<PAGE>   1
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                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549
                                 --------------
                                   FORM 10-KSB

(Mark one)

[X] ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
    1934

For the fiscal year ended December 31, 2000

                                       OR

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

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


                         Commission file number 0-26049

                           SUPPLY CHAIN SERVICES INC.
--------------------------------------------------------------------------------
                 (Name of Small Business Issuer in Its Charter)
<TABLE>
<CAPTION>

                      Delaware                           52-2159951
           -------------------------------         ---------------------
           <S>                                     <C>
           (State or Other Jurisdiction of            (I.R.S. Employer
           Incorporation or Organization)          Identification Number)
</TABLE>

         8/F, Guangdong Textile Centre, 22 Minden Avenue, Tsimshatsui,
                               Kowloon, Hong Kong
--------------------------------------------------------------------------------
           (Address of Principal Executive Offices including Zip Code)

                               011 (852) 2523-5522
--------------------------------------------------------------------------------
                (Issuer's Telephone Number, Including Area Code)

         Securities registered under Section 12(b) of the Exchange Act:

                                      None.

         Securities registered under Section 12(g) of the Exchange Act:

                        Common Stock, $0.0001 Par Value
--------------------------------------------------------------------------------
                                (Title of Class)

     Check whether the issuer: (1) filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such
shorter period that the registrant was required to file such reports), and (2)
has been subject to such filing requirements for past 90 days.

Yes     X       No
   -----------    -----------

     Check if there is no disclosure of delinquent filers in response to Item
405 of Regulation S-B contained in this form, and no disclosure will be
contained, to the best of the registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this Form 10-KSB
or any amendment to this Form 10-KSB. [X]

     State issuer's revenues for its most recent fiscal year. $628,201

     State the aggregate market value of the voting and non-voting common equity
held by non-affiliates computed by reference to the price at which the common
equity was sold, or the average bid and asked prices of such common equity as of
a specified date within the past 60 days (See definition of affiliate in Rule
12b-2 of the Exchange Act.):

     No trading market exists for the registrant's common stock, and, therefore,
no aggregate market value can be determined.

     State the number of shares outstanding of each of the issuer's classes of
common equity, as of the latest practicable date: 35,283,333 shares of common
stock are issued and outstanding as of March 30, 2001

Transitional Small Business Disclosure Format

Yes            No     X
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================================================================================

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                                TABLE OF CONTENTS
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<S>        <C>                                                                                      <C>
PART I

ITEM 1.    DESCRIPTION OF THE BUSINESS                                                               1
ITEM 2.    DESCRIPTION OF PROPERTY                                                                  14
ITEM 3.    LEGAL PROCEEDINGS                                                                        16
ITEM 4.    SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS                                      16

PART II

ITEM 5.    MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS                                 17
ITEM 6.    MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION                                19
ITEM 7.    FINANCIAL STATEMENTS                                                                     22
ITEM 8.    CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE     22
ITEM 9.    DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS                             23
ITEM 10.   EXECUTIVE COMPENSATION                                                                   25
ITEM 11.   SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT                           27
ITEM 12.   CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS                                           27
ITEM 13.   EXHIBITS, LIST AND REPORTS ON FORM 8-K                                                   29
</TABLE>

<PAGE>   3
PART I


ITEM 1. DESCRIPTION OF THE BUSINESS.

     A CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

     THIS ANNUAL REPORT INCLUDES FORWARD-LOOKING STATEMENTS THAT INVOLVE
SUBSTANTIAL RISKS AND UNCERTAINTIES AND REFLECT OUR CURRENT EXPECTATIONS AND
PROJECTIONS ABOUT FUTURE RESULTS, PERFORMANCE, PROSPECTS AND OPPORTUNITIES. YOU
CAN IDENTIFY THESE FORWARD-LOOKING STATEMENTS BY USING WORDS INCLUDING, WITHOUT
LIMITATION, "MAY," "WILL," "EXPECT," "ANTICIPATE," "BELIEVE," "INTEND,"
"ESTIMATE" AND "CONTINUE" AND SIMILAR EXPRESSIONS. THESE FORWARD-LOOKING
STATEMENTS ARE BASED ON INFORMATION CURRENTLY AVAILABLE TO OUR DIRECTORS AND
OFFICERS AND ARE SUBJECT TO A NUMBER OF RISKS, UNCERTAINTIES AND OTHER FACTORS
THAT COULD CAUSE OUR ACTUAL RESULTS, PERFORMANCE, PROSPECTS OR OPPORTUNITIES IN
2001 AND BEYOND TO DIFFER MATERIALLY FROM THOSE EXPRESSED IN, OR IMPLIED BY,
THESE FORWARD-LOOKING STATEMENTS.

     We believe it is important to communicate our expectations to our
stockholders. There may be events in the future, however, that we are not able
to predict accurately or which we cannot control. You should not place undue
reliance on any forward-looking statements, which speak only as of the date of
this annual report. Except required by federal securities laws, the directors
and officers undertake no obligation to publicly update or revise any
forward-looking statements, whether because of new information, future events,
changed circumstances or any other reason after the date of this annual report.

1A.  GENERAL

     INTRODUCTION

     We are a Delaware-incorporated holding company with operations,
including sourcing, procurement, production and other supply chain related
services, sales, marketing and other corporate activities, being carried out
through two wholly-owned subsidiaries, Supply Chain Services Limited ("SCSL")
and Leader Industrial Group Limited ("LIGL"), both incorporated and headquarted
in Hong Kong. One of those subsidiaries, SCSL, has representative offices in
Shanghai and Shenzhen, PRC and Taipei, Taiwan, Republic of China, and has sales
representatives carrying out marketing activities covering specific regions in
the United States on a commission basis. SCSL also has entered into a service
agreement with Tibet Jin Sheng Company Limited for the operation of all the
fundamental day-to-day business activities within the southern part of the PRC.
Our subsidiary SCSL is responsible for providing technical support and
supervising the performance of activities in the PRC.

     We believe that many U.S. companies import goods and merchandises from Asia
because Asian manufacturers offer competitive prices with acceptable quality
standards. Some of these companies buy through trading houses whilst the others
have local buying offices. Due to changes in consumers' demand for value and
competitive pressure in the US retail industry, the Company estimates that some
U.S. companies now offer merchandise with more variety, better prices and higher
quality In order to achieve all these objectives simultaneously, the purchase,
manufacturing & delivery functions (i.e. the supply chain) must be efficiently
managed and coordinated. We believe that traditional trading houses and buying
offices often fail to be effective managers/coordinators because of poor
management skills, absence of applicable experience, and inadequate technology
support. This leads, the Company believes, to a strong market demand for quality
services providers, especially

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those equipped with advanced technology for communication purposes, to manage
and coordinate an integrated supply chain.

     We believe we offer a "one-stop" solution to customers by providing supply
chain management services through working closely with manufacturers/suppliers,
wholesalers, retailers as well as logistic services providers in order to
implement each part in the supply chain. All our operations, including sourcing,
procurement, production and other supply chain related services, sales,
marketing and other corporate activities are conducted through our wholly-owned
subsidiaries.

     Our subsidiary SCSL's representative office in Shanghai is formed under an
alliance partnership with Bonbridge Consultancy (China) Limited ("Bonbridge").
Under a verbal understanding, Bonbridge is responsible for sourcing, production
follow-up, quality inspections and logistics activities in Shanghai and other
adjoining provinces. In consideration of the provision of their services,
Bonbridge is entitled to a commission fee, which varies from project to project,
on the net invoice amount of shipments handled by Bonbridge on behalf of SCSL.
SCSL is responsible for providing technical support and monitoring the overall
performance of this alliance partnership.

     Our subsidiary SCSL's representative office in Taipei is also formed under
an alliance partnership with Maxim (Taiwan) Company Limited ("Maxim"). Under a
verbal understanding, Maxim is responsible for sourcing, production follow-up
and quality inspections in Taiwan. In consideration of the provision of their
services, Maxim is entitled to a commission fee, which varies from project to
project, on the net invoice amount of shipments handled by Maxim on behalf of
SCSL.

     The U.S. office based in San Antonio is also a representative office for
our subsidiary SCSL. At this present stage, SCSL is sharing the office
facilities of our service agent, Merchandise Management Services, for a minimal
fee. SCSL also has 7 sales representatives carrying out marketing activities
covering specific regions in the US on a commission basis.

     We believe our management team understands that timeliness of delivery,
varieties of choices, quality standard of merchandises, communication
capabilities and cost effectiveness are their customers' key concerns. We
maintain a database of suppliers in a number of various product categories. We
believe we provide useful services and information to clients and endeavor to
execute the physical material, information and financial flows of each supply
chain process in a systematic manner. We are also developing our own proprietary
supply chain software based on management's experience in manufacturing and
logistics industries in Asia and exposure to marketing in North America. With
our own proprietary supply chain software, we believe that we will be able to
offer extensive information flow and enhance process control for our clients. By
working to expand our supplier/manufacturing resources, offering competitive
prices, broadening over business alliance partners network and developing an
internet-based supply chain software, we believe that our services can help our
customers increase efficiency and achieve cost effectiveness.

     Our customers total 10 currently and consist primarily of US-based retail
companies, trading companies, distributors and product development companies,
including Sears Roebuck & Co., Rumpus Corporation, North American Bear Company
and Focus Group Inc. Though our management has experience in a number of product
categories, it is currently focusing its efforts on working with companies in
supply chain services for toys, cut & sew products (luggage sets and stuffed
toys), trim-a-tree decorations and ornaments as well as home improvement
hardware manufactured in Asia, particularly in the PRC. Management believes its
experience in the manufacturing environment of these products and

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extensive knowledge in the logistics infrastructure in China enable us to
fulfill our customers' orders effectively, efficiently and economically. With
what we believe is sound strategy, extensive experience and strong technological
support, management believes we are positioned to become a serious competitor in
the Hong Kong supply chain management industry.

     BUSINESS STRATEGIES

     Timeliness of delivery, varieties of choices, quality merchandises,
communication capabilities and cost effectiveness are key concerns of our
customers. In order to be successful, we feel that it is crucial to address our
customers' concerns and that the highest service quality is one of the Company's
top priorities. Our existing customers, which include some of the most demanding
retailers in the U.S., we believe evidence of our capabilities to deliver high
quality services. We, however, are undertaking the following actions to enhance
our services so that our customers can realize higher efficiencies which
translating into greater cost savings :-

     -    Offer more product choices by enriching the Company's
          supplier/manufacturing resources;

     -    Provide more competitive prices by leveraging the Company's
          merchandising expertise;

     -    Broaden the Company's network of business alliance partners (such as
          logistics services providers, custom services providers and warehouse
          operators, etc.); and

     -    Develop a set of Internet-based supply chain management
          software to enable the Company's customers to extract the latest
          information on the status of their orders, with which they can react
          swiftly to changing market conditions.

     SUPPLY CHAIN MANAGEMENT ("SCM")

     The Supply Chain Management ("SCM") business is managing activities across
the entire merchandise flow from product development, manufacturing, shipping,
warehousing to delivery (in other words, the supply chain) in order to bring
products to customers faster, better, and at the lowest cost.

     Retailers and suppliers implement SCM to remain competitive, improve profit
margins and meet increasing levels of sophistication with consumers demanding
"More for Less" - that is, more quality, more variety and more service for less
cost, less time and less complexity. While the concept of SCM has been in
operation for more than 20 years, only in the last few years has SCM begun to be
fully exploited to the benefit of consumers, retailers and vendors due to the
rapid development in communication and SCM related technologies. We believe SCM
has now emerged as the new "rules of the game".

     Traditionally, marketing, distribution, planning, manufacturing, and the
purchasing organizations along the supply chain operated independently. These
organizations have their own objectives and which are often conflicting. As a
result, there is not a single, integrated plan for the organization - there were
as many plans as businesses. Clearly, there is a need for a mechanism through
which these different functions can be integrated together. SCM is a strategy
through which such integration can be achieved.

     SCM is typically viewed to lie between fully vertically integrated firms,
where the entire material flow is owned by a single firm, and those where each
channel member operates independently. Therefore, coordination between the
various players in the chain is the key to effective management. In
"Characteristics of Supply Chain Management and the Implications for Purchasing
and Logistics Strategy" published in The International Journal of

                                       3
<PAGE>   6
Logistics Management (1993), Cooper and Ellram compare successful supply chain
management to a well-balanced and well-practiced relay team. Such a team is more
competitive when each player knows how to be positioned for the hand-off. The
relationships are the strongest between players who directly pass the baton, but
the entire team needs to make a coordinated effort to win the race. We strive to
accomplish such a relationship by enhancing coordination of each process in the
supply chain to make one continuous cycle from sourcing to distribution.

     BENEFITS OF SCM

     We believe the key benefits from SCM, all of which ultimately translate
into improved profitability, to include:-

     -    Replenish out-of-stock items more regularly;

     -    Reduce working capital & inventory;

     -    Reduce back-room space;

     -    Reduce warehouse space;

     -    Reduce inventory risk (especially fashion goods);

     -    Shorten product development time;

     -    Reduce ordering lead time; and

     -    Increase on-shelf product choice.

Establishment of a SCM system involves :-

     -    Setting up good working relationship amongst all operating units,
          either internal or external, within the supply chain (such as product
          developers, manufacturers, logistic services providers, etc.);

     -    Installation of an efficient communication network to enable a timely
          sharing of essential information among all operating units within the
          supply chain; and

     -    Ensuring adequacy of infrastructure to allow a smooth physical flow of
          merchandise.

    A company does not have to establish all components of a SCM system within
its organization to materialize full SCM benefits. Engagement of third party SCM
services providers, either to compliment in-house capabilities or as a complete
source of services, is a prudent alternative. A full SCM implementation requires
substantially financial resources and management time.

     EFFICIENT COMMUNICATION NETWORK FOR SCM

     Electronic Data Interchange ("EDI"), which carries vast amount of
information among trading partners' computers with great speed and accuracy, is
one of the most crucial communication tools for SCM.

