control of the Michael Falk
     IRA. Also includes 34,353 shares issuable upon the exercise of currently
     exercisable warrants that Mr. Falk holds. Also includes 2,433,828 shares of
     common stock and 104,198 shares issuable upon the exercise of warrants that
     Commonwealth Associates, L.P. holds. Mr. Falk is Chairman and Chief
     Executive Officer of Commonwealth Associates, L.P. Mr. Falk disclaims
     beneficial ownership of the shares and warrants that Commonwealth
     Associates, L.P. holds.



 (8) Includes 50,000 shares issuable upon the exercise of stock options which
     are exercisable within 60 days of May 12, 2000, and 213,021 shares issuable
     upon the exercise of currently exercisable warrants.



 (9) Includes 25,000 shares issuable upon the exercise of stock options which
     are exercisable within 60 days of May 12, 2000. Includes 441,176 shares
     issuable upon the exercise of currently exercisable warrants held by Pequot
     Private Equity Fund II, L.P. and Pequot Endowment Fund, L.P. Also includes
     9,806,480 shares of common stock that Pequot Private Equity Fund II, L.P.,
     Pequot Partners Fund, L.P., Pequot International Fund, Inc. and Pequot
     Endowment Fund, L.P. hold. Pequot Capital Management, Inc. manages these
     entities. Mr. Poch is a principal of Pequot Capital Management, Inc. Mr.
     Poch disclaims beneficial ownership of the shares attributed to Pequot
     Capital Management, Inc.



(10) Includes 25,000 shares issuable upon the exercise of stock options which
     are exercisable within 60 days of May 12, 2000. Includes 441,176 shares
     issuable upon the exercise of currently exercisable warrants held by Pequot
     Private Equity Fund II, L.P. and Pequot Endowment Fund, L.P. Also includes
     9,806,480 shares of common stock that Pequot Capital Management, Inc.
     manages. Mr. McNiel is a principal of Pequot Capital Management, Inc. Mr.
     McNiel disclaims beneficial ownership of the shares attributed to Pequot
     Capital Management, Inc.



(11) Includes 198,021 shares of common stock issuable upon the exercise of
     currently exercisable warrants. Also includes 2,433,828 shares of common
     stock and 104,198 shares issuable upon the exercise of warrants that
     Commonwealth Associates holds. Mr. Priddy disclaims beneficial ownership of
     the shares and warrants attributed to Commonwealth Associates, L.P.



(12) Includes shares listed in footnotes 2, 4-10 and 12 above, as well as
     1,755,007 shares our other executives not listed in this table hold,
     2,199,000 shares issuable upon the exercise of stock options which are
     exercisable within 60 days of May 12, 2000 and 1,006,519 shares issuable on
     exercise of currently exercisable warrants.


ITEM 12.  CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

     In 1997, Mr. Chell loaned FutureLink Alberta, approximately $137,000 at an
annual interest rate equal to the prime rate plus 1%. FutureLink Alberta repaid
the entire balance of the loan between April and June 1998.

     On January 20, 1998, Core Ventures, Inc., our predecessor-in-interest,
purchased 46% of FutureLink Alberta in exchange for 308,000 shares of our common
stock. On November 23, 1998, Core Ventures purchased another 50.4% of FutureLink
Alberta in exchange for 334,755 shares of our common stock, and on February 26,
1999, it acquired the remaining 3.6% of FutureLink Alberta in exchange for
23,500 shares of our common stock. Cameron Chell was the President and Chief
Executive Officer of FutureLink

                                       42
<PAGE>   45


Alberta, and after the first purchase in January 1998, Mr. Chell became our
President, a director and a significant stockholder. Mr. Chell resigned as our
President and a director effective August 27, 1999.



     Cameron Chell and Robert Kubbernus were directors of both us and JAWS
Technology Inc. at the time we entered into an Alliance Partner Agreement dated
February 12, 1999.



     On August 12, 1998, Mr. Chell loaned us approximately $145,000 at an annual
interest rate equal of 8%. On February 22, 1999, we issued Mr. Chell a
convertible debenture in the principal amount of approximately $150,000, the
outstanding balance of his loan to us. This convertible debenture was
convertible at $2.00 per share after adjustment for our five-for-one reverse
stock split, for a total of 75,310 shares. Mr. Chell also received a warrant to
acquire 75,310 shares at $2.00 per share for the first year, $3.00 per share for
the second year, and $4.00 per share for the third year. On April 29, 1999, Mr.
Chell surrendered his debenture having an outstanding balance of approximately
$153,000, our notes payable having an outstanding balance of approximately
$67,000 and our trade loans payable having an outstanding balance of $30,000 in
return for a $250,000 aggregate principal amount 8% convertible note convertible
at $1.50 per share and a warrant to acquire 125,000 shares at $1.50 per share.
We reduced the conversion and exercise prices for these securities from $1.50
per share to $1.335 per share due to the effect of anti-dilution provisions. Mr.
Chell has exercised or converted all of these securities.


     In May 1999, Commonwealth Associates privately placed our units consisting
of 8% senior subordinated convertible notes convertible to shares of common
stock at $1.00 per share after adjustment for our five-for-one reverse stock
split and warrants to purchase 500 shares of common stock at $1.25 per share
after adjustment for our five-for-one reverse stock split for each $1,000
invested. Mr. Chell purchased $250,000 of our units and Mr. Kilambi purchased
$127,500 of our units.


     Michael Falk, Chief Executive Officer of Commonwealth Associates, L.P. was
appointed to our board of directors on May 7, 1999 following the consummation of
the private placement of our securities concluded in April 1999 for which we
retained Commonwealth Associates as our placement agent. We subsequently
retained Commonwealth Associates as placement agent on July 1, 1999.



     As of December 31, 1999, we had provided $550,000 in services and products
to Willson Stationers Ltd. and e-Supplies Inc. At December 31, 1999, $543,000
remained due from these entities. An allowance for doubtful accounts has been
recorded for the entire amount because of the uncertainty of collection. We have
recently settled this account for $400,000. Mr. Chell was a director of both
companies at the time some of the transactions took place. In addition, we have
reason to believe that Mr. Chell was a principal of e-Supplies Inc., at the time
of the transactions. Mr. Kilambi served on the board of directors of Willson
Stationers, Ltd., as our representative, at the request of Willson Stationers,
Ltd., for approximately one month in early 1999.


     On August 1, 1999, we loaned Vincent Romano, one of our executive officers,
$2.0 million, which he used to purchase 232,829 shares of our common stock. Mr.
Romano deposited the shares in escrow and the escrow agent releases
approximately 12.5% of the shares quarterly as the loan is forgiven in quarterly
installments of $250,000. We loaned the money to Mr. Romano under the terms of
his employment agreement. As of January 31, 2000, we have forgiven $500,000 of
this loan.


     In October 1999, we issued warrants to acquire 1,658,350 shares of common
stock to Pequot Private Equity Fund II, L.P., Pequot Partners Fund and Pequot
International Fund, which, after giving effect to anti-dilution adjustments
since their issuance, entitled the holders to purchase 1,678,139 shares of
common stock at $8.40 per share. On February 29, 2000, the funds exercised their
warrants to acquire all 1,678,139 shares of our common stock, with net proceeds
to us of approximately $12.6 million, taking into account the warrant exercise
fee of $0.90 for each warrant exercised. On April 28, 2000, in a private
placement we issued to Pequot Private Equity Fund II, L.P. and Pequot Endowment
Fund, L.P. for approximately $15.0 million, 1,764,704 shares of common stock and
warrants to purchase at a purchase price of $9.25 per share 441,176 shares of
common stock. Pequot Capital Management, Inc. manages the funds and therefore
has the power to direct the vote of the common stock that the funds hold, which
constitute more than 5%


                                       43
<PAGE>   46

of our outstanding common stock both before and after this warrant exercise. In
addition, James McNiel, one of our directors, is a Senior Vice President at
Pequot Capital Management, Inc., and Gerald Poch, also a director, is a Manager
Director/Portfolio Manager at Pequot Capital Management, Inc.

ITEM 13. EXHIBITS AND REPORTS ON FORM 8-K

(a) EXHIBITS

<TABLE>
<CAPTION>
EXHIBIT
 NUMBER                            DESCRIPTION
-------                            -----------
<C>        <S>
  2.1      Share Purchase Agreement dated August 4, 1998 between
           FutureLink Distribution Corp., a Colorado corporation,
           Donald A. Bialik, Olivia B. Bialik, Bialik Family Trust,
           Riverview Management Corporation, SysGold Ltd., and
           FutureLink Distribution Corp., an Alberta corporation(1)
  2.2      Targetco Acquisition Agreement dated August 3, 1998 between
           FutureLink Distribution Corp., a Colorado corporation, and
           FutureLink Alberta(1)
  2.3      Amending Agreement to Share Purchase Agreement dated August
           21, 1998 between FutureLink Distribution Corp., a Colorado
           corporation, Donald A. Bialik, Olivia B. Bialik, Bialik
           Family Trust, Riverview Management Corporation, SysGold
           Ltd., and FutureLink Alberta(3)
  2.4      Agreement and Plan of Reorganization and Merger dated June
           2, 1999 between FutureLink Distribution Corp., FutureLink
           California Acquisition Corp., Executive LAN Management,
           Inc., dba Micro Visions, and the selling shareholders of
           Micro Visions(6)
  2.5      Agreement and Plan of Merger dated August 1, 1999 between
           FutureLink Distribution Corp. and FutureLink California
           Acquisition Corporation, a Delaware corporation(8)
  2.6      Agreement and Plan of Reorganization and Merger dated
           September 7, 1999 between FutureLink Distribution Corp.,
           FutureLink Pleasanton Acquisition Corp., CN Networks, Inc.,
           and the selling shareholders of CN Networks(9)
  2.7      Agreement and Plan of Reorganization and Merger dated
           September 7, 1999 between FutureLink Distribution Corp.,
           FutureLink Michigan Acquisition Corp., Async Technologies,
           Inc., and the selling shareholders of Async Technologies(10)
  2.8      Certificate of Merger dated October 15, 1999 of FutureLink
           Distribution Corp., a Colorado corporation, into FutureLink
           California Acquisition Corp., a Delaware corporation(8)
  2.9      Amending Agreement dated October 15, 1999 to Agreement and
           Plan of Reorganization and Merger between FutureLink Corp.,
           FutureLink California Acquisition Corp., and the selling
           shareholders of Micro Visions(8)
  2.10     Amending Agreement dated October 29, 1999 to Agreement and
           Plan of Reorganization and Merger, between FutureLink
           Distribution Corp., FutureLink Michigan Acquisition Corp.,
           Async Technologies, and the selling shareholders of Async
           Technologies(10)
  2.11     Amending Agreement dated October 31, 1999 to Agreement and
           Plan of Reorganization and Merger between FutureLink Corp.,
           FutureLink Pleasanton Acquisition Corp., CN Networks, and
           the selling shareholders of CN Networks(9)
  2.12     Amending Agreement dated November 14, 1999 to Agreement and
           Plan of Reorganization and Merger between FutureLink Corp.,
           FutureLink Michigan Acquisition Corp., Async Technologies,
           and the selling shareholders of Async Technologies(10)
  2.13     Agreement for the Sale and Purchase of the Entire Issued
           Share Capital of KNS Holdings Limited dated November 15,
           1999 between FutureLink Corp. and the selling shareholders
           of KNS Holdings(11)
</TABLE>

                                       44
<PAGE>   47


<TABLE>
<CAPTION>
EXHIBIT
 NUMBER                            DESCRIPTION
-------                            -----------
<C>        <S>
  2.14     Amending Agreement dated November 26, 1999 to Agreement and
           Plan of Reorganization and Merger between FutureLink Corp.,
           FutureLink Michigan Acquisition Corp., Async Technologies,
           and the selling shareholders of Async Technologies(10)
  2.15     The Agreement and Plan of Reorganization and Merger dated
           December 2, 1999 by and among FutureLink Corp., FutureLink
           Maryland Acquisition Corp., Vertical Software, Inc., Curtis
           Eshelman and James C. Harvey(13)
  2.16     Supplemental Agreement dated December 20, 1999 to Agreement
           for Sale and Purchase of the Entire Issued Share Capital of
           KNS Holdings, between FutureLink Corp. and the selling
           shareholders of KNS Holdings(11)
  2.17     The Agreement and Plan of Reorganization and Merger dated
           February 1, 2000 by and among FutureLink Corp., FutureLink
           Delaware Acquisition Corp., MicroLAN Systems Inc., Madison
           Consulting Resources Inc., Madison Consulting Resources (NJ)
           Inc., Ira Silverman, Richard Silverman, Adam Silverman and
           Adam Fox(14)
  3.1      Certificate of Incorporation of FutureLink Corp.(8)
  3.2      Bylaws of FutureLink Corp.(8)
 10.1      Stock Option Plan dated June 29, 1998(1)
 10.2      First Amendment to Second Amended and Restated Stock Option
           Plan dated December 10, 1999, as amended(12)
 10.3      Agency Agreement dated April 14, 1999 between FutureLink
           Distribution Corp. and Commonwealth Associates, L.P.(5)
 10.4      Letter Agreement dated December 6, 1999 between FutureLink
           Distribution Corp. and Thomson Kernaghan & Co. Limited(12)
 10.5      Advisory Agreement dated May 1, 1999 between FutureLink
           Distribution Corp. and Commonwealth Associates, L.P.(5)
 10.6      Agency Agreement dated July 1, 1999 between FutureLink
           Distribution Corp. and Commonwealth Associates, L.P.(7)
 10.7      Loan Agreement dated August 1, 1999 between FutureLink Corp.
           and Vincent Romano(7)
 10.8      Securities Purchase Agreement dated October 15, 1999 between
           FutureLink Corp., Pequot Private Equity Fund II, L.P. and
           certain other investors(8)
 10.9      Amended and Restated Registration Rights Agreement dated
           April 28, 2000 between FutureLink Corp., Pequot Private
           Investment Fund II, L.P., and certain other investors
           (blacklined to the Registration Rights Agreement dated
           October 15, 1999 between the parties which was filed as an
           Exhibit to the Registration Statement on Form SB-2 filed on
           February 11, 2000)(16)
 10.10     Securities Purchase Agreement dated April 28, 2000 between
           FutureLink Corp., Pequot Private Equity Investment Fund II,
           L.P. and Pequot Endowment Fund, L.P.(16)
 10.11     Form of Warrant to Purchase Shares of Common Stock(16)
 10.12     Registration Rights Agreement dated December 6, 1999 between
           FutureLink Corp. and CPQ Holdings, Inc.(12)
 10.13     Securities Purchase Agreement dated December 6, 1999 between
           FutureLink Corp. and CPQ Holdings, Inc.(12)
 10.14     Employment Agreement dated June 1, 1999 between Philip
           Ladouceur and FutureLink Distribution Corp.(12)(17)
 10.15     Employment Agreement dated September 30, 1999 between Glenn
           C. Holmes and FutureLink Corp.(12)
</TABLE>


