UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                              Washington, DC 20549

                                  FORM 10-QSB

[X]  Quarterly Report pursuant to Section 13 or 15(d) of the Securities
     Exchange Act of 1934

     For the quarterly period ended June 30, 2001

[ ]  Transition Report pursuant to 13 or 15(d) of the Securities
     Exchange Act of 1934

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

          Commission File Number     333-40738
                                     ---------

                               MEGAPRO TOOLS INC.
          ------------------------------------------------------------
        (Exact name of small Business Issuer as specified in its charter)

      NEVADA                                   91-2037081
-------------------------------                ------------------------------
(State or other jurisdiction of                (IRS Employer Identification No.)
incorporation or organization)


#5-5492 PRODUCTION BOULEVARD
SURREY, BRITISH COLUMBIA, CANADA               V3S 8P5
--------------------------------               ---------------
(Address of principal executive offices)       (Zip Code)

Issuer's telephone number, including area code:(604) 533-1777
                                               --------------

                                 NOT APPLICABLE
             --------------------------------------------------------
            (Former name, former address and former fiscal six months,
                         if changed since last report)

Check whether the issuer (1) filed all reports required to be filed
by Section 13 or 15(d) of the Securities Exchange Act of 1934
during the preceding 12 months (or for such shorter period that the
issuer was required to file such reports), and (2) has been subject
to such filing requirements for the past 90 days [X] Yes    [] No

State the number of shares outstanding of each of the issuer's
classes of common stock, as of the latest practicable date:
6,847,100 shares of common stock, $0.001 par value outstanding as
of August 8, 2001.

<Page>


                  PART 1 - FINANCIAL INFORMATION

Item 1.         Financial Statements

The accompanying unaudited financial statements have been prepared
in accordance with the instructions to Form 10-QSB and Item 310 (b)
of Regulation S-B, and, therefore, do not include all information
and footnotes necessary for a complete presentation of financial
position, results of operations, cash flows, and stockholders'
equity in conformity with generally accepted accounting principles.
 In the opinion of management, all adjustments considered necessary
for a fair presentation of the results of operations and financial
position have been included and all such adjustments are of a
normal recurring nature.  Operating results for the six months
ended June 30, 2001 are not necessarily indicative of the results
that can be expected for the year ending December 31, 2001.

                                2

<Page>
===================================================================
                                               MegaPro Tools, Inc.
                               Consolidated Interim Balance Sheets
                                            (Stated in U.S. Funds)
                                          June 30,     December 31,
                                              2001            2000
-------------------------------------------------------------------
                                        (Unaudited)       (Audited)
Assets

Current
Cash                                     $   44,096    $    40,559
Accounts receivable                         143,171        339,850
Income taxes refundable                      17,996         17,996
Inventories                                 271,071        315,825
Prepaid expenses                             42,935          5,220
                                         -----------     ---------
                                            519,269        719,450

Fixed assets                                241,958        234,542

Deferred income taxes                        77,351         67,622
                                         -----------     ---------
                                          $ 838,578    $ 1,021,614
==================================================================

Liabilities and Stockholders' Equity
Current
 Bank indebtedness                        $  16,235    $    20,109
 Accounts payable                           144,741        241,224
 Accrued liabilities                         15,869         56,952
 Current portion of loans and notes payable  32,596         39,993
                                         ----------     ----------
                                            209,441        358,278
Long-term debt
 Loans and notes payable                     62,748         66,689
                                         -----------     ---------
                                            272,189        424,967
                                         -----------     ---------

Stockholders' equity
Common stock                                  6,847          6,847
Additional paid-in capital                  361,111        364,528
Deferred compensation                             -         (3,417)
Accumulated other comprehensive loss
 Foreign currency translation adjustment    (17,091)       (14,611)
Retained earnings                           215,522        243,300
                                         -----------      ---------
                                            566,389        596,647
                                         -----------      ---------
                                          $ 838,578    $ 1,021,614
===================================================================

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


===============================================================================
                                                            MegaPro Tools, Inc.
                                            Consolidated Interim Balance Sheets
                                                         (Stated in U.S. Funds)
                                                                    (Unaudited)
                                  Three Months Ended           Six Months Ended
                             June 30,       June 30,      June 30,     June 30,
                                 2001           2000          2001         2000
-------------------------------------------------------------------------------