     EDI enables standardized communication, which is a process more superior to
un-standardized e-mail communication. E-mail, the currently most popular
electronic transfer of messages, is a medium to exchange data and information
without a common global standard for the message type or structure. The
unstructured exchange does not allow the receiver of a message to process
information automatically. A purchase order placed via e-mail needs to be
reprocessed by the receiver to initiate an in-house production order or a
shipment order and therefore is not significantly more efficient than the
traditional processing of orders received via fax or letter. EDI is the
electronic communication standard that enables automatic data processing without
manual re-capturing of data.

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<PAGE>   7
     It is important to note that an Internet service provider can be used as
the network to transfer EDI messages from one business party to another, but
e-mail is not a communication standard, nor is it a substitute for the efficient
EDI-based communication.

     EDI, when used together with "Barcodes", "Serial Shipping Container Codes"
and "Location Numbers" can provide a "Merchandise Movement Tracking System"
which allows the user to identify the exact location of the merchandise at any
given point of time.

     Barcodes are machine-readable graphic symbols on consumer goods, cases,
pallets or containers that allow efficient handling and product movement. There
are global standards for barcodes, which are used in connection with scanning
technology in store, distribution centers, shipping and manufacturing.

     Serial shipping container codes form is a code and symbology system that is
designed to track inter-company product movement and distribution. The code is
used for all logistics units (e.g. pallet, container, case).

     A location number is a numeric code that identifies any functional or
physical location within an organizational entity. Typical locations can be a
specific warehouse shelf, a retail store or a distribution center. The use of
location numbers helps to move products efficiently through the supply chain
without manual re-capturing of location data.

     GLOBAL SUPPLY CHAIN MANAGEMENT ("GSCM")

     When SCM is implemented for international trade, it becomes Global Supply
Chain Management ("GSCM").

     GSCM has more components than local SCM because international trades
involve custom clearance, cross border shipping and international payments with
different currencies. GSCM's major challenge is to integrate the various
components with different business cultures and trade practices into an
efficient global supply chain. As demonstrated below, if managed effectively,
GSCM is beneficial both to the consumers and to the operating companies.

     In an analysis done by Coopers & Lybrand Consultants in 1996, it was
concluded that implementation of GSCM in the context of Hong Kong's business
environment would result in a 5.9% reduction in the ultimate consumer prices.

     A case study presented in the "Supply Chain Management in Global Trade"
published by the Hong Kong Article Numbering Association in 1997 of a U.S.
department store chain buying dress shirts from Hong Kong pursuant to the GSCM
practice showed the following benefits:

     -    Order and delivery accuracy reached 100% through Electronic Data
          Interchange;

     -    Cycle time for orders was cut from 4-5 months to 30 days at the most;

     -    Inventory in replenishment items was reduced from 17 weeks to an
          average 6-8 weeks;

     -    Capital in stock employed was reduced by more than half;

     -    Distribution center handling costs were reduced through operating a
          crossdocking procedure; and

     -    Increased consumer satisfaction through better on-shelf performance.

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     MARKET FOR GSCM SERVICES IN HONG KONG

     The Company believes that the U.S. demand for GSCM services in Hong Kong is
strong because :-

     -    The upward trend of U.S. imports from the PRC in the 1990's will be
          carried forward into the 2000's, with Hong Kong continuing as a
          service center for US-Sino trades.

     -    Changing consumer and retail trends in the U.S. is forcing U.S.
          retailers to provide more choices to consumers on a timely basis at
          more competitive prices which can be more easily accomplished with
          GSCM practices.

     -    Competitive pressure in the U.S. retail industry may force retailers
          to employ GSCM services in order to become more cost effective when
          buying from the PRC through Hong Kong.

     -    There is a strong need to build productivity, cut costs and improve
          earnings.

     CHANGING CONSUMER TRENDS

     Quality, time and price were the main factors influencing consumers'
purchase decisions in the 1980's. In the 1990's, the desire for convenience,
constraints upon time and greater interest in entertainment had added new
challenges for the retail industry in the U.S. We believe today's consumers:-

     -    Focus more on financial security, health care, comfort and safety;

     -    Continue to save more;

     -    Experience lower consumption needs; and

     -    Spend an average of only 4.3 hours per month on shopping.

     COMPETITIVE PRESSURE IN THE U.S. RETAIL INDUSTRY

     U.S. retail sales in the 1990's grew at a compound rate of only 4.6%.
Discounters and mail-order outlets had significantly outperformed others in
terms of growth by focusing on price/value and shopping convenience. Department
stores and specialty apparel stores had lost their market share of consumer
expenditure, suffering declining sales after adjusting to inflation. Competition
is rapidly strengthening. The retail markets in the U.S. are experiencing
consolidation - an overabundance of retail stores is forcing weak companies to
merge with the strong in order to survive.

     INDUSTRY PROFILE

     We believe the Hong Kong GSCM services industry is only in its infancy
stage, slowly evolving from the export trade industry.

     Major Hong Kong chain stores such as Wellcome, Marks & Spencer (Hong Kong)
and Park & Shop have implemented, internal SCM/GSCM but these organizations do
not provide services to third parties. Present participants in Hong Kong's
export trade are those who are mostly likely to evolve into GSCM services
providers but they are falling behind because the export trade industry has the
following traits :-

     -    Fragmented, full of small and medium size companies;

     -    Low information technology skills;

     -    Scarcity of human and financial resources; and

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     -    Low awareness of SCM/GSCM.

     The Hong Kong Article Numbering Association, established in 1989, is an
eager promoter of SCM/GSCM in Hong Kong. It has held SCM conferences almost
every year since 1996. It also conducted several studies on the subject with
sponsorship from the Hong Kong Government and published introductory materials
to help the export practitioners understand underlying concepts and practices of
SCM/GSCM. Despite these efforts, progress is slow (due to the inherent
limitation of the export industry as described above). Conversion of export
trade companies into supply chain operators would change the entire day-to-day
operations and company infrastructure, and require large investments in
technology, education and training.

     According to a SCM survey conducted by the Hong Kong University of Science
and Technology in 1995, more than half of the population under survey never
heard of SCM/GSCM. A 1996 survey sponsored by Hong Kong Industry Department
(interviewed 80 executives in the export industry : manufacturers, buying
offices, freight forwarders, overseas customers, export agents, shipping
companies, etc.) confirmed the awareness of SCM/GSCM in Hong Kong as follows:-

     -    Logistics providers have comprehensive knowledge;

     -    Information technology departments: high awareness;

     -    Manufacturers, buying offices: low understanding;

     -    Merchandising & sales: low understanding; and

     -    Many think SCM/GSCN is not relevant.

     The same survey also found that the actual and perceived blocks to SCM/GSCM
implementation were :-

     -    Management's lack of SCM/GSCM knowledge;

     -    Low awareness of SCM/GSCM needs;

     -    Suppliers' limited SCM/GSCM capabilities;

     -    Under-developed information technology; and

     -    Perceived high investment costs.

     THE COMPANY'S SERVICES

     With our management's extensive manufacturing experience in Asia,
particularly in the PRC, and broad exposure with overseas markets, we understand
that manufacturing in Asia could be a complicated exercise for overseas buyers
with no presence and/or limited experience in Asia. We cater a "ONE-STOP
SOLUTION" GSCM services to its customers in their purchases of Asia-manufactured
toys, cut & sew products (luggage sets and stuffed toys), Trim-A-Tree
decorations and ornaments, and home improvement hardware. Our major function is
to integrate all activities from sourcing to distribution through its sourcing,
production and logistics teams to ensure competitive pricing, high quality
products and reliability in delivery. We also focus on maximizing time and cost
effectiveness at every stage of the supply chain.

    Our directors and officers believe that in today's competitive environment,
customer service is crucial to the supply chain business. Therefore, daily and
effective communications and meaningful periodic reporting are provided to our
customers as an integral part of our services.

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     CUSTOMER PROFILE

     All our customers are US-based retail stores/chains, trading companies,
distributors and product development companies.

     Our core customers in the toys, luggage and Christmas decorations division
include :-

     -    SEARS ROEBUCK & CO., a company established in 1886. Sears is one of
          the largest department chain in the US with over 800 department stores
          and over 1,300 furniture, hardware, battery and autoparts stores in
          the US and over 100 stores in Canada.

     -    RUMPUS CORPORATION, a young New York-based soft toy development
          company.

     -    FOCUS GROUP INC., a marketing company based in Knoxville, Tennessee,
          specializing in the distribution of dolls, baby strollers, wood toys,
          Trim-A-Tree decorations and some hardware items. Its customers include
          Wal-Mart, Kmart, Roses, Dollar Stores and Service Merchandise.

     -    NORTH AMERICAN BEAR COMPANY, a New York based toy company established
          in the mid-1970s, producing uniquely designed high quality teddy
          bears. Its customers include Saks Fifth Avenue Department Stores,
          Barneys New York and ABC Stores.

Details of individual customers accounting for more than 5% of the Company's
sales and services for the years ended December 31, 1999 and 2000 are as
follows:

<TABLE>
<CAPTION>
                                                       1999                 2000
                                                       ----                 ----
    <S>                                                <C>                  <C>
    Sears, Roebuck & Co.                               13.2%                26.9%
    Rumpus Corporation                                 77.5%                36.7%
    Sports Manufacturers                               0.00%                 5.2%
      International Inc.
    North American Bear Co. Inc.                       0.00%                 9.9%
    Focus Group                                        0.00%                 5.3%
</TABLE>

     SALES AND SERVICES CONTRACTS

     We have entered into purchase contracts through our wholly-owned
subsidiaries with our U.S. suppliers. On April 25, 2000, our subsidiary LIGL
entered into the third consecutive approximately one-year purchase contract with
Sears, Roebuck & Co. for the sale, purchase and delivery of toys, dolls and
other merchandize from our supplier and for a total amount of US $181,028. We
expect LIGL to enter into another such one-year contract for a similar amount
this year.

     Additionally, our wholly-owned subsidiary, SCSL has entered into an
agreement dated 2 May 2000 with Rumpus Corporation in respect of appointing our
subsidiary as the sole and exclusive agent to undertake supply chain services,
including outsourcing and purchasing of goods in the PRC and Taiwan on behalf of
our customer. In consideration of the provision of services to our customers, we
are entitled to a commission equal to 6% of the Invoice Value (i.e. the sums
invoiced by the sellers or suppliers of the goods to our customer less any value
added tax or government taxes, duties, levied and any amounts for transport or
insurance and all out-of-pocket expenses). Our customer is obligated to pay SCSL
a monthly retainer fee which will be deducted if the commission payable is
higher than the retainer fee at the end of each quarter.

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     COMPETITION

     Currently, we believe we have very limited competition in our business
because only a very few companies in Hong Kong are capable of providing
integrated GSCM services comparable to our. Our major competitors in Hong Kong
are:-

     -    Li & Fung Distribution, the SCM arm of a well-established trading
          house in Hong Kong; and

     -    Janco and Four Stars (trading firms).

     As these companies are privately-held or divisions within larger entities,
it is difficult to assess the size of their share of the market for GSCM
services. Though our directors and officers are of the opinion that GSCM
services should dominate the Hong Kong export industry in the 2000's, they
believe this will not happen in the near term due to the difficulty for trading
companies to change their operational process, management style and corporate
infrastructure and evolve into supply chain operators. The potential roadblocks
to implementation of SCM/GSCM in Hong Kong as identified by the Hong Kong
Industry Department further our directors and officers to believe that stiff
competition in our business will not occur overnight.

     THE COMPANY'S COMPETITIVE EDGE

     We believe we have has a competitive edge in the following areas:-

     -    The past hands-on experience with the western consumer markets by our
          management team, particularly in the toy industry, enables us to
          understand its customers' need better than some of our competitors.

     -    We have the vision, skills and necessary training to carry out GSCM
          practices.

     -    Our early start of GSCM services in Hong Kong gives us the
          opportunities to cement a strong business relationship with our
          customers. The entry barriers indicated above help us to achieve this
          objective.

     -    Our management team leader, Mr. Thomas Chu, has extensive computer
          technology background and was instrumental in installing and
          implementing a "Logistics Tracking" system for a logistics services
          provider. The use of our internally developed proprietary supply chain
          management software and other state-of-the-art GSCM enabling
          technology will further set us apart from our present or future
          competitors.

     -    Our strong network of business alliance partners along the supply
          chain cycle is a valuable intangible asset, which is difficult to
          duplicate by our competitors without extensive time investment.

     GROWTH OPPORTUNITIES

     We are optimistic on the growth potential for our business because :-

     -    We believe the U.S. will continue to import more and more toy products
          from the PRC, which accounted for 59% of US's importation of toys,
          games and sporting goods in 1998.

     -    China's accession to the World Trade Organization will trigger
          additional US-Sino trade. o The growth of e-commerce will translate
          into a greater demand of supporting services such as those offered by
          us.

                                       9
<PAGE>   12

     -    Utilization of Internet technology as a global communication tool will
          enable us to tap into a wider range of potential customers and will
          help us to broaden its customer base quickly.

     -    With numerous small to medium size "traditional" trading companies
          (i.e. merely sourcing agents) in Hong Kong squeezed by stiff
          competition, we will be able to expand its customer base quickly by
          way of merger and acquisition.

     GROWTH BY ACQUISITION OF TRADING COMPANIES

     According to Hong Kong Government statistics, there were 98,031
establishments in the Hong Kong Import and Export Trade Industry employing
491,856 individuals at the end of March 1999. We believe a number of them
aspirate to evolve into GSCM companies but lack supply chain expertise. While we
have not entered into any discussions or negotiations with others at this time,
we believe that we should acquire a minimum of two Hong Kong based trading
companies in order to maximize our management capabilities, and help the
newly-acquired companies to implement GSCM practices and systems. With this
approach, we will be able to achieve a rapid business growth. We have set the
following criteria for our target companies :-

     -    North American or European customer base (at least 5 to 10 core
          accounts);

     -    Annual Sales of US$ 5,000,000-US$ 10,000,000;

     -    Net Income of US$ 250,000-US$ 1,500,000;

     -    5 to 10 years of business history;

     -    Products - toys, home improvement hardware, houseware, consumer
          electronics; and

     -    10 to 30 Employees

     After completion of each acquisition, we foresee that a transition period
of 3 to 6 months is required for the target companies to fully understand and
execute the supply chain approach. Training may be required to educate the
employees on the concept and purpose of a supply chain. We believe that we need
to be the majority shareholder in each target company since supply chain
management services are still a new concept in Asia and management control is
essential to correctly implement the supply chain strategy. We expect an average
acquisition price of about three times earnings of the target companies.