                                       45
<PAGE>   48


<TABLE>
<CAPTION>
EXHIBIT
 NUMBER                            DESCRIPTION
-------                            -----------
<C>        <S>
 10.16     Employment Agreement dated August 1, 1999 between Vincent
           Romano and FutureLink Corp.(12)
 10.17     Client/Agency Agreement dated August 7, 1999 between Sicola,
           Martin, Koons & Frank, Inc. and FutureLink Distribution
           Corp., as revised(12)
 10.18     Master Loan and Security Agreement dated November 3, 1999
           between Transamerica Business Credit Corporation, FutureLink
           Corp. and FutureLink Micro Visions Corp.(12)
 10.19     Security Agreement dated November 3, 1999 between
           Transamerica Business Credit Corporation and FutureLink
           Distribution Corp.(12)
 10.20     Master Lease and Financing Agreement dated November 15, 1999
           between Compaq Financial Services and FutureLink Corp.(12)
 10.21     Master Lease Agreement dated December 16, 1999 between
           EMC(2) Corporation and FutureLink Corp.(12)
 10.22     Revised Offer to Lease dated March 24, 1998 between Bow
           Valley Square Management Ltd. and SysGold, Ltd., as amended,
           for 250 6th Avenue, Calgary(1)
 10.23     Lease Agreement dated September 23, 1999 between Kilroy
           Realty, L.P., Kilroy Realty Corporation, and FutureLink
           Distribution Corporation for 220 Technology Drive, Irvine
           and assignment thereof dated October 15, 1999(12)
 10.24     Microsoft Certified Solution Provider Agreement dated
           January 28, 2000 between Microsoft and FutureLink
           Corp.(15)(18)
 10.25     Microsoft Application Services Agreement dated December 23,
           1999 between Microsoft and FutureLink Corp.(12)(18)
 10.26     Final Invoice/Enrollment Contract (MSCP) dated April 28,
           1998 between Microsoft and FutureLink Corp.(1)
 10.27     Direct Commercial Service License Agreement dated May 21,
           1999 between Microsoft and FutureLink Distribution
           Corp.(12)(18)
 10.28     Service Agreement dated June 1, 1998 between Willson
           Stationers and FutureLink Alberta(1)
 10.29     Solution Provider Contract dated July 27, 1998 between IBM
           Canada Ltd. and FutureLink/ SysGold Ltd.(1)
 10.30     Hosting Services Distributor Agreement (version 4) dated
           November 12, 1998 between Onyx Software and FutureLink
           Distribution Corp.(12)
 10.31     Onyx Software License Agreement dated August 5, 1998 between
           Onyx Software and FutureLink Distribution Corp.(12)
 10.32     Alliance Partner Agreement dated October 26, 1998 between
           Great Plains Software and FutureLink Distribution Corp.(12)
 10.33     Citrix Solutions Network Gold Renewal Membership Agreement
           dated July 16, 1999 between Citrix and FutureLink
           Distribution Corp.(12)(18)
 10.34     Citrix Solutions Network Platinum Renewal Membership
           Agreement dated April 20, 1999 between Citrix and Async
           Technologies(12)(18)
 10.35     Information Systems Services Agreement dated January 19,
           1999 between FutureLink Alberta and Numac Energy, Inc.(12)
 10.36     Information Systems Services Agreement dated July 1, 1999
           between Canadian Natural Resources, Ltd. and FutureLink
           Alberta(12)
 10.37     Alliance Partner Agreement dated February 12, 1999 between
           FutureLink Alberta and JAWS Technologies(1)
</TABLE>


                                       46
<PAGE>   49


<TABLE>
<CAPTION>
EXHIBIT
 NUMBER                            DESCRIPTION
-------                            -----------
<C>        <S>
 10.38     Master Consulting Agreement dated December 1, 1998 between
           Ameriquest Mortgage Company and Micro Visions(12)
 10.39     Internet Data Center Services Agreement dated May 7, 1999
           between Exodus Communications, Inc. and Micro Visions(12)
 10.40     Form of EMC(2) Corporation Software License Agreement(12)
 23.1*     Consent of Independent Auditors(12)
 27.1      Financial Data Schedule(19)
</TABLE>


-------------------------
* Filed herewith.

 (1) Included as an Exhibit to FutureLink's Registration Statement on Form SB-2
     filed August 24, 1998.

 (2) Included as an Exhibit to FutureLink's Amendment No. 1 to Registration
     Statement on Form SB-2 filed October 23, 1998.

 (3) Included as an Exhibit to FutureLink's Amendment No. 2 to Registration
     Statement on Form SB-2 filed November 24, 1998.

 (4) Included as an Exhibit to FutureLink's Amendment No. 3 to Registration
     Statement on Form SB-2 filed December 14, 1998.

 (5) Included as an Exhibit to FutureLink's Quarterly Report on Form 10-QSB for
     period ended March 31, 1999, filed May 20, 1999.

 (6) Included as an Exhibit to FutureLink's Current Report on Form 8-K filed
     June 16, 1999.

 (7) Included as an Exhibit to FutureLink's Quarterly Report on Form 10-QSB for
     period ended June 30, 1999, filed August 18, 1999.

 (8) Included as an Exhibit to FutureLink's Current Report on Form 8-K filed
     October 27, 1999.

 (9) Included as an Exhibit to FutureLink's Current Report on Form 8-K filed
     November 23, 1999.

(10) Included as an Exhibit to FutureLink's Current Report on Form 8-K filed
     December 8, 1999.

(11) Included as an Exhibit to FutureLink's Current Report on Form 8-K filed
     January 6, 2000.

(12) Included as an Exhibit to FutureLink's Registration Statement on Form SB-2
     filed February 11, 2000.


(13) Included as an Exhibit to FutureLink's Current Report on Form 8-K filed
     February 14, 2000.



(14) Included as an Exhibit to FutureLink's Current Report on Form 8-K filed
     March 15, 2000.



(15) Included as an Exhibit to FutureLink's First Amendment to Registration
     Statement on Form SB-2 filed April 14, 2000.



(16) Included as an Exhibit to FutureLink's Second Amendment to Registration
     Statement on Form SB-2 filed May 3, 2000.



(17) We entered into an employment agreement with Raghu Kilambi on June 1, 1999,
     which we amended on October 8, 1999 that is substantially identical in all
     material respects to our employment agreement with Mr. Ladouceur, except as
     to salary and bonus provisions. Mr. Kilambi's base salary is $180,000 per
     year and he is entitled to receive a performance bonus of up to $180,000.



(18) Some of our subsidiaries are parties to agreements with the same party that
     are substantially identical in all material respects.



(19) Filed electronically with FutureLink Annual Report on Form 10-KSB for the
     year ended December 31, 1999 filed March 30, 2000.


                                       47
<PAGE>   50

(b) REPORTS ON FORM 8-K IN LAST FISCAL QUARTER.

     (1) On October 27, 1999 we filed a Current Report on Form 8-K reporting (i)
our reincorporation under Delaware law, (ii) our acquisition of Executive Lan
Management, Inc. (doing business as Micro Visions), (iii) our financing with
Pequot Private Equity Fund II, and (iv) the addition of Gerald A. Poch and James
P. McNeil to our board of directors.

     We filed as Exhibits, audited financial statements for Micro Visions at
December 31, 1998 and for the 12 month periods ended December 31, 1997 and 1998
and unaudited financial statements for Micro Visions at June 30, 1999 and for
the six month periods ended June 30, 1998 and 1999 are attached to this Report,
and Unaudited pro forma financial statements showing our combination with Micro
Visions at December 31, 1998 and for the twelve months ended December 31, 1998
and at June 30, 1999 and for the six months ended June 30, 1999.

     (2) On November 23, 1999 we filed a Current Report on Form 8-K dated
November 5, 1999 reporting (i) our acquisition of CN Networks, Inc., and (ii)
the resignation of Robert J. Kubbernus from our board of directors.

     We filed as Exhibits, audited financial statements for CN Networks, Inc. at
December 31, 1998 and for the years ended December 31, 1997 and 1998 and
unaudited financial statements for CN Networks, Inc. at September 30, 1999 and
for the nine month periods ended September 30, 1998 and 1999.

     (3) On December 2, 1999 we filed a Current Report on Form 8-K/A dated
November 5, 1999 reporting an amendment to the acquisition agreement between CN
Networks, Inc. and us.

     (4) On December 8, 1999 we filed a Current Report on Form 8-K dated
November 26, 1999 reporting our acquisition of Async Technologies, Inc.

     (5) On December 14, 1999 we filed a Current Report on Form 8-K dated
November 15, 1999 reporting (i) our agreement to acquire KNS Holdings Limited
(doing business as KNS Distribution), (ii) our agreement to acquire Vertical
Software, Inc. (doing business as VSI Technology Solutions), and (iii) our
partnership with Compaq Computer Corporation.

     We filed as Exhibits, audited financial statements for KNS Distribution at
February 28, 1999 and for the years ended February 28, 1998 and 1999 and
unaudited financial statements for KNS Distribution as at September 30, 1999 and
for the nine months ended September 30, 1999.

                                       48
<PAGE>   51

                                   SIGNATURES


     Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant certifies that it has duly caused this
Amended Annual Report on Form 10-KSB/A to be signed on its behalf by the
undersigned, thereunto duly authorized on the 30th day of May, 2000.


                                          FUTURELINK CORP.

                                          By:    /s/ PHILIP R. LADOUCEUR
                                            ------------------------------------
                                              Philip R. Ladouceur,
                                              Chairman and Chief Executive
                                              Officer


     Pursuant to the requirements of the Securities Act of 1934, as amended,
this Amendment No. 1 to the Annual Report on Form 10-KSB/A has been signed below
by the following persons in the capacities and on the dates indicated.



<TABLE>
<CAPTION>
                    NAME                                       TITLE                         DATE
                    ----                                       -----                         ----
<C>                                            <S>                                       <C>
           /s/ PHILIP R. LADOUCEUR             Chairman, Chief Executive Officer and     May 30, 2000
---------------------------------------------  Director
             Philip R. Ladouceur

                      *                        President, Chief Operating Officer and    May 30, 2000
---------------------------------------------  Director
               Glen C. Holmes

            /s/ RAGHU N. KILAMBI               Executive Vice President, Chief           May 30, 2000
---------------------------------------------  Financial Officer, Principal
              Raghu N. Kilambi                 Accounting Officer and Director

                      *                        Director                                  May 30, 2000
---------------------------------------------
              F. Bryson Farrill

                      *                        Director                                  May 30, 2000
---------------------------------------------
              Timothy P. Flynn

                      *                        Director                                  May 30, 2000
---------------------------------------------
               Michael S. Falk

                      *                        Director                                  May 30, 2000
---------------------------------------------
               Gerald A. Poch

                      *                        Director                                  May 30, 2000
---------------------------------------------
               James P. McNiel

               /s/ K.B. SCOTT                  Vice President, Secretary and General     May 30, 2000
---------------------------------------------  Counsel
               Kyle B.A. Scott
</TABLE>



*By: /s/  K.B. SCOTT


     ---------------------------
     Kyle B.A. Scott
     Attorney-in-Fact


                                       49
<PAGE>   52

         INDEX TO CONSOLIDATED FINANCIAL STATEMENTS OF FUTURELINK CORP.
                           DECEMBER 31, 1998 AND 1999

<TABLE>
<CAPTION>
                                                               PAGE
                                                               ----
<S>                                                            <C>
Report of Independent Auditors..............................   F-2
Consolidated Balance Sheets.................................   F-3
Consolidated Statements of Operations.......................   F-4
Consolidated Statements of Stockholders' Equity.............   F-5
Consolidated Statements of Cash Flows.......................   F-6
Notes to Consolidated Financial Statements..................   F-7
</TABLE>

                                       F-1
<PAGE>   53

                         REPORT OF INDEPENDENT AUDITORS

The Board of Directors and Stockholders
FutureLink Corp.

     We have audited the accompanying consolidated balance sheets of FutureLink
Corp. as of December 31, 1998 and 1999, and the related consolidated statements
of operations, stockholders' equity, and cash flows for each of the two years in
the period ended December 31, 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 auditing standards generally
accepted in the United States. Those standards require that we plan and perform
the audit 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 consolidated financial position of FutureLink
Corp. at December 31, 1998 and 1999, and the consolidated results of its
operations and its cash flows for the years then ended in conformity with
accounting principles generally accepted in the United States.