Sales                      $  304,174    $  291,503    $  705,934   $  673,598
Cost of goods sold            228,454       186,475       494,231      427,080
                           ----------    ----------    ----------   -----------
Gross profit                   75,720       105,028       211,703      246,518
                           ----------    ----------    ----------   -----------
Expenses
Accounting and legal           16,954        46,264        31,674       92,560
Automotive                      2,225         1,772         3,800        3,433
Bad debts (recovery)             (201)          295           474          862
Commissions                     5,525         6,810        10,748       13,136
Depreciation                    6,462         9,211        12,716       15,019
Insurance                       2,465         1,985         4,724        4,366
Office and miscellaneous        3,101         3,297         9,787        7,677
Property taxes                    946           853         1,692        1,713
Repairs and maintenance           413         1,022           979        1,471
Travel and promotion           18,445        20,745        26,214       35,416
Utilities                       1,537         2,554         3,741        5,628
Wages and benefits             66,939       121,479       149,548      196,746
                           ----------    ----------    ----------   -----------
                              124,811       216,287       256,097      378,027
                           ----------    ----------    ----------   -----------
Operating loss                (49,091)     (111,259)      (44,394)    (131,509)
                           ----------    ----------    ----------   -----------
Other income (expense)
  Royalties (net)               3,220         4,482         9,779       10,436
  Rental                        1,465             -         3,015            -
  Interest and bank charges    (3,240)       (3,710)       (6,156)      (7,510)
                           ----------    ----------    ----------   -----------
                                1,445           772         6,638        2,926
                           ----------    ----------    ----------   -----------
Loss before
 income taxes                 (47,646)     (110,487)      (37,756)    (128,583)
                           ----------    ----------    ----------   -----------
Income tax expense (benefit)
  Current                           -       (14,902)            -       10,973
  Deferred                    (17,630)      (24,764)       (9,978)     (55,540)
                           ----------    ----------    ----------   -----------
                              (17,630)      (39,666)       (9,978)     (44,567)
                           ----------    ----------    ----------   -----------
Net loss for the
 period                    $  (30,016)   $  (70,821)   $  (27,778)  $  (84,016)
===============================================================================
Basic and diluted loss
 per share                 $   (0.004)   $    (0.010)  $   (0.004)  $   (0.012)
                           ==========    ===========   ==========   ===========
Weighted average shares
 outstanding                6,847,100      6,782,608    6,847,100    6,782,608
                           ==========    ===========   ==========   ===========

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



<Page>


===================================================================
                                               MegaPro Tools, Inc.
 Consolidated Interim Statements of Changes in Stockholders' Equity
                                              (Stated in U.S. Funds)
                                                         (Unaudited)
-------------------------------------------------------------------
                                              Additional
                               Common Stock    Paid-in    Deferred
                            Shares   Amount    Capital  Compensation
                           --------- ------ ----------- ------------
Balance, January 1, 2001   6,847,100 $6,847 $  364,528  $  (3,417)
Deferred Compensation
  Unvested Stock Options
   Expired                         -      -     (3,417)     3,417
                           --------- ------ ----------- ------------
                           6,847,100  6,847    361,111          -
                           --------- ------ ----------- ------------
Foreign Currency Adjustment        -      -          -          -
Net income for the period          -      -          -          -
                           --------- ------ ----------- ------------
Comprehensive loss for
 the period                        -      -          -          -
                           --------- ------ ----------- ------------
Balance, June 30, 2001     6,847,100 $6,847 $  361,111  $       -
====================================================================

                           (CONTINUED)

===================================================================
                                               MegaPro Tools, Inc.
 Consolidated Interim Statements of Changes in Stockholders' Equity
                                              (Stated in U.S. Funds)
                                                         (Unaudited)
                                                         (CONTINUED)
-------------------------------------------------------------------
                               Accumulated
                                  Other                     Total
                               Comprehensive   Retained Stockholders
                                  Loss         Earnings     Equity
                              --------------- ----------- ----------
Balance, January 1, 2001      $   (14,611)    $ 243,300   $ 596,647
Deferred Compensation
  Unvested Stock Options Expired        -             -           -
                               --------------- ----------- ---------
                                  (14,611)      243,300     596,647
                               --------------- ----------- ---------
Foreign Currency Adjustment        (2,480)            -      (2,480)
Net income for the period               -       (27,778)    (27,778)
                              --------------- ----------- ----------
Comprehensive loss for the period  (2,480)      (27,778)    (30,258)
                              --------------- ----------- ----------
Balance, June 30, 2001            (17,091)    $ 215,522   $ 566,389
====================================================================


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



<Page>


===============================================================================
                                                            MegaPro Tools, Inc.
                                   Consolidated Interim Statement of Cash Flows
                                                         (Stated in U.S. Funds)
                                                                    (Unaudited)
                                  Three Months Ended           Six Months Ended
                             June 30,       June 30,      June 30,     June 30,
                                 2001           2000          2001         2000
-------------------------------------------------------------------------------

