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

                                    FORM 10-K

                                  ANNUAL REPORT

                Pursuant to section 13 or 15(d)Of the Securities
                         Exchange Act of 1934

      For the fiscal year ended June 30, 2000 - Commission File #000-26421


                           Milinx Business Group, Inc.
              ----------------------------------------------------
             (Exact name of registrant as specified in its charter)



        Delaware                                       91-1954074
-------------------------------             ------------------------------------
(State or other jurisdiction of             (I.R.S. Employer Identification No.)
incorporation or  organization)



                Suite 3827 - 1001 4th Avenue, Seattle, WA, 98154
               --------------------------------------------------
               (Address of principal executive offices) (Zip Code)


                         (206) 621.7032 & (604) 647.7600
              ---------------------------------------------------
              (Registrant's telephone number, including area code)


Securities registered pursuant to Section 12(b) of the Act: None

Securities registered pursuant to section 12(g) of the Act: Common Stock
                                                           (Title of class)


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

Indicate by check mark if disclosure of delinquent  filers  pursuant to Item 405
of Regulation  S-K (ss.  229.405 of this chapter) is not contained  herein,  and
will not be  contained,  to the best of  registrant's  knowledge,  in definitive
proxy or information  statements  incorporated  by reference in Part III of this
Form 10-K or any  amendment  to this Form 10-K.  [ ]

Aggregate market value of voting stock held by  non-affiliates of the registrant
as of September  30, 2000:

Number  of  shares  of  common  stock  outstanding  as of  September  30,  2000:
16,600,644

Documents incorporated by reference: None


OMB APPROVAL
OMB Number: 3235-0063
Expires: March 31,2003
Estimated average burden hours per response:
430.00


<PAGE>
<TABLE>
<CAPTION>


                                Table of Contents
<S>                                                                                                            <C>

Item 1. Business..................................................................................................3

Item 2. Properties................................................................................................9

Item 3. Legal Proceedings........................................................................................10

Item 4. Submission of Matters to a Vote of Security Holders......................................................10

Item 5. Market for Registrant's Common Equity and Related Stockholder Matters..........

Item 6. Selected Financial Data........................................................

Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operation.

Item 7A. Quantitative and Qualitative Disclosures About Market Risk....................

Item 8. Financial Statements and Supplementary Data....................................

Item 9. Changes in and Disagreements With Accountants on Accounting and Financial Disclosure.

Item 10. Directors and Executive Officers of the Registrant............................

Item 11. Executive Compensation........................................................

Item 12. Security Ownership of Certain Beneficial Owners and Management................

Item 13. Certain Relationships and Related Transactions................................

Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K..............

Item 15. Signatures....................................................................

</TABLE>


<PAGE>


                                     PART I
Item 1.Business.


EXCEPT FOR  HISTORICAL  INFORMATION,  THE FOLLOWING  DESCRIPTION OF OUR BUSINESS
CONTAINS  FORWARD-LOOKING  STATEMENTS  BASED UPON OUR PRESENT  EXPECTATIONS  AND
PROJECTIONS, WHICH INVOLVE CONSIDERABLE RISK AND UNCERTAINTY. OUR ACTUAL RESULTS
COULD DIFFER MATERIALLY FROM THOSE SET FORTH IN THESE FORWARD-LOOKING STATEMENTS
AS A RESULT OF A MULTITUDE OF FACTORS  INCLUDING  THOSE SET FORTH IN THIS ANNUAL
REPORT.  UNLESS  SPECIFIED  OTHERWISE AS USED  HEREIN,  THE TERMS "WE"," US", OR
"OUR" REFER TO MILINX BUSINESS GROUP, INC. AND ITS WHOLLY OWNED SUBSIDIARIES.


About Milinx


The Company was  incorporated  in the State of Delaware on December 10, 1998 and
commenced active operations in February 1999.  Milinx is an Application  Service
Provider  (ASP)  whose  market  focus  principally  encompasses  the SOHO (Small
Office/Home Office), SME (Small/Medium Enterprise),  and various Reseller market
sectors in North America. The term ASP did not even exist until 1998, when Clare
Gillan, an IT Industry analyst with International Data Corporation, defined this
term to describe this new software  rental  model.  The term ASP as used in this
document  is a company  that is  remotely  hosting a  software  application  and
providing  access and use of it to clients over a secure  network on a recurring
fee or subscription basis. These services are delivered over a Wide Area Network
(WAN) or a secure Virtual  Private  Network (VPN) in both cases usually over the
Internet.


On  December  9, 1999,  Milinx  entered  into a Stock  Exchange  Agreement  with
Forestay  Corporation,  a public reporting  company  registered in Delaware,  to
acquire  all assets and  liabilities  of that  Company in  exchange  for 250,000
shares of our  common  stock.  As a  consequence  of that  acquisition,  we then
elected  successor status under the Exchange Act 12g-3. The terms and conditions
of that  Agreement  are set forth in detail in our Form 8-K filed on January 15,
2000, and Form 8-KA filed on February 15,2000.


Our Firm is  headquartered  in  Seattle,  Washington  but our  primary  business
operations  are  presently  conducted  by  our  wholly  owned  British  Columbia
subsidiary,  Milinx Business  Services,  Inc., in Vancouver,  BC. Our first Data
Center is domiciled in Vancouver,  along with all of our 106 employees including
15 in Administration,  2 in Corporate  Finance,  11 in Accounting 29 in Business
Development,  Marketing,  and  Customer  Support,  28 in IT and Web  Development
Services, 9 in Research and Advanced  Technology,  6 in Data Center Security and
Management, and 5 in Investor Relations.


The Company expects to relocate its Administration  and Marketing  activities to
Seattle,  Washington  by June 30,  2001 but  intends  to  continue  to  maintain
significant  operations  in British  Columbia  to service our  clientele  and to
continue to enjoy what we perceive to be the benefits of the lower cost of doing
our business in that  Province as compared with most  metropolitan  areas in the
United States.  Also, in that all of the Company's  revenues are collected in US
Dollars and most of its  recurring  expenditures  are paid in Canadian  Dollars,
Milinx presently enjoys a favorable exchange rate financial  benefit.  While the
Data Center in Vancouver can service up to 1,000,000  subscribers,  we intend to
establish  similar  facilities  in the United  States  and then  expand to serve
markets in Europe and Asia.