                                          /s/ ERNST & YOUNG LLP

Orange County, California
March 14, 2000,

except for Notes 13 and 16, as to which the date is


April 29, 2000


                                       F-2
<PAGE>   54


                                FUTURELINK CORP


                          CONSOLIDATED BALANCE SHEETS
                   (DOLLARS IN THOUSANDS, EXCEPT SHARE DATA)

<TABLE>
<CAPTION>
                                                                 DECEMBER 31,
                                                              -------------------
                                                               1998        1999
                                                              -------    --------
<S>                                                           <C>        <C>
ASSETS
Current assets:
Cash and cash equivalents...................................  $     7    $ 19,185
Restricted cash.............................................       --       3,099
Accounts receivable, less allowance for doubtful accounts of
  $115 and $1,363 in 1998 and 1999, respectively............    1,532      14,284
Inventory...................................................       22       4,964
Prepaid expenses............................................      116         536
                                                              -------    --------
          Total current assets..............................    1,677      42,068
Property and equipment, less accumulated depreciation of
  $203 and $2,276 in 1998 and 1999, respectively............    1,123      10,972
Goodwill and other intangibles, less accumulated
  amortization of $668 and $6,033 in 1998 and 1999,
  respectively..............................................    7,846     186,866
Deposits for acquisitions...................................       --         543
Other assets................................................       --         229
                                                              -------    --------
          Total assets......................................  $10,646    $240,678
                                                              =======    ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Lines of credit.............................................  $   819    $  1,657
Accounts payable and accrued liabilities....................    3,595      15,811
Settlement payable..........................................       --       5,000
Current portion of long-term debt...........................       --       8,554
Deferred revenue............................................       --       1,330
                                                              -------    --------
          Total current liabilities.........................    4,414      32,352
Long-term debt, less current portion........................       30       4,116
Convertible debentures, net.................................    2,153         874
Deferred taxes..............................................    1,212         588
                                                              -------    --------
          Total liabilities.................................    7,809      37,930
Commitments and contingencies...............................
Stockholders' equity:
  Preferred stock, no par value, 20,000,000 shares
     authorized,
     no shares issued and outstanding in 1998 and 1999......       --          --
  Common stock, $.0001 par value, 300,000,000 shares
     authorized,
     4,908,072 and 52,743,169 shares issued and outstanding
     at December 31, 1998 and 1999, respectively............        2           7
  Common stock issuable; 1,639,850 shares...................    2,600      42,636
  Additional paid-in capital................................    7,662     146,150
  Issuable warrants.........................................       --      60,000
  Deferred compensation.....................................       --      (1,393)
  Loan receivable from officer..............................       --      (1,500)
  Accumulated other comprehensive loss:
     Cumulative foreign currency translation adjustment.....      (96)        (77)
  Accumulated deficit.......................................   (7,331)    (43,075)
                                                              -------    --------
          Total stockholders' equity........................    2,837     202,748
                                                              -------    --------
          Total liabilities and stockholders' equity........  $10,646    $240,678
                                                              =======    ========
</TABLE>

See notes to consolidated financial statements.

                                       F-3
<PAGE>   55

                                FUTURELINK CORP

                     CONSOLIDATED STATEMENTS OF OPERATIONS
                   (DOLLARS IN THOUSANDS, EXCEPT SHARE DATA)

<TABLE>
<CAPTION>
                                                              YEAR ENDED DECEMBER 31,
                                                              -----------------------
                                                                1998          1999
                                                              ---------    ----------
<S>                                                           <C>          <C>
Revenue:
Hardware and software.......................................  $     966    $    6,748
Service delivery............................................      1,471         6,852
                                                              ---------    ----------
                                                                  2,437        13,600
Expenses:
Cost of hardware and software...............................        880         7,013
Cost of service delivery....................................      1,548        10,527
Selling, general and administration.........................      3,064        12,611
Goodwill and other intangibles amortization.................        668         4,981
Depreciation and amortization...............................        203         1,709
                                                              ---------    ----------
                                                                  6,363        36,841
                                                              ---------    ----------
Loss from operations........................................     (3,926)      (23,241)
Interest expense............................................      1,333        12,095
Interest income.............................................         --          (437)
Equity in loss of investee..................................        826            --
                                                              ---------    ----------
Loss before income taxes and extraordinary item.............     (6,085)      (34,899)
Provision (benefit) for income taxes........................       (205)           --
                                                              ---------    ----------
Loss before extraordinary item..............................     (5,880)      (34,899)
Extraordinary item..........................................         --          (845)
                                                              ---------    ----------
Net loss....................................................  $  (5,880)   $  (35,744)
                                                              =========    ==========
Loss per share -- basic and diluted
  Loss before extraordinary item............................  $   (1.86)   $    (2.44)
  Extraordinary item........................................         --         (0.06)
                                                              ---------    ----------
Net loss....................................................  $   (1.86)   $    (2.50)
                                                              =========    ==========
Weighted average shares.....................................  3,169,413    14,279,647
                                                              =========    ==========
</TABLE>

See notes to consolidated financial statements.

                                       F-4
<PAGE>   56

                                FUTURELINK CORP.
                           CONSOLIDATED STATEMENTS OF
                              STOCKHOLDERS' EQUITY
                   (DOLLARS IN THOUSANDS, EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
                                                                                                            LOAN       ACCUMULATED
                                    COMMON STOCK        COMMON    ADDITIONAL                             RECEIVABLE       OTHER
                                 -------------------    STOCK      PAID-IN     ISSUABLE     DEFERRED        FROM      COMPREHENSIVE
                                   SHARES     AMOUNT   ISSUABLE    CAPITAL     WARRANTS   COMPENSATION    OFFICER         LOSS
                                 ----------   ------   --------   ----------   --------   ------------   ----------   -------------
<S>                              <C>          <C>      <C>        <C>          <C>        <C>            <C>          <C>
BALANCE AT JANUARY 1, 1998.....   2,040,700     $1     $    --     $  1,425    $    --      $    --       $    --         $  --
 Issuance of common stock on
   acquisitions................   1,158,000     --       2,550           15         --           --            --            --
 Forgiveness of stockholder
   debt........................          --     --          --           70         --           --            --            --
 Issuance of common stock......     751,163     --          --        2,963         --           --            --            --
 Warrants issued with issuance
   of convertible debt.........          --     --          --          563         --           --            --            --
 Common stock issued, net......     133,752     --          --          763         --           --            --            --
 Common stock to be issued upon
   conversion of loan..........          --     --         733           --         --           --            --            --
 Issuance of common stock......     824,457      1        (683)       1,907         --           --            --            --
 Financing fees associated with
   converted debentures........          --     --          --          (44)        --           --            --            --
 Foreign currency translation
   adjustment..................          --     --          --           --         --           --            --           (96)
 Net loss for the year.........          --     --          --           --         --           --            --            --
                                 ----------     --     -------     --------    -------      -------       -------         -----
BALANCE AT DECEMBER 31, 1998...   4,908,072      2       2,600        7,662         --           --            --           (96)
 Exchange of exchange shares...         424     --      (2,550)       2,550         --           --            --            --
 Shares issued or issuable for
   acquisitions................  13,542,490      1      42,636      109,568         --           --            --            --
 Shares issued for cash........   9,203,499      1          --       48,317         --           --            --            --
 Shares issued upon conversion
   of debt.....................  15,859,796      2          --       22,496         --           --            --            --
 Shares issued for services....      95,431     --         (50)         525         --           --            --            --
 Exercise of warrants..........   8,648,256      1          --          300         --           --            --            --
 Equity components of
   convertible debentures and
   warrants....................          --     --          --        7,290         --           --            --            --
 Value of warrants issued with
   convertible debentures......          --     --          --        5,649         --           --            --            --
 Value of options and warrants
   issued for services.........          --     --          --          923         --           --            --            --
 Shares issued under loan
   agreement to officer........     232,829     --          --        2,000         --           --        (1,500)           --
 Shares issued upon exercise of
   employee stock options......     252,372     --          --        1,103         --           --            --            --
 Cost of warrants to be issued
   on settlement...............          --     --          --      (65,000)    60,000           --            --            --
 Deferred compensation.........          --     --          --        2,767         --       (2,767)           --            --
 Amortization of deferred
   compensation................          --     --          --           --         --        1,374            --            --
 Foreign currency translation
   adjustment..................          --     --          --           --         --           --            --            19
 Net loss for the year.........          --     --          --           --         --           --            --            --
                                 ----------     --     -------     --------    -------      -------       -------         -----
BALANCE AT DECEMBER 31, 1999...  52,743,169     $7     $42,636     $146,150    $60,000      $(1,393)      $(1,500)        $ (77)
                                 ==========     ==     =======     ========    =======      =======       =======         =====

<CAPTION>

                                                   TOTAL
                                 ACCUMULATED   STOCKHOLDERS'   COMPREHENSIVE
                                   DEFICIT        EQUITY           LOSS
                                 -----------   -------------   -------------
<S>                              <C>           <C>             <C>
BALANCE AT JANUARY 1, 1998.....   $ (1,451)      $    (25)       $     --
 Issuance of common stock on
   acquisitions................         --          2,565              --
 Forgiveness of stockholder
   debt........................         --             70              --
 Issuance of common stock......         --          2,963              --
 Warrants issued with issuance
   of convertible debt.........         --            563              --
 Common stock issued, net......         --            763              --
 Common stock to be issued upon
   conversion of loan..........         --            733              --
 Issuance of common stock......         --          1,225              --
 Financing fees associated with
   converted debentures........         --            (44)             --
 Foreign currency translation
   adjustment..................         --            (96)            (96)
 Net loss for the year.........     (5,880)        (5,880)         (5,880)
                                  --------       --------        --------
BALANCE AT DECEMBER 31, 1998...     (7,331)         2,837          (5,976)
                                                                 ========
 Exchange of exchange shares...         --             --              --
 Shares issued or issuable for
   acquisitions................         --        152,205              --
 Shares issued for cash........         --         48,318              --
 Shares issued upon conversion
   of debt.....................         --         22,498              --
 Shares issued for services....         --            475              --
 Exercise of warrants..........         --            301              --
 Equity components of
   convertible debentures and
   warrants....................         --          7,290              --
 Value of warrants issued with
   convertible debentures......         --          5,649              --
 Value of options and warrants
   issued for services.........         --            923              --
 Shares issued under loan
   agreement to officer........         --            500              --
 Shares issued upon exercise of
   employee stock options......         --          1,103              --
 Cost of warrants to be issued
   on settlement...............         --         (5,000)             --
 Deferred compensation.........         --             --              --
 Amortization of deferred
   compensation................         --          1,374              --
 Foreign currency translation
   adjustment..................         --             19              19
 Net loss for the year.........    (35,744)       (35,744)        (35,744)
                                  --------       --------        --------
BALANCE AT DECEMBER 31, 1999...   $(43,075)      $202,748        $(35,725)
                                  ========       ========        ========
</TABLE>

See notes to consolidated financial statements.

                                       F-5
<PAGE>   57

                                FUTURELINK CORP.

                     CONSOLIDATED STATEMENTS OF CASH FLOWS
                             (DOLLARS IN THOUSANDS)

<TABLE>
<CAPTION>
                                                              YEAR ENDED DECEMBER 31,
                                                              -----------------------
                                                               1998            1999
                                                              -------        --------
<S>                                                           <C>            <C>
OPERATING ACTIVITIES
Net loss....................................................  $(5,880)       $(35,744)
Adjustments to reconcile net loss to net cash used in
  operating activities:
Depreciation and amortization...............................      871           6,690
Deferred income taxes.......................................     (205)             --
Amortization of deferred compensation.......................       --           1,374
Warrants issued with convertible debt.......................       --           5,649
Common stock, warrants and options issued for services......    2,125           1,898
Non-cash interest expense...................................    1,294           7,290
Loss on sale of assets......................................       48              --
Change in operating assets and liabilities,
  net of effect from business acquisitions:
  Accounts receivable.......................................   (1,406)            574
  Inventory.................................................      (22)         (2,393)
  Prepaid expenses..........................................     (116)           (247)
  Other assets..............................................       --            (229)
  Accounts payable and accrued expenses.....................    2,302          (2,556)
  Deferred revenue..........................................       --           1,330
                                                              -------        --------
  Net cash used in operating activities.....................     (989)        (16,364)
                                                              -------        --------
INVESTING ACTIVITIES
Purchases of property and equipment.........................     (819)         (3,244)
Disposition of assets.......................................       33              --
Business acquisitions, net of cash balances acquired........   (2,019)        (28,413)
Deposits for acquisitions...................................     (110)           (543)
Cash advances to investees..................................     (990)             --
Restricted cash.............................................       --          (3,099)
Other.......................................................      (69)             --
                                                              -------        --------
  Net cash used in investing activities.....................   (3,974)        (35,299)
                                                              -------        --------
FINANCING ACTIVITIES
Net cash advanced (paid) under lines of credit..............      819            (119)
Proceeds from issuance of common shares, net................      681          48,318
Proceeds from exercise of employee stock options............       --           1,103
Proceeds from exercise of warrants..........................       --             301
Repayment of capital lease obligations......................      (67)             --
Issuance of common shares upon debt conversion, net of
  costs.....................................................    2,447          22,498
Repayment of convertible debentures and promissory notes....       --          (1,279)
Other financing fees........................................       89              --
Advances from stockholders..................................    1,097              --
                                                              -------        --------
  Net cash provided by financing activities.................    5,066          70,822
                                                              -------        --------
Effect of currency rate changes.............................      (96)             19
                                                              -------        --------
Increase in cash............................................        7          19,178
Cash at beginning of period.................................       --               7
                                                              -------        --------
CASH AT END OF PERIOD.......................................  $     7        $ 19,185
                                                              =======        ========
NON CASH INVESTING AND FINANCING ACTIVITIES
Business acquisitions:
  Assets acquired...........................................  $ 8,999        $189,756
  Liabilities assumed.......................................    2,934           2,453
  Notes payable issued......................................      436           6,685
  Common stock and options issued...........................    3,610         152,205
                                                              -------        --------
    Cash paid for acquisitions..............................  $ 2,019        $ 28,413
                                                              =======        ========
SmallCaps settlement payable................................  $    --        $  5,000
Capital lease obligations...................................       --           5,763
Loan to officer for common stock............................       --           2,000
SUPPLEMENTAL INFORMATION, CASH PAID FOR:
Interest....................................................  $    38        $  1,007
Income taxes................................................       37              --
</TABLE>

See notes to consolidated financial statements.

                                       F-6
<PAGE>   58

                                FUTURELINK CORP.

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                               DECEMBER 31, 1999

1. BASIS OF PRESENTATION

THE COMPANY

     FutureLink Corp. (the "Company") is a Delaware corporation headquartered in
Irvine, California. The Company provides server-based computing services, and is
an application services provider, or ASP. The Company's services enable software
applications to be deployed, managed, supported and upgraded from centrally
located servers, rather than on individual desktop computers. For server-based
computing customers, the Company installs and integrates software applications
on customers' servers. For our ASP customers, the Company hosts software
applications on servers at data centers, and rents computing services to
customers for a monthly fee. ASP customers connect to facilities over the
Internet, through a dedicated telecommunications line or by wireless connection.
ASP services were introduced in March 1999.