Cash provided by (used in)
Operating activities
  Net loss for the period  $  (30,016)   $  (70,821)   $  (27,778)  $  (84,016)
  Items not involving cash
    Depreciation                6,462         9,211        12,716       15,019
    Amortization of deferred
     compensation cost              -        24,500             -       24,500
    Deferred income taxes     (17,630)      (24,764)       (9,978)     (55,540)
   (Increase) decrease in
     assets
    Accounts receivable        98,098       111,233       193,449      185,136
    Income taxes refundable         -       (20,134)            -        5,674
    Inventory                  47,952      (128,677)       43,796     (101,112)
    Prepaid expenses          (39,373)        8,316       (37,749)     (16,480)
   Increase (decrease) in
     liabilities
    Accounts payable          (16,909)       62,521       (95,924)     (20,508)
    Accrued liabilities       (20,127)      (58,744)      (40,543)      (2,355)
    Income taxes payable            -        10,883             -       10,883
                           ----------------------------------------------------
                               28,457       (76,476)       37,989      (38,799)
                           ----------------------------------------------------
Investing activity
  Purchase of fixed assets    (14,079)      (16,993)      (21,651)     (55,364)
                           ----------------------------------------------------
Financing activities
  Increase (decrease) in
   bank indebtedness           16,285             -        (3,902)           -
  Repayment of loans           (4,192)       (3,514)       (6,926)     (15,038)
  Repayment of notes payable   (3,261)      (20,451)       (3,261)     (20,451)
  Share capital issued              -       136,600             -      181,600
                           ----------------------------------------------------
                                8,832       112,635       (14,089)     146,111
                           ----------------------------------------------------
Increase in cash during
 the period                    23,210        19,166         2,249       51,948
Effect of foreign currency
 on cash                        1,152        (5,963)        1,288       (6,254)
Cash, beginning of period      19,734        56,398        40,559       23,907
                           ----------------------------------------------------
Cash, end of period        $   44,096    $   69,601    $   44,096   $   69,601
===============================================================================

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



<Page>

===============================================================================
                                                            MegaPro Tools, Inc.
                             Notes to Consolidated Interim Financial Statements
                                                         (Stated in U.S. Funds)
                                                                    (Unaudited)
June 30, 2001
-------------------------------------------------------------------------------

1.   Basis of Presentation
     The consolidated interim financial statements included
     herein, presented in accordance with United States
     generally accepted accounting principles and stated in US
     dollars, have been prepared by the Company, without audit,
     pursuant to the rules and regulations of the Securities
     and Exchange Commission.  Certain information and footnote
     disclosures normally included in financial statements
     prepared in accordance with generally accepted accounting
     principles have been condensed or omitted pursuant to such
     rules and regulations, although the company believes that
     the disclosures are adequate to make the information
     presented not misleading.

     These statements reflect all adjustments, consisting of
     normal recurring adjustments which, in the opinion of
     management, are necessary for fair presentation of the
     information contained therein.  It is suggested that these
     consolidated interim financial statements be read in
     conjunction with the financial statements of the Company
     for the year ended December 31, 2000 and notes thereto
     included in the Company's registration statement filed on
     Form SB-2 with the Securities and Exchange Commission.
     The Company follows the same accounting policies in the
     preparation of interim reports.

     Results of operations for the interim periods are not
     indicative of annual results.

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

2.   Nature of Business

     The Company was incorporated in the State of Nevada on
     December 17, 1998 and was inactive until the acquisition
     of Mega Tools Ltd. and Mega Tools USA, Inc. via reverse
     acquisition on September 30, 1999.  The Company is engaged
     in the manufacture and sale of a patented multi-bit
     screwdriver.

     The Company has entered into an exclusive North American
     licence agreement  with the patent holder of a retracting
     cartridge type screwdriver.  This licence agreement gives
     the Company unrestricted use of the patent in Canada and
     the United States until November 8, 2005.  The Company's
     wholly owned subsidiaries, Mega Tools USA, Inc. and Mega
     Tools Ltd. manufacture and market the drivers to customers
     in the United States and Canada.  The Company believes the
     accompanying unaudited consolidated interim financial
     statements contain all adjustments (consisting of only
     those which are normal and recurring in nature) necessary
     to present fairly, the financial position of the company
     as of June 30, 2001 and the results of operations and cash
     flows for the six months ending June 30, 2001 and 2000,
     respectively.



<Page>

Item 2.   Management's Discussion and Analysis or Plan of
          Operations

FORWARD LOOKING STATEMENTS

The information in this discussion contains forward-looking
statements within the meaning of Section 27A of the Securities Act
of 1933, as amended, and Section 21E of the Securities Exchange Act
of 1934, as amended.  These forward-looking statements involve
risks and uncertainties, including statements regarding the
Company's capital needs, business strategy and expectations. Any
statements contained herein that are not statements of historical
facts may be deemed to be forward-looking statements. In some
cases, you can identify forward-looking statements by terminology
such as "may", "will", "should", "expect", "plan", "intend",
"anticipate", "believe", "estimate", "predict", "potential" or
"continue", the negative of such terms or other comparable
terminology. Actual events or results may differ materially. In
evaluating these statements, you should consider various factors,
including the risks outlined in the Risk Factors section below,
and, from time to time, in other reports the Company files with the
SEC. These factors may cause the Company's actual results to differ
materially from any forward-looking statement. The Company
disclaims any obligation to publicly update these statements, or
disclose any difference between its actual results and those
reflected in these statements. The information constitutes forward-
looking statements within the meaning of the Private Securities
Litigation Reform Act of 1995.

