<PAGE>   1
FORM 10KSB


                      SECURITIES AND EXCHANGE COMMISSION

                            WASHINGTON, D.C 20549

                                 FORM 10-KSB

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

                   For the fiscal year ended June 30, 2001

                             MegaChain.com, Ltd.
                 -------------------------------------------
                               (Name of Issuer)


            Delaware                                     11-3177042
-------------------------------                     --------------------
(State or other jurisdiction of                        (IRS employer
 incorporation or organization)                    identification number)



 34 West 8th Avenue Vancouver, BC, CANADA                  V5Y 1M7
------------------------------------------              --------------
 (Address of principal executive offices)                 (Zip Code)

Registrant's telephone number (604) 873-3847
                              ---------------

Securities to be registered pursuant to 12(b) of the Act:

                             Title of each class
                        Name of each exchange on which
                             To be so registered
                        each class is to be registered

None                                    None
---------------                    ---------------

None                                    None
---------------                    ---------------


Securities to be registered pursuant to Section 12(g) of the Act:

                       Common stock, Par Value $0.0001
                 ---------------------------------------------
                               (Title of class)

                                Not Applicable
                 ---------------------------------------------
                               (Title of class)

<PAGE>   2



                                    INDEX

<TABLE>
<CAPTION>
                                                                            PAGE NO.
<S>                                                                        <C>
PART I   DESCRIPTION OF BUSINESS

Item 1   Description of Business
Item 2   Management Discussion and Analysis or Plan of Operation
Item 3   Description of Property
Item 4   Security Ownership of Certain Beneficial Owners and Management
Item 5   Directors, Executive Officers, Promoters And Control Persons
Item 6   Executive Compensation
Item 7   Certain Relationships and Related Transactions
Item 8   Legal Proceedings
Item 9   Market for Common Equity and Related Stockholder Matters
Item 10  Recent Sales of Unregistered Securities
Item 11  Description of Securities
Item 12  Indemnification of Officers and Directors
Item 13  Financial Statements and Exhibits
Item 14  Changes In and Disagreements with Accountants on Accounting and
Financial Disclosure

PART II  FINANCIAL INFORMATION
           Financial Statements and Exhibits
             INDEPENDENT AUDITORS' REPORT                                       F-1
             CONSOLIDATED BALANCE SHEETS                                        F-2
             CONSOLIDATED STATEMENTS OF OPERATIONS                              F-3
             CONSOLIDATED STATEMENT OF STOCKHOLDERS'
                 EQUITY (DEFICIT)                                               F-4
             CONSOLIDATED STATEMENTS OF CASH FLOWS                              F-5
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS                         F-7-13

PART III  EXHIBITS
</TABLE>

<TABLE>
<CAPTION>
Exhibit       SEC Ref.           Title of Document
Page
  No.           No.
<S>         <C>              <C>
  *1         (3)(i),(4)       Certificate of Incorporation, as amended
  *2          (3)(ii)         By-Laws
  *3           (10)           Form of Options granted to Executive
                               Officers
  *4           (10)           Form of Options granted to Consultants
  *5           (21)           Subsidiaries
  *6           (10)           Management Agreement
  *7           (10)           Option Agreement
  *8           (10)           Option Agreement for EEC
  *9           (10)           Licence Agreement for UK
  *10          (10)           New Option Agreement for EEC
  *11          (10)           Engagement of Services
  *12          (10)           Engagement of Services
   13          (10)           Consulting Agreement with Samuel Skipper
   14          (10)           Consulting Agreement with Stuart Brazier
</TABLE>

<PAGE>   3

     -   Previously filed with the Company's Registration Statement on Form
         10-SB/A filed March 16, 2000 or the Company's Form 10-KSB for the
         fiscal year ended June 30, 2000.

     -
SIGNATURES




                                    PART I

ITEM 1.   Description of Business

(a)  Business Development.

MegaChain.com Ltd., ("MegaChain" or the "Company") was originally incorporated
as EC Capital Ltd. ("EC"), in the State of Delaware on September 10, 1993. In
October 1995, the Company completed a public offering of 1,100,000 shares of
common stock and received net proceeds of approximately $472,000.

In September 1996, the Company acquired Northern Lights Software, Ltd., a New
York Corporation that provided training and consulting services to SQL Server
Datatbases ("Northern NY"), by issuing 8,000,000 shares of its common stock in
exchange for 7,000,000 issued and outstanding shares of Northern NY.

The Company then split its outstanding shares on a two-for-one basis and
changed its name to Northern Lights Software Ltd. In the first half of 1997
NORTHERN NY ceased operations due to under capitalization and significant
losses from cost overruns. Northern NY remains inactive to date.

In September 1997 the Company changed its name to Formquest International Ltd.
Formquest acted as a holding company and never had any operations. In February
1999, Formquest disposed Of the assets of its subsidiary, Northern Lights
Software Ltd. to an entity controlled by a principal stockholder, Mr. John
Formicola, for the assumption of liabilities in the amount of $463,593 as
disclosed in the Financial Statements.

In February, 1999 the Company acquired all of the issued and outstanding
shares of 573795 BC Ltd. ("573795"), a company incorporated in October of 1998
and organized under the laws of the Province of British Columbia, Canada by
issuing 6,000,000 common shares to 573795's shareholders. Messrs Bill and Tom
Lavin were the sole shareholders of 573795. Subsequent to the acquisition
Messrs Lavin owned approximately 46 percent of the issued and outstanding
stock of Formquest.

In April, 1999, the Company completed the sale of 2,000,000 shares of common
stock at a price of $0.50 per share resulting in $958,000. The Company also
changed its name to MegaChain.com Ltd.

In August, 1999, the shareholders authorized an additional 10,000,000, $0.0001
par value common shares as well as the creation of 5,000,000, $0.0001 par
value preferred shares without attributes.

<PAGE>   4

Effective as of December 28, 2000, the Company implemented a 1 for 20 reverse
split of its common stock and began trading under the new stock symbol,
"MGCC".

Effective as of June 26, 2001, the Company implemented a 1 for 4 reverse split
of its common stock and began trading under the new stock symbol, "MGCA".

MegaChain is devoting substantially all of its present efforts in securing and
establishing its business, and although its planned operations have commenced
there have been no significant revenues derived therefrom.

MegaChain is in the business of electronic direct marketing [EDM]. To this end
it has designed and created a software system that uses the Internet, email
and a multi-tiered commission program for the purpose of advertising websites
and their goods and services.

Megachain intends to act as an Application Service Provider [ASP] that
provides this software to businesses interested in creating their own email
marketing campaigns. The software system tracks responses to email
advertisements, identifying the individual that responded and the
corresponding individual or individuals who referred them. It also tracks the
subsequent omissions generated by those responses and to whom those
commissions are due.

The software is based on a relationship between the vendor, who agrees to pay
for referrals and sales due to email advertising sent by the system and
individuals that sign up as agents to proliferate these emails. Agents agree
to forward vendor email to friends, relatives and business associates and are
promised commissions for those individuals they contact who respond to the
email incentives.

The software is capable of supporting and tracking up to 100 levels of agents,
but for most purposes referral commissions will be paid to a maximum of ten
levels. The amount of commissions payable to the agent will be clearly posted
for each incentive that is forwarded.

Megachain intends to create revenue streams both by charging set-up and
maintenance fees and sharing in the commissions generated by the referrals.

Agents may increase their chance for earning commissions by recruiting other
agents to participate in the referral program as well. The software tracks who
is being recruited and by whom and appropriately credits each agent when an
individual responds to an email advertisement.

An individual becomes an agent upon completion of the agent registration form.
The necessity of a unique name and email address insures that each agent can
only register once. Upon registration agents receive a user ID and password
which allows them to enter a part of the web site that displays details
including commissions paid to date, commissions due, number o responses per
email incentive from their list of contacts and other pertinent information.

<PAGE>   5

When a vendor creates an email advertisement, the database records the product
or offer description, the amount of commission an agent will be paid for each
sale, email address or web site visit, the number of levels of subagents that
commissions will be paid to and the amount of commissions that each level of
sub-agent will receive.

An email that contains details of the product or service being advertised, the
commissions available and a sample of the actual advertisement is then sent
from the vendor to every agent. Each agent decides whether to forward the
advertisement to all of his personal email contacts, to only some of them or
not to forward the particular advertisement at all.

Management anticipates that the MegaChain system will allow agents with
personal email lists of their own [such as are contained in contact management
software packages like 'Outlook' and 'Maximizer'], to easily add existing
lists to their MegaChain email list.