<PAGE>

The ASP Business Opportunity


We believe that the ASP delivery model of Information  Technology  Services (IT)
is very well positioned to become the dominant  global business  computing model
of the 21st Century,  based upon  forecasts of market  penetration  from leading
technology  research  analysts  expanding  from US $6  billion  dollars  in 2001
(Forrester),  US $23 billion  dollars in 2003, to US $44 billion dollars in 2004
(Ovum).  According  to  International  Data  Corporation  "...the ASP Model will
function  like a  `disruptive  innovation',  threatening  to  encroach  upon and
displace existing ways of doing business for all sorts of IT vendors".


To the  customer,  the  ASP  model  appears  to  offer  the  following  distinct
advantages:

     o    Lower Total Cost of Ownership.

     o    The  latest  software  is readily  available  and more  affordable.

     o    Applications can be deployed much more expeditiously.

     o    Focus can be on the customer's core competency  rather than supporting
          and implementing expensive IT applications.

     o    Changing to newer and more  productive  software  and hardware is much
          more rapid and less expensive.

     o    Scalability  is  insured as the right  solutions  are put in place and
          then expanded.

     o    Capital can be freed to invest in the business.

     o    No IT Staff or consultants need to be retained by the customer.

The Milinx Approach


We intend to utilize our core competency as a full-service  Application  Service
Provider  to become a leading  firm in the middle  ground of the ASP Market with
our focus encompassing both the customers sought and the applications  delivered
to them. It is not the intention of Milinx to initially  compete with other ASPs
in providing complex applications to large corporations.  There are many ASPs in
that market segment who, in our opinion,  are finding  acceptance by prospective
clients  difficult  as those  firms  have  already  invested  in  extensive  and
expensive  IT  solutions  that they will only slowly  abandon.  We believe  that
initial  market  penetration is much more likely to occur through an entry level
suite of products targeting smaller and medium sized businesses which tend to be
more  adaptable,  open to new  innovations,  and lack the capital  resources for
technology infrastructure and qualified IT personnel.


The  strategic  plan is to focus our initial  efforts on providing our customers
with an  integrated  application  solution set that  addresses the core needs of
businesses,   expands  presence,  increases  productivity,  and  builds  lasting
relationships. Our Customer Sales and Support Center is available for all levels
of assistance and is staffed by competent personnel on a twenty four hours a day
seven days a week (24/7)  basis.  We believe that our extensive  investment  and
total  commitment to this effort will greatly enhance our ability to acquire and
retain  subscribers and facilitate the sale of our existing and new offerings to
them.
<PAGE>


                    SOFTWARE APPLICATIONS AND PATENTS PENDING
                    -----------------------------------------

The Company  has  purchased  software  licenses  for Virtual  Office and Unified
Messaging from iPlanet (a Sun/Netscape  Alliance) and Uforce Inc. to accommodate
500,000  subscribers  with  additional  payments  required  to  reach  1,000,000
subscribers. In addition, we purchased BillerXpert, which provides Internet bill
presentment and payment solutions to our customers.


Many of our  competitors  base their  business  model on  reselling  third party
applications,  which rapidly leads to lower commoditization  pricing. At Milinx,
however, we are focused on developing innovative  proprietary technology that is
either unique to us or enhances the third party  applications that we deliver to
customers.  We believe  this  business  strategy  will  create  our  sustainable
competitive  advantage,  so critical to short and long-term success. The Company
has eight patent-pending applications, which are under review in both Canada and
the United  States.  If these patents are granted to us, they have an expiration
date of twenty (20) years from date of filing.  In our  opinion,  this  approach
will  distinguish  us  dramatically  in the  marketplace  by adding value to our
services along with the avoidance of expensive  licensing  agreements with third
party vendors.


                                PRODUCT OVERVIEW
                                ----------------

Milinx is now and will be making our  initial  offering  to  customers  in three
increments that began in June 2000 and will conclude in April 2001.  However, as
market  conditions  dictate  and the  results of our  Research  and  Development
efforts  come to  fruition,  new  services  may be added to  supplement  present
offerings and continually  expand our product line.  Initially,  our two primary
target markets for Milinx's services will be the Small Office/Home Office (SOHO)
market (under 10  employees)  and the Small to Medium  Enterprises  (SME) market
(under 500 employees).


Already available are the following services:


miOffice:    Servicing both the SOHO and SME markets, this suite of applications
             currently includes  collaboration and file-sharing  applications as
             well as e-mail and calendaring solutions.


miMessaging: This Unified  Messaging  solution  includes the ability to have all
             voice,  paging,  fax and e-mail  messages  sent to one  mailbox for
             dissemination  to the  customer,  as well as expanded  functions to
             include "follow-me messaging", voice recognition and text-to speech
             conversion.

<PAGE>

October to December 2000


The fourth  quarter of 2000 is expected by us to see the  following new services
added to the Milinx suite of offerings:


miTraining:   Focused  primarily  to  the  SOHO  market,   this  Internet  based
              application suite provides online training for our clientele.


miBilling:   Expected  to be  deployed by the end of  2000,this  application  is
             targeted  at  SOHO  and  SME  organizations   that  want  to  avail
             themselves  of,  web  centric  business   billing   techniques  and
             procedures  to  properly   control  and  monitor   their   accounts
             receivables with the latest technology available.


miCommerce:  This  website-creation  solution  is  aimed  at the  SOHO  and  SME
             businesses  that seek to  establish  an online  catalogue  and sell
             their products  securely over the Internet with instant credit card
             billing and transaction remittances.  Currently, in the final stage
             of  development,  it is expected to be ready for deployment  during
             the fourth quarter of 2000.


January to March 2001


miOffice     VO: Aimed at the SOHO and SME markets,  this next stage of MiOffice
             will  include  word   processing,   presentation   and  spreadsheet
             solutions. This suite of products is currently in the developmental
             stage,  and with  integration  into our suite of  services by March
             2001.


miCRM:       Customer Relationship  Management (CRM) solutions are by definition
             intended to centralize  and organize all customer  information  for
             any company. Milinx's solution is expected to be available in early
             2001 to  service  a primary  target  market  of SMEs  along  with a
             secondary market of SOHOs.


miPortal:    This application  creates a secure,  customized online  environment
             that allows our customers to bring employees,  partners,  suppliers
             and customers together onto the same web centric environment.  This
             development-stage  solution is expected to deploy late in the first
             quarter of 2001.


miCast:      This  application  increases the versatility and utility of e-mail,
             allowing our  customers  to add  voiceover  functionality  to their
             e-mails  without  significantly  increasing  the size of the e-mail
             file.  In the  development  stage,  this solution is expected to be
             available by April 2001.