OVERVIEW

We were founded to design, market and manufacture innovative multi-
bit screwdriver products under the "Megapro" brand name and
incorporating the retractable cartridge design patented by Winsire
Enterprises Corporation.  Our business commenced in 1994 when we
began selling our Megapro 15 in 1 Screwdriver to the industrial and
commercial tools market.  Our revenues have grown since 1994 as we
have expanded our product sales in the industrial and commercial
tools market and have expanded our line of screwdriver products.
We commenced sales of our screwdriver products to the retail market
in late 1996. Our business plan is to increase our revenues by
increasing sales to the retail market, while preserving and
increasing our existing sales in the industrial and commercial
tools markets.  Our objective is to increase sales to the retail
market by pursuing direct sales to major retailers and by pursuing
private label branding relationships with major retailers.

Our operating expenses include sales and marketing expenses and
general and administrative costs.  Sales and marketing expenses
include commissions paid on sales of our screwdriver products.
Our general and administrative expenses consist primarily of salary
and employee benefits, accounting and legal expenses, and
depreciation and other expenses associated with our office in
Surrey, British Columbia, Canada.  Our costs of goods sold consist
primarily of patent royalty payments, payments to outside
manufacturers, raw materials, labour, shipping and other
manufacturing expenses associated with production and packaging of
our screwdriver products.  Other expenses consist primarily of
interest on our long-term debt.

We are planning on spending approximately $500,000 over the next
twelve months on implementing our business plan to expand sales of
our screwdriver products to the retail market. These expenses will
have a material impact on our results of operations and financial
condition for future periods.  We anticipate that our operating
expenses will increase and earnings will decrease initially as we
incur these additional expenses.  Our objective is to increase our
revenues as a result of increases in sales to the retail market.
We anticipate that any increase in revenues will be realized in
financial periods subsequent to the financial period in which we
incur our increased operating expenses.  If we are not successful
in increasing sales to the retail market, then our

                                3

<Page>

increased revenues will not offset our increased operating expenses
and our profitability will suffer. In this event, we may be required
to raise additional capital through debt or equity financing to pay
for our increased operating costs.

RESULTS OF OPERATIONS

Revenue

Net revenues increased slightly to $705,934 for the six months ended
June 30, 2001 from $673,598 for the six months ended June 30, 2000.
We experienced an increase in revenues due in part to an increase
in sales of our products in the United States.  Revenues from sales
in the United States increased to $456,388 from $400,621 during this
period, while revenues from sales in Canada decreased to $249,546
from $272,977.  The increase in sales in the United States was
primarily attributable to increased orders from established
customers.  We also experienced revenues from new customers in the
United States.  The decrease in sales in Canada was primarily
attributable to a decrease in sales to Home Depot Canada.  We
withdrew sales of our screwdriver products to Home Depot Canada in
the second quarter of 2001.  We are attempting to increase revenue
in the third quarter of 2001 by launching additional products,
including double ended screwdriver bits with grooves for power tools
and a screwdriver with a quick-connect coupler.  There is no
assurance that these additional products will enable us to increase
our revenues.

We anticipate that Jore Corporation will commence sales of
screwdriver products incorporating our licensed patented designs to
Home Depot Canada during the third or fourth quarter of 2001.  Jore
Corporation was unable to commence sales in the second quarter of
2001 as Jore Corporation filed for voluntary reorganization under
Chapter 11 of the U.S. Bankruptcy Code in this second quarter. Jore
Corporation's filing under the U.S. Bankruptcy Code adds increased
risk to whether sales of our screwdriver products will be completed
by Jore Corporation in either the third or fourth quarter of 2001.
Any sales by Jore Corporation would be pursuant to a sub-license
agreement between us and Jore Corporation.  We would earn royalties
from Jore Corporation from sales made to Home Depot Canada, rather
than earning sales revenue directly, if Jore Corporation commences
sales to Home Depot Canada.

Costs of Goods Sold

Cost of goods sold increased to $494,231 for the six months ended
June 30, 2001 from $427,080 for the six months ended June 30, 2000.
 The increase in cost of goods sold is attributable in part to an
increase in sales during the second quarter of 2001.  The increase
in our revenues did not exceed the increase in cost of goods sold
with the result that our gross profit decreased to $211,703 for the
six months ended June 30, 2001 from $246,518 for the six months
ended June 30, 2000, representing a decrease of $34,815.  Cost of
goods sold as a percentage of sales increased to 70.0% in the second
quarter of 2001 from 63.4% in the second quarter of 2000.  This
increase is attributable primarily due to an increase in assembling
and packaging costs.  We are evaluating means of reducing cost of
goods sold by having certain components of our screwdriver products
manufactured by non-U.S. manufacturers.