The email direct marketing field is rapidly becoming more competitive. There
are a growing number of businesses that seek to create 'permission-based',
opt-in' or 'specific interest' targeted- email advertising services. To date,
the Company is aware of only one other competitor that is addressing the need
for a software system that tracks multi-tiered, commission based referrals.
The Company believes the MegaChain software, by virtue of the fact that it can
create revenue streams for any existing company with a database [as well as
individuals], is positioned well to compete with other email direct marketing
programs.

The agent sales force is recruited in a variety of ways. An individual surfing
the web and coming to a site that offer the MegaChain program can sign up
directly. Upon reading the instructions and signing up, he may enter his list
composed of email addresses of his personal contacts. These contacts can in
turn be solicited by email to become agents and enter their personal email
lists. This type of proliferation of a sales force has become known as viral
marketing and is in common usage among many of the more recent advertising
companies on the Internet.

The information required to complete an agent registration form includes first
name, last name, email address, address, city, state or province, country,
postal zip code and phone number. A birth date is also required as an
individual must be 18 years or older to participate as an agent. After this
information in entered the agent must choose a login name and password.

The vendor compensates MegaChain, after the vendor email campaign runs its
course. A vendor email incentive campaign runs for a specific amount of time
[limited time offer]. The vendor agrees in advance what amount of commission
it is prepared to pay upon result [either sale, email capture or identified
web visitor]. When the campaign time is expired, a detailed invoice is created
that contains the exact number of responses and the name and email address of
each respondent. It is at this juncture that the vendor pays MegaChain.

<PAGE>   6

Agents are compensated within thirty days after the close of the offer. The
MegaChain software accounts exactly for all the agent and sub-agent payments.
All agents within the system are paid directly from the vendor.

MegaChain can provide any company with an Internet presence, a powerful, cost
effective means of advertising and selling its product or service through the
use of an innovative software suite combining multi-level marketing techniques
and the use of personalized emailmessages offering valuable product
incentives.

Email received from a friend, relative or business acquaintance has a greater
likelihood of being read than does unsolicited Email. MegaChain's clients have
the unique advantage of having their advertisements sent by agents to a group
of individuals with whom the agent has a personal relationship and whom the
agent believes may have an interest in the content of the advertisement. The
advertiser only pays for certified referrals [an individual registering on the
advertiser's web page as a result of the MegaChain system].

Individuals who register as agents with MegaChain can earn commissions by
forwarding promotional emails to their friends and acquaintances. Each
recipient of the email may also register as an agent with MegaChain and earn
commissions through the same process. Furthermore, companies with pre-existing
databases, such as list brokers and Internet Service Providers, can themselves
become agents, and secure an additional revenue stream.

Detailed Breakdown of the MegaChain Software Suite

The first step in creating an effective Multi-Level Marketing program is to
recruit a sales force. MegaChain refers to the sales force as "agents".

In addition to introducing their personal contacts to new products, the
primary objective of agents is to recruit their own eChain network. To assist
agents in achieving this objective, MegaChain suggests that vendors provide
agents a recruiting email, which explains the benefits of the vendor's
Program. agents download this email from the vendor web site and then forward
it to their contacts.

The email is uniquely coded so that when contacts respond to become agents
they will be added to the recruiting agent's eChain. An "eChain" is an agent's
Multi-Level Marketing email chain, which includes the contacts in their
personal database and any agents that they have recruited. The recruiting
agent will share in the revenues from all qualified referrals or products
purchased through the new agent's eChain. Moreover, when agents create their
own eChain, the initial recruiting agent continues to share in these revenues
as explained in the commission structure section.

Consumers can be directly recruited to become vendor agents via a product
response email. The email explaining the agent program is automatically sent
to consumers when they respond to a vendor advertisement. If the consumer
becomes an agent, they are automatically

<PAGE>   7

added to the contacting agent's eChain. If the consumer is not interested in
becoming an agent, they are tagged and will not receive future solicitations.

Individuals may also sign up directly to become agents on the vendor web site.
agents recruited in this manner become part of the vendor's eChain.

Agent Registration

The individual becomes an agent upon completion of the agent registration
form. A software mechanism will ensure an individual can only registered once.
Upon registration, agents receive a User ID and password, which allows them to
access MegaChain's reporting module.

Management anticipates that the MegaChain system will integrate with most
major contact management software packages. This will aid agents in creating
and managing their eChain.

MegaHit

MegaHit's function is to send qualified referrals to a vendor's clients. When
A vendor contracts with a client, the client's product information is added to
the vendor database. This database captures the product description, the
commission structure (e.g. number of levels and percentage on which
commissions are paid) and the product campaign email, which has been created
to sell the product.

A campaign opportunity package, which includes details about the product, the
commission structure and the product campaign email attachment, will then be
emailed to the vendor's agents. Agents will also be able to search the
vendor's inventory of campaigns by category. This will give the agent the
ability to target a specific portion of his eChain.

If agents are interested in participating in the product campaign, they will
only need to download and forward the email attachment to their eChain. Each
product campaign that agents email is uniquely coded ensuring they will be
credited with all resulting commissions earned from their eChain.

When an individual from an agent's eChain clicks on the product campaign email
and visits the advertiser's web site they are registered as a qualified
referral. The commission from this qualified referral is credited to the
appropriate agent's account.

Agents will have access to their account information using a reporting module
accessed by a user ID and password. This module will allow them to view their
entire eChain, the various campaigns promoted and all commissions earned to
date.

Commissions

MegaChain retains a percentage of the gross commission paid by the vendor, and
then distributes the remainder as agent commissions. In a

<PAGE>   8

four level example, agent 1 receives 25% of the fee the vendor is prepared to
pay for each of his eChain members who respond to the vendor's promotional
email. If one of agent 1's eChain members becomes an agent, "agent 2", and
forwards the promotional email to a friend who, in turn, visits the
advertiser's web site, agent 2 would receive 25% of the Fee while agent 1
receives 12%. To illustrate the complete cycle, agent 2 then signs up agent 3
who signs up agent 4. Assuming one of agent 4's eChain members responds to a
promotional email, 25% of the Fee goes to agent 4, 12% to agent 3, 6% to agent
2 and 3% to agent 1. Agents 1, 2 and 3 have earned commissions from agent 4's
efforts. In the event that none of agent 1's eChain members opt to become
agents the vendor only pays 25% of the fee he would pay normally. The
MegaChain system will record all certified referrals, calculate all
commissions and provide each agent with a record of commissions earned.

Timely and accurate payment of commissions is vital. The payment module will
facilitate payment of commissions by either: (i) sending a check, (ii)
crediting the agent's bank account, or (iii) paying in E-cash. To make option
(iii) viable, the Company is currently considering strategic relationships
with several E-cash companies.

Intellectual Property and Proprietary Rights

The Company regards portions of the MegaChain software suite and other designs
including its web site design as proprietary and will attempt to protect them
with a combination of trade secret laws, employee and third-party
nondisclosure agreements, built-in software protections, and similar means.

Although the Company believes that its current technology and designs have
been independently developed, there can be no assurance that the technology
does not or will not infringe on the rights of others. The Company has no
patents, trademarks or copyrights pertaining to its products, and it may be
possible for unauthorized third parties to copy certain portions of the
Company's products or to "reverse engineer" or otherwise obtain and use, to
the Company's detriment, information that the Company regards as proprietary.

Moreover, the laws of some countries do not offer the same protection to the
Company's proprietary rights, as do those of the United States and Canada.
There can be no assurance that legal protections relied upon by the Company to
protect its proprietary position will be adequate or that the Company's
competitors will not independently develop technologies that are substantially
equivalent or superior to those utilized by the Company. It is the intention
of the company to apply for patent protection of its Internet multi-level
marketing "business method". Management believes that the MegaChain.com
Internet multi-level marketing business method is novel as well as
non-obvious, and meets the other requirements of clarity and support required
for being patentable.

Government Regulation

Based upon its experience and knowledge of the industry, management believes
that its products will comply with applicable regulations in the markets,
which the company has targeted for sales, however, there

<PAGE>   9

can be no assurances that future regulations or laws will not be adopted.
Management further believes that there are no federal or state regulations
that may adversely affect the company's "relationship marketing system".