                          MARKETING AND SALES CHANNELS
                          ----------------------------

With the completion of our first Data Center in August 2000, the  implementation
of our Marketing  Plan began in earnest.  We researched  our known and perceived
competitors  along with identifying the initial suite of offerings that would be
most appealing to the marketplace.

<PAGE>

Initially,   we  are  offering  our  products   through  three   distinct,   but
complementary, sales channels:

     o    Direct  Corporate  Sales Force:  Targeting  businesses  of  sufficient
          existing or potential  size to justify the  deployment of Milinx Sales
          Personnel,  supplemented  by IT  Professionals,  to address  technical
          challenges and issues.  Usually, this is a firm of 100+ employees that
          would   greatly   benefit  from   outsourcing   some  or  all  of  its
          applications.

     o    Direct Sales Network: An independent  targeted group of 5,000 business
          professionals  who  contract  with our wholly  owned  subsidiary,  ASP
          Technology  One,  Inc.,  to resell  Milinx  products for a commission,
          specifically oriented to the SOHO and SME markets.

     o    Internet Service Providers (ISPs) and Telcos: Offering Milinx Products
          to the  existing  customer  base of these  firms in a revenue  sharing
          model. As an example,  in September 2000, we successfully  concluded a
          Strategic  Marketing Alliance with AOL Canada to offer our services to
          that firm's  subscribers.  We expect that this  marketing  opportunity
          will expand and allow us valuable  entree into a very wide spectrum of
          geographic  locations.  By leveraging  these alliances we expect to be
          able to  introduce  our  services  to millions of users in a very cost
          effective and timely manner.

We believe that the timing is very  opportune  for this  business  model for the
following reasons:

     o    Rapidly  increasing  awareness and  acceptance  of web based  software
          solutions.

     o    The exponential  growth that has occurred and we expect to continue to
          occur of  E-Commerce  and Internet  usage  (according  to  CommerceNet
          Research Center, projected users will number 490 million in 2002).

     o    The availability of web based software products.

     o    The expanding  demands of small and medium sized  businesses  for cost
          effective, robust, and the latest IT Solutions along with a profitable
          and facile Internet presence.




collectively,  in our opinion,  the offerings  with which Milinx has entered the
ASP market represent a suite of products  encompassing depth,  functionality and
comprehensiveness for our key target sectors, and positions the Company to score
rapid  penetration  gains that we  believe  necessary  to achieve a  significant
market share.


                                   Competition
                                   -----------

The  markets  for our  services  are now,  and will  continue  to be,  extremely
competitive.  To obtain customers, we are and will be are expending considerable
financial   resources  on  marketing  our  services.   These  payments   include
advertising,  commissions,  share  warrants  and  options  and  other  financial
inducements.  In that many of our competition  have  substantially  more capital
resources  than  Milinx,  our ability to compete may be impaired  now and in the
future.

<PAGE>

There are over 600 firms that  classify  all or a  significant  portion of their
business to be functionally ASP in nature and many more that provide IT services
over the Internet.  However, the two principal  differentiating  factors are the
comprehensiveness  of the product offerings and  competitiveness  of the pricing
structure to our customers.


First,  Milinx is a "pure play" ASP which purposely does not now offer ancillary
Internet  services.  We believe that our concentrated focus on our core business
is the most  expedient  route to positive  cash flow and  profitability.  In our
opinion,  new  web  centric  business  applications  will  significantly  dilute
revenues currently being derived through high margin consulting services.


Second,  our market  focus is, by design,  targeted to the SMEs and SOHOs rather
than on being an Enterprise Resource Provider ("ERP") to Fortune 2000 Companies,
which,  in our opinion,  is the most  difficult  market segment to penetrate and
unquestionably is the most competitive.  We believe that the strategy of many of
our  competitors  is  fallacious  in that  reselling  standardized  third  party
applications  through  restrictive  licensing  agreements  will  quickly lead to
intense price competition and low profit margins. The development of proprietary
applications  and less  expensive  indirect sales channels will, in our opinion,
give Milinx a distinct cost advantage although third party applications would be
expeditious to implement.


Our present and prospective competitors include other ASPs, systems integrators,
ISPs, software companies,  and telecommunication  companies  ("Telcos").  Unlike
Milinx,  many of these  firms  have long  established  operating  histories  and
substantial  financial  resources.  However, we believe the Company can secure a
profitable and long term market niche by providing the following services:

     o    A  comprehensive   suite  of  services  that  is  secure,   scaleable,
          functional, and reliable.
     o    Proprietary applications, which do not merely resell other third party
          applications. o Competitive subscription fees.
     o    Customized web sites unique to that customer.
     o    All basic IT business services for our target market.
     o    Total quality 24/7 customer service.
     o    Strategic  relationships  to  build  customer  base  through  indirect
          channels.

ASPs.  We compete with other  companies  whose stated core business is providing
ASP services. These competitors include  USinternetworking,  FutureLink,  Corio,
Applicast, Interliant, Interpath, NaviSite, Telecomputing, and Breakaway.


SYSTEMS  INTEGRATORS.  We compete with many well established  commercial systems
integrators  who bundle their  consulting  services  with  hardware and software
providers to provide  outsourcing  for the  customer.  Examples of these include
Andersen  Consulting,   Breakaway  Solutions,   iXL,  Enterprises,   EDS,  KPMG,
PricewaterhouseCoopers, and MCI Systemhouse.

<PAGE>

ISPs AND WEB HOSTING COMPANIES.  We expect that business oriented North American
ISPs and Web Hosting  firms will begin to expand  their  product line to include
service offerings with Internet and Web Hosting on a subscription  basis.  Among
these  are  AOL,   Concentric   Networks,   Frontier   Corporation,   MindSpring
Enterprises,  NETCOM  On-Line  Communications  Services,  Verio,  Exodus,  UUNet
Technologies, Verizon, PSINet, and Digex.