     The Company has experienced net losses over the past two years and had an
accumulated deficit of approximately $43.1 million at December 31, 1999. Such
losses are attributable to both cash losses resulting from costs incurred in the
development of the Company's services and infrastructure, interest expense and
non cash amortization charges. The Company expects operating losses to continue
for the foreseeable future as it continues to develop and promote its services.

BASIS OF PRESENTATION

     The consolidated financial statements include the accounts of the Company
and its wholly owned subsidiaries. All significant intercompany accounts and
transactions have been eliminated.

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

USE OF ESTIMATES

     The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the amounts reported in the financial statements and
accompanying notes. Actual results could differ from those estimates.

REVENUE RECOGNITION

     The Company generates revenue from ASP services, information technology
services, outsourcing contract services, and from the resale of computer
hardware and software. Service revenue is recognized when the service is
delivered, or over the term of the applicable contracts. Payments received in
advance, even if non-refundable, are recorded as deferred revenue. ASP
implementation fees are generally paid in advance, and are deferred and
recognized ratably over the term of the ASP service contract, generally two to
five years. Revenue from the resale of computer hardware and software is
recorded upon shipment, or upon installation when required under contract terms.

FAIR VALUE OF FINANCIAL INSTRUMENTS

     Financial instruments consisting principally of cash, accounts receivable,
payables, accrued liabilities, and short-term and long-term obligations, and
their carrying values in the accompanying consolidated balance sheets
approximate their fair value. It is management's opinion that the Company is not
exposed to significant currency or credit risks arising from these financial
instruments.

CONCENTRATION OF CREDIT RISK AND KEY SUPPLIER

     The Company sells the majority of its services and products throughout
North America. Sales to the Company's recurring customers are generally made on
an open account while sales to occasional customers

                                       F-7
<PAGE>   59
                                FUTURELINK CORP.

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

may be made on a prepaid basis. The Company performs periodic credit evaluations
of its ongoing customers and generally does not require collateral. Reserves are
maintained for potential credit losses.

     Citrix Systems, Inc. ("Citrix") is one of the Company's key suppliers. The
Company uses Citrix software almost exclusively to connect its customers to
software applications.

CASH AND CASH EQUIVALENTS

     Cash and cash equivalents consist of money market accounts and other
short-term investments with a maturity of three months or less when purchased.

INVENTORY

     Inventory, consisting of computer hardware and software held for resale, is
recorded at the lower of cost (first in, first out) or market.

SOFTWARE LICENSES

     The Company capitalizes the costs associated with the purchase of licenses
for major business process application software used in providing ASP services.
The licenses specify the maximum number of users permitted to utilize the
license in connection with the Company's service. All amounts are
non-refundable, regardless of the actual number of users assigned a license in
connection with ASP services. The licenses are amortized over the life of the
contract.

PROPERTY AND EQUIPMENT

     Property and equipment is carried at cost. Depreciation and amortization
are provided using the straight-line method over the assets' estimated useful
lives ranging from two to five years. Assets recorded under capital leases are
depreciated over the shorter of their estimated useful lives or the related
lease terms using the straight-line method. This depreciation is included in
depreciation and amortization in the accompanying consolidated financial
statements.

LONG-LIVED ASSETS

     The Company follows Financial Accounting Standards Board Statement ("FAS")
No. 121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived
Assets to be Disposed of," which requires impairment losses to be recorded on
long-lived assets used in operations when indicators of impairment are present.

     Long-lived assets and certain identifiable intangibles held and used by the
Company are reviewed for impairment whenever events or changes in circumstances
indicate that the carrying amount of an asset may not be recoverable. The
recoverability test is performed at the individual entity level based on
undiscounted cash flows. Based upon its analysis, the Company believes that no
impairment of the carrying value of its long-lived assets, inclusive of
goodwill, existed at December 31, 1999. The Company's analysis was based on an
estimate of future undiscounted cash flows using forecasts contained in the
Company's strategic plan. It is at least reasonably possible that the Company's
estimate of future undiscounted cash flows may change during 2000. If the
Company's estimate of future undiscounted cash flows should change or if the
strategic plan is not achieved, future analyses may indicate insufficient future
undiscounted cash flows to recover the carrying value of the Company's
long-lived assets, in which case such assets would be written down to estimated
fair value.

                                       F-8
<PAGE>   60
                                FUTURELINK CORP.

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

GOODWILL

     Goodwill is recorded at cost and is being amortized using the straight-line
method over five years. The recoverability of goodwill is assessed periodically
based on management estimates of undiscounted future operating cash flows from
each of the acquired businesses to which the goodwill relates.

ASSEMBLED WORKFORCE

     Assembled workforce represents the valuation placed on the knowledge,
expertise, and contacts of employees and consultants upon acquisition, and is
being amortized using the straight-line method over three years.

FOREIGN CURRENCY TRANSLATION

     The assets and liabilities of the Company's foreign operations are
generally translated into U.S. dollars at current exchange rates. Revenue and
expenses are translated at average exchange rates in effect for the year. The
resulting cumulative translation adjustments have been recorded as a separate
component of consolidated stockholders' equity. Foreign currency transaction
gains and losses, if any, are included in the consolidated net loss.

INCOME TAXES

     The Company utilizes the liability method of accounting for income taxes as
set forth in FAS No. 109, "Accounting for Income Taxes." Under this method,
deferred tax assets and liabilities are recognized based on the anticipated
future tax effects arising from the differences between the financial statement
carrying amounts of assets and liabilities and their respective tax bases of
assets and liabilities using enacted tax rates.

STOCK-BASED COMPENSATION

     The Company accounts for stock-based awards to employees in accordance with
Accounting Principles Board Opinion No. 25, "Accounting for Stock Issued to
Employees" and related interpretations and has adopted the disclosure-only
alternative of FAS No. 123, "Accounting for Stock-Based Compensation." Options
granted to consultants, independent representatives and other non-employees are
accounted for using the fair value method as prescribed by FAS No. 123.

STOCK SPLIT

     On June 1, 1999, the Company completed a 5 for 1 reverse stock split of its
common stock. Accordingly, all share and per share amounts have been
retroactively restated in the consolidated financial statements to reflect this
split.

LOSS PER SHARE

     Basic loss per share is calculated by dividing the net loss by the average
number of common shares outstanding during the year. Diluted loss per share is
calculated by adjusting outstanding shares, assuming any dilutive effects of
options, warrants, and convertible securities. For all years presented, the
effect of stock options, warrants, and convertible securities were not included
as the results would be anti-dilutive. Consequently, there is no difference
between the basic and dilutive net loss per share.

                                       F-9
<PAGE>   61
                                FUTURELINK CORP.

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

SEGMENTS OF A BUSINESS ENTERPRISE

     FAS No. 131, "Disclosures about Segments of an Enterprise and Related
Information," establishes standards for the way that public business enterprises
report information about operating segments in annual consolidated financial
statements and requires that those enterprises report selected information about
operating segments in interim financial reports. FAS No. 131 also establishes
standards for related disclosures about products and services, geographic areas,
and major customers. The Company operates in one segment, information technology
solutions.

COMPREHENSIVE INCOME

     FAS No. 130, "Reporting Comprehensive Income," establishes standards for
reporting and displaying comprehensive income and its components in the
consolidated financial statements. Comprehensive loss includes cumulative
translation adjustments for the years ended December 31, 1998 and 1999. These
adjustments are accumulated within the accompanying Consolidated Statements of
Stockholders' Equity under the caption "Comprehensive Loss."

RECLASSIFICATIONS

     Certain amounts in the 1998 consolidated financial statements have been
reclassified to conform to the current year presentation.

RECENT ACCOUNTING PRONOUNCEMENTS

     In June 1998, FAS No. 133, "Accounting for Derivative Instruments and
Hedging Activities" was issued, which establishes new standards for recording
derivatives in interim and annual financial statements. This statement requires
recording all derivative instruments as assets or liabilities, measured at fair
value. Statement No. 133, as amended, is effective for all fiscal quarters of
all fiscal years beginning after June 15, 2000. Management does not anticipate
the adoption of the new statement will have a significant impact on the
consolidated results of operations or financial position of the Company.

3. ACQUISITIONS

     The Company completed the following acquisitions during the years ended
December 31, 1998 and 1999.

EXECUTIVE LAN MANAGEMENT, INC.

     On October 15, 1999, the Company finalized an Agreement and Plan of
Reorganization and Merger with Executive LAN Management Inc. ("Micro Visions").
The agreement provided for a merger of Micro Visions with a subsidiary of the
Company such that all of Micro Visions' outstanding stock was sold to the
Company in exchange for total consideration of $86.0 million, consisting of
$12.0 million cash, 6,000,000 common shares issued upon closing, and a further
2,400,000 common shares earned during 1999 as contingent consideration valued in
the aggregate at $71.2 million and options to acquire 475,000 shares of common
stock valued at $2.8 million. Of the contingent shares, 1,200,000 were earned as
of December 31, 1999 but had not been issued. The value of the contingent
shares, determined based on the share price of $31.2 million when earned, is
included in stockholder's equity as common stock issuable. The acquisition was
accounted for by the purchase method of accounting, and the excess purchase
price of $85.9 million over the estimated fair value of net assets acquired was
allocated to goodwill and is being amortized over five years.

                                      F-10
<PAGE>   62
                                FUTURELINK CORP.

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

CN NETWORKS, INC.

     On November 5, 1999, the Company finalized an Agreement and Plan of
Reorganization and Merger with CN Networks, Inc. ("CNI"). The agreement provides
for a merger of CNI with a subsidiary of the Company such that all of CNI's
outstanding stock was sold to the Company in exchange for total consideration of
$19.9 million consisting of $3.9 million cash and 1,181,816 common shares of the
Company's common stock valued at $9.1 million, and options to acquire 500,000
shares of common stock valued at $6.9 million. The acquisition was accounted for
by the purchase method of accounting, and the excess purchase price of $20.4
million over the estimated fair value of net assets acquired was allocated to
goodwill and is being amortized over five years.

ASYNC TECHNOLOGIES, INC.

     On November 26, 1999, FutureLink finalized an Agreement and Plan of
Reorganization and Merger with Async Technologies, Inc. and Async Technical
Institute, Inc. The Agreement provides for an initial merger between Async
Technologies, Inc. and Async Technical Institute, Inc., with Async Technologies,
Inc. ("Async") being the surviving entity, and then a subsequent merger of Async
with a subsidiary of the Company such that Async's outstanding stock was sold to
the Company in exchange for total consideration of $35.0 million consisting of
$6.0 million cash, 1,298,705 common shares issued upon closing, and a further
439,850 common shares earned during 1999 as contingent consideration valued in
the aggregate at $21.4 million, and options to acquire 500,000 shares of common
stock valued at $7.6 million. The contingent shares were earned as of December
31, 1999 but had not yet been issued. The value of the contingent shares of
$11.4 million, determined based on the share price when earned, has been
included in stockholders' equity as common stock issuable. The acquisition was
accounted for by the purchase method of accounting, and the excess purchase
price of $36.2 million over the estimated fair value of net assets acquired was
allocated to goodwill and is being amortized over five years.

KNS HOLDINGS LIMITED

     On December 22, 1999, the Company finalized an Agreement for the Sale and
Purchase of the entire issued share capital of United Kingdom based KNS Holdings
Limited ("KNS"). The Agreement provided for a merger of KNS with a subsidiary of
the Company such that all of KNS' outstanding stock was sold to the Company. The
total purchase price was $44.0 million consisting of $5.0 million cash,
2,160,307 shares of the Company's common stock valued at $32.3 million and notes
payable in the amount of $2.7 million and $4.0 million due April 6, 2000 and
June 30, 2000, respectively. The acquisition was accounted for by the purchase
method of accounting, and the excess purchase price of $42.7 million over the
estimated fair value of net assets acquired was allocated to goodwill and is
being amortized over five years.

FUTURELINK ALBERTA

     On January 20, 1998 the Company issued 308,000 common shares in exchange
for 1,540,000 common shares (46%) of FutureLink Alberta. The total value
ascribed to the investment was $15,400. Effective November 23, 1998, the Company
issued 334,755 common shares in exchange for an additional 1,673,775 common
shares (50.4%) of FutureLink Alberta. The total value ascribed to the investment
was $987,527.

                                      F-11
<PAGE>   63
                                FUTURELINK CORP.

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

     On February 26, 1999, FutureLink Alberta became a wholly owned subsidiary
when the Company purchased the remaining 117,500 shares (3.6%) of FutureLink
Alberta in exchange for 23,500 common shares of the Company. FutureLink Alberta
was consolidated from November 24, 1998. From January 20, 1998 to November 23,
1998 the Company's share in FutureLink Alberta's loss, accounted for using the
equity method, was $860,000.

     The following pro forma results of operations give effect to the
acquisition of the above companies as if the transactions had occurred January
1, 1998 (in thousands, except per share data):

<TABLE>
<CAPTION>
                                                         YEAR ENDED DECEMBER 31,
                                                         ------------------------
                                                            1998          1999
                                                         ----------    ----------
<S>                                                      <C>           <C>
Revenue................................................   $ 46,112      $ 64,778
Net loss...............................................   $(42,058)     $(68,681)
Loss per share.........................................   $ (13.27)     $  (4.81)
</TABLE>

4. DEPOSITS ON ACQUISITIONS

     On December 2, 1999, the Company entered into an Agreement and Plan of
Reorganization and Merger with Vertical Software, Inc. ("VSI"). The agreement
provides for a merger of VSI with a subsidiary of the Company such that all of
VSI's outstanding stock will be sold to the Company in exchange for
consideration of $27.6 million consisting of $8.1 million cash and 1,026,316
common shares of the Company's common stock valued at $19.5 million. The
transaction closed on January 31, 2000 (see Note 16). At December 31, 1999, the
Company paid $543,000 relating to deposits and acquisition costs on the proposed
acquisition of VSI.