     We do not have specific target companies at the moment but believe we have
access to several sources with which we can identify potential targets.

     One of our considerations in making acquisition decisions is the impact of
such actions on shareholder value. We will not enter into an acquisition if the
transaction improves its sales value but not earnings, either immediately or in
any intermediate term.

     MARKETING STRATEGY

     Since we recognize GSCM services as a specialized business, its marketing
is not done by "cold-calling", but on a referral basis. We believe we have
formed a number of usable alliances with its sales representatives in the U.S.
Currently, we have 3 sales representatives covering the Northeastern U.S., 2
sales representatives covering Southeastern U.S. and 2 sales representatives
covering Mid-eastern U.S. These sales representatives are not on our payroll,
but are compensated on a commission basis (ranging from 1% to 5%). We supply the
representatives with company brochures and other marketing materials to support
their marketing activities. The sales representatives

                                       10
<PAGE>   13
carry out preliminary visits and are responsible for servicing the customers on
a day-to-day basis. Our key management team members, Mr. Thomas Chu and Miss
Pauline Chu, travel with these sales representatives to visit new and existing
accounts at least twice per year or on an as-needed basis.

     We maintain extensive communications with our U.S. sales representatives.
They not only provide us with information on our customers, but also on the
general market conditions with which we will revise existing marketing
strategies, if appropriate, or formulate new ones.

     We are internally developing a proprietary web-based SCM software
comprising ten main modules and 34 sub-modules. The ten main modules covering
all phases of a supply chain are as follows:-

     -    Purchase Order Management

     -    Shipping Order Booking

     -    Sourcing

     -    Warehousing System

     -    Production Tracking

     -    Customs Clearance Tracking

     -    Quality Control

     -    Payment and Invoicing

     -    Trade Financing

     -    Shipment Tracking

     Our key marketing strategy is to promote our technological capabilities to
potential customers for the following reasons :-

     -    We believe our software will enable us to provide current information
          to overseas buyers, which is not available if they are dealing with
          agents/trading firms operating under traditional modes of
          communication. Our technological capabilities tend to be an attractive
          proposal to potential U.S. customers because they always seek business
          partners who are equipped to match their own operational standards.

     -    We believe our technological capabilities will set us apart from our
          competitors and place us as a world-class player in the arena of GSCM
          services.

    We have targeted to complete all ten main software modules in June 2001.

     We are establishing the ISUPPLYCHAIN Internet platform in 3 phases to
enable the use of our proprietary SCM software by our customers, and as part of
our marketing program. With our Internet presence, more companies in the western
countries will be able to find out how our GSCM services can help them develop
their sourcing capabilities in Asia.

     SALES STRATEGY

     As part of our sales strategy, we aim to target a group of companies that
will most likely utilize our services. This group of companies is defined with
the following criteria :-

     -    North America-based or Europe-based companies;

     -    Purchase orders of at least US$500,000 per annum;

     -    Companies with little sourcing/manufacturing experience in Asia;

     -    Companies with no buying office or presence in Asia; and

                                       11
<PAGE>   14
     -    Product development companies, retail stores, distributors and chain
          stores.

     DELIVERY OF SERVICES

     Our services are delivered mainly through three phases of operations: (i)
sourcing & merchandising, (ii) quality control, and (iii) logistics & shipping.
We employ state-of-the-art technologies, either installed in-house or those of
our business alliance partners, to support our operations. We also utilize the
warehousing facilities of our alliance partners for logistics services in the
PRC.

     Sourcing is the first phase of our operations. During this phase, our
sourcing team conducts a cost analysis, quality comparisons as well as factory
visits, in order to fully understand the suppliers' capabilities and management
skills. We understand that the workflow has just begun at the procurement stage,
which requires detailed negotiations on pricing, payment terms and shipment
schedules. Once the purchase order is placed, we work closely with the suppliers
and manufacturers to review production capacity and planning in order to ensure
that delivery schedules are achievable. Manufacturing products to fit our
customers' specific requirements is our major concern, and is supported by
Enterprise Resource Planning ("ERP") systems. To ensure that supplier compliance
is met, we monitor production and product quality closely by conducting informal
and formal on-site inspections. Since production rarely proceeds smoothly, we
assist our customers to make "running changes" on the production line without
delaying the production schedule, where possible. Details of individual
suppliers accounting for more than 5% of our purchases and services are as
follows:

<TABLE>
<CAPTION>
                                                              1999             2000
                                                              ----             ----
       <S>                                                    <C>              <C>
       Pelagie Industrial Ltd                                 64.3%            65.4%
       Bondrich Development Ltd                               22.9%            0.00%
       Mutual Fit Company Limited                             10.6%            0.00%
       Winch Printers Ltd                                     0.00%            10.4%
       Winfaith Shipping Ltd                                  0.00%            8.6%
       Zui Fat Industrial Ltd                                 0.00%            8.6%
</TABLE>

     Quality control is the second phase of operations and is a major concern to
us and to our customers. At the pre-production stage, we work with our customers
and suppliers/manufacturers to draw up a Quality Assurance criteria list, the
basis for quality control checkpoints during live production runs. All products
being manufactured by the vendors must be submitted to one of the designated
international lab test centers (ACTS, SGS, etc.) in order to certify that
products meet the stringent safety standards set by the respective governmental
entities. Furthermore, we appoint qualified quality control professionals to
conduct on-site quality inspections using AQL (Acceptable Quality Level)
standards or standards pre-determined by its customers at various stages of
production.

     The third phase of our operations, logistics, plays a significant role in
the global sourcing effort and is detrimental to the supply chain if not planned
and executed properly. A number of issues, which will directly affect inventory
flow, costs and delivery schedules, must be addressed:-

     -    Control and tracking movement of goods;

     -    Influence over carriers, warehouse providers, and consolidators in
          terms of pricing and service;

                                       12
<PAGE>   15
     -    Effect of a vendor's assumptions on transportation costs on the
          product unit cost, and ultimately profit margins;

     -    Logistics options - choosing the most appropriate choice (air-freight
          or ocean freight, Less-Than-Container-Load or Full-Container-Load or
          consolidated);

     -    Maximization of freight and container space;

     -    Delivery to end-user or ultimate distribution center; and

     -    Customs clearance.

     As a major component of our services, we strive to provide strategic and
tactical logistics solutions to meet the growing demand from overseas companies
importing and exporting their goods to and from Asia. One of our goals is not
only to resolve our customers' transportation needs, but also to identify a
solution which will be value-added in terms of timing, pricing and reliability.

     BUSINESS ALLIANCE PARTNERS

     We work closely with carefully selected business alliance partners to
deliver its services. Our partners come from various fields, including :-

     -    Independent sourcing and merchandising agents in Taipei and Shanghai;

     -    Quality Control professionals;

     -    Licensed warehouse operators in the PRC; and

     -    Logistics services providers.

     COMPUTER HARDWARE

     We use personal computers for our operations and communications with our
customers. We will need to acquire and install additional hardware equipment to
support the automated integration of our GSCM services, and to host, develop and
maintain our supply chain management software on an in-house basis. We currently
use Dell servers to support the preliminary stages of our SCM software
development. Before completion and installation of the necessary hardware, we
will seek to use reputable computer service companies to host and maintain our
platform.

     PROPRIETARY SCM SOFTWARE

     Our wholly-owned subsidiary, Supply Chain Services Limited has entered into
a service agreement dated 3 January 2001 with Greatmind Technology Limited in
respect of an appointment of the service provider to undertake software
development and programming activities for the Company's supply chain software
program.

     The Company's development of the proprietary SCM software will equip it
with real time tracking abilities and in-house EDI capabilities. There are 3
phases in the development schedule of our supply chain software program. Phase
1, which entailed the establishment of a corporate website (ISUPPLYCHAIN) to be
used for future integration with our supply chain software, was completed in
April 2000. Phase 2 encompasses the software programming and development of our
purchase order management, shipment order booking and shipment tracking modules,
and it expected to be completed by March 2001. The completion of the purchase
order management module will allow us to have EDI conversion, downloading and
uploading capabilities. Phase 3 covers production tracking, quality control,
customs clearance, warehouse systems, trade finance and payment and invoicing
modules and is expected to be

                                       13
<PAGE>   16
completed by June 2001. Each phase will be fully equip the Company with tracking
capabilities over the sourcing, purchasing, production, quality control and
logistics processes.

     Though we have outsourced the initial software development, and
hosting/maintenance of ISUPPLYCHAIN to a third-party computer service provider
at a total cost of US$ 550,000 payable in stipulated monthly installments being
US$ 35,483 from January 2001 to July 2001 and US$ 60,323 from August 2001 to
December 2001, we plan to carry out software enhancements, further developments
and maintenance with in-house capabilities in the nearest future. We intend to
build up our in-house technology capabilities by employing qualified I.T.
professionals. Our company holds full ownership of the proprietary SCM software
and it shall be treated as assets of the Company beyond the termination of the
service agreement. Furthermore, all rights to the software programs, codes,
copyrights, patent, trademark, design rights and any other intellectual property
rights in the materials developed, written, created and prepared by the service
provider are to be vested with the Company. The ISUPPLY CHAIN internet platform
is currently being hosted with a reliable internet service provider in Hong
Kong, but we plan to host the platform in-house once we have the financial
resources to invest in appropriate hardware and employ our own in-house IT
professionals.

     With our proprietary SCM software, ISUPPLYCHAIN Internet platform, and full
computer system integration for the GSCM practice, we will be recognized as a
"technology-based" GSCM services provider. This positioning will add weight to
our competitiveness because we believe technology capabilities are key
considerations when western companies choose supply chain partners.

     EMPLOYEES

     As of 30 March, 2001, we have 13 full time officers and employees in Hong
Kong and the PRC under our subsidiary, SCSL. None of our sales representatives
in the U.S. are employed by the Company or its subsidiaries. These sales
representatives service us on a commission basis, ranging from 1% to 5% for each
sale made. One of our sales representatives, Stanley Walsh, receives a monthly
consulting service fee through a contract between his company, Merchandise
Management Services ("MMS"), and SCSL (see "Executive Compensation"). We also
use the services of independent sales representatives and quality control
specialists. Additional employees will be hired as required.


ITEM 2. DESCRIPTION OF PROPERTY

     OFFICE AND STAFF QUARTERS IN HONG KONG

     We have entered into a tenancy agreement dated 12 May 1999 with Chinasound
Limited in respect of leasing the office premises at 8th Floor of Guangdong
Textile Centre, No. 22, 24 and 26, Minden Avenue, Kowloon, Hong Kong for a term
of 2 years commencing from 7 May 1999 to 6 May 2001. We, as tenants have been
granted two rent-free periods commencing from 7 May 1999 to 21 July 1999 and
from 7 March 2001 to 6 May 2001. The monthly rental of HK$ 22,750 and
air-conditioning and management charges of HK$9,555 is payable in advance on the
7th day of each calendar month.

     Through our wholly-owned subsidiary SCSL, we have entered into a tenancy
agreement dated 11 January 2000 with Chinasound Limited in respect of leasing
the office premises to be occupied as the Company's new showroom at 5th Floor of
Guangdong Textile Centre, No. 22, 24 and 26, Minden Avenue, Kowloon, Hong Kong
for a term of 2 years commencing from 6

                                       14
<PAGE>   17
December 2000 to 5 December 2002. We, as tenants have been granted two rent-free
periods commencing from 6 December 2000 to 5 February 2001 and from 6 October
2002 to 5 December 2002. The monthly rental of HK$ 22,750 and air-conditioning
and management charges of HK$ 9,555 is payable in advance on the 7th day of each
calendar month.

     Through our wholly-owned subsidiary LIGL, we have entered into a tenancy
agreement dated 21 October 2000 with Shek Kwu Investments Limited in respect of
leasing the premises at Flat B, 1st Floor of Tower II and car parking space No.
6 on 2nd Level of Ruby Court, No. 55 South Bay Road, Hong Kong as staff quarters
for our President and Director, Mr. Thomas Chu. The term is of 2 years
commencing from 21 October 2000 to 20 October 2002. The monthly rental of HK$
41,300 is payable on the 21st day of each calendar month. Upon giving 2 month's
prior written notice, we are entitled to early termination of this tenancy
agreement however, not earlier than 20 December 2001 or unless and until 14
month's rent has been paid.

     OFFICE AND STAFF QUARTERS IN THE PRC

     Through our wholly-owned subsidiary SCSL, we have entered into a office
lease contract dated 15 January 2001 with Tibet Jin Sheng Company Limited in
respect of leasing the 220 square-meter office premises situated at Room 1501 &
1508, East Tower, Yi Hai Plaza, Cheng Ye Road, Nanshan District, Shenzhen
Municipality, the PRC for a term of one year commencing from 1 February 2001 to
31 January 2002. The monthly rental of RMB 5,333.33 is payable in advance on or
prior to the fifth day of each calendar month. We are also obligated to pay
two-thirds of payment of utility fees (including water and electricity fees),
sanitation fees and building management fees.

     Through our wholly-owned subsidiary SCSL, we have entered into a lease
contract dated 1 February 2001 with Mr. Shao Lin Zheng in respect of leasing the
92 square-meter staff quarters situated at Room 601, Unit 3, Nan Shui Garden,
Nanshui Buxing Street, Nanshan District, Shenzhen Municipality, the PRC for a
term of 2 years commencing from 19 February 2001 to 18 August 2001 with an
option to renew the lease for a further term of two years. The monthly rental of
RMB 1,500 is payable in advance on or prior to the fifth day of each calendar
month. We are also obligated to pay water, electricity and telephone charges,
gas fees, sanitation fees and building management fees.