SOFTWARE COMPANIES. Many of the established and significant software application
companies either now have or will in the near future offer application solutions
for rent over the Internet.  Some that already do include SAP,  Oracle,  IBM, JD
Edwards,  Microsoft,  Siebel Systems,  and PeopleSoft.  In June 2000,  Microsoft
announced a new .Net Strategy that will be implemented by subscriptions over the
Internet within the next two years,  offering their world-renowned  existing and
expanded product line.


TELCOS. Many long distance  companies,  regional Bell operating  companies,  and
competitive  local  exchange  carriers  now  offer  Internet  services  to their
clientele.   Although  these  firms  have   traditionally  not  been  nimble  in
identifying  and serving new markets,  the expansive  size of their networks and
abundant financial resources make them potentially formidable adversaries.


ALTHOUGH MILINX BELIEVES THAT ITS CURRENT AND FUTURE AVAILABLE SERVICE OFFERINGS
DO OR WILL COMPETE  FAVORABLY,  WE MIGHT NOT BE ABLE TO MAINTAIN OUR COMPETITIVE
POSITION  AGAINST  PRESENT AND FUTURE  COMPETITORS.  MANY HAVE LONGER  OPERATING
HISTORIES AND SIGNIFICANTLY  GREATER FINANCIAL,  TECHNICAL,  MARKETING AND OTHER
RESOURCES  THAN US. THESE  COMPANIES MAY WELL BE ABLE TO RESPOND MORE QUICKLY TO
NEW OR CHANGING OPPORTUNITIES,  CHALLENGES,  TECHNOLOGIES, STANDARDS OR CUSTOMER
REQUIREMENTS.

Item 2.  Properties.


          Seattle Head Office:
          2 offices at 3827-1001 Fourth Avenue.

          Vancouver Administration Offices:
          13,000  square  feet at 1080 Howe  Street  houses  our  Administration
          functions,  including Accounting,  Business Development and Marketing,
          Research  &  Development,   Communications,  Legal,  Human  Resources,
          Investor Relations and Intellectual Property Departments, as well as a
          few members of our corporate IT department.

          Vancouver Data Center:
          14, 005 square feet at 1045 Howe Street houses our Data Centre, Client
          Services, Web Team and the remainder of our IT department.

          New Location for Vancouver Administration Offices:
          Beginning December 1st, 2000, we will be leasing 23,226 square feet at
          595 Burrard Street. Our  administrative  departments will begin moving
          on January 15th.

Item 3.  Legal Proceedings.

     (a)  On January 11, 2000, Interactive  Intelligence,  Inc.  ("Interactive")
          advanced a claim  through the  American  Arbitration  Association  for
          $3,900,000.00  US funds for an alleged  breach of a  Software  License
          Agreement.  Interactive is the owner of a software program designed to
          handle intra company  telecommunications and small answering services.
          The  Company  had  responded  to  Interactive's  Arbitration  claim by
          denying any amount was owing and  counterclaiming  against Interactive
          for damages stemming from Interactive's  failure to deliver a workable
          system. On February 2, 2000, the Company commenced suit in the Supreme
          Court of British Columbia, (the "British Columbia Lawsuit"), naming as
          defendants, Interactive and others. This matter was ultimately settled
          with neither party  receiving  any payment from the other.  Each party
          bore their own costs.  Milinx's legal expenses  incurred in the fiscal
          year ending June 30, 2000 amounted to $106,393.49

     (b)  On October 4, 2000, two former employees of the Company's  subsidiary,
          Milinx Business Services,  Inc.,  ("Services"),  Don Williams and Reza
          Bazargan  advanced  separate actions in British Columbia Supreme Court
          against  Services  alleging  breach  of  their  employment   severance
          agreements  and  claiming  unspecified   damages.   Services  will  be
          vigorously  defending  these actions and  counterclaiming  against the
          respective   individuals   for  breach  of  employment  and  severance
          agreements  and  claiming   return  of  funds  paid  out  under  their
          respective  severance agreements and damages for wrongful breach.

                                    PART II

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

No matters were submitted to a vote of security holders in fiscal year 2000.
<PAGE>


Item 5. Market for Registrant's Common Equity and Related Stockholder Matters.


          MARKET INFORMATION


          On June 8, 2000 our common stock began trading, under Rule 211, on the
          NASD Over the Counter Bulletin Board National Quotation System,  under
          the  trading  symbol  "MIXBA".  The  following  sets forth the average
          closing  prices  for high and low bid  information  for the  quarterly
          periods indicated:

          2000                                       High                  Low
          ----                                       -----                ------
          Quarter ended June 30/00                   $8                   $5.625
          Quarter ended September 30/00              $7.375               $4.125

          The above  market  quotations  were  taken  directly  from the  NASDAQ
          website  and  reflect  inter-dealer  prices  without  retail  mark-up,
          mark-down  or  commission  and may  not  accurately  represent  actual
          transactions.

          HOLDERS

          a)      Common Equity.

                  As of September 30, 2000 there were approximately nine hundred
                  eighty two (982)  registered  shareholders of record of common
                  stock.

          b)      Preferred Convertible to Common Equity.

                  As of  September  30, 2000 there were  approximately  four (4)
                  shareholders of record of Series A Preferred shares.

                  As of September 30, 2000 there were approximately sixteen (16)
                  shareholders of record of Series C Preferred shares.


          DIVIDENDS


          No dividends have been declared since inception.


          RECENT SALES OF UNREGISTERED SECURITIES


          During the period from  inception to June 30, 1999, the Company issued
          the following unregistered securities.  Unless indicated, cash and net
          proceeds  are the same.  Also unless  indicated,  sales under Rule 506
          were to persons  believed to be  accredited  investors,  as defined in
          Regulation D:


          On February 12, 1999 the Company  completed a placement under Rule 504
          of Regulation D, selling  4,300,000  shares of its voting common stock
          for total cash proceeds of $100,000.00.


          Also on February  12, 1999 under  Regulation  S, Rule 506, the Company
          completed a private  placement,  issuing  2,925,000 Series A Preferred
          shares to two of the Company's directors, including the President, and
          to its legal  counsel for total cash  proceeds of  $2,925.00;  also at
          that time, the Company issued 45,000 shares of its voting common stock
          to an officer of the Company for total cash proceeds of $45.00.
<PAGE>


          Each share of Series A Preferred  stock is entitled to 2 times  voting
          rights of the  common  shares to which  they may be  converted  on all
          matters  on  which  shareholders  are  entitled  to  vote  and  can be
          converted into shares of common stock at a ratio of 3 shares of common
          stock for each share of Series A Preferred  stock.  Series A Preferred
          stock has a preference on dividends,  liquidation  and merger at $0.32
          per share.