General and Administrative Expenses

General and administrative expenses decreased to $256,097 for the
six months ended June 30, 2001 from $378,027 for the six months
ended June 30, 2000.  The decrease of $121,930 is primarily the
result of a decrease in accounting and legal costs to $31,674 for
the six months ended June 30, 2001 from $92,560 for the six months
ended June 30, 2000.  We incurred higher accounting and legal costs
in the first six months of 2000 due to completion of our audited
financial

                                4

<Page>

statements and the preparation for our filing of a
registration statement with the United States Securities and
Exchange Commission.  These audited financial statements have been
completed and our registration statement is effective.  However, we
continue to incur accounting and legal costs in connection with our
being a reporting company under the Securities Exchange Act of
1934. Wages and benefits were $149,548 for the six months ended
June 30, 2001 compared to $196,746 for the six months ended June
30, 2000, representing a decrease in wages in benefits of $42,198.
The reduction in wages and benefits for the second quarter of 2001
was the result of a reduction to our Surrey, British Columbia staff
by two full time employees in the second quarter of 2001.  We have
delayed the hiring of an office manager until such time as we
achieve additional financing and pursue our plan of operations to
expand our current business.  While we will attempt to increase our
revenues during the third quarter by introducing new products, we
anticipate that these product introductions will not increase our
operating expenses.

Income Before Income Taxes

We incurred a loss before income taxes in the amount of $37,756 for
the six months ended June 30, 2001, compared to a loss before
income taxes of $128,583 for the six months ended June 30, 2000.
The decrease in our loss before income taxes in the amount of
$90,827 is primarily attributable to the decrease in our general
and administrative expenses in the amount of $121,930, net of the
decrease in our gross profit of $34,815.

Income taxes recoveries were $9,978 (26.4% of loss before income
taxes) in the second quarter of 2001 as compared to $44,567 (34.7%
of loss before income taxes) in the second quarter of 2000.
Differences between the effective rate and the statutory rate
resulted from a valuation allowance provided for Canadian discounted
tax assets and permanent differences between accounting and taxable
income as a result of non-deductible expenses.

Net Income

We incurred a loss after income taxes in the amount of $27,778 for
the six months ended June 30, 2001, compared to a loss after income
taxes of $84,016 for the six months ended June 30, 2000.  The
decrease in our net loss in the amount of $56,238 is primarily
attributable to our decreased general and administrative expenses.


FINANCIAL CONDITION

Liquidity and Capital Resources

Our cash position was $44,096 on June 30, 2001, compared to $40,559
on December 31, 2000.  Our working capital position was $309,828 on
June 30, 2001, compared to $361,172 on December 31, 2000.

Net cash provided by operating activities was $37,989 for the six
months ended June 30, 2001, compared to net cash used in operating
activities of $38,779 for the six months ended June 30, 2000.  The
increase in cash provided by operating activities was primarily the
result of a decrease in net working capital assets during the six
months ended June 30, 2001 in the amount of $51,344. This decrease
was off-set by our net loss of $27,778 for the six months ended
June 30, 2001.  We incurred a decrease in our accounts receivable
of $193,449 during the first six months of 2001.  Our accounts
payable decreased in the amount of $95,924 during the first six
months of 2001.  Our inventories also decreased during the first
six months of 2001, resulting in a further increase in cash in the
amount of $43,796.

                               5

<Page>

Net cash used for investment activities was $21,651 for the six
months ended June 30, 2001 compared to $55,364 for the six months
ended June 30, 2000.  Net cash used in investment activities
consisted exclusively of property and equipment purchases.

Net cash used in financing activities was $14,089 for the six
months ended June 30, 2001, compared to net cash provided by
financing activities of $146,111 for the six months ended June 30,
2000. The cash used in financing activities was attributable to the
repayment of current portions of our current long term
indebtedness, including our bank indebtedness, during the six
months ended June 30, 2001.  Cash provided by financing activities
for the six months ended June 30, 2000 was primarily attributable
to sales of our common stock.

Historically, we have funded our business operations primarily from
net operating income.  We have also relied on loans from the Bank
of Montreal and Mr. Robert Jeffery, one of our shareholders, and
sales of our common stock to fund business operations.

We obtained a fixed loan from the Bank of Montreal in 1998.  This
loan is payable on demand with an agreed upon repayment schedule
requiring payments of $834 per month, plus interest at the bank's
funding rates, plus 1.5% per annum.  The principal amount of the
outstanding loan was $22,292 as at June 30, 2001, compared to
$27,509 as at December 31, 2000.  We also have a further loan with
the Bank of Montreal that is secured by the Company's vehicle.  The
principal amount of this outstanding loan was $10,304 as of June
30, 2000, compared to $12,484 as at December 31, 2000.  This loan
is payable on demand with an agreed upon repayment schedule
requiring payments of $347 per month, plus interest at the bank's
prime lending rates, plus 1.5% per annum.

Mr. Robert Jeffery, one of our shareholders, has advanced us
unsecured loans at an interest rate of 10.25% per annum.  The loans
are repayable in full on October 1, 2002.  Until maturity, we are
required to make quarterly payments of interest to Mr. Jeffery.
The principal amount of this loan was $62,748 as at June 30, 2001,
compared to $66,689 as at December 31, 2000.

We did not complete any sales of our common stock during the first
six months of 2001.