     MOTOR VEHICLES

     Through our wholly-owned subsidiary SCSL, we have entered into a hire
purchase agreement dated 16 December 1999 with Inchroy Credit Corporation
Limited in relation to the hiring of a motor vehicle Registration No. JH 6212
for a period of 48 months commencing from 16 December 1999. The monthly rental
of the motor vehicle of HK$ 12,917 is payable in advance on the 16th day of each
calendar month. The motor vehicle was valued at HK$ 573,000 as of 16 December
1999.

     Through our wholly-owned subsidiary SCSL, we have entered into a vehicle
lease contract dated 15 December 2000 with Mr. Wei Jun Fan in relation to the
hiring of a motor vehicle Freeca AT, Registration No. Guangdong B-K9874, for a
period of 3 years commencing from 1 January 2001. The monthly rental of the
motor vehicle being RMB 8,000 is payable in advance on the 5th day of each
calendar month. The motor vehicle is valued at RMB 214,000.

     COMPUTER EQUIPMENT

     Presently, no equipment or properties except basic computer equipment are
owned. We anticipate purchasing additional computer equipment and developing
proprietary computer software to support our operations. The funds will come
from this Offering.

                                       15
<PAGE>   18
     INTELLECTUAL PROPERTY

     In relation to the Company's proprietary SCM software and our engagement
with Greatmind Technology Limited for the development of the Company's supply
chain software, programming and hosting/maintenance of ISUPPLYCHAIN
Internet-based platform, the company holds full ownership of the proprietary SCM
software and such software shall be treated as assets of the Company beyond the
termination of the service agreement. Further, all rights to the software
programs, codes, copyrights, patent, trademark, design rights and any other
intellectual property rights in the materials developed, written, created and
prepared by the service provider are to be vested with the Company.

     EMPLOYMENT INSURANCE

     Through our wholly-owned subsidiary SCSL, we have taken out an employment
insurance policy with Royal & Sun Alliance Insurance (Hong Kong) Limited
commencing from 1 September 2000 to 31 August 2001 to cover the employment of 5
employees working at the premises being 8th Floor, Guangdong Textile Centre, 22
Minden Avenue, Tsimshatsui, Kowloon, Hong Kong. The amount of liability insured
is HK$ 100,000,000 for any one accident or disease which may be caused or
suffered by its employees.

     COMMERCIAL INSURANCE

     Through our wholly-owned subsidiary SCSL, we have taken out a commercial
insurance policy with the Hong Kong & Shanghai Insurance Company Limited
commencing from 6 February 2001 to 5 February 2002 to cover the loss of contents
including business furniture, fixtures, fittings and office equipment in the
event of fire at the office premises being Room 1501, East Tower, Yi Hai Plaza,
Cheng Ye Road, Nanshan District, Shenzhen Municipality, the PRC. This insurance
policy is extended to cover the perils of aircraft, earthquake, explosion,
vehicle impact, riot and strike, malicious damage, sprinkler leakage, typhoon
and windstorm and water tanks. The total sum of office contents insured is HK$
100,000. Due to the recent increase in employees, we are in the process of
extending the coverage and amount of liability insured.


ITEM 3. LEGAL PROCEEDINGS

     There is no litigation pending or, to the Company's knowledge, threatened
by or against the Company.


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

     During the fourth quarter of the fiscal year 2000, no matter was submitted
to a vote of security holders, through the solicitation of proxies or otherwise.

                                       16
<PAGE>   19
PART II


ITEM 5. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS

5A.  MARKET PRICE

     There is no trading market for the Company's common stock at present and
there has been no trading market to date. There is no assurance that a trading
market will ever develop or, if such a market does develop, that it will
continue.

     The Commission has adopted Rule 15g-9 which establishes the definition of a
Penny Stock. For any transaction involving a Penny Stock, unless exempt, the
rules require that: (i) a broker or dealer approve a person's account for
transactions in Penny Stocks; and (ii) the broker or dealer receive from the
investor a written agreement to the transaction, setting forth the identity and
quantity of the Penny Stock to be purchased. In order to approve a person's
account for transactions in Penny Stocks, the broker or dealer must: (i) obtain
financial information and investment experience and objectives of the person;
and (ii) make a reasonable determination that the transactions in Penny Stocks
are suitable for that person and that person has sufficient knowledge and
experience in financial matters to be capable of evaluating the risks of
transactions in Penny Stocks. The broker or dealer must also deliver, prior to
any transaction in a Penny Stock, a disclosure schedule prepared by the
Commission relating to the Penny Stock market, which, in highlight form: (i)
sets forth the basis on which the broker or dealer made the suitability
determination; and (ii) states that the broker or dealer received a signed,
written agreement from the investor prior to the transaction. Disclosure also
has to be made about the risks of investing in Penny Stocks in both public
offerings and in secondary trading, and about commissions payable to both the
broker-dealer and the registered representative, current quotations for the
securities and the rights and remedies available to an investor in cases of
fraud in Penny Stock transactions. Finally, monthly statements have to be sent
disclosing recent price information for the Penny Stock held in the account and
information on the limited market in Penny Stocks.

     The Company is considering trading its securities on the over-the-counter
("OTC") market. The OTC market differs from national and regional stock
exchanges in that it: (i) is not sited in a single location but operates through
communication of bids, offers and confirmations between broker-dealers; and (ii)
securities admitted to quotation are offered by one or more broker-dealers
rather than the "specialist" common to stock exchanges. The Company may apply
for listing on the NASD OTC Bulletin Board or may offer its securities in what
are commonly referred to as the "pink sheets" of the National Quotation Bureau,
Inc. To qualify for listing on the NASD OTC Bulletin Board, an equity security
must have one registered broker-dealer, known as the market maker, willing to
list bid or sale quotations and to sponsor the company for listing on the
Bulletin Board.

     If trading in the Company's shares is conducted in the OTC market, a
shareholder may find it more difficult to dispose of, or to obtain accurate
quotations as to the market value of, the Company's securities.

5B.  HOLDERS

     There are seven holders of our Common Stock as of December 31, 2000 and
March 27, 2001 as follows:

                                       17
<PAGE>   20
<TABLE>
<CAPTION>
SHAREHOLDER                                              AMOUNT
-----------                                            ----------
<S>                                                    <C>
Gi-Tech Developments Limited*                          25,299,999

Mr. Hardy Kung Chin Lok                                 3,250,000

Mr. King-Kwok Yu                                        2,000,000

Mr. Richard Che Keung Wong                              2,000,000

Miss Pauline Wai Man Chu                                1,366,667

Mr. Eddie Chow                                            700,000

Mr. Tze Tat Fung                                          666,667
-----------------------------------------------------------------
Total Outstanding                                      35,283,333
</TABLE>
----------
*    Gi-Tech Developments Limited is a company 100% owned by our President and
     Chairman of the Board, Thomas Y.C. Chu.

     The issued and outstanding shares of the Company's common stock were issued
in accordance with the exemptions from registration afforded by Sections 3(b)
and 4(2) of the Securities Act of 1933 and Rules 506 and 701 promulgated
thereunder. See PART II, ITEM 11, "SECURITY OWNERSHIP OF CERTAIN BENEFICIAL
OWNERS AND MANAGEMENT".

5C.  DIVIDENDS

     The Company has not paid any dividends to date, and has no plans to do so
in the immediate future. Dividends, if any, will be contingent upon the
Company's revenues and earnings, if any, and capital requirements and financial
conditions. The payment of dividends, if any, will be within the discretion of
the Company's Board of Directors. The Company presently intends to retain all
earnings, if any, for use in its business operations and accordingly, the Board
of Directors does not anticipate declaring any dividends prior to a business
combination.

5D.  RECENT SALES OF UNREGISTERED SECURITIES

     During the past three years, the Company has sold securities that were not
registered as follows:

<TABLE>
<CAPTION>

Date                            Name                 Number of Shares         Consideration
----                   -------------------------     ----------------       -------------------
<S>                    <C>                           <C>                    <C>
April 20, 1999         King Kwok Yu                     2,000,000           $200
April 20, 1999         Richard C. K. Wong               2,000,000           $200
April 20, 1999         Hardy K. C. Lok                  2,000,000           $200
August 28, 2000        Gi-Tech Developments Ltd*       25,299,999           9,499 SCSL shares**
August 28, 2000        Tze Tat Fung                       666,667           see note below***
August 28, 2000        Pauline W. M. Chu                1,366,667           500 SCSL shares**
November 27, 2000      Hardy K.C. Lok                   1,250,000           $250,000
November 27, 2000      Eddie Chow                         700,000           $140,000
</TABLE>

                                       18
<PAGE>   21
----------
*    Gi-Tech Developments Limited is a company 100% owned by our President and
     Chairman of the Board, Thomas Y.C. Chu.

**   Pursuant to a share exchange agreement with Supply Chain Services Limited
     as reported by the Company on Form 8-K on September 11, 2000, as amended on
     November 9, 2000.

***  Mr. Fung's shares were designated by Gi-Tech in recognition of Mr. Fung's
     introduction of the Company to SCSL which led to the merger as set forth in
     the Company's Form 8-K on September 11, 2000, as amended on November 9,
     2000.

5E.  USE OF PROCEEDS FROM REGISTERED SECURITIES

     The Company has not sold any registered securities.


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

6A.  FORWARD-LOOKING STATEMENTS

     As stated in Item 1, "Description of the Business," the statements
contained in this Annual Report on Form 10-KSB that are not historical facts are
forward-looking statements (as such term is defined in the Private Securities
Litigation Reform Act of 1995) that involve risks and uncertainties. Such
forward-looking statements may be identified by, among other things, the use of
forward-looking terminology such as "believes," "expects," "may," "should" or
"anticipates" or the negative thereof or other variations thereon or comparable
terminology, or by discussions of strategy that involve risks and uncertainties.
From time to time, the Company or its representatives have made or may make
forward-looking statements, orally or in writing. Such forward-looking
statements may be included in various filings made by the Company with the
Securities and Exchange Commission (the "SEC"), or press releases or oral
statements made by or with the approval of an authorized executive officer of
the Company. These forward-looking statements, such as statements regarding
anticipated revenues, capital expenditures and other statements regarding
matters that are not historical facts, involve predictions. The Company's actual
results, performance or achievements could differ materially from the results
expressed in, or implied by, these forward-looking statements. Potential risks
and uncertainties that could affect the Company's future operating results
include, but are not limited to: (i) economic conditions, including economic
conditions related to entry into any new business venture; (ii) the availability
of equipment from the Company's vendors at current prices and levels; (iii) the
intense competition in the markets for the Company's new products and services;
(iv) the Company's ability to integrate acquired companies and businesses in a
cost-effective manner; (v) the Company's ability to effectively implement its
branding strategy; and (vi) the Company's ability to develop, market, provide,
and achieve market acceptance of new service offerings to new and existing
clients. Any such forward-looking statements should be read only in conjunction
with this entire Annual Report and the exhibits hereto.

6B.  RESULTS OF OPERATIONS

     Our operations in 2000 were lower than the corresponding period in 1999.
Our sales and services totaled US$1,990,746 in 1999, but only US$628,201 in
2000. As such, our gross profits were down from US$201,234 in 1999 to US$126,997
in 2000, and we operated at a loss of US$299,371. Our net income after tax
operated at a loss of US$265,177, in contrast to our positive net income of
US$88,797 in 1999.

                                       19
<PAGE>   22
     SALES AND SERVICES

     Sales and services decreased from US$1,990,746 in 1999 to US$628,201 in
2000. The lower sales resulted from the following factors:-

     (1) Mr. Chu, our President, did not commence his services with the Company
until September 2000. Due to the late commencement of Mr. Chu's employment with
the Company, his efforts and strategic planning will only build up business for
the coming year 2001 since the marketing season for 2000 has passed.

     (2) One of SCSL's core clients, Rumpus Corporation, changed its marketing
strategy which affected revenue for the year 2000. In 1999, Rumpus'
purchase orders amounted to approximately US$1,194,000, but in 2000, Rumpus'
purchase order volume dropped to approximately US$300,000.

     (3) Our subsidiary, SCSL, voluntarily terminated a supply chain service
program with Plymouth Trading LLC because our management felt that without the
completion of the SCM software, we were not equipped to fulfill all the services
outlined in our service agreement.

     (4) Shipments of some of the purchase programs were delayed to January and
February 2001.

     KNOWN TRENDS LIKELY TO HAVE MATERIAL IMPACT ON SHORT OR LONG TERM
LIQUIDITY.

     Selling expenses for the year ending 2000 was higher due to increase in
advertising subsides which was used for the girls toys program with Sears
Roebuck's Wish Book catalog. General and administrative expenses for the year
ending 2000 increased to US$389,539, from US$195,563 for the year ending 1999.
Primary reasons for the higher general & administrative expenses are due to
substantial increase in auditors' remuneration and legal fees as a result of the
private placement, SEC filings and pre-IPO related activities, expansion in
office facilities, rise in staff employment and higher business travel expenses
for the marketing of supply chain services to potential customers in the U.S.A.

     INTERNAL AND EXTERNAL SOURCES OF LIQUIDITY.

     We continue to increase liquidity through internal and external means.
Internally, we continue to receive funds from our customers, including the
service contracts of our subsidiaries, LIGL and SCSL, with Sears, Roebuck & Co.
and Rumpus Corp., respectively. Furthermore, we continue to rely on our
shareholders to support our operations. Externally, we raised US$390,000 via two
private placements to Mr. Hardy Kung Chin Lok and Mr. Eddie Chow in November
2000, and we seek to raise additional external funds in connection with this
Offering. Although we have no current intention to make additional private
placements with individual investors, we have received indications of interest
in our Common Stock from private investors, and are confident that we can raise
additional funds externally as needed.

     KNOWN TRENDS LIKELY TO HAVE MATERIAL IMPACT ON NET SALES, REVENUE OR
INCOME.

     Net income after tax lowered from US$88,797 in 1999 to a loss of US$265,177
in 2000. This decrease was a combination effect from the lower sales and higher
selling, general and administrative expenses in 2000.