          On March 15, 1999 under  Regulation  S, the  Company  issued to Credit
          Assure  International Inc. an option to purchase 750,000 shares of the
          Company's  Preferred A stock for $27,000 total cash proceeds.  Options
          were granted on March 15, 1999 and exercised on April 6, 1999.  Due to
          the absence of any market for the Company's  preferred stock, value of
          the option, if any, at the date of grant was considered negligible.


          On March 19, 1999 the Company  completed a placement under Rule 504 of
          Regulation D selling  1,300,000  shares of its voting common stock for
          total proceeds of $130,000.00.


          On March 26, 1999,  under  Regulation S, Credit  Assure  International
          Inc.  exercised  its option on 750,000  Series A Preferred  shares for
          total cash proceeds of $27,000.00.


          On April 2, 1999 the Company  completed a private placement under Rule
          701 of Regulation D, selling 675,000 shares of its voting common stock
          for total cash  proceeds of  $33,750.00  to  directors,  including the
          President, officers and consultants of the Company.


          On April 5, 1999 the Company  completed a placement  under Rule 504 of
          Regulation D, selling  1,800,000 shares of its voting common stock for
          total proceeds of $320,000.00.


          On April 20, 1999 200,000  options were granted under Rule 701 to four
          of the Company's  sales  associates  permitting the purchase of common
          shares at $2.00 per share  effective  July 15,  1999 and  expiring  on
          March 31, 2001.  Using an option  valuation  model,  fair value of the
          options at the date of grant was  determined to be  negligible  due to
          low stock  volatility and options being "out of the money" at the date
          of the grant.


          On May 25,  1999 the  Company  completed  a  private  placement  under
          Regulation S, Rule 701,  selling  350,000  shares of its voting common
          stock for total proceeds of $17,500 to an officer of the Company.  The
          proceeds were collected in full prior to the issuance of the financial
          statements;  however,  the proceeds  were  included in total  accounts
          receivable at June 30, 1999.

<PAGE>

          On May 25, 1999,  under Rule 506, 900,000 1999 Internal Warrant A were
          privately issued to a director and the Company's legal counsel.  These
          warrants are  exercisable at $ 4.00 per common share until January 31,
          2001. The warrants were issued for cash proceeds of $200.00.


          From June 19,  1999  through to December  31,  1999 the  Company  sold
          1,681,250  Class A units at $2.00 per unit for total cash  proceeds of
          $3,362,500. In May 2000, unit holders exercised their right to convert
          these units into Series B Preferred shares and all outstanding Class A
          units were  converted  into  1,681,250  Series B Preferred  shares and
          840,625 International A Warrants, as more specifically stated below.


          On June 30, 1999,  under  Regulation S, the Company  privately  issued
          295,000   Class  A  units  at  $2.00   per  unit  to  Trans   Research
          International Ltd. for total cash proceeds of $590,000.00.


          Subsequent to June 30, 1999, the Company issued the following:


          On July 25, 1999 under  Regulation S, 650,000 1999 Internal  Warrant B
          were issued to two directors.  These warrants are exercisable at $6.00
          per Series A Preferred share until March 31, 2005.


          On September 30, 1999,  also under  Regulation  S, the Company  issued
          613,750 1999 Class A units at $2.00 per unit to North American Funding
          Limited for total cash proceeds of $1,227,500.


          On October 15, 1999 under  Regulation S, the Company issued 375,000 of
          its  common  shares  to  Milinx  International  Inc.,   (Cayman),   as
          consideration for intellectual property.  Also on October 15, 1999 the
          Company  issued 50,000  common  shares to Credit Assure  International
          Inc. as consideration for intellectual property and trademarks.


          On October 31, 1999 the Company issued  privately under  Regulation S,
          163,500  1999 Class A units at $2.00 per unit for total cash  proceeds
          of $327,000.00 to Millennium Three Holdings Ltd.


          On November 11, 1999 the Company  allotted  71,000  common  shares for
          issuance to employees of its  subsidiary,  Milinx  Business  Services,
          Inc. under Regulation S, Rule 701. The shares were issued at $0.05 per
          common share for total cash proceeds of $3,550.00.


          On November 30, 1999 under  Regulation S, the Company issued privately
          212,500  1999 Class A units at $2.00 per unit for total cash  proceeds
          of $425,000.00 to Millennium Three Holdings Ltd.


          As of  December  9, 1999  James  Medley,  a new member of the Board of
          Directors was awarded  180,000  common  warrants under Rule 506, at an
          exercise price of $4.00 per share.  These  Warrants  expire on January
          31, 2001.
<PAGE>


          Also  on  December  9,  1999  the   outstanding   shares  of  Forestay
          Corporation, a Delaware Corporation, were exchanged for 250,000 shares
          of common stock of the Company,  under Rule 506, in a  transaction  in
          which Forestay became a wholly owned subsidiary of the Company.


          On  December  31,  1999  under  Regulation  S, the  Company  issued to
          Millennium Three Holdings Ltd. 396,500 1999 Class A Units at $2.00 per
          unit for total cash proceeds of $793,000.00.


          From  January 1, 2000 to June 30, 2000 the Company  issued  privately,
          under  Regulation  S,  Rule  506,  4,986,923  Class D Units  for  cash
          proceeds net of commissions  of  $9,097,662.  During this same period,
          2,624,412 Class D Units were converted to 2,624,412 Preferred C Series
          shares and 1,312,206 D Warrants for total cash proceeds to the Company
          of $2,625.00.


          On January 31, 2000,  under Regulation S, the Company issued privately
          325,500  1999 Class A Units at $2.00 per unit for total cash  proceeds
          of $651,000.00.


          As of May 10, 2000, the Company awarded a grant of 39,000 shares each,
          in  escrow,  to two of its  executives.  The  shares are to be granted
          subsequent to the Company  completing a Form S-8  registration  of its
          common stock.  Due to price  volatility of the  Company's  stock,  the
          Company is unable to determine the amount of  additional  compensation
          that will be recorded at the time such shares are issued.