Management is of the opinion that the company's systems does not fall under
any statutory definition of a "chain letter" and does not contravene any
federal or state statutes or regulations. The company cannot predict the
extent or impact of future legislation or regulation by federal, state or
local authorities in the United States or foreign countries. Sales of the
company's products in foreign jurisdictions may require the approval of
domestic and foreign regulatory agencies, which may impede or preclude the
company's efforts to penetrate such markets.


ITEM 2.   Management's Discussion and Analysis or Plan of Operation

Plan of Operation

On April 6, 1999, in connection with a Rule 504 offering, the Company issued
2,000,000 shares of common stock in exchange for net proceeds of $958,000.

Research and development activities commenced during April of 1999. The
expenditures relating to research and development in fiscal 2000, totaled
$56,770 and in fiscal 2001 totaled $417,270 as reported in the Consolidated
statement of Operations.

The Company is devoting substantially all of its present efforts to
establishing its business, and, although certain planned operations have
commenced, there have been no significant revenues derived there from.

Efforts towards the next phase, sales and marketing, continue. MegaChain's
plan of operations for the next 12 months includes the following elements.

A] Increasing traffic to the MegaChain web site.

In order to proliferate public awareness of the Megachain website, our web
master has created a template of 'key words' that are recognized by all major
search engines. These 'key words' are specific to the type of vendors we feel
will be most interested in incorporating the MegaChain software into their own
sales and marketing efforts.

B] Enlisting independent sales companies who will represent the MegaChain
software, on a commission basis, to interested vendor parties.

C] Increasing affiliate vendors.

To this end, MegaChain's sales force has been contacting web vendors of goods
and services to offer them the opportunity of creating megachain email
incentives. The response has been positive because the megachain system, being
predicated on the 'pay only upon results' principle, holds no risk.

D] Acquisition of strategic financial partners.

<PAGE>   10

The company intends to continue to seek out other business entities engaged in
similar business activities, e.g. direct, targeted, permission based, email
marketing, who may have interest in the megachain system, in order to
investigate the possibilities of acquisition of the megachain technology or
the formation of a joint venture. To date there are no agreements,
understandings or other arrangements for strategic partnerships.

E] Future Plans.

Although the company's software product is ready to be sold as a stand-alone
data base management system, a considerable sales and marketing budget is
required to introduce it into the marketplace. At present, the company has not
sufficient funds to apply towards this end. As a result, management is
devoting substantially all of its present efforts towards locating a suitable
merger or acquisition candidate that will provide necessary funds, strategic
symbiosis and expertise in order to help the company achieve its goals.


On June 30, 2001 the Company had $37,126 cash and cash equivalents and
$252,035 of liabilities. At present the Company is expending approximately
$3,700 per month to maintain its skeletal operations including legal and
accounting costs related to filings.

The company has agreements with Blue Wave Productions Ltd., a company whose
shareholders consist of Messrs Lavin, to provide management and other
services. As of July 1, 2000, Blue Wave Productions Ltd. has deferred its fees
until such time as the company has the means to pay.

The Company's has reduced or deferred its overhead sufficiently so that cash
reserve is sufficient to finance the operating expenses throughout the next
fiscal year.

On February 25, 2000, the Company entered into a License Agreement whereby it
granted to Greenchip Plc. (a public company listed on the London UK OFEX
Exchange) an exclusive license for the United Kingdom to use and distribute
all products and technology developed by the Company. The Company also granted
to Greenchip Plc. a new option to receive the exclusive license for the
European Economic Community to and distribute all products and technology
developed by the Company.

On May 1, 2000 the Company entered into an Engagement of Services Agreement
with Enterprise CyberSystems Inc. whereby it retained the services of
Enterprise CyberSystems Inc. asses various aspects of the MegaChain software
and to provide an opinion about the cost and time frame for recreating the
software as well as estimate the approximate costs to create the next stage of
features to enable the Company to operate as an Application Service Provider
("ASP").

On May 15, 2000, the Company entered into an Engagement of Services Agreement
with Terrific Software Inc. whereby it retained the services of Terrific
Software Inc. to modify the MegaChain software to enable to Company to operate
as an ASP.

<PAGE>   11

In January 2001, the Company issued 145,000 shares of common stock to two
consultants, Samuel M. Skipper and Stuart Brazier for on-going services
commencing January 1, 2001.

In January 2001, the Company issued 5,000 shares of common stock, valued at
$4,000 for legal services.

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS

The following discussion should be read in conjunction with the Company's
Consolidated Financial Statements appearing elsewhere in this report.

Year ended June 30, 2001



Revenue: There was no revenue during the fiscal year ended June 30, 2001 and
June 30, 2000 since the Company is in a development stage.

Cost of Revenue:

Software Development Expenses: During fiscal 2001 the Company incurred
$417,270 in software development costs associated with the operations of the
B.C. subsidiary. This is an increase of $360,500 over fiscal 2000.

Selling and Marketing Expenses: Selling and Marketing expenses of $106,169 for
fiscal 2001 consisted of marketing consulting, promotional and travel
expenses.

General Administrative Expenses: General and administrative expenses for
fiscal 2001 were $164,504 a decrease of $132,911 over fiscal 2000. The
decrease was due to a reduction in staffing and office costs.

ITEM 3.   Description of Property

The Company presently maintains its principal place of business at 34 West 8th
Avenue, Vancouver, British Columbia, Canada V5Y 1M7. The premises is leased on
a month-to-month basis at a fair market value price of $1,000 from Blue Wave
Productions Ltd. Megachain's offices occupy approximately 50 percent of the
facility. Blue Wave Productions has deferred charging rent until such time as
the Company has sufficient funds to pay.


ITEM 4.   Security Ownership of Certain Beneficial Owners and Management

     The following table sets forth as of August 30, 2001, the number and
percentage of the outstanding shares of common stock which, according to the
information supplied to the Company, were beneficially

<PAGE>   12

owned by (i) each person who is currently a director of the Company, (ii) each
executive officer, (iii) all current directors and executive officers of the
Company as a group and (iv)each person who, to the knowledge of the Company,
is the beneficial owner of more than 5% of the outstanding common stock. The
only beneficial owners of more than 5% of the outstanding common stock of
which MegaChain is aware are also directors or officers. Except as otherwise
indicated, the persons named in the table have sole voting and dispositive
power with respect to all shares beneficially owned, subject to community
property laws where applicable.

<TABLE>
<CAPTION>
                                 Common         Options       Percent of
                                 Shares           (1)          Class(2)
Name and Address
<S>                            <C>            <C>            <C>
Tom Lavin                       37,500          100,000         15.1%
34 West 8th Avenue
Vancouver, BC, Canada
V5Y 1M7

Bill Lavin                      37,500          100,000         15.1%
Half Moon Bay Villas, #4
P.O. Box 1386
Basseterre, St. Kitts

Tom Johnson                         -0-          75,000         0.36%
12478 San Bruno Cove
San Diego, California
92130, USA

Donald Steele                       -0-         100,000         0.49%
6471 Madrona Crescent
West Vancouver, BC, Canada
V7W 2J7

Terrific Software Inc.           50,000              -0-        19.6%
P.O. Box N65,
Nassau, Bahamas


All Executive officers and       75,000         375,000        31.24%
   Directors  as a  Group
(4 persons)
</TABLE>

(1) These figures represent options that are vested or will vest within 60
days from the date as of which information is presented in the table.

(2) These  figures represent the  percentage  of  ownership of the named
individuals assuming each of them alone has exercised his or her options, and
percentage ownership of all officers and directors of a group assuming all
such purchase rights held by such individuals are exercised.

There are no agreements between or among any of the shareholders, which would
restrict the issuance of shares in a manner that would cause any change of
control of the Company. There are no voting trusts, pooling arrangements or
similar agreements in place between or among any of the

<PAGE>   13

shareholders, nor do the shareholders anticipate the implementation of such an
agreement in the near term.


ITEM 5.   Directors, Executive Officers, Promoters and Control Persons

(a)  Directors and Executive Officers

<TABLE>
<CAPTION>
        Name                 Age               Position
      ---------             -----         -----------------------
<S>                        <C>           <C>
     Tom Lavin               51           President/CEO/Director

     Bill Lavin              50           VP/Director/Secretary

     Tom Johnson             50           VP

     Donald Steele           50           Director
</TABLE>

Tom Lavin has been involved with electronics technology, telecommunications
and the advertising industry for over 20 years. He has been President of Blue
Wave Productions Ltd., one of Western Canada's largest and most successful
audio production facilities since 1980 and a Partner in Teddy Bear
Productions, a company that designs and produces national television and radio
advertising for such clients as McDonald's, B.C. Tel, Ford, Toyota, Jeep,
Kawasaki and Future Shop since 1985.