                                       20
<PAGE>   23
     MATERIAL COMMITMENTS FOR CAPITAL EXPENDITURES AND EXPECTED SOURCES OF
FUNDS.

     Pursuant to a contract through our subsidiary SCSL, we have appointed the
service provider Greatmind Technology Limited to undertake software development
and programming activities for the Company's supply chain software program. We
have outsourced this initial software development and hosting/maintenance of the
software with in-house EDI capabilities at a total cost of US$ 550,000. We
expect the source of funds to pay for this service to come from a portion of
proceeds used from any initial offering of our shares on the OTC market, if such
an offering occurs.

     On November 15, 2000, we also signed a services contract with 4Going
Public.com in connection with 4Going Public.com's services as our representative
in connection with any proposed initial public offering on the OTC market. We
paid $10,500 on November 15, 2000, and another $9,500 is due and owing upon
completion of any initial public offering by us on the OTC market.

     SIGNIFICANT ELEMENTS OF INCOME OR LOSS NOT ARISING FROM CONTINUING
OPERATIONS.

     Our subsidiary SCSL has agreed to serve as escrow agent for funds due to a
charitable organization in Asia. No such funds have been received to date;
however, any such funds will be transferred out of SCSL's account after a
foundation is established by the charitable organization. We believe the holding
of such funds, which we will have no rights to and are only acting as escrow
agent for such funds, will be activities we will not be required to document on
our balance sheet. However, if we are required to show the injection and release
of funds on our balance sheet, our accounts may, at some point in time, show a
material increase when there is such an injection of funds and a corresponding
decrease when we, as the escrow agent, are required to release such funds.

     CAUSES FOR MATERIAL CHANGES FROM PERIOD TO PERIOD IN ONE OR MORE LINE
ITEMS.

     See "Significant Elements of Income or Loss not Arising from Continuing
Operations" above.

     SEASONAL ASPECTS HAVING A MATERIAL EFFECT ON FINANCIAL CONDITIONS OR
RESULTS OF OPERATIONS.

     Currently, many of the products we are currently handling for customers are
toys. As such, our customers experience greater activity during the last quarter
of the year, as United States consumers look to purchase holiday gifts. We also
handle garden tools for one of our customers, a product which is more likely to
be purchased by United States consumers in the first and second quarters of the
year. We expect to continue to diversify into other products that may not be as
effected by seasonal changes.

     INCOME TAXES.

     Our subsidiary, SCSL, applied to the Hong Kong Inland Revenue Department
for holdover of provisional profits tax totaling HK$ 96,300 for the fiscal year
ending 1999/2000; we were liable to the profits tax totaling HK$ 96,300 in
accordance with Hong Kong tax regulations on March 16, 2001.

                                       21
<PAGE>   24
ITEM 7. FINANCIAL STATEMENTS

     The balance sheets included in this Form 10-KSB for the year ended December
31, 2000 have been audited by Areson & Company, Certified Public Accountants and
have been prepared in accordance with generally accepted accounting principles
and pursuant to the rules and regulations of the Securities and Exchange
Commission.


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

     Details on the changes in the Company's Independent Accountants are as
follows:

     (a)  Resignation of Independent Accounting Firm

          (i)   Arthur Andersen & Co. our certifying accountant resigned at our
                request as the Company's auditors on September 8, 2000.

          (ii)  The certifying accountant's report on our financial statements
                for the periods from March 29, 1999 (date of incorporation) to
                April 30, 1999 and from March 29, 1999 (date of incorporation)
                to December 31, 1999 contained no adverse opinion, no disclaimer
                of opinion nor was qualified or modified as to uncertainty audit
                scope or accounting principles.

          (iii) Our Board of Directors approved the change in auditors at its
                meeting on September 4, 2000. We reported this change in
                auditors on our current report pursuant to Form 8-K filed with
                the Securities and Exchange Commission on September 11, 2000, as
                amended on November 9, 2000.

          (iv)  During the period from March 29, 1999 (date of incorporation) to
                December 31, 1999 and subsequent interim periods preceding their
                resignation, the Company had no disagreements with the
                certifying accountants on any matter of accounting principle or
                practice, financial statement disclosure, or auditing scope or
                procedure, which disagreements, if not resolved to the
                satisfaction of the certifying accountants, would have caused it
                to make reference to the subject matter of the disagreements in
                connection with their report.

     (b)  Engagement of New Independent Accountants

     On September 5, 2000, our Board of Directors formally approved the
engagement of Areson & Company as its new certifying accountants (the "new
accounting firm") to audit our financial statements.

     During the period from March 29, 1999 (date of incorporation) to December
31, 1999 and subsequent interim periods prior to the engagement of the new
accounting firm, we did not consult with the new accounting firm with regard to
any of the matters listed in Regulation S-K Items 304(a)(2)(i) or (ii).

                                       22
<PAGE>   25
ITEM 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS

9A.  BACKGROUNDS OF DIRECTORS

     The names and ages of all past and present Directors and Executive Officers
of the Company are as follows:
<TABLE>
<CAPTION>

Name                                   Age      Position and Office Held            Term
----                                   ---     --------------------------    -------------------
<S>                                    <C>     <C>                           <C>
Thomas Yan Chuen Chu(1)(2)(5)          53      Director (Chairman of         September 4, 2000
                                                 the Board)                    to present
                                                 President                     September 4, 2000
                                                                               to present

Pauline Wai Man Chu(1)(2)(5)           30      Director                      September 4, 2000
                                                                               to present

Hardy Kung Chin Lok(5)                 50      Director (Chairman of         May, 1999 to
                                                 the Board)                    September 4, 2000
                                                 Director                      September 4, 2000
                                                                               to present

Richard Che Keung Wong(3)              56      Director (Vice Chairman       May, 1999 to
                                                 of the Board)                 September 4, 2000
                                                 Vice President -              September 4, 2000
                                                 Corporate Development         to present

King Kwok Yu(4)                        48      Director and President        May, 1999 to
                                                                               September 4, 2000
                                                 Secretary, Treasurer and      September 4, 2000
                                                 Controller                    to present
</TABLE>

(1)  Mr. Thomas Yan Chuen Chu is the natural father of Miss Pauline Wai Man Chu.
     There are no other family relationships among our directors and officers.

(2)  Mr. Thomas Yan Chuen Chu and Miss Pauline Wai Man Chu also serve as
     Directors of the Company's wholly-owned subsidiaries, Supply Chain Services
     Limited and Leader Industrial Group Limited. Miss Pauline Wai Man Chu is
     also the General Manager of Supply Chain Services Limited and Leader
     Industrial Group Limited.

(3)  Mr. Richard Che Keung Wong also operates his own business in property
     investment and management and of another company listed on the SEHK and has
     executive positions with other companies which have business activities
     dissimilar to those of the Company. He spends a minimum of 4 hours per
     month on the business affairs of the Company.

(4)  Mr. King Kwok Yu also has executive position with other companies which
     have business activities dissimilar to those of the Company. He spends a
     minimum of 5 hours per week on the business affairs of the Company.

(5)  All current Directors hold office until the next annual meeting of the
     stockholders, currently scheduled for the third Thursday in May, 2001 and
     until successors have been elected and qualified. Executive Officers are

                                       23
<PAGE>   26

     appointed by the Board of Directors at meetings of the Directors and hold
     office until they resign or are removed from office.

     Set forth below are summary descriptions containing the names of the past
and present directors and officers of the Company, and the commercial and
educational experience of each during at least the past five (5) years:

     THOMAS YAN CHUEN CHU has served in executive positions with a number of
companies in Hong Kong in fields related to our business. He joined TCA (Hong
Kong) Limited and TCA Group Inc. of Massachusetts, USA in 1984 as the President
and Chief Executive Officer of the group. TCA (Hong Kong) Limited and TCA Group
Inc. were principally involved in toy design, marketing and distribution in the
U.S.A. and in the manufacturing of toys in China. In 1993, Mr. Chu became the
President of High Progress Limited, a Hong Kong-based company engaged in the
manufacturing, marketing and distribution of toys. From 1994 to 1996, Mr. Chu
became Senior Vice President of Pam & Frank Industrial Limited, a company listed
on the Stock Exchange of Hong Kong, with the responsibilities of overseeing
China operations and supervising US operations, including warehousing,
distribution and national sales and marketing. Pam & Frank Industrial Limited
was a company engaged in the manufacturing and exporting of sporting goods. In
May 1996, Mr. Chu became the Vice President of the Hong Kong operations of
United States Consolidation Limited, a logistics service provider. In late 1997,
Mr. Chu was named the Chief Financial Officer of United States Consolidation
Limited, and in 1998, Mr. Chu became Executive Vice President of operations in
Asia. Mr. Chu was responsible for management of the Asian operations,
encompassing trucking, warehousing, consolidation and other logistics
activities. In September 2000, Mr. Chu joined Supply Chain Services Inc. as a
Director and President and joined Supply Chain Services Limited and Leader
Industrial Group Limited as Managing Director on a full-time basis.

     PAULINE WAI MAN CHU graduated with a Bachelor of Arts Degree and Cum Laude
Distinction in Economics from Wellesley College in Massachusetts in 1992.
Between 1992 and 1998, Ms. Chu held a number of executive and managerial
positions with international financial institutions. In 1998, Ms. Chu joined
Leader Industrial Group Limited as Business Development Manager, responsible for
all day-to-day activities of its toy trading business. In March 1999, Ms. Chu
became a shareholder and director of Supply Chain Services Limited upon its
incorporation. In April 1999, Ms. Chu became General Manager of both Leader
Industrial Group and Supply Chain Services Limited. In September 2000, Ms. Chu
also became the Director of Supply Chain Services Inc. Ms. Chu is responsible
for all day-to-day operations for the group, including merchandising, customer
service and marketing.

     HARDY KUNG CHIN LOK received a Bachelor of Science in Civil Engineering
from the City University of Manchester (U.K.) - Institute of Science &
Technology in 1972. From 1976 to the present, Mr. Lok has been with John Lok &
Partners, Ltd. and The Sun Company, Ltd., both in Hong Kong, and is currently
serving as Managing Director of both entities. In May 1999, Mr. Lok formed the
Company with Mr. Richard Che Keung Wong and Mr. King Kwok Yu. From May 1999 to
September 2000, Mr. Lok served as a Director/Chairman of the Board to Paddington
Inc. Mr. Lok was replaced as the Chairman of Board by Mr. Thomas Yan Chuen Chu,
but remains as a Director of the Company in September 2000 after the Company
effected a merger with Supply Chain Services Limited in August 2000. At present,
Mr. Lok also serves as a Director to several property and construction companies
in Hong Kong, a consulting and advisory services company in Hong Kong and a cold
storage company in Hong Kong.

     RICHARD CHE KEUNG WONG received a Diploma in Youth and Community Services
in 1971 from the Jordanhill College of Education, Glasgow, Scotland and a
Bachelor of Arts in Economics from York University (Canada) in 1976. For over

                                       24
<PAGE>   27
twenty years, Mr. Wong has held a number of executive and managerial positions
with international and Hong Kong financial, consumer products and investment
entities. From May 1999 to September 2000, Mr. Wong served as a Director/Vice
Chairman of the Board to the Company. Mr. Wong resigned as a Director to the
Company in September 2000 after we effected a merger with Supply Chain Services
Limited in August 2000. Mr. Wong was appointed as Vice President-Corporate
Development of the Company in September 2000. At present, Mr. Wong is also a
Director of several property holding companies in Hong Kong and of a company
listed on the Stock Exchange of Hong Kong.

     KING KWOK YU received a Bachelor of Arts in Economics from York University
(Canada) in 1976, a Master of Arts in Economics from University of California,
Santa Barbara in 1977 and a Masters in Business Administration in Accounting
from Golden Gate University in San Francisco, California in 1979. Mr. Yu
registered as a Certified Public Accountant with the Board of Accountancy of the
State of California in 1982 and now holds an inactive Certified Public
Accountant status. Mr. Yu has seventeen years of executive and managerial
accounting and finance experience with U.S. and Hong Kong companies. In May
1999, Mr. Yu formed the Company with Mr. Richard Che Keung Wong and Mr. Hardy
Kung Chin Lok. From May 1999 to September 2000, Mr. Yu served as a Director to
the Company. Mr. Yu resigned as a Director to the Company in September 2000
after we effected a merger with Supply Chain Services Limited in August 2000.
From May 2000 to present, Mr. Yu is the Secretary, Treasurer and Controller of
the Company. In September 2000, Mr. Yu was appointed as a Director to Global
Recreation Inc. which filed a Registration Statement F-1 with the Securities and
Exchange Commission in the same month. Global Recreation Inc.'s Registration
Statement F-1 has yet to be declared effective by the Securities and Exchange
Commission. In December 2000, Mr. Yu was appointed as a Director to Equity
Finance Holding Corporation which is a Reporting Company under the Exchange Act.


ITEM 10. EXECUTIVE COMPENSATION

     The directors have adopted an executive compensation plan for executive
officers and directors as follows: directors agreed that the directors will
receive no cash compensation or reimbursement for the expenses incurred in
connection with attending board and committee meetings. The Company reserves the
right to pay consulting fees to its board members and officers for the time and
services they provide to the Company.

     SUMMARY COMPENSATION TABLE

<TABLE>
<CAPTION>
                                                            Annual Compensation
                                               ---------------------------------------------
                                                                                Other Annual
Name and Principal Position       Year            Salary          Bonus         Compensation
---------------------------       ----         ------------       -----         ------------
                                                   ($)             ($)              ($)


<S>                               <C>          <C>                <C>           <C>
Thomas Yan Chuen Chu
  President, and Director         1998              --              --               --
                                  1999              --              --               --
                                  2000              0*              0*               0*
Pauline Wai Man Chu
  Director, and General
</TABLE>
                                       25

<PAGE>   28
<TABLE>
<CAPTION>
                                                            Annual Compensation
                                               ---------------------------------------------
                                                                                Other Annual
Name and Principal Position       Year            Salary          Bonus         Compensation
---------------------------       ----         ------------       -----         ------------
                                                ($)                ($)              ($)
<S>                               <C>          <C>                <C>           <C>
  Manager of the
  Company's wholly-owned
  subsidiaries, SCSL and LIGL     1998              --              --               --
                                  1999              --              --               --
                                  2000         HK 273,000**         0                0
Richard Che Keung Wong
 Vice President - Corporate
 Development                      1998              0               0                0
                                  1999              0               0                0
                                  2000              0               0                0
King Kwok Yu
 Treasurer, Secretary
 and Controller                   1998              0               0                0
                                  1999              0               0                0
                                  2000              0               0                0
</TABLE>
----------
*    Amounts due and owing were not paid, and were subsequently, waived and
     released by Mr. Chu.