5. PROPERTY AND EQUIPMENT

     Property and equipment are comprised of the following at December 31, 1998
and 1999 (in thousands):

<TABLE>
<CAPTION>
                                                             1998      1999
                                                            ------    -------
<S>                                                         <C>       <C>
Computers and equipment...................................  $  606    $ 3,932
Software licenses.........................................     185        678
Office and other equipment................................     181      1,136
Equipment under capital lease.............................     136      6,937
Leasehold improvements....................................     218        565
                                                            ------    -------
                                                             1,326     13,248
Less accumulated depreciation and amortization............    (203)    (2,276)
                                                            ------    -------
                                                            $1,123    $10,972
                                                            ======    =======
</TABLE>

     Included in accumulated depreciation at December 31, 1998 and 1999 is
$19,000 and $735,000 respectively, related to equipment under capital leases.

                                      F-12
<PAGE>   64
                                FUTURELINK CORP.

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

6. GOODWILL AND OTHER INTANGIBLES

     Goodwill and other intangible assets are comprised of the following at
December 31, 1998 and 1999 (in thousands):

<TABLE>
<CAPTION>
                                                            1998       1999
                                                           ------    --------
<S>                                                        <C>       <C>
Goodwill.................................................  $5,314    $189,699
Assembled workforce......................................   3,200       3,200
                                                           ------    --------
                                                            8,514     192,899
Less accumulated amortization............................    (668)     (6,033)
                                                           ------    --------
                                                           $7,846    $186,866
                                                           ======    ========
</TABLE>

7. LINE OF CREDIT AGREEMENTS

     The Company and its subsidiaries have various lines of credit allowing
aggregate borrowings of $5.4 million. The lines bear interest at various rates
ranging from prime (8.5% at December 31, 1999) plus 1% to prime plus 3% per
annum, and mature at various intervals through November 30, 2000. The lines are
secured by certificates of deposits aggregating $3.1 million (reflected as
restricted cash on the accompanying consolidated balance sheet at December 31,
1999) and receivables and other assets of certain subsidiaries of the Company.
Aggregate borrowings under the line of credit agreements at December 31, 1998
and 1999 were $819,000 and $1.7 million, respectively. At December 31, 1999, the
aggregate unused amount under the agreements was approximately $3.7 million.

8. LONG-TERM DEBT

     Long-term debt consists of the following at December 31, 1998 and 1999 (in
thousands):

<TABLE>
<CAPTION>
                                                              1998     1999
                                                              ----    -------
<S>                                                           <C>     <C>
Capital lease obligations, net of original issue discount of
  $727......................................................  $30     $ 5,985
Note payable to former KNS stockholders.....................   --       6,685
                                                              ---     -------
                                                               30      12,670
Less current portion of long-term debt......................   --       8,554
                                                              ---     -------
Long-term debt..............................................  $30     $ 4,116
                                                              ===     =======
</TABLE>


     Capital lease obligations are for the lease of up to $22.5 million of
computer hardware and related infrastructure costs. Aggregate monthly payments
are currently $195,000 and are based upon thirty-six to forty-one month
amortization periods, including interest implicit in the lease at rates ranging
from 9% to 14% per annum. As of December 31, 1999, the Company had available
borrowings of $19.4 million under the various lease lines. In addition to the
lease payments, the Company issued to the lessors warrants valued at $727,000 to
acquire 42,553 shares of common stock at $8.50 per share. The value of the
warrants has been reflected as a discount of the related debt, and is being
amortized to interest expense over the life of the debt.


     Notes payable to KNS consist of notes of $2.7 million and $4.0 million and
are due April 6, 2000 and June 30, 2000, respectively. The notes are unsecured
and bear interest at LIBOR plus 1% per annum which is payable at maturity.

                                      F-13
<PAGE>   65
                                FUTURELINK CORP.

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

     Principal maturities of long-term debt outstanding, including original
issue discount of $727,000, at December 31, 1999 occur as follows (in
thousands):

<TABLE>
<CAPTION>
YEARS ENDING
DECEMBER 31,                                         AMOUNT
------------                                         -------
<S>                                                  <C>
   2000............................................  $ 8,706
   2001............................................    2,147
   2002............................................    2,177
   2003............................................      367
                                                     -------
   Total...........................................  $13,397
                                                     =======
</TABLE>

9. CONVERTIBLE DEBENTURES

     Convertible debentures consist of the following at December 31, 1998 and
1999 (in thousands);

<TABLE>
<CAPTION>
                                                               1998     1999
                                                              ------    ----
<S>                                                           <C>       <C>
10% TK convertible debentures...............................  $2,153    $ --
8% Senior subordinated convertible promissory notes.........      --     629
10% Convertible debentures..................................      --     245
                                                              ------    ----
                                                              $2,153    $874
                                                              ======    ====
</TABLE>

10% TK CONVERTIBLE DEBENTURES

     During 1998, the Company entered into a 10% convertible debenture agreement
with Thomson Kernaghan & Co. Ltd. ("TK") as agent, to provide up to $5.0 million
of financing. The financing included the issuance of 208,333 share purchase
warrants at an exercise price of $4.80 per share. During 1998, the Company
received an aggregate $2.7 million under the financing arrangement, and $500,000
of this debt plus accrued interest was converted into 374,955 common shares.

     During 1999, the Company amended the terms of the 10% TK convertible
debentures which increased the total available financing from $5.0 million to
$6.0 million, of which the Company received an additional $3.3 million in 1999
bringing aggregate borrowings under the agreement to $5.5 million. An additional
129,534 warrants at an exercise price of $4.80 per share were issued in
connection with the increase in available funding. The fair value of these
warrants of $129,500 was recorded as additional paid-in capital with an
offsetting entry to original issue discount on debt.

     Of the total principal amount of the debentures, approximately $1.7 million
has been attributed to the intrinsic value of the beneficial conversion option.
Of this amount, $911,990 related to debentures received during the year ended
December 31, 1999. The amount attributed to the beneficial conversion option has
been included in interest expense as the option was exercisable upon issuance.

     On April 26, 1999, the Company amended the terms of the 10% TK convertible
debenture agreement. Previously, the debenture holders had the right to convert
the debentures at a price equal to the lower of $3.75 per share and 78% of the
average closing bid price of the Company's common stock for the three trading
days immediately preceding the conversion. Following the amendment, the
debenture conversion price was fixed at $1.00 per common share. In addition, the
previously issued warrants were re-priced such that the exercise price of $4.80
became $1.25 per common share. An amount of $1.2 million has been included in
additional paid-in capital as the estimated value attributed to the warrants as
they were exercisable upon issuance. The Company also issued an additional
warrant to purchase 862,132 shares of common stock at an exercise price of $1.25
per share such that a total of 1,200,000 warrants were outstanding related to
this convertible debenture agreement. An amount of $1.0 million attributable to
the

                                      F-14
<PAGE>   66
                                FUTURELINK CORP.

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

intrinsic value of the conversion feature of the amended debt was included as
interest expense with a corresponding credit to additional paid-in capital as
the conversion option was exercisable upon issuance.

     During 1999, $4.0 million of the convertible debentures were converted into
4,018,602 shares of common stock. In addition, the Company paid approximately
$1.9 million as consideration for the cancellation of $1.5 million of the
principal balance. The extinguishment of this debt resulted in an $844,552
extraordinary item during the year ended December 31, 1999. This amount includes
charges of $259,318 for unamortized finance fees, $174,000 for unamortized debt
discount associated with the $3.5 million of debt existing at the time, and
$411,000 relating to the cost of settling $1.5 million of debt.

     During the year ended December 31, 1999, 1,291,921 shares of common stock
were issued on the exercise of all the outstanding warrants issued to TK. In
connection with the exercise of the warrants, the Company issued an additional
125,000 shares to the note holders for agreeing to a lock up provision.

8% SENIOR SUBORDINATED CONVERTIBLE PROMISSORY NOTES

     During 1999, the Company completed an $8.0 million financing of 8% senior
subordinated convertible promissory notes, of which management and directors of
the Company purchased $433,000. The notes were convertible at the option of the
note holders at a conversion price of $1.00 per share, except those issued to
management and directors, that were convertible at $1.50 per share, subject to a
12-month lock up provision. Issue costs of $780,000 were paid relating to the
issuance of the debentures and were recorded as original issue discount on debt.
$7.4 million of the notes were converted during the year ended December 31, 1999
into 8,579,019 shares of common stock. The remaining balance of the notes due at
December 31, 1999 of $620,000 plus accrued interest is due April 30, 2000. An
amount of $4.9 million was attributed to the intrinsic value of the beneficial
conversion option and has been included in additional paid-in capital with an
offsetting entry to interest expense.

     Upon entering into the agreement, the Company issued warrants to purchase
3,802,750 shares of common stock at $1.25 per share to the external holders of
the debentures and warrants to purchase 216,500 shares of common stock at $1.50
per share to directors and management of the Company. An amount of $2.4 million
based on the Black Scholes pricing model has been included in additional paid-in
capital as the estimated value of the warrants. During the year ended December
31, 1999, the board of directors offered the warrant holders an option to
exchange 100 warrants for 95 shares on a cashless basis. As such, 3,696,500 of
these warrants were exercised on a cashless basis and exchanged for 3,517,933
shares of common stock.

     In addition, warrants to purchase 2,000,000 shares at an exercise price of
$1.25 per share were provided to the agent as a placement fee. An amount of $1.8
million based on the Black Scholes pricing model has been attributed to the
value of the warrants and has been recorded to additional paid-in capital. The
placement fee is attributable to the equity portion of the debt and, therefore,
this issue cost has also been recorded as a charge against additional paid-in
capital. On May 1, 1999, the Company entered into an agreement to retain the
holder of the majority of the notes as a financial advisor for a period of one
year. Compensation for the services received under the agreement include payment
of $5,000 per month and issuance of warrants to purchase 2,000,001 shares of
common stock at par value. A value of $1.2 million, based on the Black Scholes
pricing model, has been assigned as the estimated value of the warrants, which
is being amortized to consulting expense at the rate of $100,000 per month over
the one-year contract term. During the year ended December 31, 1999, the board
of directors offered the warrant holders an option to exchange 100 warrants for
95 shares on a cashless basis. As such, 4,000,001 warrants were exercised on a
cashless basis and exchanged for 3,799,974 shares of common stock.

     The initial terms of the notes contained certain anti-dilution provisions.
The subsequent issuance of securities at terms and conditions preferential to
that of the promissory notes resulted in an additional

                                      F-15
<PAGE>   67
                                FUTURELINK CORP.

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

289,599 shares issued to those noteholders. An amount of $246,000 was attributed
to these additional shares and has been included in contributed capital with an
offsetting entry to interest expense. These anti-dilution privileges also
resulted in the remaining $620,000 of unconverted notes at December 31, 1999
having a conversion price of $0.89 for noteholders and $1.34 for management.

10% CONVERTIBLE DEBENTURE

     During 1999, the Company issued a $275,000 promissory note that was
subsequently converted into a 10% debenture that can be converted into shares of
the Company's common stock at $1.15 per share. The note matures on April 20,
2002, and the Company may prepay upon 30 days advance notice. Accrued interest
of $18,000 at December 31, 1999 is due at maturity. In the accompanying
consolidated financial statements as of December 31, 1999, the balance due on
the convertible debt and the accrued interest is reflected net of $50,000
unamortized debt discount and finder's fee, which is being amortized to interest
expense over the life of the debenture.

     An amount of $79,821 was attributed to the intrinsic value of the
beneficial conversion option and has been reflected as interest expense during
the year and included in additional paid-in capital. Upon entering the
agreement, the Company issued warrants to purchase 44,505 shares of common stock
of the Company at $1.25 per share to the holder of the debenture. The warrants
expire April 30, 2001. An amount of $41,800 has been included in additional
paid-in capital as the estimated value of the warrants and debt discount.

10. STOCKHOLDERS' EQUITY

     On October 15, 1999, the Company amended its authorized preferred shares
from 5,000,000 to 20,000,000 and its authorized common shares from 100,000,000
to 300,000,000.

ISSUANCE OF COMMON STOCK AND WARRANTS FOR CASH

     During 1999, the Company completed a private placement which resulted in
net proceeds to the Company of $46.1 million through the issuance of 9,090,909
common shares and warrants to purchase 2,401,041 shares of common stock. The
warrants are exercisable for up to five years at an exercise price of $8.50 per
share. A finance fee of $3.0 million was paid to the placement agent. The
Company also issued 909,091 warrants to purchase shares of common stock to the
placement agent. The warrants are exercisable for up to five years at an
exercise price of $8.50 per share. Subsequent to year end, the warrant holders
exercised all the outstanding warrants (see Note 16).

     During 1998, the Company issued 51,163 common shares and 51,163 warrants
for $847,000 cash. Of the warrants, 16,667 are exercisable at $15.50 on or
before January 29, 2000 (which have subsequently expired); 21,163 are
exercisable at $20.00 on or before April 20, 2000; and 13,333 are exercisable at
$16.25 on or before April 22, 2000. At December 31, 1999, none of the warrants
have been exercised.

ISSUANCE OF COMMON STOCK UPON CONVERSION OF CONVERTIBLE DEBT

     During 1999, the Company issued $301,241 aggregate principal amount of its
10% convertible debentures, due on June 30, 1999 in exchange for stockholders'
advances of $289,000 including interest existing at December 31, 1998. Upon
entering into the convertible debenture agreement, the Company issued warrants
to purchase 150,621 shares of common stock to the holders of the debentures.
Each warrant gives the holder the right to purchase one common share of the
Company for $2.00 per share on or before February 22, 2000, for $3.00 per share
between February 23, 2000 and February 22, 2001 and $4.00 per share between
February 23, 2001 and February 22, 2002. An amount of $20,000 has been included
in additional paid-in capital as the estimated value attributed to the 150,621
warrants. During

                                      F-16
<PAGE>   68
                                FUTURELINK CORP.

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

1999, the Company repaid $253,000 of the principal amount and $55,000 of
principal and interest was converted into 27,431 common shares such that the
full principal and interest relating to the note has been settled.

     During 1999, the Company issued $500,000 aggregate principal amount of its
8% convertible debentures, due February 28, 2002, convertible at $1.51 per
share. An amount of $125,000 was attributed to the intrinsic value of the
conversion option and was included in additional paid-in capital. Upon entering
into the 8% convertible debenture agreement, the Company issued warrants to
purchase 26,553 of common stock of the Company to the holder of the 8%
convertible debentures at $1.88 per share. The warrants expire on February 28,
2001. An amount of $36,000 was reflected as original issue discount and included
in additional paid-in capital as the estimated value of the warrants. On August
21, 1999, $500,000 of principal and $37,000 of accrued interest and other fees
were converted into 355,836 common shares.