In the early 1990's Tom Lavin headed the New England Digital File Transfer
Project for the WAT Group of Companies, then founded and took Axion
Communications Incorporated public in 1994 via an initial public offering on
the Vancouver Stock Exchange. He acted as CEO for Axion Communications,
managing over 40 employees and a client base of nearly 15,000 until May, 1997.
Prior to his involvement with MegaChain, he consulted independently on a
number of high tech and telecom projects.

Bill Lavin has been involved in technical development, management and sales
and marketing for over 20 years. He has provided management and consulting to
companies such as American Express, Chevron, Kaiser Permanente and Pacific
Bell. With American Express, he spearheaded the launch of several products
including Platinum and Gold Year End Summary, Optima MIS and a World Wide
Marketing System.

Mr. Lavin has many years of experience in directing the successful
implementation of projects using leading edge technologies and has a thorough
understanding of data processing, management, MIS and marketing applications.
Prior to his involvement in MegaChain, his most recent endeavors included
acting as Vice President of Sales and for Tier Corporation of Walnut Creek
California, a consulting firm with over 150 employees and over $US 40 Million
in sales, and from 1996 to 1998, as President of Internet Gaming Network
Incorporated, a company whose securities are traded on the Vancouver Stock
Exchange.

<PAGE>   14


Thomas Johnson is owner and President since 1986 OF Tak Sales Inc., a sales
and marketing company located in San Diego. He has been at the forefront of
sales and marketing trends for over 25 years and has extensive experience in
promoting Multilevel Marketing plans including Amway, Herbalife and Excel.
During the last two years he has been actively involved in the development of
the creative strategies and marketing material exclusively for internet
companies. His efforts have been instrumental in developing the sales and
marketing plans of both Winstreak, an on-line internet gaming site and Sharc,
a web site that specializes in internet on-line sports contest. Additionally
he has consulted for Danken, an Internet email service company. Megachain has
engaged Mr. Johnson directly as a consultant and has no contract with his
company, Tak Sales. Mr. Johnson spends approximately 10 hours per week
promoting Megachain's products to potential customers.

Don Steele is a marketing and corporate development specialist with a
background in a variety of industries. During the past five years Mr. Steele
has been involved in a number of entrepreneurial ventures. Since 1985 he has
acted as President of Don Steele Ltd. doing business as motion picture and
television marine services, a company that contracts with film productions
houses for labor and equipment for the filming of marine sequences. During
1998 and 1999 he established a Peat Processing operation in Northern Alberta
and currently maintains contact with software consultants and developers in
the United Kingdom on Megachain's behalf.

There are no family relationships among directors or executive officers except
that Bill Lavin is Tom Lavin's father's half brother.

Each director was appointed to fill a position on the Board of Directors until
the next ensuing annual general meeting. Messrs Lavin and Steele were first
appointed March 15, 1999.


ITEM 6.   Executive Compensation
    Name and Title                  Year                   Salary

None of the Executives received any compensation in the year 2001.



Stock Options

On August 12, 1999, the Board of Directors approved various "Non Qualified"
stock option agreements. The purpose of granting the stock options is to
attract and retain the best available executive personnel, other key
employees, contract consultants and others to be responsible for the
management, growth and success of the business, and to provide an incentive
for such individuals to exert their best efforts on behalf of the Company and
its shareholders. Optionees under the agreements are those Directors,
officers, key employees, consultants and others selected by the Board of
Directors who hold positions of responsibility and whose participation in such
agreements the Board and management determines to be in the best interests of
the Company.

The exercise price of the option is $ 0.75 USD per share. Options awarded
under the plan shall be exercisable at such time and shall be

<PAGE>   15

subject to such restrictions and conditions, including the performance of a
minimum period of service after the grant, as the Board may impose, which need
not be uniform for all participants; provided, however, that no Option shall
be exercisable for more than 5 years after the date on which it is granted.

<TABLE>
<CAPTION>
Name and Title           Number of Options    Date Granted     Exercise Price
<S>                     <C>                 <C>               <C>
Tom Lavin,
President & CEO,
Director                       100,000       August 12, 1999       $.75


Bill Lavin,
Vice President,
Director                       100,000       August 12, 1999       $.75


Tom Johnson
Vice President                  75,000       August 12, 1999       $.75

Donald Steele
Director                       100,000       August 12, 1999       $.75
</TABLE>

In addition to the above named individuals, an additional 350,000 options in
aggregate, exercisable at $0.75 were granted to various employees and
consultants on August 12, 1999. These options expire at the earliest of 5
years after the date on which they are granted or 120 days after the
optionee's service with the Company ceases for any reason.



In addition to the above named individuals, an additional 350,000 options in
aggregate, exercisable at $0.75 were granted to various consultants on August
12, 1999. These options expire at the earliest of 5 years after the date on
which they are granted or 120 days after the optionee's service with the
Company ceases for any reason.


ITEM 7.   Certain Relationships and Related Transactions

573795 BC LTD. was incorporated in October of 1998. Messrs Lavin each
transferred intellectual property represented by the initial business plan of
Megachain.com into the Company in exchange for 100 common shares each. The
intellectual property was nominally valued at $200.

The Company presently maintains its principal place of business at 34 West 8th
Avenue, Vancouver, British Columbia, Canada V5Y 1M7. The premise is leased on
a month-to-month basis from Blue Wave Productions Ltd., A company owned by
Messrs Lavin.

Pior to July 1, 2000 Management fees totaling $7,500 per month were paid to
Blue Wave Productions Ltd. As of July 1, 2000 payment of

<PAGE>   16

management and marketing fees have been deferred. The company currently has
one employee. An additional $3,100 per month is paid and continues to be paid
to Blue Wave for the use of its premises (rent), support staff and other
resources committed by the corporation to the business of the Company
including a multi-line telephone answering system and other office equipment.




ITEM 8.   Legal Proceedings

On or about August 4,2000 Management received a letter from an attorney
advising that there is an Order for Entry of Default Judgment in favour of two
alleged former employees of Northern Lights Software, Ltd. dated March 10,
1998 in the total amount of $74,887.53. The judgment was obtained in the State
of Colorado and was apparently for unpaid wages. Until this time, present
management was unaware of this claim and judgment. A former director of the
Company advised management that he was also unaware of this claim and judgment
and believed that claimants were actually employees of Northern Lights
Software (New York) Ltd., a subsidiary of Northern Lights Software, Ltd.
Pursuant to an Agreement and Plan of Reorganization dated February 15, 1999,
that former director personally warranted that there were no undisclosed
liabilities in the Company. The Company intends to dispute the Judgment or in
the alternative seek compensation from the former director. Management is not
able to determine its chance of success in attempting to set aside the
Judgment. In the event the Company is unable to set aside the Judgment,
Management believes it may be possible to obtain compensation from the former
director.

Other than that stated above, to the best knowledge of the Officers and
Directors of the Company, neither the Company nor any of its Officers or
Directors is a party to any material legal proceeding or litigation and such
persons know of no other material legal proceeding or litigation contemplated
or threatened. Other than that stated above, there are no judgments against
the Company or its Officers or Directors. None of the Officers or Directors
has been convicted of a felony or misdemeanor relating to securities or
performance in corporate office.

ITEM 9.   Market for Common Equity and Related Stockholder Matters

The Following table sets forth the high and low bid prices of the common stock
of the Company reported on the OTC Bulletin Board ("MGCA") since the quarter
ending June 30, 2000. The quotations reflect inter-dealer prices without
retail mark-up, mark-down, or commissions and may not necessarily represent
actual transactions. There is an absence of an established trading market for
the Company's common stock, as the market is limited, sporadic and highly
volatile the absence of an active market may have an effect upon the high and
low prices as reported.

<TABLE>
<CAPTION>
                              High / Low Bid

                     Quarter         High           Low
                     Ending           Bid           Bid
<S>                                 <C>           <C>
                     6/30/01          .72          .12
</TABLE>

<PAGE>   17


<TABLE>
<S>                                 <C>           <C>
                     3/31/01         2.00          .28
                    12/31/00         6.80          .80
                     9/30/00        16.00         6.40
</TABLE>

As of September 18, 2001 there were a total of 43 shareholders of record.