**   HK$312,000 also due and owing was not paid, and was subsequently
     discharged, waived and released by Ms. Chu.


EMPLOYMENT CONTRACTS

THOMAS YAN CHUEN CHU

     Our wholly-owned subsidiary, SCSL, has entered into two contracts with
Thomas Chu in relation to his employment and services to SCSL. However, no
amounts due and owing to Mr. Chu were ever paid by SCSL, and

                                       26
<PAGE>   29
pursuant to two Release Agreements dated March 27, 2001 between Mr. Chu and
SCSL, Mr. Chu waived, released and discharged all claims to past, present or
future remuneration due and owing in connection with the two agreements
previously signed with SCSL.

     DIRECTORS' COMPENSATION

     Our directors received no compensation for their services as directors. One
of our directors, Pauline Wai Man Chu, received compensation for her services as
an officer of the Company in 2000.

     STOCK OPTION PLAN AND OTHER LONG-TERM INCENTIVE PLAN

     Although the directors have raised the idea of instituting a Stock Option
plan in a recent board meeting, we currently do not have any Stock Option Plan
or any Long-term Incentive Plan.


ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

     The following table sets forth, as of March 30, 2000, each person known
by the Company to be the beneficial owner of five percent or more of the
Company's common stock. Each person has sole voting and investment power with
respect to the shares shown. None of the stockholders listed at this time have
any rights to acquire within sixty (60) days any additional common or preferred
stock from options, warrants, rights, conversion privilege(s) or similar
obligations. No preferred stock of the Company has been issued at this time.

<TABLE>
<CAPTION>
                                                                      Amount of
                                                                      Beneficial    Percentage
Title of Class      Name and Address of Beneficial Owner              Ownership     of Class
--------------      -------------------------------------------       ----------    ----------
<S>                 <C>                                               <C>           <C>
Common Stock        Mr. Thomas Yan Chuen Chu                          25,299,999    71.7%
                      8/F,  Guangdong Textile Centre,
                      22 Minden Avenue,
                      Tsimshatsui, Hong Kong

Common Stock        Mr. Hardy Kung Chin Lok                           3,250,000     9.2%
                      Suite E, 15/F, Ho Lee Commercial Building,
                      40 D'Aguilar Street, Central, Hong Kong

Common Stock        Mr. King-Kwok Yu                                  2,000,000     5.6%
                      Suite E, 15/F, Ho Lee Commercial Building,
                      40 D'Aguilar Street, Central, Hong Kong

Common Stock        Mr.Richard Che Keung Wong                         2,000,000     5.6%
                      Suite E, 15/F, Ho Lee Commercial Building,
                      40 D'Aguilar Street, Central, Hong Kong

</TABLE>


ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

     The following table sets forth, as of March 30, 2001, the record and
beneficial ownership of Common Stock (the only voting securities) of the Company
by each director and officer, all directors and officers as a group, and each
person known to us to own beneficially, or of record, five percent or more of
the total issued and outstanding Common Stock of the Company.

                                       27
<PAGE>   30
<TABLE>
<CAPTION>
                                                                         Amount of
                                                                         Beneficial         Percentage
Title of Class      Name, Title  and Address of Beneficial Owner         Ownership(1)       of Class
--------------      --------------------------------------------         -------------      ----------
<S>                 <C>                                                  <C>                <C>
Common Stock        Thomas Yan Chuen Chu                                                        0.00%
                      President, and Director                                     0(3)
                      8/F Guangdong Textile Centre
                      22 Minden Avenue, Tsimshatsui
                      Kowloon, Hong Kong

Common Stock        Pauline Wai Man Chu                                   1,366,667             3.87%
                      Director
                      8/F Guangdong Textile Centre
                      22 Minden Avenue, Tsimshatsui
                      Kowloon, Hong Kong

Common Stock        Hardy Kung Chin Lok                                   3,250,000             9.21%
                      Director
                      Suite E, 15/F, Ho Lee
                      Commercial Building, 40
                      D'Aguilar Street, Central
                      Hong Kong

Common Stock        Richard Che Keung Wong                                2,000,000             5.67%
                      Vice President - Corporate
                      Development and Past Director
                      Suite E, 15/F, Ho Lee
                      Commercial Building, 40
                      D'Aguilar Street, Central
                      Hong Kong

Common Stock        King Kwok Yu                                          2,000,000             5.67%
                      Treasurer, Secretary, Controller
                      and Past Director
                      Suite E, 15/F, Ho Lee
                      Commercial Building, 40
                      D'Aguilar Street, Central
                      Hong Kong

Common Stock        GI-Tech Developments Limited(2)                      25,299,999(3)         71.71%
                      Stockholder
                      8/F Guangdong Textile Centre
                      22 Minden Avenue, Tsimshatsui
                      Kowloon, Hong Kong
-------------------------------------------------------------------------------------------------------
 All directors and officers as a group (5 persons)                       33,916,666         24.42%
                                                                                            of
                                                                                            authorized
                                                                                            shares
 </TABLE>

                                       28
<PAGE>   31
(1)  As used in this table, "beneficial ownership" means the sole or shared
     power to vote, or to direct the voting of, a security, or the sole or share
     investment power with respect to a security (i.e., the power to dispose of
     or to direct the disposition of a security).

(2)  GI-Tech Developments Limited is a privately held corporation organized
     under the laws of the British Virgin Islands. All of the issued and
     outstanding Common Stock of GI-Tech is beneficially owned by Mr. Thomas Yan
     Chuen Chu.

(3)  Mr. Thomas Yan Chuen Chu is the direct and beneficial owner of all of the
     issued and outstanding Common Stock of GI-Tech Developments Limited and as
     such has beneficial ownership of all 25,999,999 shares of the Company now
     owned by GI-Tech Developments Limited.


ITEM 13. EXHIBITS, LIST AND REPORTS ON FORM 8-K

     (a)  Exhibits

          3.1  Articles of Incorporation filed as an exhibit to the Company's
               Registration Statement on Form 10-SB filed on May 12, 1999, as
               amended on June 1, 1999.*

          3.2  By-Laws filed as an exhibit to the Company's Registration
               Statement on Form 10-SB filed on May 12, 1999, as amended on June
               1, 1999.*

          4.1  Instruments Defining the Rights of Holders filed as an exhibit to
               the Company's Registration Statement on Form 10-SB filed on May
               12, 1999, as amended on June 1, 1999.*

          23.1 Consent of Accountants

     (b)  The Company filed an amended report on Form 8-K on November 9, 2000,
          and a current report on Form 8-K on December 7, 2000, both of which
          occurred during the last quarter of the period covered by this Annual
          Report.*

----------
*    Incorporated by reference as noted above.

                                       29
<PAGE>   32
                                   SIGNATURES

     In accordance with Section 13 or 15(d) of the Securities Exchange Act of
1934, the Company caused this Annual Report to be signed on its behalf by the
undersigned, thereunto duly authorized.

                                        SUPPLY CHAIN SERVICES INC.

                                        By: /s/ Thomas Yan Chuen Chu
                                            -----------------------------------
                                            Thomas Yan Chuen Chu
                                            President and Chairman of the Board

                                            Date: March 30, 2001

     In accordance with the Securities Exchange Act of 1934, this Annual Report
has been signed by the following persons on behalf of the registrant and in the
capacities and on the dates indicated.


                                        By: /s/ Pauline Wai Man Chu
                                            -----------------------------------
                                            Pauline Wai Man Chu
                                            Director and Vice Chairman
                                            Date: March 30, 2001



                                        By: /s/ Hardy Kung Chin Lok
                                            -----------------------------------
                                            Hardy Kung Chin Lok
                                            Director
                                            Date: March 30, 2001



                                        By: /s/ King-Kwok Yu
                                            -----------------------------------
                                            King-Kwok Yu
                                            Secretary, Treasurer, and Controller
                                            Date: March 30, 2001


<PAGE>   33


SUPPLY CHAIN SERVICES INC.


REPORT AND FINANCIAL STATEMENTS
FOR THE PERIOD FROM
SEPTEMBER 10, 1997 TO DECEMBER 31, 1998
AND YEARS ENDED DECEMBER 31, 1999 AND 2000


<PAGE>   34


SUPPLY CHAIN SERVICES INC.


REPORT AND FINANCIAL STATEMENTS
FOR THE PERIOD FROM
SEPTEMBER 10, 1997 TO DECEMBER 31, 1998
AND YEARS ENDED DECEMBER 31, 1999 AND 2000

<TABLE>
<CAPTION>

CONTENTS                                                                Pages
--------                                                               -------
<S>                                                                    <C>
Report of Independent Public Accountants                                1 to 2

Consolidated Balance Sheets                                                  3

Consolidated Statements of Operations                                        4

Consolidated Statements of Cash Flows                                        5

Consolidated Statements of Changes in Stockholders' Equity                   6

Notes to Consolidated Financial Statements                             7 to 14
</TABLE>



<PAGE>   35


SUPPLY CHAIN SERVICES INC.

REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS


To the Stockholders and the Board of Directors of Supply Chain Services Inc.:

We have audited the accompanying consolidated balance sheets of Supply Chain
Services Inc. (a company incorporated in the State of Delaware, United States of
America; formerly known as Paddington Inc.; ("the Company") and Subsidiaries
("the Group") as of December 31, 1998, 1999 and 2000, and the related
consolidated statements of operations, cash flows and changes in stockholders'
equity for the period from September 10, 1997 (date of incorporation of the
Company's subsidiary, Leader Industrial Group Limited) to December 31, 1998 and
years ended 31 December, 1999 and 2000. These financial statements give
retroactive effect, for all years and period presented, to the acquisition of
Supply Chain Services Limited and Leader Industrial Group Limited as a reverse
acquisition as described in Note 2 to the accompanying financial statements.
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 generally accepted auditing standards
in the United States of America. Those standards require that we plan and
perform the audits 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.

                                                                (cont'd ... p.2)


                                      -1-
<PAGE>   36


SUPPLY CHAIN SERVICES INC.

REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS (Cont'd)



To the Stockholders and the Board of Directors of Supply Chain Services Inc.:



In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of Supply Chain
Services Inc. and Subsidiaries as of December 31, 1998, 1999 and 2000, and the
results of their operations and cash flows for the period from September 10,
1997 (date of incorporation of the Company's subsidiary, Leader Industrial Group
Limited) to December 31, 1998 and years ended December 31, 1999 and 2000 after
giving retroactive effect to the acquisition of Supply Chain Services Limited
and Leader Industrial Group Limited as a reverse acquisition as described in
Note 2 to the accompanying financial statements, in conformity with generally
accepted accounting principles in the United States of America.




ARESON & COMPANY
CERTIFIED PUBLIC ACCOUNTANTS


DATED   March 19, 2001    HONG KONG

                                      -2-
<PAGE>   37
SUPPLY CHAIN SERVICES INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
AS OF DECEMBER 31, 1998, 1999 AND 200
(AMOUNTS EXPRESSED IN UNITED STATES DOLLARS)

<TABLE>
<CAPTION>
                                                                          As of 12.31.
                                                               ---------------------------------
                                                  Notes           2000         1999         1998
                                                  -----           ----         ----         ----
                                                                     $            $            $
<S>                                               <C>         <C>           <C>           <C>
ASSETS

Current assets:
Cash and bank deposits                                         191,762       55,099       25,031
Accounts receivable                                            120,689       35,563            -
Stock subscription receivable                                   50,000            -            -
Other receivable and prepayments                               111,910       25,985          399
Deposits                                            5           32,872        7,247            -
Due from stockholders                              12            7,958            -            -
                                                              --------      -------       ------
TOTAL CURRENT ASSETS                                           515,191      123,894       25,430

Furniture, fixtures, equipment and capital
  lease, net                                        6           45,622       64,951       15,509

Deferred expenses, net                              7           49,291       59,375       28,500
Deferred taxation                                   9           26,781            -            -
                                                              --------      -------       ------
TOTAL ASSETS                                                   636,885      248,220       69,439
                                                              ========      =======       ======
LIABILITIES AND STOCKHOLDERS'
  EQUITY

Current liabilities:
Capital lease obligations, current portion          8           16,129       16,129        4,801
Accounts payable                                               112,840            -            -
Other payable and accrued liabilities                          171,677       31,661        8,245
Deposits from customers                                          1,605        3,029            -
Due to a stockholder                               12              219       20,143       27,247
Provision for taxation                                          13,781       13,123            -
                                                              --------      -------       ------
TOTAL CURRENT LIABILITIES                                      316,251       84,085       40,293

Capital lease obligations, non-current              8           32,258       48,387        6,402
  portion
Due to a stockholder                               12           66,748            -            -
Deferred taxation                                   9                -        8,984        4,777
                                                              --------      -------       ------
TOTAL LIABILITIES                                              415,257      141,456       51,472
                                                              --------      -------       ------
Stockholders' equity:
Common stock, par value                            10            3,528        3,333        3,333
Addition paid-in capital                                       379,846            -            -
Retained earnings (deficit)                                   (161,746)     103,431       14,634
                                                              --------      -------       ------
TOTAL STOCKHOLDERS' EQUITY                                     221,628      106,764       17,967
                                                              --------      -------       ------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY                     636,885      248,220       69,439
                                                              ========      =======       ======

</TABLE>


The notes on pages 7 through 18 are an integral part of the consolidated
financial statements.