     During 1999, the Company issued 8% senior subordinated convertible
promissory notes and warrants for gross proceeds of $15.0 million. In addition,
warrants to purchase 2,250,000 shares of common stock were issued to note
holders at an exercise price of $8.50 per common share. The notes were initially
due on the earlier of (i) July 19, 2001; (ii) the consummation of a public
offering of the Company's securities; (iii) the completion of a private
placement resulting in gross proceeds of at least $15.0 million; and (iv) the
consummation of a merger, combination or the sale of substantially all of the
Company's assets, or the purchase by a single entity or person of more than 50%
of the Company's voting stock. The notes were initially convertible into common
stock at an exercise price of $8.50 per common share. However, if prior to
maturity, the Company completed a private placement of debt or equity securities
resulting in gross proceeds of at least $15.0 million, and the terms of this
subsequent placement are acceptable to the agent and the noteholders, the notes
will automatically convert as payment for an investment into the securities sold
in the subsequent conversion, and were to be converted at the same price and
terms as that private placement. Concurrent with the private placement described
above, the notes were converted into 2,727,172 common shares. Additional
warrants to purchase 711,818 shares of common stock were also issued. The
warrants are exercisable for up to five years at an exercise price of $8.50 per
common share. As part of the transaction, the Company paid $1.4 million cash and
issued 225,000 warrants to the placement agent as a finance fee. These warrants
are exercisable at $8.50 per share and expire July 27, 2001. Additional issue
costs of $42,592 were incurred. The warrants to purchase 2,475,000 shares of
common stock initially issued under this offering were recorded as a component
of equity since it was known that the notes would convert into the securities of
a subsequent offering. Accordingly, no amount has been recorded to additional
paid-in capital.

     During 1999, the Company issued $8.0 million of 8% Senior Convertible
Promissory notes, of which $7.4 million of notes were converted into 8,579,019
shares of common stock. In addition, 7,696,501 warrants related to these notes
were exercised during 1999.

     During 1998, a stockholder advanced the Company $729,802. Interest incurred
on the loan to July 2, 1998 in the amount of $2,849 was added to the principal
amount owing. $350,000 of the loan was assigned to another stockholder on July
2, 1998. On the same date, both portions of the loan were converted into 225,448
common shares with an ascribed value of $732,651, and an equal number of
warrants. Each warrant entitles the holders to purchase one common share at
$5.00 on or before June 30, 1999 and $6.25 on or before June 30, 2000. At
December 31, 1999, none of the warrants have been exercised.

LOAN RECEIVABLE FROM OFFICER

     On August 1, 1999, the Company loaned $2.0 million to an executive with
recourse which was then used by the executive to purchase 232,829 common shares
of the Company. The loan receivable has been recorded as a reduction of
stockholders' equity (deficit). The shares have been escrowed. On October 1,
1999, 29,129 shares were released from escrow. An additional 29,100 shares will
be released from escrow
                                      F-17
<PAGE>   69
                                FUTURELINK CORP.

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

on a quarterly basis commencing January 1, 2000. So long as the executive
remains employed by the Company, $250,000 of the principal amount of the loan
shall be forgiven on a quarterly basis. The loan bears interest at 5.625% per
year. Interest is payable annually; however, should the executive be employed at
the end of each annual period, the interest will be forgiven at such time.
During the year ended December 31, 1999, the Company recognized $500,000 as
salary expense relating to the services received from the employee in relation
to the loan agreement.

ISSUANCE OF COMMON STOCK FOR SERVICES

     On July 27, 1998, the Company issued 700,000 shares of common stock to
employees, officers and directors of the Company for $3,500. The fair value of
these shares at that time was approximately $2.1 million. The difference between
the fair value and the cash consideration received has been included as
additional paid-in capital and as salary expense for the year ended December 31,
1998.

     During 1998, the Company entered into an agreement for consulting services
which provided for the settlement of fees with shares of the Company's common
stock. The number of shares issued was based on 95% of the average closing price
of the Company's stock during the trading days for the month in question as
quoted on the NASD Over the Counter Bulletin Board. At December 31, 1998,
$50,000 was owing for consulting services in relation to this agreement,
equating to 23,051 shares. During 1999, the 23,051 shares were issued along with
an additional 41,652 shares relating to services performed in 1999.

STOCK OPTION PLAN

     The Company's Stock Option Plan (the "Plan") became effective on June 29,
1998, and was amended on November 30, 1998, September 23, 1999, November 17,
1999 and December 10, 1999. The Plan provides for the issuance of incentive and
non-qualified stock options. The aggregate number of shares which may be issued
pursuant to options under the Plan may not exceed twenty percent of our shares
of common stock issued and outstanding on a fully diluted basis. The maximum
number of shares which may be issued pursuant to options was fixed at 11,000,000
by the Company's board of directors.

     The Plan is administered by the Company's board of directors. Generally,
the board may amend or terminate the Plan if it does not cause any adverse
effect on any then outstanding options or unexercised portions thereof. The
board of directors must obtain the consent of the stockholders to increase the
number of shares covered by the Plan, to change the class of persons eligible to
receive options, or to extend the term of the Plan beyond 10 years. The board of
directors sets the consideration for each option award. All options must
generally have an exercise price equal to at least 85% of the fair market value
of the underlying common stock on the date of the grant. Incentive stock options
must have an exercise price equal to at least 100% of the fair market value of
the underlying common stock on the date of the grant, and options granted to a
person who owns more than 10% of the voting power of our outstanding stock and
any outstanding stock of our subsidiaries must have an exercise price equal to
at least 110% of the fair market value of the underlying common stock on the
date of the grant.

                                      F-18
<PAGE>   70
                                FUTURELINK CORP.

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

     Activity under the Plan is as follows:

<TABLE>
<CAPTION>
                                                                                  OPTIONS OUTSTANDING
                                                                             ------------------------------
                                                                 NUMBER                         WEIGHTED
                                                                   OF         PRICE PER         AVERAGE
                                                                 SHARES         SHARE        EXERCISE PRICE
                                                                ---------    ------------    --------------
<S>                                                             <C>          <C>             <C>
Balance at January 1, 1998..................................           --              --           --
Options granted.............................................      872,500    $2.25-$ 5.85        $4.05
Options canceled............................................      (40,000)   $3.80-$ 5.85        $4.31
                                                                ---------    ------------        -----
Balance at December 31, 1998................................      832,500    $2.25-$ 5.85        $4.05
Options granted.............................................    6,559,000    $1.40-$23.13        $7.90
Options expired.............................................     (117,900)   $1.40-$ 8.50        $3.90
Options exercised...........................................     (252,600)   $1.40-$ 5.85        $4.39
                                                                ---------    ------------        -----
Balance at December 31, 1999................................    7,021,000    $1.40-$23.13        $8.01
                                                                =========    ============        =====
</TABLE>

     The weighted average remaining contractual life and weighted average
exercise price of options outstanding and of options exercisable as of December
31, 1999 were as follows:

<TABLE>
<CAPTION>
                                                     WEIGHTED           OPTIONS
                                   WEIGHTED          AVERAGE        EXERCISABLE AT       WEIGHTED
RANGE OF            OPTIONS        AVERAGE          REMAINING        DECEMBER 31,        AVERAGE
EXERCISE PRICES   OUTSTANDING   EXERCISE PRICE   CONTRACTUAL LIFE        1999         EXERCISE PRICE
---------------   -----------   --------------   ----------------   ---------------   --------------
<S>               <C>           <C>              <C>                <C>               <C>
 $ 1.40-$ 3.80     2,893,500        $ 3.10             2.81            1,054,166          $3.38
 $ 5.00-$ 8.97     2,857,500        $ 6.76             4.11              672,500          $6.28
 $       14.69       500,000        $14.69             4.84                   --             --
 $22.69-$23.13       770,000        $23.01             4.94                   --             --
</TABLE>

     The price at which options were granted during 1998 and 1999 were generally
based upon the market value of the Company's common stock at the time of the
grants. At December 31, 1999, there were options to purchase 11,000,000 shares
of common stock available to grant.

     The weighted average fair value of options granted during 1998 and 1999 was
$2.49 and $8.02 per share, respectively. Pursuant to FAS No. 123, the Company
has elected to continue using the intrinsic value method of accounting for
stock-based awards granted to employees and directors in accordance with APB
Opinion No. 25 and related Interpretations in accounting for its stock option
and purchase plans.

     The Company recorded approximately $1.6 million of net deferred
compensation in the year ended December 31, 1999, for the difference between the
exercise price of certain of the Company's stock options granted under the Plan
and the fair market value of the underlying common stock. Such amount has been
presented as a reduction of stockholders' equity and is being amortized ratably
over the vesting period of the applicable options. The Company amortized an
aggregate of $524,000 of deferred compensation during 1999.

                                      F-19
<PAGE>   71
                                FUTURELINK CORP.

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

Accordingly, no compensation cost has been recognized for its stock option plans
and its stock purchase plan other than that described above. For pro forma
purposes, the estimated value of the Company's stock options to employees is
amortized over the vesting period of the underlying instruments. The results of
applying FAS No. 123 to the Company's options to employees would approximate the
following:

<TABLE>
<CAPTION>
                                                        1998          1999
                                                     ----------    -----------
<S>                                                  <C>           <C>
Net loss
  As reported......................................  $   (5,880)   $   (35,744)
  Pro forma........................................  $   (7,197)   $   (89,041)
Basic and fully diluted loss per share:
  As reported......................................  $    (1.86)   $     (2.50)
  Pro forma........................................  $    (2.27)   $     (6.23)
Basic and diluted weighted average common shares...   3,169,413     14,279,647
</TABLE>

     The pro forma effect on net loss for 1998 and 1999 is not likely to be
representative of the effects on reported net loss for future years.

     The fair value of options granted under the Company's stock option plan
during 1998 and 1999 was estimated on the date of grant using the Black-Scholes
option-pricing model with the following assumptions:

<TABLE>
<CAPTION>
                                                           1998          1999
                                                        ----------    ----------
<S>                                                     <C>           <C>
Weighted average risk-free interest rates.............        5.03%         5.03%
Expected years from vest date to exercise date........  2.1 to 3.5    2.1 to 3.5
Expected stock volatility.............................       135.5%        135.5%
Dividend yield........................................        None          None
</TABLE>

WARRANTS

     The Company has issued warrants to purchase the Company's common stock to
certain individuals or organizations at December 31, 1999 as follows:

     Warrants to acquire 225,448 shares of common stock. Each warrant entitles
the holders to purchase one common share at $6.25 by June 30, 2000.

     Warrants to acquire 51,163 shares of common stock. 16,667 of the warrants
entitles the holders to purchase one common share at $15.50 by January 29, 2000
(which have subsequently expired); 21,163 of the warrants entitles the holders
to purchase one common share at $20.00 per share by April 20, 2000, and; 13,333
of the warrants entitle the holders to purchase one common share at $16.25 per
share by April 22, 2000.

     Warrants to acquire 2,401,041 shares of common stock. Each warrant
initially entitled the holders to purchase one common share at $8.50 by June 30,
2000. However, to induce holders to exercise such warrants, subsequent to
December 31, 1999, the Company offered to pay each holder $0.95 per underlying
share of common stock to compensate such holders for committing their capital to
an early exercise of their warrants per share for aggregate net proceeds to the
Company of $18,008,000 (see Note 16).

     Warrants to acquire 2,475,000 shares of common stock. Each warrant entitles
the holders to purchase one common share at $8.50 by July 27, 2001.

     Warrants to acquire 310,250 shares of common stock, of which 27,750 are
owned by members of management. Each warrant entitles the holders to purchase
one common share at $1.11 or $1.34 by April 6, 2000, by management.

                                      F-20
<PAGE>   72
                                FUTURELINK CORP.

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

     Warrants to acquire 1,620,909 shares of common stock. Each warrant entitles
the holders to purchase one common share at $8.50 by October 15, 2001.

     Warrants to acquire 150,621 shares of common stock. Each warrant entitles
the holders to purchase one common share at $2.00 by February 23, 2013.

     Warrants to acquire 261,124 shares of common stock. Each warrant entitles
the holders to purchase one common share at prices ranging from $1.25 to $8.50
through 2004.

COMMON STOCK ISSUABLE

     At December 31, 1999, the following shares of common stock are issuable
for:

<TABLE>
<S>                                                           <C>
Warrants....................................................   7,495,556
Common stock options........................................   7,021,000
Convertible debentures......................................     918,283
Acquisitions................................................   4,074,426
                                                              ----------
                                                              19,509,265
                                                              ==========
</TABLE>

11. INCOME TAXES

     The income tax benefit differs from the amount computed by applying the
U.S. federal statutory rate to the loss before income taxes as follows (in
thousands):

<TABLE>
<CAPTION>
                                                              YEAR ENDED DECEMBER 31,
                                                              -----------------------
                                                                1998          1999
                                                              ---------    ----------
<S>                                                           <C>          <C>
Tax benefit at U.S. statutory rate (34%)....................   $(2,069)     $(11,866)
Increase (decrease) in taxes resulting from:
  Valuation allowance.......................................     1,690         3,240
  State taxes...............................................      (121)           --
  Non deductible expenses...................................       541         5,717
  Foreign tax rate differences and foreign losses without
     benefit................................................      (258)        2,909
  Other.....................................................        12            --
                                                               -------      --------
Provision (benefit) for income taxes........................   $  (205)     $     --
                                                               =======      ========
</TABLE>

                                      F-21
<PAGE>   73
                                FUTURELINK CORP.