Plan of Operations

We anticipate that we will require additional funding in the amount
of approximately $500,000 over the next twelve-month period in
connection with our planned expansion into the retail market.
These expenses will be comprised primarily of increased marketing
expenses and inventory acquisition costs.  If we are successful in
securing increased orders for the retail market, then we will be
required to substantially increase our inventory prior to
realization of sales.  This increase in inventory will require
additional funding in excess of cash provided from our current
operations.

We plan to finance our expansion into the retail market using both
revenues from existing operations and equity financings.  We
anticipate that funds from equity financings would be raised from
private placement sales of our common stock.

We believe that we have sufficient capital resources and liquidity
over both the short and long term to sustain our business
operations.  Our revenues from existing operations are sufficient
to cover our current costs of goods sold and general and
administrative expenses.  While we require additional financing in
order to pursue our planned expansion, we do not require additional
financing in order to sustain our present business operations.  If
we are not successful in obtaining additional financing for our
planned expansion, we will not proceed with the planned expansion.
 If we are only successful in raising a portion of the required
funds, then we will scale back our

                               6

<Page>

expenditures on the expansion to stay within the funds available
from the financing and our current business operations.

We can provide no assurance that adequate funds from public or
private financings will be available when needed, or that, if
available, it will be offered on acceptable terms.  If we issue
additional shares of our common stock to raise funds, then our
existing shareholders will suffer dilution.  If we are unable to
sell additional shares of our common stock to raise additional
funds, our plan is to scale back our expansion into the retail
market.  If we are able to raise funds in excess of the budgeted
$500,000 expansion, then we may decide to increase our expenses in
completing our expansion to the retail market.

Our actual expenditures and business plan may differ from this
stated plan of operations.  Our Board of Directors may decide not
to pursue this plan.  In addition, we may modify the plan based on
the available amounts of financing in the event that we cannot
obtain the required equity financings to complete the plan.  We do
not have any arrangement in place for any debt or equity financing
that would enable us to meet our stated plan of operations.

New Accounting Pronouncements

In June 1998, SFAS No. 133, Accounting for Derivative Instruments
and Hedging Activities, was issued.  SFAS No. 133 requires
companies to recognize all derivative contracts as either assets or
liabilities on the balance sheet and to measure them at fair value.
 If certain conditions are met, a derivative may be specifically
designated as a hedge, the objective of which is to match the
timing of gain or loss recognition on the hedging derivative with
the recognition of: (a) the changes in the fair value of the hedged
asset or liability that are attributable to the hedged risk; or (b)
the earnings effect of the hedged forecasted transaction.  For a
derivative not designated as a hedging instrument, the gain or loss
is recognized in income in the period of change. SFAS No. 133 is
effective for all fiscal quarters of fiscal years beginning after
June 15, 2000.

Historically, we have not entered into derivative contracts either
to hedge existing risks or for speculative purposes.  Accordingly,
we do not expect adoption of the new standards on January 1, 2001
to affect our financial statements.

In 1999, the SEC issued Staff Accounting Bulletin No. 101 dealing
with revenue recognition which is effective in the fourth quarter
of 2000.  We adopted Staff Accounting Bulletin No. 101 in the
fourth quarter of 2000 with no material impact on our financial
statements.


RISK FACTORS

An investment in our common stock involves a high degree of risk.
You should carefully consider the risks described below and the
other information in this Form 10-QSB and any other filings we may
make with the United States Securities and Exchange Commission in
the future before investing in our common stock. If any of the
following risks occur, or if others occur, our business, operating
results and financial condition could be seriously harmed. The
trading price of our common stock could decline due to any of these
risks, and you may lose all or part of your investment.

                               7

<Page>

If We Are Not Successful In Increasing Sales Of Our Screwdriver
Products To The Retail Market, Then We May Not Earn Sufficient
Revenues To Cover The Cost Of Our Expansion And Our Business And
Financial Condition May Be Harmed.
----------------------------------------------------------------
Currently, we earn approximately 80% of our revenues from sales of
our screwdriver products to the industrial and commercial tools
market.  We are planning significant growth in the sales of our
screwdriver products and the number of screwdriver products we
offer for sale.  Our planned business expansion contemplates
increasing sales of our screwdriver products to the retail tools
market as we estimate that the retail tools market is approximately
ten times the size of the industrial and commercial tools market.
This planned growth will require us to hire additional personnel,
increase our production capacity, and generally expand our business
operations.  This expansion will result in our operating costs
increasing.  If we are not successful in increasing our sales to
the retail tool market in an amount that exceeds our increased
operating costs, then our business will be harmed.  In addition,
continued growth could strain our management, production,
engineering, financial and other resources.  Any failure to manage
this expansion could have a materially adverse effect on our
business financial condition and results of operations, such as an
increase in expenses or a decrease in profit margins and net
income.