          In May 2000,  under Reg. S, 1,681,250  Class A Units were converted to
          1,681,250 Series B Preferred  shares and 840,625 1999  International A
          Warrants netting total cash proceeds to the Company of $1,682.00.


          From May to June  2000,  under  Rule 506,  417,000  shares of Series C
          preferred  stock were  converted  to 417,000  shares of the  Company's
          voting stock at shareholder's request.


          Also from May to June 2000,  under Rule 506,  2,624,412  Class D Units
          were converted into 2,624,412  shares of Series C Preferred  stock and
          1,312,206 Class D Warrants.


          In June 2000,  under Rule 506,  417,000  shares of Series C  Preferred
          shares  were  converted  into  417,000  common  stock  shares  at  the
          stockholder's request.


          In June 2000,  under Rule 506,  37,500 Class D Warrants were converted
          into 37,500 common stock shares of the  Company's  voting common stock
          for total cash proceeds of $75,000.00.


          Subsequent to June 30, 2000,  under Regulation S, the Company has sold
          89,997  common  shares at $4.50 per share for total cash  proceeds  of
          $404,986.00.
<PAGE>

          Also  subsequent  to June  30,  2000,  448,187  Class D  Warrant  were
          converted  to 448,157  common  shares for total cash  proceeds  to the
          Company of $896,374.


          Subsequent  to June 30, 2000,  investors  converted  906,912 Unit D to
          906,912 Series C Preferred shares and 453,456 Warrant D for total cash
          proceeds to the Company of $907.00. Since, investors converted 906,912
          Series C Preferred shares to 906,912 common shares.

          Subsequent  to June 30,  2000,  38,989  common  shares were awarded to
          legal  counsel in  settlement  for legal fees and future legal fees of
          $77,985,  under Rule 506.  Counsel was further awarded a Warrant as of
          October 12, 2000 for a term  ending June 30,  2002,  to purchase up to
          100,000 common shares,  warrant  consideration  set at $250.00 with an
          exercise  price being the lowest closing share price on either October
          12 or 13,  2000.  The  warrant  was  otherwise  in the same  terms and
          conditions as the warrant issued to James Medley, Director.

          All above proceeds were used for general working capital and operating
          purposes,   including  the  lease  and  rental  of  equipment,  legal,
          accounting and transfer agent fees, construction of the Company's data
          center,  as well salaries to employees,  directors and officers of the
          Company.


<PAGE>

Item 6. Selected Financial Data.
<TABLE>
<CAPTION>


                                             Milinx Business Group, Inc. and Subsidiaries
                                                        Reg. 229.301. Item 301
                                                        June 30, 2000 and 1999


                                                                                     Year ended         Six months ended
                                                                                    June 30, 2000         June 30, 2000
                                                                                  -----------------     -----------------
<S>                                                                               <C>                   <C>

Operating revenues                                                                         197,193                43,424

(Loss) continuing operations                                                           (6,636,452)             (844,250)
(Loss) continuing operations per common share - basic and diluted
                                                                                             (.74)                 (.32)

Cash                                                                                     2,162,430                 4,522

Property and equipment, net of accumulated depreciation                                  3,572,168               714,232

Other assets - software licenses                                                         2,036,985               261,250

Total assets                                                                             8,993,249             1,107,537

Capital lease obligations, long term                                                       927,808                     -
</TABLE>



<PAGE>


Item 7. Management's  Discussion and Analysis of Financial Condition and Results
of Operation.


          The following discussion and analysis should be read together with the
          financial  statements  and  related  notes of Milinx  included in this
          filing. The discussion contains  forward-looking  statements involving
          risks  and  uncertainties,  such  as our  future  plans,  projections,
          objectives,  expectations  and  intentions.  Our actual  results could
          differ  materially  from  those  anticipated  in such  forward-looking
          statements  wherever they appear in this filing.  Significant  factors
          that could cause or contribute to differences  include those discussed
          in "Risk  Factors" as well as those set forth  throughout  this filing
          and other filings previously made by the Company.  The forward-looking
          statements contained herein are made as of the date of this filing and
          we assume no obligation to update these forward-looking  statements or
          to update the reasons  actual  results  could differ  materially  from
          those  anticipated  in  these  forward-looking  statements.  See  Risk
          Factors.


          Our View of the Economy


          The United States is now in the tenth year of the  strongest  economic
          expansion  in its history  with  exceptional  uninterrupted  growth in
          Gross Domestic Product ("GDP"), low unemployment,  real income growth,
          high job creation,  acceptable levels of inflation,  a strong currency
          and record levels of capital  expenditures.  The Technology  Sector of
          the economy has unquestionably  been the most significant  contributor
          to this record expansion providing increases to business productivity,
          thereby  abating an  increase in  inflation,  high  paying  jobs,  and
          capital formation. Canada just began its recovery in 1995 and there is
          empirical  evidence to suggest  that its  economic  growth in relative
          terms will meet or exceed  those of the United  States in the next two
          years.


          However,  oil  prices  have  recently  escalated  dramatically  to the
          highest  levels seen since the Persian  Gulf War in 1990 and the trade
          deficit  with the rest of the world may well set a record of over $300
          billion dollars in 2000. While petroleum products now account for less
          than  3% of  GDP,  dramatic  oil  price  escalation  in the  past  has
          contributed  significantly to economic recessions and,  therefore,  we
          cannot be completely  sanguine that the economic expansion will not be
          retarded by this occurrence.  In addition,  if the US dollar begins to
          weaken,  the  Federal  Reserve  Board may well be  forced to  increase
          interest rates to support the currency, which could also have negative
          effects on the economy.


          In recent  months,  there has been a noticeable  slowing in technology
          expenditures as individuals  and businesses have retrenched  purchases
          of personal  computers and software.  We think this trend is temporary
          as both evaluate the most advantageous and inexpensive venue to access
          the Internet for  e-commerce,  business-to-business  transactions  and
          communication.

<PAGE>

          Since the first  quarter of 2000,  the US stock  markets  have been in
          some turmoil. In particular,  the shares of many technology firms have
          significantly  declined  as  investors  seem well to have  returned to
          fundamentals  seeking investment  opportunities that promise near term
          positive cash flow and profitability in their business plans. There is
          no  question  that   achievement  of  performance   has  now  replaced
          "concepts" in the mind of individual and institutional  investors.  We
          see this as a positive  trend for those  firms that can meet or exceed
          expectations. Alternatively, the share prices of companies that do not
          achieve forecasted results will suffer significant losses.