                                      -3-
<PAGE>   38
SUPPLY CHAIN SERVICES INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE PERIOD FROM SEPTEMBER 10, 1997 TO DECEMBER 31, 1998
AND YEARS ENDED DECEMBER 31, 1999 AND 2000
(AMOUNTS EXPRESSED IN UNITED STATES DOLLARS)

<TABLE>
<CAPTION>

                                                        Year ended 12.31.              Period from
                                                   ----------------------------        9.10.1997 to
                                          Notes          2000              1999        12.31.1998
                                          -----          ----              ----        ------------
                                                            $                 $                   $
<S>                                       <C>      <C>               <C>               <C>
Sales and services                                    628,201         1,990,746             242,760
Cost of sales and services                           (501,204)       (1,789,512)           (170,462)
                                                   ----------        ----------          ----------
Gross profit                                          126,997           201,234              72,298
Commission income                                      10,580            53,664                   -
Retainer fee                                           34,000           110,000                   -
                                                   ----------        ----------          ----------
                                                      171,577           364,898              72,298
Selling expenses                                      (16,348)           (6,677)             (4,438)
General and administrative expenses                  (389,539)         (195,563)            (31,626)
Depreciation and amortization                         (65,061)          (55,036)            (14,360)
                                                   ----------        ----------          ----------
OPERATING INCOME (LOSS)                              (299,371)          107,622              21,874
Other income                                            3,032             1,016                   -
Interest expenses                                      (3,945)           (2,512)             (2,463)
                                                   ----------        ----------          ----------
INCOME (LOSS) BEFORE INCOME TAXES                    (300,284)          106,126              19,411
Income taxes                                9          35,107           (17,329)             (4,777)
                                                   ----------        ----------          ----------
NET INCOME (LOSS)                                    (265,177)           88,797              14,634
                                                   ==========        ==========          ==========
EARNINGS (LOSS) PER COMMON SHARE                     (0.00792)          0.00266            0.000439
                                                   ==========        ==========          ==========
WEIGHTED AVERAGE NUMBER OF
  COMMON SHARES OUTSTANDING                        33,466,894        33,333,333          33,333,333
                                                   ==========        ==========          ==========
</TABLE>



The notes on pages 7 through 18 are an integral part of the consolidated
financial statements.

                                      -4-
<PAGE>   39
SUPPLY CHAIN SERVICES INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE PERIOD FROM SEPTEMBER 10, 1997 TO DECEMBER 31, 1998
AND YEARS ENDED DECEMBER 31, 1999 AND 2000
(AMOUNTS EXPRESSED IN UNITED STATES DOLLARS)

<TABLE>
<CAPTION>

                                                            Year ended 12.31.        Period from
                                                          ----------------------     9.10.1997 to
                                                              2000          1999     12.31.1998
                                                              ----          ----    --------------
                                                                 $             $                $
<S>                                                       <C>            <C>              <C>
CASH FLOWS FROM OPERATING ACTIVITIES

Net income (loss)                                         (265,177)       88,797           14,634
Adjustments to reconcile net income (loss) to net
cash provided by (paid for) operating activities:
Depreciation and amortization                               65,061        55,036           14,360
Loss on sale of motor vehicle                                    -         2,328                -
Income tax provision (credit)                              (35,107)       17,329            4,777
Decrease/(Increase) in operating assets:
Accounts receivable                                        (85,126)      (35,563)               -
Other receivable and prepayments                           (85,925)      (25,586)            (399)
Deposits                                                   (25,625)       (7,247)               -
Due from stockholders                                       (7,958)            -                -
Increase/(Decrease) in operating liabilities:
Accounts payable                                           112,840             -                -
Other payable and accrued liabilities                      140,016        23,416            8,245
Deposits from customers                                     (1,424)        3,029                -
Due to a stockholder                                        46,824        (7,104)          27,247
                                                          ---------      --------         --------
NET CASH PROVIDED BY (PAID FOR) OPERATING ACTIVITIES      (141,601)      114,435           68,864

CASH FLOWS FROM INVESTING ACTIVITIES

Proceeds from sale of motor vehicle                              -         6,194               -
Purchases of furniture, fixtures and equipment             (11,648)      (27,108)          (2,323)
Deferred expenses                                          (24,000)      (52,250)         (38,000)
                                                          ---------      --------         --------
NET CASH USED IN INVESTING ACTIVITIES                      (35,648)      (73,164)         (40,323)
                                                          ---------      --------         --------
CASH FLOWS FROM FINANCING ACTIVITIES

Issuance of shares                                         330,041             -            3,333
Repayment of capital element of capital lease
  obligations                                              (16,129)      (11,203)          (6,843)
                                                          ---------      --------         --------
NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES        313,912       (11,203)          (3,510)
                                                          ---------      --------         --------
NET INCREASE IN CASH AND BANK DEPOSITS                     136,663        30,068           25,031
CASH AND BANK DEPOSITS AS OF BEGINNING OF YEAR/PERIOD       55,099        25,031                -
                                                          ---------      --------         --------
CASH AND BANK DEPOSITS AS OF END OF YEAR/PERIOD            191,762        55,099           25,031
                                                          =========      ========         ========
</TABLE>



The notes on pages 7 through 18 are an integral part of the consolidated
financial statements.

                                      -5-
<PAGE>   40
SUPPLY CHAIN SERVICES INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
FOR THE PERIOD FROM SEPTEMBER 10, 1997 TO DECEMBER 31, 1998
AND YEARS ENDED DECEMBER 31, 1999 AND 2000
(AMOUNTS EXPRESSED IN UNITED STATED DOLLARS)

<TABLE>
<CAPTION>

                                            Common stock
                                      -----------------------
                                                                  Additional     Retained
                                       Number of                    paid-in       Earnings
                                        shares        Amount        capital       (deficit)
                                      ----------     --------     ----------    -----------
                                               $            $              $             $

<S>                                   <C>            <C>             <C>          <C>
Insurance of new shares               33,333,333     3,333.33

Net income from September 10, 1997
  to December 31, 1998                                                              14,634
                                      ----------     --------        -------      --------
Balance as of December 31, 1998       33,333,333     3,333.33             -         14,634
Net income from January 1, 1999 to
  December 31, 1999                            -            -              -        88,797
                                      ----------     --------        -------      --------
Balance as of December 31, 1999       33,333,333     3,333.33              -       103,431
Issuance of new shares                 1,950,000       195.00        389,805             -
Shares issue costs                             -            -         (9,959)            -
Net loss from January 1, 2000 to
  December 31, 2000                            -            -              -      (265,177)
                                      ----------     --------        -------      --------
Balance as of December 31, 2000       35,283,333     3,528.33        379,846      (161,746)
                                      ==========     ========        =======      ========
</TABLE>


The notes on pages 7 through 18 are an integral part of the consolidated
financial statements.

                                      -6-
<PAGE>   41
SUPPLY CHAIN SERVICES INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(AMOUNTS EXPRESSED IN UNITED STATES DOLLARS UNLESS OTHERWISE STATED)


1       ORGANIZATION AND PRINCIPAL ACTIVITIES

        Supply Chain Services Inc. (the" Company") was incorporated in the State
        of Delaware, United States of America, on March 29, 1999 to serve as a
        vehicle to effect a merger, exchange of capital stock, asset
        acquisition, or other business combination with a domestic or foreign
        private business. On August 28, 2000, the Company acquired 100% equity
        interest in Supply Chain Services Limited ("SCSL") and its wholly-owned
        subsidiary, Leader Industrial Group Limited ("LIGL"), in a transaction
        which is described below in this Note. With effect from August 31, 2000,
        the Company changed its name from Paddington Inc. to Supply Chain
        Services Inc, the present one.

        During the period from March 29, 1999 (date of incorporation) to August
        28, 2000 (date of acquisition of SCSL and its wholly-owned subsidiary,
        LIGL by the Company), the Company's sole asset was cash on hand in the
        amount of $600 and the Company was considered as a Development Stage
        Enterprise.

        ACQUISITION OF SCSL AND ITS WHOLLY-OWNED SUBSIDIARY LIGL

        On August 28, 2000, the Company consummated a stock-for-stock merger
        transaction whereby the Company acquired, for an aggregate price of
        $2,733.33, 10,000 shares of common shares, par value HK$1 each,
        representing all of the issued and outstanding shares of SCSL in
        exchange for the issuance by the Company of 27,333,333 shares of its
        common stock to Gi-Tech Developments Limited ("Gi-Tech") and Miss
        Pauline Wai Man Chu ("the SCSL stockholders"), and a designee of Gi-Tech
        pursuant to the Share Exchange Agreement signed on the same date by and
        amongst the Company, the SCSL stockholders. Gi-Tech is a company
        incorporated in the British Virgin Islands and Mr. Thomas Yan Chuen Chu
        ("Mr. Chu") is the beneficial owner of all of its issued and outstanding
        common stock, and as such is the beneficial owner of all 25,299,999
        shares of the Company now owned by Gi-Tech. In connection with the
        transaction, Gi-Tech designated Mr. Tze Tat Fung to receive 666,667
        shares of common stock of the Company. Miss Pauline Wai Man Chu received
        1,366,667 shares of the Company's shares in connection with the
        transaction.

        LIGL was incorporated in Hong Kong on September 10, 1997 and commenced
        business mainly in the trading of toys in April 1998. All the then
        issued and outstanding common shares of LIGL were owned by Gi-Tech which
        was 100% beneficially owned by Mr. Chu.

        On March 12, 1999, SCSL was incorporated in Hong Kong. 95% of the issued
        and outstanding common shares of SCSL were owned by Gi-Tech and were
        therefore beneficially owned by Mr. Chu. 5% of the issued and
        outstanding common shares of SCSL were owned by Miss Pauline Wai Man
        Chu. SCSL commenced business as a supply chain management services
        provider in April 1999. In April 1999, SCSL acquired the entire issued
        and outstanding common shares of LIGL. After the acquisition, Gi-Tech,
        which remained to be 100% beneficially owned by Mr. Chu, owned
        indirectly 95% of LIGL's issued and outstanding common shares and Miss
        Pauline Wai Man Chu became a 5% indirect shareholder of LIGL.

        SCSL has its headquarters in Hong Kong and has representative offices in
        Mainland of the People's Republic of China (the "PRC") and in Taiwan.

2       BASIS OF PRESENTATION

        The acquisition of SCSL and its wholly-owned subsidiary, LIGL, by the
        Company on August 28, 2000 has been treated as a reverse acquisition
        since SCSL is the continuing entity as a result of the stock-for-stock
        merger transaction as described above in Note 1 to the accompanying
        financial statements. On this basis, the historical financial statements
        prior to August 28, 2000

                                      -7-
<PAGE>   42
        represent the consolidated financial statements of SCSL and LIGL.

        The consolidated financial statements of SCSL, and LIGL were prepared on
        the basis as if SCSL and LIGL had been a single group since September
        10, 1997 (the date of incorporation for LIGL and the earliest date
        covered by this report) since both companies had been under common
        majority ownership and management, and carried out complimentary
        business activities since the date of incorporation.

        The historical stockholders' equity accounts of the Company as of
        December 31, 1999 has been retroactively restated to reflect the
        issuance of 27,333,333 shares of common stock of par value $0.0001 each
        in connection with the acquisition.

3       SUBSIDIARIES

        Details of the Company's subsidiaries (which together with the Company
        are collectively referred to as "the Group") as of December 31, 2000
        were as follows:

<TABLE>
<CAPTION>
                                                          Percentage of
                                                          equity
                                         Place of         interest
        Name                             incorporation    held             Principal activities
        -------------------------------  ---------------  ---------------  ------------------------
<S>                                      <C>              <C>              <C>
        Supply Chain Services Limited    Hong Kong        100%             Provision supply chain
                                                                           management services

        Leader Industrial Group Limited  Hong Kong        100%             Toy trading
</TABLE>

4       SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

        BASIS OF CONSOLIDATION

        The consolidated financial statements include the accounts of the
        Company and its subsidiaries. All material intercompany transactions and
        balances within the Group have been eliminated on consolidation.

        INVENTORIES

        Inventories are stated at the lower of cost, on a first-in first-out
        basis, and market value.

        FURNITURE, FIXTURES, EQUIPMENT AND CAPITAL LEASES

        Furniture, fixtures, equipment and capital leases are recorded at cost.
        Gains or losses on disposals are reflected in current operations.
        Depreciation for financial reporting purposes is provided using the
        straight-line method over the estimated useful lives of the assets from
        three to five years. All ordinary repair and maintenance costs are
        expensed as incurred.

        DEFERRED EXPENSES

        Advertising subsidies granted to customers for the promotion of the
        Group's products are capitalized as deferred expenses and are amortized
        on the straight-line method by reference to the period over which the
        related products are expected to be marketed but not exceeding three
        years.

        REVENUE RECOGNITION

        Sales are recognized upon delivery of goods and passage of title to
        customers.

                                      -8-
<PAGE>   43
        Deposits or advanced payments from customers prior to delivery of goods
        and passage of title of goods are recorded as deposits from customers.

        Service income is recognized when the related services are rendered.

        INCOME TAXES

        The Group accounts for income tax under the provisions of Statement of
        Financial Accounting Standards No. 109, which requires recognition of
        deferred tax assets and liabilities for the expected future tax
        consequences of events that have been included in the financial
        statements or tax returns. Deferred income taxes are provided using the
        liability method. Under the liability method, deferred income taxes are
        recognized for all significant temporary differences between the tax and
        financial statement bases of assets and liabilities.

        OPERATING LEASES

        Operating leases represent those leases under which substantially all
        the risks and rewards of ownership of the leased assets remain with the
        lessors. Rental payments under operating leases are charged to expense
        on the straight-line basis over the period of the relevant leases.

        FOREIGN CURRENCY TRANSLATION

        Transactions in foreign currencies are recorded at the applicable
        exchange rates ruling at the transaction dates. Monetary assets and
        liabilities denominated in foreign currencies at the balance sheet date
        are translated at the applicable exchange rates ruing at that date.
        Exchange differences are included in the results of operations.