If We Lose Any Of Our Large Customers, Our Revenues Could
Substantially Decrease.
--------------------------------------------------------------
Most of our sales of screwdriver products are derived from a small
number of customers.  Sales to Cully Enterprises, our largest
customer, accounted for 16.3% of our net revenues in 2000, 18.3% of
our net revenues in 1999 and 23.0% of our net revenues in 1998.  A
significant decrease in sales to, or the loss of, any of our major
customers would have a material adverse effect on our business
prospects, operating results and financial condition, such as a
substantial decline in revenues.

If We Fail To Develop New Distribution Channels, Then Our Revenue
Growth May Be Diminished And Our Business And Financial Condition
May Be Harmed.
-----------------------------------------------------------------
We cannot ensure that we will be able to develop new distribution
channels that will be required to penetrate the retail market or
that this growth strategy will be implemented successfully. Our
growth depends on our ability to develop new distribution channels
in order to sell our product in the retail market.  The challenges
that we face in developing new distribution channels will include:

   -  Establishing retail consumer recognition of our products;

   -  Establishing new distribution arrangements with experienced
      distributors in the retail market;

   -  Managing existing relationships with our current distributors;

   -  Displacing relationships that potential new distributors have
      with current product vendors.

Our failure to develop new distribution channels and our inability
to penetrate the retail market and generate future revenues will
have a material adverse effect on our business prospects, operating
results and financial condition.

If We Lose Our President, Mr. Neil Morgan, Our Ability To Manage
Our Business Could Be Adversely Impacted And Our Business And
Financial Condition May Be Harmed.
-----------------------------------------------------------------
Our performance and future success depends to a significant extent
on our senior management and technical personnel; in particular the
experience and continued efforts of Mr. Neil Morgan, the Company's
founder, President and Chief Executive Officer.  The loss of Mr.
Morgan could have a

                               8

<Page>

material adverse effect on our business prospects.  To reduce our
risk from this potential loss of Mr. Morgan, we maintain key-man
type life insurance for him in the amount of CDN$1,500,000.  We
presently do not have an employment agreement with Mr. Morgan.

As We Do Not Have Any Long Term Agreements With Our Manufacturers,
Our Business May Be Interrupted And Revenues Lost In The Event That
We Are Not Able To Use Our Current Manufacturers To Manufacture Our
Screwdriver Products.
------------------------------------------------------------------
We do not manufacture the components used to make our screwdriver
products.  We rely on outside manufacturers for the manufacture of
each component of our screwdriver products and the assembly of our
screwdriver products.  We do not have long term manufacturing
agreements with any of our manufacturers.  In addition, our license
agreement with Winsire Enterprises Corporation requires that we use
one of two designated manufacturers for the manufacture of the
patented cartridge designs.  If we are not able to maintain our
relationships with our current manufacturers, or if our current
manufacturers increase their cost of manufacturing the components
comprising our screwdriver products, then our business prospects,
operating results and financial condition may be harmed as a result
of any increased costs or business disruption which we incur as a
result of establishing new manufacturing relationships.

Our Inability To Obtain Acceptance Of Our New Products In The
Marketplace Could Adversely Affect Our Ability To Generate New
Revenues And New Customers.
---------------------------------------------------------------
We are in the process of developing new products that are
variations of our current line of screwdriver products.  Our future
success will depend in part on our continuous and timely
development and introduction of these new products into the market.
 We can provide no assurance that our distributors will accept our
new products or that they will obtain market acceptance by the
ultimate purchasers.  Acceptance of our new products will depend
on:

   -  products introduced by our competitors;
   -  the success of our marketing efforts;
   -  our success in establishing distributors for our new products;
      and
   -  the functionality, quality and pricing of our new products.

If we are not successful in achieving market acceptance of our new
products, then our business prospects, financial condition and
operating results will be harmed as a result of the increased costs
we will incur in developing these products and our inability to
generate increased revenues from their sale.

We Face Competition In The Screwdriver Product Market That Could
Adversely Affect Our Sales.
-----------------------------------------------------------------
The screwdriver product market in which we compete is a mature and
highly competitive market.  Our competition includes many companies
that have significantly greater financial, technical,
manufacturing, sales and marketing resources than we do.  These
competitors offer products that are similar to our screwdriver
products, or are different products with similar functionalities.
We have designed our screwdriver products to offer functionality,
ease of use and performance that exceeds the functionality, ease of
use and performance of products offered by our competitors.
However, we can provide investors with no assurance that we will be
able to compete with our competitors, particularly in view of the
fact that many of our competitors own well-known brands, enjoy a
large end-user base, have established distribution relationships
and long-standing customer relationships. Our failure to compete
successfully against our current or future competitors would

                               9

<Page>

have a material adverse effect on our business, operating results and
financial condition, including loss of customers, decline in
revenues and loss of market share.