          Milinx Overview


          Our Company was incorporated in the State of Delaware in December 1998
          and commenced active operations on February 10, 1999. Since that time,
          we have invested substantial financial resources in computer hardware,
          software,   integration  technology,   proprietary  applications,  and
          skilled,  experienced personnel with the objective to become a leading
          Application   Service   Provider   ("ASP")   targeting   our  services
          principally to the SME (small and medium sized  enterprises)  and SOHO
          (small office and home office) markets on a subscription  basis. Since
          1998, we provided IT services under the trade name  "Business  Builder
          Toolbox"(BBT) but the system discontinued services on June 30,2000.


          In August  2000,  we opened our first Data  Center in a 14,000  square
          feet floor of an office  building in Vancouver,  BC. Milinx has formed
          an alliance  among Sun  Microsystems,  Inc.,  Netscape  Communications
          Corporation,  and their affiliate,  iPlanet,  to potentially provide a
          wide array of  services  in a secure  environment.  Although  our Data
          Center can service up to 1,000,000 customers, Milinx intends to expand
          into the United States which can be  accomplished  rapidly with either
          "mini" data centers or co-located facilities with other companies.


          We propose to set standards of excellent service within the context of
          a "Total Customer Experience" by providing application implementation,
          integration, and management.


          This value proposition enables our customers to:


          Gain access to integrated  applications  that automate  their internal
          processes and their exchanges with suppliers, partners, and customers.


          Minimize  the  considerable  upfront  costs  of  licensing  enterprise
          software and  implementing  them on their  existing  systems  allowing
          businesses to expend valuable resources on their core competencies.


          Reduce considerably the time and expenditures of constantly  upgrading
          and integrating computer software and hardware.


          Outsource  their IT  requirements  and be provided with total Customer
          Sales and Support on a 24/7 basis.
<PAGE>


          We believe  that our  sustainable  competitive  advantage  will be the
          ultimate  comprehensiveness  of  our  services,  the  reliability  and
          scalability  of  our  industry  leading  hardware  and  software,  and
          proprietary applications unique to and totally owned by Milinx.


          Results of Operations


          Revenue:  Fiscal year 2000 was a one of  investment,  development  and
          recruitment  of personnel to be able to achieve our goal of becoming a
          leading ASP service provider.  For the year, we had total net sales of
          $197,193 as compared  with $43,424 in 1999.  All revenue was generated
          from the BBT suite of services which was discontinued on June 30,2000.
          All future revenue will be generated from present and future offerings
          of ASP services to customers.


          Cost of Sales:  Milinx had cost of sales of $48,112 and  $365,449  for
          fiscal years 1999 and 2000 respectively.  All costs were attributed to
          the services  provided to customers of the BBT. These were principally
          phone lines and service  ($195,395),  commissions paid ($51,912),  and
          marketing ($94,371).


          With   the  ASP  business   model,   these   expenses   will  increase
          significantly  in the future.  In  September  2000,  we concluded a 24
          month branding,  promotional,  and marketing Agreement with AOL Canada
          (AOL) that provided, among other terms and conditions,  for a $237,793
          payment by Milinx in four quarterly installments and all revenue to be
          shared 80% to us and 20% to AOL. As the Company  aggressively  expands
          marketing our  services,  it is highly likely that we will be entering
          into similar agreements, paying commissions,  bonuses, and other sales
          inducements, including options or warrants to purchase Milinx's common
          stock.


          Gross Profit (Loss):  The gross loss from  providing  services for the
          BBT increased from $4,688 in 1999 to$168,256 in fiscal year 2000.


          Selling,   General,  and  Administrative   Expenses:   These  expenses
          increased  significantly  to $6,442,914 in 2000 from $839,192 in 1999.
          This  increase of $5,603,722  between 1999 and 2000 was  principally a
          result of the following:

               o    Amortization of computer  hardware,  software,  and licenses
                    increased  $412,212 to $454, 244 as the Company acquired the
                    assets integral to its ASP business.  This expense is likely
                    to increase in future years.

               o    Licensing  and  software  write-downs  were  $304,500 as the
                    Company expenses discontinued or unusable software. In 1999,
                    there was no such  expense and is not likely to recur in the
                    future years.

               o    Consulting  fees  increased  $589,858  to  $652,498  due  to
                    necessity of retaining third parties for systems integration
                    and others to advise the firm on its business operations. By
                    expanding  operations  geographically  and  outsourcing  the
                    development  of  proprietary  technology,  this  expense  is
                    likely to further increase.
<PAGE>

               o    Office  expenses  increased  from  $15,633  to  $202,816  or
                    $187,183.   As  the  Company  completes   occupancy  of  its
                    relocated.  Administrative  Offices  and opens new  offices,
                    this expense will increase significantly.

               o    Legal expenditures  increased $365,525 to $482,441.  In that
                    Milinx  will have to continue  to raise  significant  equity
                    capital and expand its  business  operations,  this  expense
                    will continue to increase in future years.

               o    Rent  increased  from  $24,466 to $208,937 or  $184,495.  In
                    2000,  this expense  included  occupancy  costs for the Data
                    Center and expanded administrative office space. The Company
                    is  committed  to occupy  new  office  space at 595  Burrard
                    Street,  Vancouver,  BC. which,  commencing December 1,2000,
                    will increase our monthly  rental  expense by $49,833.  With
                    our planned geographic expansion, this expense will increase
                    substantially in 2001.

               o    Travel and entertainment of $298,587 increased $259,025 from
                    $39,562.As we continue to grow, these expenses will increase
                    commensurately.

               o    Wages,   salaries,  and  benefits  of  $2,972,149  increased
                    significantly  from  $322,172 as new  personnel  was rapidly
                    added in fiscal year 2000 to administrate,  develop, market,
                    and service its ASP product line. With the planned expansion
                    of  Milinx,  additional  personnel  will  have  to be  hired
                    further increasing this expenditure in the future.

               o    Payment  of  compensation  through  the  issuance  of  stock
                    totaled $318,835. There was no such expense for this item in
                    1999 as the  shares of the common  stock  were not  trading.
                    Presuming  the share price  Milinx  stock  increases  in the
                    future,  there  will  be a  commensurate  increase  in  this
                    expense.