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

     Deferred income taxes reflect the net tax effects of temporary differences
between the carrying amounts of the assets and liabilities for financial
reporting purposes and the amounts used for income tax purposes. Significant
components of the deferred taxes are as follows at December 31, 1998 and 1999
(in thousands):

<TABLE>
<CAPTION>
                                                               1998       1999
                                                              -------    -------
<S>                                                           <C>        <C>
Deferred tax liability:
  Assembled workforce.......................................  $(1,212)   $  (808)
  Depreciation..............................................       --       (467)
  Cash to accrual adjustment................................       --       (392)
                                                              -------    -------
     Total deferred tax liability...........................   (1,212)    (1,667)
                                                              -------    -------
Deferred tax asset:
  Net operating loss carryforwards..........................    1,905      7,084
  Bad debt reserve..........................................       --        475
  Inventory reserve.........................................       --        100
  Deferred compensation.....................................       --        224
  Other.....................................................      368        293
                                                              -------    -------
Deferred tax assets.........................................    2,273      8,176
Valuation allowance.........................................   (2,273)    (7,097)
                                                              -------    -------
                                                                   --      1,079
                                                              -------    -------
Net deferred tax liability..................................  $(1,212)   $  (588)
                                                              =======    =======
</TABLE>

     The Company has recorded a valuation allowance for the full amount of
deferred tax assets in light of its history of operating losses since its
inception. When recognized, $288,000 of the valuation allowance will reduce
goodwill. The remaining balance may be available to offset future tax expense.
The net change in the valuation allowance for deferred tax assets was an
increase of approximately $4.8 million resulting primarily from an increase in
net operating losses.

     The Company has U.S. net operating losses carryforward of $8.7 million
which begins to expire in 2012. Certain Company ownership changes can
significantly limit the utilization of net operating loss carryforwards in the
period following the ownership change. The Company has not determined whether
such changes have occurred and the effect such changes could have on its ability
to carry forward all or some of the U.S. net operating losses.

     The Company has non-capital losses carried forward for Canadian income tax
purposes of $10.6 million. These losses expire beginning in 2001.

12. RELATED PARTY TRANSACTIONS

     On August 1, 1999, the Company loaned $2.0 million to an officer of the
Company that was used to purchase 232,829 shares of common stock (see Note 10).

     During the year ended December 31, 1999, management of the Company
participated in the 8% senior subordinated convertible promissory note offering
by purchasing notes totaling $433,000 (see Note 9).

     During the year ended December 31, 1999, the Company provided services and
products of $78,000 to Jaws Technologies Inc., an entity of which a Director was
also a Director of the Company. An amount of $57,000 is owing from Jaws
Technologies Inc. at December 31, 1999. In addition, the Company

                                      F-22
<PAGE>   74
                                FUTURELINK CORP.

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

obtained services from Jaws Technologies Inc. in the amount of $12,000. At
December 31, 1999, $2,000 remains owing by the Company.

     During the year ended December 31, 1998, the Company provided services and
products of $40,000 to Jaws Technologies Inc. An amount of $37,000 was owing
from Jaws Technologies Inc. at December 31, 1998.

     During the year ended December 31, 1999, the Company provided services and
products of $550,000 to Willson Stationers Ltd. and e-Supplies Inc., related
entities of which a previous Director was also a Director of these companies. At
December 31, 1999, $543,000 remained due from these entities. An allowance for
doubtful accounts has been recorded for the entire amount due to the uncertainty
of collection.

     During the year ended December 31, 1998, the Company provided services and
products of $64,000 to Willson Stationers Ltd. At December 31, 1998, an amount
of $59,000 was owing from Willson Stationers Ltd. In addition, the Company
obtained $21,000 of products from Willson Stationers Ltd. during the period. At
December 31, 1999, $25,000 remains due to this entity.

     During 1998, two of the Company's stockholders advanced the Company
$289,000. In addition, one of the Company's stockholders advanced the Company an
additional $17,000 which was outstanding at December 31, 1998. These amounts
were repaid during 1999.

13. COMMITMENTS AND CONTINGENCIES

COMMITMENTS

     The Company has various leases for office premises which expire on various
dates through 2004. The future minimum lease payments at December 31, 1999 under
operating leases are as follows (in thousands):

<TABLE>
<S>                                                             <C>
2000........................................................    $1,515
2001........................................................     1,081
2002........................................................       399
2003........................................................       165
2004........................................................        71
                                                                ------
Total future minimum lease payments.........................    $3,231
                                                                ======
</TABLE>

     Rent expense was $118,000 and $937,000 for the years ended December 31,
1998 and 1999, respectively.

CONTINGENCIES


     From time to time the Company is a defendant or plaintiff in litigation
arising in the ordinary course of business. To date, other than litigation
SmallCaps OnLine Group LLC brought and the subsequent settlement of that action,
no litigation has had a material effect on the Company and, the Company is not a
party to any material litigation except as described below.



     In the past, persons formerly associated with the Company, which may
include one or more of our former executive officers or directors, may have
engaged in activities as part of an effort to profit from unlawful trading
activity in our stock. As a result, the Company may be subject to civil or
criminal actions, fines or penalties. If any proceedings are commenced against
the Company, the Company will need to spend significant money and management
time in the Company's defense. If a court determined


                                      F-23
<PAGE>   75
                                FUTURELINK CORP.

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)


that the Company participated in these activities, the Company could be liable
for damages or penalties that would have a material adverse effect on the
Company's financial condition and results of operation.



     SmallCaps OnLine Group LLC, previously known as Bridge Technology Group
LLC, sued the Company on January 12, 2000 in the New York County Supreme Court
to recover fees the Company allegedly owed for advisory and investor relations
services. SmallCaps' complaint requested compensation for fees totaling $5.1
million, as well as warrants to purchase an aggregate of 3,289,689 shares of
common stock at exercise prices ranging from $1.00 to $8.50 per share. The total
value of the damages SmallCaps claimed was $110.0 million. On February 11, 2000,
the Company settled SmallCaps' complaint by agreeing to pay SmallCaps $5.0
million on or before March 14, 2000, and to issue to SmallCaps warrants to
purchase an aggregate of 3,000,000 shares of our common stock at exercise prices
ranging from $8.50 to $22.50 per share, subject to anti-dilution protection.
Since the issuance of these warrants, their exercise prices have been adjusted
and now range from $8.33 to $22.05 per share. The Company issued the warrants to
SmallCaps on March 1, 2000 and paid SmallCaps the $5.0 million on March 14,
2000. The total value of the settlement on February 11, 2000 was $65.0 million
which has been recorded in the accompanying consolidated balance sheets as a
charge to paid-in capital.



     On November 6, 1998, the Company's former Chief Executive Officer and a
director, Mr. Cameron Chell, entered into a Settlement Agreement with The
Alberta Stock Exchange to resolve a pending investigation into Mr. Chell's
alleged breaches of Alberta Stock Exchange rules and by-laws. As part of the
Settlement Agreement, Mr. Chell acknowledged that he had breached certain duties
of supervision, disclosure, or compliance relating to various offers and sales
of securities, and Mr. Chell was prohibited from receiving Alberta Stock
Exchange approval in any capacity for a five year period, subjected to a
CDN$25,000 fine and a three year period of enhanced supervision. The Company
cannot be certain that the Settlement Agreement with the Alberta Stock Exchange
ends all proceedings with regard to these matters.



     On January 20, 2000, the Company commenced a proceeding in Canada against
Mr. Chell, various other former employees of and consultants to the Company and
various other defendants alleging that these defendants misappropriated a
corporate opportunity in breach of fiduciary and contractual obligations. Most
of these defendants made counterclaims seeking, among other things, damages for
interference with their economic interests and for severance compensation in the
form of cash and stock options. The Company entered into a settlement agreement
with the defendants effective April 26, 2000 that has the following key terms:



     - Mr. Chell will be entitled to exercise options to acquire 175,000 shares
       of common stock that were scheduled to vest June 1, 2000,



     - Mr. Chell or his nominee shall pay to us $400,000 in settlement of a
       related party debt that involved Mr. Chell, and



     - All other claims have been dropped by all parties, who have provided
       mutual releases, with the claim and counterclaims to be discontinued.



     On January 7, 2000, Tony Bryson, an individual who had previously been
employed by the Company, filed a lawsuit against the Company seeking $180,000
for the value of lost stock options, salary and benefits the Company allegedly
promised him, and other damages he allegedly sustained as a result of alleged
actions by the Company. This lawsuit has been filed under Canadian law. Canadian
law provides for severance pay to any employee of the Company Canadian
operations in an amount that is appropriate based on, among other things, the
nature of the position held by the employee and the length of time the employee
worked for the company, unless the employer can establish that the termination
was for just cause. The exact amount of severance pay is often disputed between
employers and employees in Canada.


                                      F-24
<PAGE>   76
                                FUTURELINK CORP.

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)


Accordingly, there is a risk that in addition to this lawsuit, one or more other
former employees will make claims for cash severance pay as well as options.



     On January 26, 2000, Michael Chan filed a suit in the Court of Queen's
Bench of Alberta, Judicial District of Calgary alleging that FutureLink Alberta
breached its contract to deliver him options to purchase 250,000 shares of
FutureLink Alberta at $1.00 per share. Mr. Chan seeks 50,000 shares of common
stock or, alternatively, damages of approximately $1.5 million in cash, general
damages of approximately $200,000 and punitive damages of approximately
$200,000. We have filed a statement of defense in this action refuting Mr.
Chan's claims.



     Under certain California State regulatory requirements, the Company was to
offer a rescission of certain options granted to California employees. The
Company applied for and has received an order from the State of California
approving the proposed terms of the rescission offer. The rescission offer was
made with respect to 1,240,500 options at an exercise price of $8.50, and 40,000
shares issued in relation to other options exercised to date which offer will
remain open subsequent to December 31, 1999. In light of market prices for the
Company's common stock recently being significantly in excess of the exercise
price, the Company received rescission notices from only three option holders in
January 2000 for a total of 29,000 options. The Company paid $31,800 plus
interest to these option holders in exchange for cancellation of their options
under the rescission offer.



     A claim has been filed against the Company in the amount of approximately
$340,000 plus costs for damages from alleged Company misrepresentations and
interference with contractual relations regarding a sale transaction between two
third parties involving shares of the Company's common stock. The Company has
entered into an indemnity agreement with a former principal of the Company
whereby the former principal defends this action on behalf of the Company, bears
the costs of legal counsel and agrees to indemnify the Company for any losses.
Management believes the claim is without merit.



     A claim has been filed against the Company's subsidiary, FutureLink Alberta
in the amount of $194,000 plus costs for damages and loss of rent related to a
purported lease agreement with respect to a building in Calgary, Alberta,
Canada. The Company is counter claiming an amount of approximately $266,000
against the claimant. The plaintiff has now leased the premises in question to a
third party, thereby mitigating its alleged losses. However, it is impossible at
this time for the Company to predict with any certainty the outcome of such
litigation. Management believes the claim is without merit and will defend the
Company's position vigorously.



     A claim was filed against the Company's subsidiary, SysGold (now merged
into FutureLink Alberta) by TAP Consulting Ltd. in the amount of approximately
$102,000 for damages and loss of compensation relating to services provided to
the Company. Management believes the claim is without merit. An indemnity
agreement has been obtained from the previous stockholders of SysGold.



     The Company is currently aware of other former employees and consultants
who may make claims against the Company that represent, in the aggregate, $1.5
million in damages which includes approximately 95,000 stock options and
monetary damages. At this time, management is unable to determine an amount, if
any, it may ultimately be required to pay to settle these issues.



     The Company's pending lawsuits involve complex questions of fact and law
and could require the expenditure of significant costs and diversion of
resources to defend. Although management believes the outcome of the Company's
outstanding legal proceedings, claims and litigation will not have a material
adverse effect on the Company's business, results of operations or financial
position, the results of litigation are inherently uncertain. The Company is
unable to make an estimate of the range of possible loss from outstanding
litigation, except as noted, and no amounts have been provided for such matters
in the consolidated financial statements.


                                      F-25
<PAGE>   77
                                FUTURELINK CORP.

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

14. SEGMENT INFORMATION

     The Company's activities are conducted in one operating segment with all
activities relating to the sales and support of information technology
solutions. These activities for all of 1998 and virtually all of 1999 were
carried out in two geographic segments, Canada and the United States. On
December 22, 1999, the Company acquired KNS which is located in the United
Kingdom.

<TABLE>
<CAPTION>
                                                         DECEMBER 31, 1998
                                              ----------------------------------------
                                              CANADA      U.S.      EUROPE     TOTAL
                                              ------    --------    ------    --------
<S>                                           <C>       <C>         <C>       <C>
Revenue.....................................  $2,437    $     --     $ --     $  2,437
Long-lived assets...........................  $8,966    $      3     $ --     $  8,969
</TABLE>

<TABLE>
<CAPTION>
                                                         DECEMBER 31, 1999
                                              ----------------------------------------
                                              CANADA      U.S.      EUROPE     TOTAL
                                              ------    --------    ------    --------
<S>                                           <C>       <C>         <C>       <C>
Revenue.....................................  $7,178    $  6,215     $207     $ 13,600
Long-lived assets...........................  $9,556    $187,560     $722     $197,838
</TABLE>

     Long-lived assets consist of property and equipment, goodwill, and
assembled workforce.

15. 401(k) PLAN

     The Company assumed several 401(k) plans in connection with the
acquisitions in 1999. Pursuant to these plans, employees may elect to reduce
their current compensation by up to the statutorily prescribed annual limit and
to have the amount of such reduction contributed to these plans. These plans
permit the Company, but do not require, additional matching contributions to
these plans on behalf of all participants in these plans. Through December 31,
1999, the Company has not made any contributions to these plans.

16. SUBSEQUENT EVENTS

     On January 31, 2000, the Company completed the acquisition of Vertical
Software, Inc. and on February 29, 2000 the Madison Technology Group of
Companies for an aggregate purchase price of $85.1 million consisting of cash of
$14.6 million, a promissory note of $7.3 million due July 2000; and 3,001,486
shares of common stock valued at $63.2 million. The acquisitions will be
accounted for by the purchase method, and the estimated excess purchase price
over the estimated fair value of net assets acquired of $82.9 million will be
allocated to goodwill and amortized over five years.

     On February 3, 2000, the Company entered into a definitive agreement to
acquire Charon Systems Inc. for $6.9 million in cash and 1,072,940 shares of
common stock.

     On February 11 and February 29, 2000, warrant holders exercised their
rights to acquire 2,401,041 shares of common stock at an effective price of
$7.50 per share for aggregate net proceeds to the Company of $18.0 million. The
warrants had an adjusted (for anti-dilution) exercise price of $8.40 per share
and the holders of these warrants effectively paid $7.50 per share after
adjustment for a warrant exercise fee of $0.90 for each warrant exercised.