If We Are Unable To Obtain Raw Materials Or Components Of Our
Products At Our Current Prices, Then Our Manufacturing Capability
And results Of Operation Will Be Adversely Affected.
-----------------------------------------------------------------
We purchase raw materials and key components of our screwdriver
products from third party vendors.  Although there are alternative
sources for many of the raw materials and components, we could
experience manufacturing and shipping delays if it became necessary
to replace current suppliers or manufacturers.  In addition, the
prices of raw materials supplied by certain vendors are subject to
a number of factors including general economic conditions,
competition, labor costs and general supply levels.  Our inability
to obtain reliable and timely supplies of raw materials and
components on a cost-effective basis, or an unanticipated change in
suppliers or manufacturers could have a material adverse effect on
our ability to manufacture our screwdriver products and our
revenues and profitability.

If The Patent Protection Of Our Screwdriver Design Is Lost, Our
Business And Financial Condition May Be Harmed.
-----------------------------------------------------------------
Our ability to generate revenues and to maintain our competitive
position depends in part on the ability of Winsire Enterprises
Corporation to maintain patent protection for the cartridge design
of our screwdriver products.  These patents expire in the Year 2012
in the United States and in the Year 2012 in Canada.  We can
provide no assurance to investors that the patent we licensed will
not be challenged, invalidated, or circumvented by other
manufacturers in the future.

If We Are Found Liable In A Product Liability Lawsuit Arising From
The Use Of Our Screwdriver Products, Our Business And Financial
Condition May Be Harmed.
------------------------------------------------------------------
We face potential risk of product liability claims because our
screwdriver products are used in activities where injury may occur,
including in the building and construction industries.  Although we
do have product liability insurance coverage, we cannot be certain
that this insurance will adequately cover all product liability
claims or that we will be able to maintain this insurance at a
reasonable cost and on reasonable terms.  If we are found liable
for damages with respect to a product liability claim and our
insurance coverage is inadequate to satisfy the claim, then our
business, operating results and financial condition could be
materially and adversely affected.

If We Issue Additional Shares Of Our Common Stock In Order To Raise
Additional Capital, Shareholder's Interests In The Company Will Be
Diluted.
-------------------------------------------------------------------
We anticipate that we will be required to raise additional equity
and debt capital in order to continue our current level of
operations and to expand our business operations.  We have no
additional equity or debt financing currently in place.  Financings
may not be available to us when needed for our expansion or, if
available, may be on unfavorable terms.  We anticipate that any
additional equity financing will result in dilution to existing
shareholders.  If we are unable to obtain additional financing,
then we anticipate that we will not be able to complete our
business expansion as projected.  This inability to expand will
most likely have a material adverse effect on our business,
operating results and financial condition.

                               10

<Page>

Because There Is No Market For Our Common Stock, Our Stock Will Be
Difficult To Sell, And If A Market For Our Common Stock Develops,
Then Our Stock Price May Be Volatile.
------------------------------------------------------------------
There is no market for our common stock and we can provide
investors with no assurance that a market will develop.  If a
market develops, we anticipate that the market price of our common
stock will be subject to wide fluctuations in response to several
factors, including:

  1.   actual or anticipated variations in our results of operations;
  2.   our ability or inability to generate new revenues;
  3.   increased competition; and
  4.   conditions and trends in the general economy and the
       industrial tools markets.

Further, we anticipate that our common stock may be traded in the
future on the NASD over the counter bulletin board.  Companies
traded on the bulletin board have traditionally experienced extreme
price and volume fluctuations.  We can provide no assurance that
our common stock will be traded on the over the counter bulletin
board.  If our common stock is traded on the bulletin board, our
stock price may be adversely impacted by factors that are unrelated
or disproportionate to our operating performance.

Because A Portion Of Our Operating Expenses And Revenues Are In
Canadian Dollars, Our Financial Results And Operating Condition May
Be Impacted By Currency Fluctuations In The Canadian Dollar In
Comparison To The U.S. Dollar.
-------------------------------------------------------------------
Our reporting currency is the U.S. dollar.  Approximately 82% of our
operating expenses are incurred in Canadian dollars, as our
principal executive office is located in Surrey, British Columbia,
Canada.  In addition, approximately 35% of our revenues are earned
from sales of our screwdriver products in Canada in Canadian
dollars.  Accordingly, our financial results and operating condition
will be affected by currency fluctuations in the Canadian dollar in
comparison to the U.S. dollars.

                               11

<Page>

PART II - OTHER INFORMATION

Item 1. Legal Proceedings

     None

Item 2. Changes in Securities

     None

Item 3. Defaults upon Senior Securities

     None

Item 4. Submission of Matters to a Vote of Security Holders

     None

Item 5. Other Information

     None

Item 6. Exhibits and Reports on Form 8-K.


EXHIBITS

     None

REPORTS ON FORM 8-K

     None

                               12

<Page>

                           SIGNATURES

In accordance with the requirements of the Securities and
Exchange Act of 1934, the Registrant has duly caused this report
to be signed on its behalf by the undersigned, thereunto duly
authorised.

MEGAPRO TOOLS INC.

Date:     August 10, 2001


By:       /S/ Neil Morgan
          -------------------------
          NEIL MORGAN,
          President, Secretary and Treasurer