        The translation of the financial statements of subsidiaries into United
        States dollars is performed for balance sheet accounts using the closing
        exchange rate in effect at the balance sheet dates and for revenue and
        expense accounts using an average exchange rate during each reporting
        period. The gains or losses resulting from translation are included in
        stockholders' equity separately as cumulative translation adjustments.

        EARNINGS (LOSS) PER COMMON SHARE

        Earning (Loss) per common share is computed in accordance with Statement
        of Financial Accounting Standards No.128 by dividing net income (loss)
        for each year by the weighted average number of shares of common stock
        outstanding during the years, as if the common stock issued for the
        acquisition of SCSL and LIGL (see Note 1). The weighted average number
        of shares used to compute earnings (loss) per common share is 33,333,333
        for the period ended December 31, 1998 and year ended December 31, 1999,
        and 33,466,894 for the year ended December 31, 2000.

        USE OF ESTIMATES

        The preparation of financial statements in conformity with generally
        accepted accounting principles in the United States of America requires
        management to make estimates and assumptions that affect certain
        reported amounts and disclosures. Accordingly, actual results could
        differ from those estimates.

5       DEPOSITS

<TABLE>
<CAPTION>

                                                                         As of 12.31.
                                                                -------------------------------
                                                                  2000         1999        1998
<S>                                                             <C>           <C>          <C>
                                                                     $            $           $
        Deposits comprised:

        Deposits to suppliers                                    1,605          304           -
        Rental and utility deposits                             31,267        6,943           -
                                                                ------       -------       ----
                                                                32,872        7,247           -
                                                                ======       =======       ====
</TABLE>

                                       -9-
<PAGE>   44
6       FURNITURE, FIXTURES, EQUIPMENT AND CAPITAL LEASE

        Furniture, fixtures, equipment and capital lease comprised:

<TABLE>
<CAPTION>
                                                                         As of 12.31.
                                                              -----------------------------------
                                                                 2000          1999          1998
                                                                 ----          ----          ----
                                                                    $             $             $
<S>                                                           <C>           <C>            <C>
        Furniture, fixtures and equipment:
        Furniture and fixtures                                  3,778         1,885             -
        Office equipment                                       16,036        14,023         2,323
        Leasehold improvements                                 11,846         4,104             -
        Capital lease:
        Motor vehicle                                          73,935        73,935        18,046
                                                              -------       -------        ------
        Total cost                                            105,595        93,947        20,369
        Less   Accumulated depreciation:
               Furniture, fixtures and equipment              (10,683)       (4,351)         (348)
               Capital lease                                  (49,290)      (24,645)       (4,512)
                                                              -------       -------        ------
        Furniture, fixtures, equipment and
          capital lease, net                                   45,622        64,951        15,509
                                                              =======       =======        ======
</TABLE>


7       DEFERRED EXPENSES

<TABLE>
<CAPTION>
                                                                         As of 12.31.
                                                              -----------------------------------
                                                                 2000          1999          1998
                                                                 ----          ----          ----
                                                                    $             $             $
<S>                                                           <C>           <C>            <C>

        Advertising subsidies, cost                           114,250        90,250        38,000
        Less: Accumulated amortization                        (64,959)      (30,875)       (9,500)
                                                              -------       -------        ------
        Deferred expenses, net                                 49,291        59,375        28,500
                                                              =======       =======        ======
</TABLE>

8       CAPITAL LEASE OBLIGATIONS

        Future minimum lease payments under capital lease, together with the
        present value of the minimum lease payments, are as follows:

<TABLE>
<CAPTION>
                                                                       As of 12.31.
                                                            -------------------------------------
                                                               2000           1999           1998
                                                               ----           ----           ----
                                                                  $              $              $
<S>                                                         <C>            <C>             <C>
        Payable:
        Within one year                                      20,000         20,000          6,039
        In the second year                                   20,000         20,000          6,039
        In the third to fourth years, inclusive              20,002         40,002          2,013
                                                            -------        -------         ------
                                                             60,002         80,002         14,091
        Less: imputed interest                              (11,615)       (15,486)        (2,888)
                                                            -------        -------         ------
        Present value of minimum lease payments              48,387         64,516         11,203
        Less: current portion                               (16,129)       (16,129)        (4,801)
                                                            -------        -------         ------
        Non-current portion                                  32,258         48,387          6,402
                                                            =======        =======         ======
</TABLE>

9       INCOME TAXES

        The Company and its subsidiaries are subject to income taxes on an
        equity


                                       -10-
<PAGE>   45
        basis on income arising in or derived from the tax jurisdiction
        in which they operate. The Company has not yet commenced any business
        operations up to December 31,2000 and is therefore not subject to any
        income taxes. The Hong Kong subsidiaries are subject to Hong Kong
        profits tax at the rate of 16%.


        Income tax credit (charge) comprised:

<TABLE>
<CAPTION>
                                                                                         Period from
                                                                                         9.10.1997 to
                                                              Year ended 12.31.           12.31.1998
                                                            --------------------         ------------
                                                              2000          1999
                                                              ----          ----
                                                                 $             $
<S>                                                         <C>          <C>                  <C>
        Hong Kong profits tax:
        Current                                               (658)      (13,122)                  -
        Deferred                                            35,765        (4,207)             (4,777)
                                                            ------       -------              ------
                                                            35,107       (17,329)             (4,777)
                                                            ======       =======              ======
</TABLE>

        Components of deferred tax assets (liabilities) are as follows:

<TABLE>
<CAPTION>
                                                                      As of 12.31.
                                                            -------------------------------------
                                                              2000            1999           1998
                                                              ----            ----           ----
                                                                 $               $              $
<S>                                                         <C>             <C>            <C>

        Cumulative tax losses                               36,842           2,234            781
        Accumulated differences between
          taxation allowances and
          depreciation/amortization expenses
          of:
          Furniture, fixtures and equipment                 (2,174)         (1,718)          (998)
          Deferred expenses                                 (7,887)         (9,500)        (4,560)
                                                            ------          ------         ------
                                                            26,781          (8,984)        (4,777)
                                                            ======          ======         ======
</TABLE>

        The tax loss carry forwards have no expiration date.

10      SHARE CAPITAL

        PREFERRED STOCK

        The Company is authorized to issue 20,000,000 shares of preferred stock
        with a par value of $0.0001 each, with such designations, voting and
        other rights and preferences as may be determined from time to time by
        the Board of Directors.

        COMMON STOCK

        The Company is authorized to issue 120,000,000 shares of common stock
        with a par value of $0.0001 each. During the period from March 29, 1999
        (date of incorporation) to September 3, 2000, the Company had 6,000,000
        shares of issued and outstanding common stock. On September 4, 2000, the
        Company issued 27,333,333 shares of common stock of par value $0.0001
        each to the SCSL stockholders and a designee of one of the SCSL
        stockholders in connection with its acquisition of SCSL as described in
        Notes 1 and 2 to these financial statements. On December 7, 2000, the
        Company issued 1,250,000 and 700,000 shares of common stock of par value
        $0.0001 each to Mr. Hardy Kung Chin Lok and Mr. Eddie Chow in exchange
        for the cash consideration of $250,000 and $140,000 respectively.
        $340,000 of these cash consideration had been received by the Company as
        at the balance sheet date and the remaining $50,000 received in January
        2001.

11      OPERATING LEASE COMMITMENTS

        At the balance sheet date, the Group had operating lease agreements for
        office and quarters premises which extend through December 2002.

                                      -11-
<PAGE>   46
        Future minimum rental payments under the non-cancellable operating
        leases are as follows:

<TABLE>
<CAPTION>
                                                                       As of 12.31.
                                                             ------------------------------------
                                                                2000           1999          1998
                                                                ----           ----          ----
                                                                   $              $             $
<S>                                                          <C>             <C>             <C>
        Payable:
        Within one year                                       98,561         35,226             -
        In the second year                                    76,703          5,871             -
                                                             -------         ------          ----
                                                             175,264         41,097             -
                                                             =======         ======          ====
</TABLE>

12      RELATED PARTY TRANSACTIONS

        Details of the amount due from/to stockholders of the Company are as
        follows:

<TABLE>
<CAPTION>
                                                                         As of 12.31.
                                                              -----------------------------------
                                                                2000           1999          1998
                                                                ----           ----          ----
                                                                   $              $             $
<S>                                                           <C>            <C>           <C>
        Due from:
        Mr. King Kwok Yu,
        Mr. Hardy Kung Chin Lok
        & Mr. Richard Che Keung Wong jointly                   7,958              -             -
                                                              ======         ======        ======
        Due to:
        Mr. King Kwok Yu                                         219              -             -
                                                              ======         ======        ======
        Gi-Tech Developments Limited
          ("Gi-Tech")                                         66,748         20,143        27,247
                                                              ======         ======        ======
</TABLE>

        The amount due to Gi-Tech is unsecured and non-interest bearing. There
        subsisted a subordination agreement between the subsidiaries and Gi-Tech
        whereby all sums for which the subsidiaries are presently indebted or
        may become indebted to Gi-Tech shall not be repayable or repaid in whole
        or in part, except in the event of any proceedings analogous to the
        winding-up, liquidation or dissolution of the subsidiaries.

        The amount due from/to other individual stockholders is unsecured,
        non-interest bearing and without pre-determined repayment terms.

13      SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION

        Cash paid for interest and income taxes comprised:

<TABLE>
<CAPTION>


                                                             Year ended 12.31.       Period from
                                                            ------------------       9.10.1997 to
                                                             2000         1999        12.31.1998
                                                             ----         ----       ------------
                                                                $            $                  $
<S>                                                         <C>          <C>                <C>
        Interest                                            3,945        2,512              2,463
                                                            =====        =====              =====
        Income taxes                                           -             -                  -
                                                            =====        =====              =====
</TABLE>

        Supplemental disclosure of investing activities:

        During the period ended December 31, 1998 and year ended December 31,
        1999, the Group entered into capital lease arrangements to purchase a
        motor vehicle with a capital value of $18,046 and $64,516 respectively.

14      OTHER SUPPLEMENTAL INFORMATION

                                      -12-
<PAGE>   47
        The following items were included in the consolidated statements of
operations:

<TABLE>
<CAPTION>

                                                              Year ended 12.31.       Period from
                                                            --------------------      9.10.1997 to
                                                             2000          1999        12.31.1998
                                                            ------       -------      ------------
                                                                 $             $                 $
<S>                                                         <C>           <C>         <C>

        Amortization of deferred expenses                   34,084        21,375             9,500
        Depreciation of furniture, fixture
          and equipment
          - owned assets                                     6,332         4,003               348
          - assets held under capital lease                 24,645        29,658             4,512
        Interest expenses for capital lease
          obligations                                        3,945         2,512             2,155
        Operating  lease rentals for premises,  net
        of sub-rental income                                29,739         7,812                 -
        Loss on sale of motor vehicle                            -         2,328                 -
        Net foreign exchange loss (gain)                    (2,907)        4,077               197
        Repairs and maintenance                                479           188             3,835
                                                            ======        ======             =====
</TABLE>


15      SEGMENTAL ANALYSIS

        MAJOR CUSTOMERS

        Details of individual customers accounting for more than 5% of the
        Group's sales and services are as follows:

<TABLE>
<CAPTION>


                                                            Year ended 12.31.            Period from
                                                           ------------------           9.10.1997 to
                                                           2000          1999            12.31.1998
                                                           ----          ----           ------------
<S>                                                        <C>           <C>            <C>
        Rumpus Corporation                                 36.7%         77.5%                    -
        Sears, Reebuck & Co.                               26.9%         13.2%                 96.2%
        North American Bear Co. Inc.                        9.9%            -                     -
        Focus Group                                         5.3%            -                     -
        Sports Manufacturers International Inc.             5.2%            -                     -
                                                           ====          ====                  ====
</TABLE>

        MAJOR SUPPLIERS

        Details of individual suppliers accounting for more than 5% of the
        Group's purchases and services are as follows:

<TABLE>
<CAPTION>



                                                            Year ended 12.31.        Period from
                                                           -------------------       9.10.1997 to
                                                           2000           1999       12.31.1998
                                                           ----           ----       ------------
<S>                                                        <C>            <C>        <C>
        Pelagie Industrial Ltd                             65.4%          64.3%             52.4%
        Bondrich Development Ltd                              -           22.9%             21.2%
        Play Vogue Industrial Co. Ltd                         -              -              21.9%
        Mutual Fit Company Limited                            -           10.6%                -
        Zui Fat Industrial Ltd                             10.4%             -                 -
        Winch Printers Ltd                                  8.6%             -                 -
        Winfaith Shipping Ltd                               6.6%             -                 -
                                                           ====           ====              ====
</TABLE>

16      SUBSEQUENT EVENTS

        To cope with the potential growth for the Group's business, the
        following significant events occurred subsequent to the balance sheet
        date:

        The Group established a new office in Shenzhen, PRC for its sourcing,
        quality control and logistics staff. In connection with the operation of
        the new office, the Group has entered into operating lease agreements
        for office premises and motor vehicle which extend through December
        2003.

                                      -13-
<PAGE>   48

        Future minimum rental payments under the non-cancellable operating
        leases are as follows:

<TABLE>
<CAPTION>
                                                                Office                 Motor
                                                              premises               vehicle
                                                              --------               -------
                                                                     $                     $
<S>                                                           <C>                     <C>
        Payable:
        Within one year                                          9,100                11,600
        In the second year                                       2,800                11,600
        In the third year                                          180                11,600
                                                                ------                ------
                                                                12,080                34,800
                                                                ======                ======
</TABLE>

        The Group is in the progress of establishing an internet platform to
        enable the use of a set of proprietary web-based supply chain management
        software with a view to promote its technology capabilities to potential
        customers. On January 3, 2001, the Group entered into an agreement for
        the development of the software at a fee of $550,000, to be payable by
        monthly instalments within one year from the balance sheet date. No
        contract has yet been entered for purchase of computer hardware.
        However, the management anticipates that $129,000 will be utilized in
        this respect. Expenditure incurred up to the balance sheet date and
        directly attributable to the development of the internet platform
        amounting to $16,516 is included as prepayment in the balance sheet.

                                      -14-