     On April 28, 2000, the Company completed a private placement of
approximately $15 million of common equity with institutional private equity
investors. As part of this private placement, the Company issued to the
investors 1,764,704 shares of common stock and warrants to purchase 441,176
shares of common stock at $9.25 per share.



     From January 1, 2000 through April 29, 2000, certain note holders of
convertible debt converted $796,000 of debt into 865,568 shares of common stock
in accordance with the terms contained in the convertible debt agreements.


                                      F-26
<PAGE>   78

                                 EXHIBIT INDEX


<TABLE>
<CAPTION>
EXHIBIT
 NUMBER                            DESCRIPTION
-------                            -----------
<C>        <S>
  2.1      Share Purchase Agreement dated August 4, 1998 between
           FutureLink Distribution Corp., a Colorado corporation,
           Donald A. Bialik, Olivia B. Bialik, Bialik Family Trust,
           Riverview Management Corporation, SysGold Ltd., and
           FutureLink Distribution Corp., an Alberta corporation(1)
  2.2      Targetco Acquisition Agreement dated August 3, 1998 between
           FutureLink Distribution Corp., a Colorado corporation, and
           FutureLink Alberta(1)
  2.3      Amending Agreement to Share Purchase Agreement dated August
           21, 1998 between FutureLink Distribution Corp., a Colorado
           corporation, Donald A. Bialik, Olivia B. Bialik, Bialik
           Family Trust, Riverview Management Corporation, SysGold
           Ltd., and FutureLink Alberta(3)
  2.4      Agreement and Plan of Reorganization and Merger dated June
           2, 1999 between FutureLink Distribution Corp., FutureLink
           California Acquisition Corp., Executive Lan Management,
           Inc., dba Micro Visions, and the selling shareholders of
           Micro Visions(6)
  2.5      Agreement and Plan of Merger dated August 1, 1999 between
           FutureLink Distribution Corp. and FutureLink California
           Acquisition Corporation, a Delaware corporation(8)
  2.6      Agreement and Plan of Reorganization and Merger dated
           September 7, 1999 between FutureLink Distribution Corp.,
           FutureLink Pleasanton Acquisition Corp., CN Networks, Inc.,
           and the selling shareholders of CN Networks(9)
  2.7      Agreement and Plan of Reorganization and Merger dated
           September 7, 1999 between FutureLink Distribution Corp.,
           FutureLink Michigan Acquisition Corp., Async Technologies,
           Inc., and the selling shareholders of Async Technologies(10)
  2.8      Certificate of Merger dated October 15, 1999 of FutureLink
           Distribution Corp., a Colorado corporation, into FutureLink
           California Acquisition Corp., a Delaware corporation(8)
  2.9      Amending Agreement dated October 15, 1999 to Agreement and
           Plan of Reorganization and Merger between FutureLink Corp.,
           FutureLink California Acquisition Corp., and the selling
           shareholders of Micro Visions(8)
  2.10     Amending Agreement dated October 29, 1999 to Agreement and
           Plan of Reorganization and Merger, between FutureLink
           Distribution Corp., FutureLink Michigan Acquisition Corp.,
           Async Technologies, and the selling shareholders of Async
           Technologies(10)
  2.11     Amending Agreement dated October 31, 1999 to Agreement and
           Plan of Reorganization and Merger between FutureLink Corp.,
           FutureLink Pleasanton Acquisition Corp., CN Networks, and
           the selling shareholders of CN Networks(9)
  2.12     Amending Agreement dated November 14, 1999 to Agreement and
           Plan of Reorganization and Merger between FutureLink Corp.,
           FutureLink Michigan Acquisition Corp., Async Technologies,
           and the selling shareholders of Async Technologies(10)
  2.13     Agreement for the Sale and Purchase of the Entire Issued
           Share Capital of KNS Holdings Limited dated November 15,
           1999 between FutureLink Corp. and the selling shareholders
           of KNS Holdings(11)
  2.14     Amending Agreement dated November 26, 1999 to Agreement and
           Plan of Reorganization and Merger between FutureLink Corp.,
           FutureLink Michigan Acquisition Corp., Async Technologies,
           and the selling shareholders of Async Technologies(10)
  2.15     The Agreement and Plan of Reorganization and Merger dated
           December 2, 1999 by and among FutureLink Corp., FutureLink
           Maryland Acquisition Corp., Vertical Software, Inc., Curtis
           Eshelman and James C. Harvey(13)
</TABLE>

<PAGE>   79
                           EXHIBIT INDEX (CONTINUED)


<TABLE>
<CAPTION>
EXHIBIT
 NUMBER                            DESCRIPTION
-------                            -----------
<C>        <S>
  2.16     Supplemental Agreement dated December 20, 1999 to Agreement
           for Sale and Purchase of the Entire Issued Share Capital of
           KNS Holdings, between FutureLink Corp. and the selling
           shareholders of KNS Holdings(11)
  2.17     The Agreement and Plan of Reorganization and Merger dated
           February 1, 2000 by and among FutureLink Corp., FutureLink
           Delaware Acquisition Corp., MicroLAN Systems Inc., Madison
           Consulting Resources Inc., Madison Consulting Resources (NJ)
           Inc., Ira Silverman, Richard Silverman, Adam Silverman and
           Adam Fox(14)
  3.1      Certificate of Incorporation of FutureLink Corp.(8)
  3.2      Bylaws of FutureLink Corp.(8)
 10.1      Stock Option Plan dated June 29, 1998(1)
 10.2      First Amendment to Second Amended and Restated Stock Option
           Plan dated December 10, 1999, as amended(12)
 10.3      Agency Agreement dated April 14, 1999 between FutureLink
           Distribution Corp. and Commonwealth Associates, L.P.(5)
 10.4      Letter Agreement dated December 6, 1999 between FutureLink
           Distribution Corp. and Thomson Kernaghan & Co. Limited(12)
 10.5      Advisory Agreement dated May 1, 1999 between FutureLink
           Distribution Corp. and Commonwealth Associates, L.P.(5)
 10.6      Agency Agreement dated July 1, 1999 between FutureLink
           Distribution Corp. and Commonwealth Associates, L.P.(7)
 10.7      Loan Agreement dated August 1, 1999 between FutureLink Corp.
           and Vincent Romano(7)
 10.8      Securities Purchase Agreement dated October 15, 1999 between
           FutureLink Corp., Pequot Private Equity Fund II, L.P. and
           certain other investors(8)
 10.9      Amended and Restated Registration Rights Agreement dated
           April 28, 2000 between FutureLink Corp., Pequot Private
           Investment Fund II, L.P., and certain other investors
           (blacklined to the Registration Rights Agreement dated
           October 15, 1999 between the parties which was filed as an
           Exhibit to the Registration Statement on Form SB-2 filed on
           February 11, 2000)(16)
 10.10     Securities Purchase Agreement dated April 28, 2000 between
           FutureLink Corp., Pequot Private Equity Investment Fund II,
           L.P. and Pequot Endowment Fund, L.P.(16)
 10.11     Form of Warrant to Purchase Shares of Common Stock(16)
 10.12     Registration Rights Agreement dated December 6, 1999 between
           FutureLink Corp. and CPQ Holdings, Inc.(12)
 10.13     Securities Purchase Agreement dated December 6, 1999 between
           FutureLink Corp. and CPQ Holdings, Inc.(12)
 10.14     Employment Agreement dated June 1, 1999 between Philip
           Ladouceur and FutureLink Distribution Corp.(12)(17)
 10.15     Employment Agreement dated September 30, 1999 between Glenn
           C. Holmes and FutureLink Corp.(12)
 10.16     Employment Agreement dated August 1, 1999 between Vincent
           Romano and FutureLink Corp.(12)
 10.17     Client/Agency Agreement dated August 7, 1999 between Sicola,
           Martin, Koons & Frank, Inc. and FutureLink Distribution
           Corp., as revised(12)
</TABLE>

<PAGE>   80
                           EXHIBIT INDEX (CONTINUED)


<TABLE>
<CAPTION>
EXHIBIT
 NUMBER                            DESCRIPTION
-------                            -----------
<C>        <S>
 10.18     Master Loan and Security Agreement dated November 3, 1999
           between Transamerica Business Credit Corporation, FutureLink
           Corp. and FutureLink Micro Visions Corp.(12)
 10.19     Security Agreement dated November 3, 1999 between
           Transamerica Business Credit Corporation and FutureLink
           Distribution Corp.(12)
 10.20     Master Lease and Financing Agreement dated November 15, 1999
           between Compaq Financial Services and FutureLink Corp.(12)
 10.21     Master Lease Agreement dated December 16, 1999 between
           EMC(2) Corporation and FutureLink Corp.(12)
 10.22     Revised Offer to Lease dated March 24, 1998 between Bow
           Valley Square Management Ltd. and SysGold, Ltd., as amended,
           for 250 6th Avenue, Calgary(1)
 10.23     Lease Agreement dated September 23, 1999 between Kilroy
           Realty, L.P., Kilroy Realty Corporation, and FutureLink
           Distribution Corporation for 220 Technology Drive, Irvine
           and assignment thereof dated October 15, 1999(12)
 10.24     Microsoft Certified Solution Provider Agreement dated
           January 28, 2000 between Microsoft and FutureLink
           Corp.(15)(18)
 10.25     Microsoft Application Services Agreement dated December 23,
           1999 between Microsoft and FutureLink Corp.(12)(18)
 10.26     Final Invoice/Enrollment Contract (MSCP) dated April 28,
           1998 between Microsoft and FutureLink Corp.(1)
 10.27     Direct Commercial Service License Agreement dated May 21,
           1999 between Microsoft and FutureLink Distribution
           Corp.(12)(18)
 10.28     Service Agreement dated June 1, 1998 between Willson
           Stationers and FutureLink Alberta(1)
 10.29     Solution Provider Contract dated July 27, 1998 between IBM
           Canada Ltd. and FutureLink/ SysGold Ltd.(1)
 10.30     Hosting Services Distributor Agreement (version 4) dated
           November 12, 1998 between Onyx Software and FutureLink
           Distribution Corp.(12)
 10.31     Onyx Software License Agreement dated August 5, 1998 between
           Onyx Software and FutureLink Distribution Corp.(12)
 10.32     Alliance Partner Agreement dated October 26, 1998 between
           Great Plains Software and FutureLink Distribution Corp.(12)
 10.33     Citrix Solutions Network Gold Renewal Membership Agreement
           dated July 16, 1999 between Citrix and FutureLink
           Distribution Corp.(12)(18)
 10.34     Citrix Solutions Network Platinum Renewal Membership
           Agreement dated April 20, 1999 between Citrix and Async
           Technologies(12)(18)
 10.35     Information Systems Services Agreement dated January 19,
           1999 between FutureLink Alberta and Numac Energy, Inc.(12)
 10.36     Information Systems Services Agreement dated July 1, 1999
           between Canadian Natural Resources, Ltd. and FutureLink
           Alberta(12)
 10.37     Alliance Partner Agreement dated February 12, 1999 between
           FutureLink Alberta and JAWS Technologies(1)
 10.38     Master Consulting Agreement dated December 1, 1998 between
           Ameriquest Mortgage Company and Micro Visions(12)
</TABLE>

<PAGE>   81
                           EXHIBIT INDEX (CONTINUED)


<TABLE>
<CAPTION>
EXHIBIT
 NUMBER                            DESCRIPTION
-------                            -----------
<C>        <S>
 10.39     Internet Data Center Services Agreement dated May 7, 1999
           between Exodus Communications, Inc. and Micro Visions(12)
 10.40     Form of EMC(2) Corporation Software License Agreement(12)
 23.1*     Consent of Independent Auditors
 27.1      Financial Data Schedule(19)
</TABLE>


-------------------------
 * Filed herewith.

 (1) Included as an Exhibit to FutureLink's Registration Statement on Form SB-2
     filed August 24, 1998.

 (2) Included as an Exhibit to FutureLink's Amendment No. 1 to Registration
     Statement on Form SB-2 filed October 23, 1998.

 (3) Included as an Exhibit to FutureLink's Amendment No. 2 to Registration
     Statement on Form SB-2 filed November 24, 1998.

 (4) Included as an Exhibit to FutureLink's Amendment No. 3 to Registration
     Statement on Form SB-2 filed December 14, 1998.

 (5) Included as an Exhibit to FutureLink's Quarterly Report on Form 10-QSB for
     period ended March 31, 1999, filed May 20, 1999.

 (6) Included as an Exhibit to FutureLink's Current Report on Form 8-K filed
     June 16, 1999.

 (7) Included as an Exhibit to FutureLink's Quarterly Report on Form 10-QSB for
     period ended June 30, 1999, filed August 18, 1999.

 (8) Included as an Exhibit to FutureLink's Current Report on Form 8-K filed
     October 27, 1999.

 (9) Included as an Exhibit to FutureLink's Current Report on Form 8-K filed
     November 23, 1999.

(10) Included as an Exhibit to FutureLink's Current Report on Form 8-K filed
     December 8, 1999.

(11) Included as an Exhibit to FutureLink's Current Report on Form 8-K filed
     January 6, 2000.

(12) Included as an Exhibit to FutureLink's Registration Statement on Form SB-2
     filed February 11, 2000.


(13) Included as an Exhibit to FutureLink's Current Report on Form 8-K filed
     February 14, 2000.



(14) Included as an Exhibit to FutureLink's Current Report on Form 8-K filed
     March 15, 2000.



(15) Included as an Exhibit to FutureLink's First Amendment to Registration
     Statement on Form SB-2 filed April 14, 2000.



(16) Included as an Exhibit to FutureLink's Second Amendment to Registration
     Statement on Form SB-2 filed May 3, 2000.



(17) We entered into an employment agreement with Raghu Kilambi on June 1, 1999,
     which we amended on October 8, 1999 that is substantially identical in all
     material respects to our employment agreement with Mr. Ladouceur, except as
     to salary and bonus provisions. Mr. Kilambi's base salary is $180,000 per
     year and he is entitled to receive a performance bonus of up to $180,000.



(18) Some of our subsidiaries are parties to agreements with the same party that
     are substantially identical in all material respects.



(19) Filed electronically with FutureLink Annual Report on Form 10-KSB for the
     year ended December 31, 1999 filed March 30, 2000.