Dividend Policy

To date, the Company has not paid cash or other dividends on the common stock.
Holders of common stock are entitled to receive such dividends as may be
declared and paid from time to time by the Board of Directors out of funds
legally available therefore. The Company intends to retain any earnings, if
any, for the operation of its business and does not anticipate paying cash
dividends on the common stock in the foreseeable future.

ITEM 10.  Recent Sales of Unregistered Securities

In February, 1999, the Company acquired all of the issued and outstanding
voting shares of the capital stock of 573795 BC Ltd. ("573795")in exchange for
6,000,000 shares of the Company's common stock for the purpose of effecting
the acquisition of 573795. No underwriter or broker was involved in the
offering, and no commissions were paid on the sale of the shares. The shares
were offered and sold in reliance on the exemption set forth in Section 4(2)
of the Securities Act of 1933.

In order to provide the Company with additional working capital to implement
its business plan, the Company completed on April 5, 1999, a placement of
2,000,000 shares common stock at a price of $0.50 per share in reliance on
Rule 504 of Regulation D promulgated under the Securities Act of 1933. No
underwriter or broker was involved in the offering, and no commissions were
paid on the sale of the shares. The officers and directors of the Company sold
the shares to approximately 20 investors.

The Company retained the services of Enterprise Cybersystems, Inc. to provide
an independent evaluation of the MegaChain Software System. As the Company
does not have the capital to pay for this service, it issued 3,125 common
shares to Enterprise Cybersystems on August 17, 2000.

The Company retained the services of Terrific Software Inc., to develop the
Company's next release of viral marketing software. The new software platform
will enable the Company to re-establish its business based upon an industry
standard Application Service Provider model. Development on the new software
platform commenced in July 2000 and Management anticipates that it will be
completed within 180 days of that date. Since the Company does not have the
capital to pay for this software development, on August 17, 2000 it issued
50,000 common shares to Terrific Software Inc. for these services.

The Company retained the services of Samuel M. Skipper and Stuart Brazier to
advise and consult on the Company's merger and acquisition strategies,
investor relations and the Company's business development.

ITEM 11.  Description of Securities

General

<PAGE>   18


The authorized capitalization of MegaChain consists of 30,000,000 shares of
common stock, par value $0.0001, and 5,000,000 shares of preferred stock, par
value $0.0001. There are 305,050 common shares outstanding and no shares of
preferred stock outstanding.




                                 Common Stock

Holders of common stock are entitled to one vote for each share held on all
matters submitted to a vote of shareholders and do not have cumulative voting
rights. Accordingly, holders of a majority of the shares of all common stock
outstanding entitled to vote in any election of directors may elect all of the
directors standing for election. Holders of common stock are entitled to
receive ratably such dividends, if any, as may be declared by the board of
directors out of funds legally available therefore. Upon the liquidation,
dissolution or winding up of the Company, the holders of all shares of common
stock are entitled to receive ratably the net assets of the Company available
after the payment of all debts and other liabilities. Holders of common stock
have no preemptive, subscription, redemption or conversion rights.


                               Preferred Stock

The Board of Directors is authorized to classify any shares of its authorized
but unissued preferred stock as preferred stock in one or more series. With
respect to each series, the Board of Directors shall determine the number of
shares which shall constitute such series; the rate of dividend, if any,
payable on shares of such series; whether the shares of such series shall be
cumulative, non-cumulative or partially cumulative as to dividends, and the
dates from which any cumulative dividends are to accumulate; whether the
shares of such series may be redeemed, and, if so, the price or prices at
which and the terms and conditions on which shares of such series may be
redeemed; the amount payable upon shares of such series in the event of the
voluntary or involuntary dissolution, liquidation or winding up of the affairs
of MegaChain; the sinking fund provisions, if any, for the redemption of
shares of such series; the voting rights, if any, of the shares of such
series; the terms and conditions, if any, on which shares of such series may
be converted into shares of capital stock of MegaChain of any other class or
series; whether the shares of such series are to be preferred over shares of
capital stock of MegaChain of any other class or series as to dividends, or
upon the voluntary or involuntary dissolution, liquidation, or winding up of
the affairs of MegaChain, or otherwise; and any other characteristics,
preferences, limitations, rights, privileges, immunities or terms not
inconsistent with the provisions of the Certificate of Incorporation. The
availability of preferred stock, while providing desirable flexibility in
connection with possible acquisitions and other corporate purposes, could have
the effect of discouraging takeover proposals, and the issuance of preferred
stock could have the effect of delaying or preventing a change in control of
MegaChain not approved by the Board of Directors.

ITEM 12.  Indemnification of Officers and Directors

<PAGE>   19

MegaChain's Certificate of Incorporation provides that, to the fullest extent
that limitations on the liability of directors and officers are permitted by
the Delaware General Corporation Law (the "DGCL"), no director or officer of
the Company shall have any liability to MegaChain or its stockholders for
monetary damages. The DGCL provides that a corporation's charter may include a
provision which restricts or limits the liability of its directors or officers
to the corporation or its stockholders for money damages except: (1) to the
extent that it is provided that the person actually received an improper
benefit or profit in money, property or services, for the amount of the
benefit or profit in money, property or services actually received, or (2) to
the extent that a judgment or other final adjudication adverse to the person
is entered in a proceeding based on a finding in the proceeding that the
person's action, or failure to act, was the result of active and deliberate
dishonesty and was material to the cause of action adjudicated in the
proceeding. MegaChain's Certificate of Incorporation and Bylaws provide that
it shall indemnify and advance expenses to its currently acting and its former
directors to the fullest extent permitted by the DGCL and that MegaChain shall
indemnify and advance expenses to its officers to the same extent as its
directors and to such further extent as is consistent with law.

The Certificate of Incorporation and Bylaws provide that MegaChain will
indemnify its directors and officers and may indemnify employees or agents to
the fullest extent permitted by law against liabilities and expenses incurred
in connection with litigation in which they may be involved because of their
offices with MegaChain. However, nothing in the Certificate of Incorporation
or Bylaws of MegaChain protects or indemnifies a director, officer, employee
or agent against any liability to which he would otherwise be subject by
reason of willful misfeasance, bad faith, gross negligence or reckless
disregard of the duties involved in the conduct of his office. To the extent
that a director has been successful in defense of any proceeding, the DGCL
provides that he shall be indemnified against reasonable expenses incurred in
connection therewith.

ITEM 13.  Financial Statements

For the information required by this Item, refer to the Index of the Financial
Statements appearing on page F-1 of this registration.

ITEM 14.  Changes In and Disagreements with Accountants on Accounting and
Financial Disclosure

          None


ITEM 15.  Financial Statements and Exhibits


For the information required by this Item, refer to the Index to Financial
Statements appearing on page F-1 of the registration statement.

Exhibits

<PAGE>   20

Copies of the following documents are included as exhibits to this report
pursuant to Item 601 of Regulation S-B.

<TABLE>
<CAPTION>
Exhibit        SEC Ref.          Title of Document
  No.            No.
<S>          <C>              <C>
   *1          (3)(i),(4)      Certificate of Incorporation, as amended
   *2           (3)(ii)        By-Laws
   *3            (10)          Form of Options granted to Executive
                                Officers
   *4            (10)          Form of Options granted to Consultants
   *5            (21)          Subsidiaries
   *6            (10)          Management Agreement
   *7            (10)          Option Agreement
   *8            (10)          Option Agreement for EEC
  **9            (10)          Licence Agreement for UK
 **10            (10)          New Option Agreement for EEC
 **11            (10)          Engagement of Services
 **12            (10)          Engagement of Services
***13            (10)          Consulting Agreement with Samuel Skipper
***14            (10)          Consulting Agreement with Stuart Brazier
</TABLE>

* Previously filed with the Company's Registration Statement on Form 10-SB/A
filed March 16, 2000.

* The Financial Data Schedule is presented only in the electronic filing with
the Securities and Exchange Commission.

** Previously filed with the Company's Form 10-KSB for the Fiscal Year ended
June 30, 2000.

*** Filed herewith.

PART II    FINANCIAL INFORMATION

<PAGE>   21


                      MEGACHAIN.COM. LTD. AND SUBSIDIARIES

                        CONSOLIDATED FINANCIAL STATEMENTS

                             JUNE 30, 2001 AND 2000


<PAGE>   22


                      MEGACHAIN.COM. LTD. AND SUBSIDIARIES





                                 C O N T E N T S



<TABLE>
<CAPTION>
                                                                      PAGE
                                                                      ----

<S>                                                                <C>
INDEPENDENT AUDITORS' REPORT                                           F-1


CONSOLIDATED BALANCE SHEETS                                            F-2


CONSOLIDATED STATEMENTS OF OPERATIONS                                  F-3


CONSOLIDATED STATEMENT OF STOCKHOLDERS'
   EQUITY (DEFICIT)                                                    F-4


CONSOLIDATED STATEMENTS OF CASH FLOWS                                  F-5


NOTES TO CONSOLIDATED FINANCIAL STATEMENTS                         F-6 to F-11
</TABLE>


<PAGE>   23

                          INDEPENDENT AUDITOR'S REPORT



To the Board of Directors and Stockholders of
MegaChain.Com Ltd.
Vancouver, British Columbia, Canada


We have audited the accompanying consolidated balance sheets of MegaChain.Com,
Ltd. and Subsidiaries as of June 30, 2001 and 2000, and the related consolidated
statements of operations, stockholders' equity (deficit) and cash flows for the
years then ended. 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 consolidated financial statements referred to above present
fairly, in all material respects, the consolidated financial position of
MegaChain.Com, Ltd. and Subsidiaries as of June 30, 2001 and 2000, and the
results of their consolidated operations and cash flows for the years then
ended, in conformity with accounting principles generally accepted in the United
States.

The accompanying consolidated financial statements have been prepared assuming
that the Company will continue as a going concern. As discussed in Note 3, the
Company is currently developing technology and software and has not received any
revenue from operations, has suffered recurring losses from operations and has a
working capital deficit. These factors raise substantial doubt about the
entity's ability to continue as a going concern. Management's plans in regard to
these matters are also described in Note 3. The financial statements do not
include any adjustments that might result from the outcome of this uncertainty.



                                       COGEN SKLAR, LLP


BALA CYNWYD, PA
September 7, 2001


                                      F-1
<PAGE>   24

                      MEGACHAIN.COM. LTD. AND SUBSIDIARIES
                           CONSOLIDATED BALANCE SHEETS
                             JUNE 30, 2001 AND 2000


<TABLE>
<CAPTION>
                                                                      2001             2000
                                                                  -----------      -----------
<S>                                                               <C>              <C>
      ASSETS

CURRENT ASSETS
   Cash and cash equivalents                                      $    37,126      $   155,106
   Miscellaneous receivables                                            3,857            4,382
   Prepaid expenses                                                    21,000            1,011
                                                                  -----------      -----------
                                                                       61,983          160,499

PROPERTY AND EQUIPMENT - Net                                           32,067           41,997

INTANGIBLE ASSETS - Net                                               157,500          217,500
                                                                  -----------      -----------

TOTAL ASSETS                                                      $   251,550      $   419,996
                                                                  ===========      ===========

      LIABILITIES AND STOCKHOLDERS' EQUITY

CURRENT LIABILITIES
   Account payable and
     accrued expenses                                             $   252,035      $    10,893
                                                                  -----------      -----------


TOTAL CURRENT LIABILITIES                                             252,035           10,893
                                                                  -----------      -----------

      STOCKHOLDERS' EQUITY (DEFICIT)


PREFERRED STOCK; $.0001 par value, 5,000,000 shares
  authorized; and no shares issued and outstanding                         --               --

COMMON STOCK - $.0001 par value; 30,000,000 shares
  authorized; 348,800 shares issued and 305,050 shares
  outstanding as of June 30, 2001 and 245,675 shares
  issued and  201,925 shares outstanding as of June 30, 2000               31               20

ADDITIONAL PAID-IN CAPITAL                                          3,227,770        2,762,781

ACCUMULATED DEFICIT                                                (3,219,051)      (2,357,117)

ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS)                          (9,235)           3,419

LESS:  TREASURY STOCK -
  43,750 shares at cost                                                    --               --
                                                                  -----------      -----------

TOTAL STOCKHOLDERS' EQUITY (DEFICIT)                                     (485)         409,103
                                                                  -----------      -----------

TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)              $   251,550      $   419,996
                                                                  ===========      ===========
</TABLE>



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

                                      F-2
<PAGE>   25

                      MEGACHAIN.COM. LTD. AND SUBSIDIARIES
                      CONSOLIDATED STATEMENTS OF OPERATIONS
                   FOR THE YEARS ENDED JUNE 30, 2001 AND 2000


<TABLE>
<CAPTION>
                                              2001           2000
                                           ---------      ---------

<S>                                        <C>            <C>
EXPENSES
   Professional fees                       $  88,418      $ 156,403
   Selling and marketing                     106,169        121,279
   Software development                      417,270         56,770
   Management fee                             89,585         89,073
   General and administrative expenses       164,504        297,415
                                           ---------      ---------

LOSS FROM OPERATIONS                         865,946        720,940

INTEREST INCOME                                4,012         17,791
                                           ---------      ---------

NET LOSS                                   $ 861,934      $ 703,149
                                           =========      =========

BASIC AND DILUTED LOSS PER SHARE
 OF COMMON STOCK                           $   (3.18)     $   (3.48)
                                           =========      =========


WEIGHTED AVERAGE SHARES
 OUTSTANDING OF COMMON STOCK                 271,456        201,925
                                           =========      =========
</TABLE>



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

                                      F-3
<PAGE>   26

                      MEGACHAIN.COM. LTD. AND SUBSIDIARIES
            CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY (DEFICIT)
                   FOR THE YEARS ENDED JUNE 30, 2001 AND 2000




<TABLE>
<CAPTION>
                                                                                                Accumulated
                                                 Common Stock        Additional                   Other
                                           ------------------------    Paid-In    Accumulated  Comprehensive  Treasury Comprehensive
                                             Shares        Amount      Capital      Deficit       Income       Stock         Loss
                                           -----------  -----------  -----------  -----------   -----------    -----    ------------
<S>                                        <C>          <C>          <C>          <C>          <C>            <C>      <C>

BALANCE AT JUNE 30, 1999                       201,925  $        20  $ 2,664,781  $(1,653,968)  $        --   $ --      $        --

Common stock options issued for
  consulting expense                                --           --       98,000           --            --     --               --

Net loss for the year ended June 30, 2000           --           --           --     (703,149)           --     --         (703,149)

Foreign currency translation adjustment             --           --           --           --         3,419     --            3,419
                                                                                                                        -----------

COMPREHENSIVE LOSS                                  --           --           --           --            --     --      $  (699,730)
                                           -----------  -----------  -----------  -----------   -----------   ----      ===========


BALANCE AT JUNE 30, 2000                       201,925           20    2,762,781   (2,357,117)        3,419     --      $        --

Issuance of common stock for
  services performed                            58,125            6      428,994           --            --     --               --

Issuance of common stock for
  prepaid consulting services                   45,000            5       35,995           --            --     --               --

Net loss for the year ended June 30, 2001           --           --           --     (861,934)           --     --         (861,934)

Foreign currency translation adjustment             --           --           --           --       (12,654)    --          (12,564)
                                                                                                                        -----------

COMPREHENSIVE LOSS                                  --           --           --           --            --     --      $  (874,498)
                                           -----------  -----------  -----------  -----------   -----------   ----      ===========


BALANCE AT JUNE 30, 2001                       305,050  $        31  $ 3,227,770  $(3,219,051)  $    (9,235)  $ --
                                           ===========  ===========  ===========  ===========   ===========   ====
</TABLE>




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

                                      F-4
<PAGE>   27

                      MEGACHAIN.COM. LTD. AND SUBSIDIARIES
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                   FOR THE YEARS ENDED JUNE 30, 2001 AND 2000




<TABLE>
<CAPTION>
                                                                  2001           2000
                                                               ---------      ---------
<S>                                                            <C>            <C>
CASH FLOWS FROM OPERATING ACTIVITIES
  Net loss                                                     $(861,934)     $(703,149)
  Adjustments to reconcile net loss to net cash
    used in operating activities
      Issuance of common stock options for
        consulting expense                                            --         98,000
      Issuance of common stock for
        services performed                                       421,270             --
      Depreciation and amortization                               69,202         65,260
      Changes in assets and liabilities
        Decrease in:
          Miscellaneous receivables                                  443          3,556
          Prepaid expenses                                        16,002         17,038
        Increase (decrease) in:
          Accounts payable and accrued expenses                  238,262         (7,197)
                                                               ---------      ---------


      Net cash used in operating activities                     (116,755)      (526,492)


CASH FLOWS FROM INVESTING ACTIVITIES
      Capital expenditures                                            --        (35,888)


EFFECT OF EXCHANGE RATES ON CASH                                  (1,225)         3,612
                                                               ---------      ---------


NET DECREASE IN CASH AND CASH EQUIVALENTS                       (117,980)      (558,768)


CASH AND CASH EQUIVALENTS - BEGINNING OF YEAR                    155,106        713,874
                                                               ---------      ---------


CASH AND CASH EQUIVALENTS - END OF YEAR                        $  37,126      $ 155,106
                                                               =========      =========


SUPPLEMENTAL SCHEDULE OF NONCASH
  INVESTING AND FINANCING ACTIVITIES

  Issuance of common stock for prepaid consulting services     $  36,000      $      --
                                                               =========      =========
</TABLE>



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

                                      F-5
<PAGE>   28

                      MEGACHAIN.COM. LTD. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                             JUNE 30, 2001 AND 2000



NOTE 1 - ORGANIZATION AND NATURE OF OPERATIONS

Formquest International, Ltd. ("Formquest"), formerly Northern Lights Software,
Ltd. had ceased operations in the first half of 1997 and remained inactive until
1999. In February 1999, Formquest disposed of the assets of its subsidiary,
Northern NY, with a stockholders' deficit to an entity controlled by a principal
stockholder for the assumption of liabilities. On February 15, 1999, Formquest
purchased all of the issued and outstanding shares of 573795 BC Ltd. ("BC"), a
corporation organized on October 26, 1998 under the laws of the Province of
British Columbia, Canada for 6,000,000 (pre-split) shares of common stock. BC is
a development stage company which owns proprietary software for the enhancement
of sales on the internet. BC has no prior operations and minimal assets except
the technology and software that it will further develop. The acquisition will
be accounted for under the purchase method of accounting. The purchase price of
$300,000 was allocated to technology and is being amortized on a straight-line
basis over five years.

Formquest completed an offering under Regulation D on April 5, 1999 for
2,000,000 shares of common stock for net proceeds of approximately $958,000.

On April 14, 1999 Formquest changed its name to MegaChain.Com, Ltd. ("the
Company").


NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

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

Concentration of Credit Risk Involving Cash
The Company maintains its cash balances in a bank located in Canada. These
balances are not insured.

Cash Equivalents
The Company considers all highly liquid instruments with a maturity of three
months or less to be cash equivalents.

Fair Value of Financial Instruments
Financial instruments consist of cash, receivables, and accounts payable. The
carrying amount approximates fair value because of the short maturity of these
instruments.

Depreciation
The cost of property and equipment is depreciated over the estimated useful
lives of the related assets. Depreciation is computed using the straight line
and accelerated methods.

Cost of Computer Software
The Company accounts for costs of computer software under the American Institute
of Certified Public Accountants Statement of Position 98-1, "Accounting for
Costs of Computer Software Developed or Obtained for Internal Use," which
requires that costs incurred in the preliminary project stage should be expensed
as incurred. Costs incurred in the application development stage are
capitalized. Post-implementation/operation stage costs such as training and
maintenance are expensed as incurred. The impairment of capitalized software
costs will be recognized in accordance with SFAS No. 121 if the software is not
expected to provide any service potential or when it is no longer probable that
the software being developed will be completed and placed in service and the
undiscounted cash flow estimated to be generated is less than the carrying
amount of the software. The Company's evaluation considers changes in the
operating environment and business strategy, competitive information, market
trends and operating performance.


                                      F-6
<PAGE>   29

                      MEGACHAIN.COM. LTD. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                             JUNE 30, 2001 AND 2000



NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

Research and Development Costs
Research and development costs are expensed as incurred.

Intangibles
Technology costs are recorded at cost and are amortized using the straight-line
method over five years.

Estimates
The preparation of financial statements in conformity with accounting principles
generally accepted in the United States requires the use of estimates based on
management's knowledge and experience. Accordingly, actual results could differ
from those estimates.

Income Taxes
The Company accounts for its income taxes under Statement of Financial
Accounting Standards ("SFAS") No. 109, "Accounting for Income Taxes," which
requires an asset and liability approach to financial accounting and reporting
for income taxes. Deferred income tax assets and liabilities are computed
annually for temporary differences between the financial statement and tax bases
of assets and liabilities that will result in taxable or deductible amounts in
the future based on enacted tax laws and rates applicable to the periods in
which the differences are expected to affect taxable income. Valuation
allowances are established when necessary to reduce deferred tax assets to the
amount expected to be realized. Income tax expense is the tax payable or
refundable for the period plus or minus the change during the period in deferred
tax assets and liabilities.

Earnings (Loss) Per Share
The Company follows SFAS No. 128, "Earnings Per Share" (EPS), which establishes
standards for computing and presenting EPS. Under this new standard, Basic EPS
is computed based on weighted average shares outstanding and excludes any
potential dilution; Diluted EPS reflects potential dilution from the exercise or
conversion of securities into common stock or from other contracts to issue
common stock.

Basic earnings (loss) per share include the weighted average number of shares
outstanding during the year. Diluted earnings (loss) per share include the
weighted average number of shares outstanding and dilutive potential common
shares, such as warrants. Assumed conversion of options and warrants would be
antidilutive, therefore, basic and diluted earnings (loss) per share are the
same.

Recoverability of Long Lived Assets
The Company follows SFAS No. 121, "Accounting for the Impairment of Long-Lived
Assets and for Long-Lived Assets to be Disposed Of". The Statement requires that
long -lived assets and certain identifiable intangibles be reviewed for
impairment whenever events or changes in circumstances indicate that the
carrying amount of the asset may not be recoverable. The Company is not aware of
any events or circumstances which indicate the existence of an impairment which
would be material to the Company's annual financial statements.

Comprehensive Income
The Company follows SFAS No. 130, "Reporting Comprehensive Income", which is a
more inclusive financial reporting methodology that includes disclosure of
certain financial information that historically has not been recognized in the
calculation of net income. The components of comprehensive income (loss)
consists of foreign currency translation adjustments of ($9,235) and $3,419 for
the years ended June 30, 2001 and 2000.

Cost of Start-up Activities
The Company follows Statement of Positions 98-5, Reporting on the Costs of
Start-Up Activities ("SOP 98-5"), which requires costs of start-up activities
and organization costs to be expensed as incurred.


                                      F-7
<PAGE>   30

                      MEGACHAIN.COM. LTD. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                             JUNE 30, 2001 AND 2000



NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

Recent Accounting Pronouncements
In August 2001, SFAS No. 142, "Goodwill and Other Intangible Assets" was issued
which is effective for fiscal years beginning after December 15, 2001. SFAS No.
142 addresses how intangible assets that are acquired individually or with a
group of other assets should be accounted for upon their acquisition and also
addresses how goodwill and other intangible assets should be accounted for after
they have been initially recognized in the financial statements. Also, for
previously recognized non-goodwill intangible assets, the useful lives must be
reassessed with remaining amortization periods adjusted accordingly, and
reflected as a change in accounting principles. Based on the Company's policy
for accounting for intangibles, management does not anticipate the adoption of
this standard will result in any significant impact on earnings or financial
position of the Company.


NOTE 3 - MANAGEMENT PLANS

The accompanying financial statements have been prepared on a going concern
basis, which contemplates the realization of assets and the satisfaction of
liabilities and commitments in the normal course of business. As discussed in
Note 1, the company has developed software for the enhancement of sales on the
Internet and has not received any revenue from operations. In addition, the
Company has suffered recurring losses from operations and at June 30, 2001 has a
working capital deficit of $190,052. These factors raise substantial doubt about
the ability of the Company to continue as a going concern.

Although the Company's software product is ready to be sold as a stand-alone
data base management system, a considerable sales and marketing budget is
required to introduce it to the marketplace. At the present, the Company has no
funds to apply towards this end. As a result, management is devoting
substantially all of its present efforts towards locating a suitable merger or
acquisition candidate that will provide necessary funds, strategic symbiosis and
expertise in order to help the Company to achieve its goals.

At present the Company is expending approximately $3,700 per month to maintain
skeletal operations, including legal and accounting costs related to Securities
and Exchange Commission ("SEC") filings. As of September 1, 2001 the Company was
compelled, due to lack of funds, to dismiss its sole employee, the chief
software programmer. At the present time the Company's cash reserves are
sufficient to cover the legal and accounting costs of its required SEC filings.

The balance sheet does not include adjustments relating to the recoverability
and classification of recorded assets, or the amounts and classifications of
liabilities that might be necessary in the event the Company cannot continue in
existence.


NOTE 4 - PROPERTY AND EQUIPMENT

Property and equipment consists of the following:


<TABLE>
<CAPTION>
                                      2001        2000
                                    -------     -------

<S>                                 <C>         <C>
Machinery and equipment             $46,318     $47,243
Less: Accumulated depreciation       14,251       5,246
                                    -------     -------

                                    $32,067     $41,997
                                    =======     =======
</TABLE>



                                      F-8
<PAGE>   31

                      MEGACHAIN.COM. LTD. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                             JUNE 30, 2001 AND 2000



NOTE 5 - INTANGIBLE ASSETS

Intangible assets consist of the following:


<TABLE>
<CAPTION>
                                      2001         2000
                                    --------     --------

<S>                                 <C>          <C>
Technology                          $300,000     $300,000
Less: Accumulated amortization       142,500       82,500
                                    --------     --------

                                    $157,500     $217,500
                                    ========     ========
</TABLE>


Technology was acquired in 1999 at a cost of $300,000 and is being amortized on
a straight-line basis over five years.


NOTE 6 - STOCKHOLDERS' EQUITY

Common Stock
On August 19, 1999, the Board of Directors of the Company approved a resolution
that increased the authorized shares of common stock to 30,000,000 shares and
changed the par value from $0.001 to $0.0001 per share. Additionally, the
company is authorized to issue 5,000,000 shares of preferred stock with a par
value to $0.0001 per share.

In August 2000, the Company issued 53,125 shares (post-split) of restricted
common stock to two consulting firms on ongoing services that commenced in July
2000. These shares were valued at $425,000 and were reflected as deferred
consulting fees at time of issuance. These consulting fees were charged to
operations as software development through December 31, 2000.

In January 2001, the Company issued 45,000 shares of common stock to two
consultants for on-going services commencing in January 2001. These shares were
valued at $36,000 and were reflected as prepaid expenses at time of issuance.
These costs will be charged to consulting expense as the services are incurred.

In January 2001, the Company issued 5,000 shares of common stock, valued at
$4,000 for legal services.

Effective as of December 28, 2000, the Company implemented a 1 for 20 reverse
split of its common stock and began trading under the new stock symbol "MGCC".
On June 26, 2001, the Company implemented a 1 for 4 reverse split of its common
stock and was trading under the new stock symbol "MGCA". All amounts of the
Company's common stock presented in these financial statements and notes have
been retroactively restated to give effect to these reverse splits.

Stock Options
In August 1999, the Board of Directors approved the establishment of a stock
option plan and 825,000 options were granted, expiring in five years, to
purchase 825,000 shares of common stock at an exercise price of $0.75, which
represents the fair value of the common stock at date of grant. 350,000 options
were granted to non-employees and 475,000 options were granted to officers and
non-employee members of the Board of Directors. As permitted under SFAS No. 123,
the Company accounts for stock options granted to officers, employees and
non-employee members of the Board of Directors as prescribed under Accounting
Principles Board Opinion No. 25 which recognizes compensation cost based upon
the intrinsic value of the equity award. Accordingly, no compensation expense
will be recognized for such equity awards.


                                      F-9
<PAGE>   32

                      MEGACHAIN.COM. LTD. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                             JUNE 30, 2001 AND 2000



NOTE 6 - STOCKHOLDERS' EQUITY (Continued)

However, in accordance with SFAS No. 123, compensation cost associated with the
350,000 stock options granted to non-employees was accounted for based on the
fair value at the date of grant estimated using the Black-Scholes model with the
following assumptions: no dividend yield, expected volatility of 60%, and a
risk-free interest rate of 5.5%. The Black-Scholes model valued these options at
a total of $98,000, which was charged to general and administrative expenses for
the year ended June 30, 2000.

Warrants
In conjunction with the blank check offering in October 1995, the Company issued
110,000 warrants to the underwriter at a price of $0.001 per warrant. Each
warrant entitles the holder to purchase one share of common stock at a price of
$0.60 per share for a four year period commencing one year from the effective
date of the offering. These warrants expired in October 2000.


NOTE 7 - INCOME TAXES

There is no income tax expense (benefit) for the years ended June 30, 2001 and
2000 due to the following:

Current Tax Provision (Benefit)
For the year ended June 30, 2001, the operating loss cannot be carried back to
earlier years.

Deferred Tax Provision (Benefit)
The deferred tax assets, consisting mainly of net operating loss carryforwards,
were offset by a valuation allowance. Management believes that a valuation
allowance is considered necessary since it is more likely than not that the
deferred tax asset will not be realized through future taxable income.

The reconciliation of the statutory federal rate to the Company's effective
income tax rate is as follows:


<TABLE>
<CAPTION>
                                         2001           2000
                                      ---------      ---------

<S>                                   <C>            <C>
Statutory tax provisoin (benefit)     $(293,000)     $(239,000)
Tax differentials on foreign loss        42,000         27,000
Increase in valuation allowance         251,000        212,000
                                      ---------      ---------

                                      $      --      $      --
                                      =========      =========
</TABLE>



Under SFAS No. 109, Accounting for Income Taxes, deferred tax assets and
liabilities are recognized for the future tax consequences attributable to
differences between the financial statement carrying amounts of existing assets
and liabilities and their respective tax bases. Deferred tax assets and
liabilities are measured using enacted tax rates.

The components of the net deferred tax assets (liabilities) are as follows:


<TABLE>
<CAPTION>
                                         2001             2000
                                     -----------      -----------

<S>                                  <C>              <C>
Net operating loss carryforwards     $ 2,488,000      $ 1,626,000
Valuation allowance                   (2,488,000)      (1,626,000)
                                     -----------      -----------

                                     $        --      $        --
                                     ===========      ===========
</TABLE>


                                      F-10
<PAGE>   33

                       MEGACHAIN.COM LTD. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                             JUNE 30, 2001 AND 2000



NOTE 7 - INCOME TAXES (Continued)


The use of net operating loss carryforwards is limited when there has been a
substantial change in ownership (as defined) during a three year period. Because
of the recent and contemplated changes in common stock, options and warrants,
such a change may occur in the future. In this event, the use of net operating
losses each year would be restricted to the value of the Company on the date of
such change multiplied by the federal long term rate ("annual limitation");
unused annual limitations may then be carried forward without this limitation.
Also, in the event the business enterprise of the loss corporation is not
continued for the two year period commencing on the change date, the net
operating loss carryforwards may no longer be available.

At June 30, 2001, the Company had net operating loss carryforwards of
approximately $1,079,000 for U. S. income tax purposes, which if not used will
expire during the years 2012 through 2016. At June 30, 2001, the Company had net
operating loss carryforwards of approximately $1,409,000 for Canadian income tax
purposes, which if not used will expire in 2008.


NOTE 8 - RELATED PARTY TRANSACTIONS

The Company accrued a management fee of $89,585 in 2001 and paid a management
fee of $89,073 in 2000 to a corporation whose principal stockholders are also
stockholders of the company.

The Company leased its office space and office equipment from this corporation
for approximately $1,000 per month in 2001 and $1,500 per month in 2000. Also
during 2001 and 2000, this corporation paid approximately $63,000 and $103,000
of expenses on behalf of the Company. These expenses consisted mainly of
contract labor and telephone expenses. These expenses were fully reimbursed by
the Company to this corporation during each year and charged to general and
administration expenses.

Amounts due to this corporation and included in accounts payable as of June 30,
2001 and 2000 were approximately $97,000 and $-0-.


NOTE 9 - CONTINGENCIES

At the time of the disposition of Northern NY, there were unpaid payroll taxes
including interest and penalties amounting to approximately $445,000 which were
assumed by an entity controlled by a principal stockholder and the Company was
indemnified against this obligation. Although the Company does not believe it is
liable for this obligation, there can be no assurance that a claim could not be
brought against the Company. If a claim is asserted, the Company intends to
defend itself vigorously against the claim.

During August 2000, the Company received notification of an Order for Entry of
Default Judgment in favor of two alleged former employees of Northern Lights
Software, Ltd., which was dated March 10, 1998, for unpaid wages of
approximately $75,000. Until this notification, present management was unaware
of this claim and judgment. Pursuant to an Agreement and Plan of Reorganization,
dated February 15, 1999, the former director personally warranted that there
were no undisclosed liabilities to the Company. The Company intends to dispute
this claim and if unsuccessful, will pursue reimbursement of any settlement
costs from the former director.


                                      F-11