          Net Loss from Operations


          The net loss from  operations  increased  from  $844,250 to $6,636,452
          or $5,792,180.


          Liquidity and Capital Resources


          As of June 30, 2000, we had cash resources of $2,162,445 on hand which
          was an increase of $2,157,923  from June 30,1999.  Working capital was
          $1,579,629 as compared with a working  capital  deficit of $443,669 in
          1999.

<PAGE>

          During the year, the Company raised  $11,573,951  from equity security
          financing.  Principally,  these funds were used to fund operations and
          acquire  computer  hardware,   software,  and  licenses  incident  and
          necessary to its ASP service  offerings to  customers.  Subsequent  to
          June  30,2000,  the Company  received  $3,584,748 by the exercise of D
          Unit  Investor  Warrants  for  1,792,374  shares of common stock at an
          exercise  price of $2.00 per  share.  In  addition,  we  financed  our
          computer   hardware   purchases  by  the  use  of  lease   obligations
          aggregating $1,463,869.


          In August 2000,  the Company began  offering to  accredited  investors
          2,500,000 common shares of Milinx stock at a price of $4.50 a share or
          $11,250,000. As of the date of this filing, $404,990 had been received
          from this offering.


          We  believe  that the  proceeds  of this  offering  combined  with the
          revenue  derived  from  operations  will be  sufficient  to  fund  our
          operations for the next twelve months.


          However,  if the  common  stock  offering  is not  successful  and the
          revenues from operations do not meet projections, the Company will not
          be able to fund present or planned operations.  Were either or both of
          these  events to occur,  Milinx  would have to  significantly  curtail
          operations  and seek other sources of financing that may or may not be
          available.


          Risk Factors


          Investing in our Company involves risk. You should carefully  consider
          the risks and uncertainties  described in this filing before making an
          investment  decision.  These risks and  uncertainties are not the only
          ones that we face or that may adversely affect our business. If any of
          the following risks or  uncertainties  actually  occur,  our business,
          financial  condition,  or results of  operations  could be  materially
          adversely   affected.   This  report  also  contains   forward-looking
          statements that inherently  involve risk and  uncertainty.  Our actual
          results  could  differ   materially   from  those   described  in  the
          forward-looking  statements.  This  could  occur  because of the risks
          described in this filing or other unanticipated events and occurrences
          not now foreseen.

          The Application Service Provider (ASP) Business Model has not yet been
          proven.


          Of the 600 firms that  classify all or a portion of their  business as
          ASP in  nature.  Currently,  we not  aware of any  that are  presently
          profitable.


          Our success  depends upon the acceptance and increased use of Internet
          based business software solutions and we cannot be sure that this will
          happen.


          Our  business  model is based upon the market  acceptance  of Internet
          based software solutions by our potential customers.  The marketing of
          software  over the  Internet  has only  begun to  evolve  and could be
          adversely effected by a number of factors  including,  but not limited
          to, security concerns,  inadequate network delivery,  and inconsistent
          performance by the Internet.
<PAGE>


          We are competing with Companies  with much greater  capital  resources
          and longer operating histories


          The ASP market is now and will  continue to be extremely  competitive.
          Many  of  these  firms  either  have on  hand  available  considerable
          financial resources not available to us.


          Milinx is presently operating at a loss and experiencing negative cash
          flow.


          While we began  operating  in February  1999,  our Data Center was not
          opened until August 2000 enabling us to market our services.  Starting
          our  Company  involved  substantial  capital  and other  expenditures.
          Developing  and  marketing  our  services  will  involve  considerable
          additional capital and expenditures.


          Our present monthly cash flow deficit is $1,500,000 and could increase
          to $2,000,000 in December 2000 if revenue projections are not met.


          Milinx continues to operate at a substantial monthly cash flow deficit
          that has  only  been  funded  by  equity  capital  to  date.  While we
          anticipate  recurring  revenue  to  increase  monthly,   there  is  no
          assurance that this will occur.


          The Company  will need  significant  additional  financing to complete
          development of its product line and proprietary  applications  that we
          may not be able to obtain either on terms acceptable to us or at all.


          Since its  inception,  we have  relied  almost  exclusively  on equity
          capital to fund our operations and capital expenditures. In the fiscal
          year ending June 30,2000  Milinx spent  $3,626,184  for fixed  assets,
          property, and equipment.  While we have received $16,380,119 in equity
          funding,  the  Company has raised  these funds  itself and there is no
          assurance that this can occur in the future.


          The  marketing  of services  just began in August 2000 and there is no
          assurance that the product line or pricing will be successful.


          As of the date of this  filing,  the Company has two services to offer
          to customers  with the  remainder to be available  late in 2000 or the
          first quarter of 2001.  Presently,  we do not have a sufficient number
          of subscribers to ratify either our products or pricing.


          None of our  proprietary  applications  is now in service and none are
          commercially proven.


          At the  core of our  Business  Model  is the  development  and  market
          acceptance of our proprietary applications only one of which is now in
          service. If we are unable to complete our proprietary applications, we
          will have to rent or purchase  applications,  which will substantially
          increase the amount of financing required and increase the expenses of
          the Company.

<PAGE>

          The  marketing  of our services  has just  commenced  and will involve
          considerable funding which is not now available.


          Initially, the Company intends to market its services through licensed
          Resellers,  our Direct Sales Force, and Internet Service Providers. To
          date, we have only begun to expend  significant funds on marketing but
          equity  funding and revenue,  which is by no means  assured,  can only
          meet future planned expenditures.


          Additional key personnel will need to be hired and existing  personnel
          retained  to  fulfill  the  Company's  Business  Plan  which  will  be
          challenging and increase expenditures.


          Although  we have  built  our staff  with  experienced  and  qualified
          professional  staff,  additional  personnel will need to be hired in a
          very  competitive  workplace  environment.  We have certain of our key
          personnel under management  contracts and are expanding our efforts to
          include them all.


          The Company  presently  enjoys  lower  costs of doing  business by its
          principal operations being domiciled in Vancouver,  BC. However, these
          cost advantages in the future are not assured.


          Presently,  we operate most of our  business  through our wholly owned
          subsidiary, Milinx Business Services, Inc. The costs of doing business
          in British Columbia are  significantly  lower than major  metropolitan
          areas in the United States. Also, in that most of our expenditures are
          dominated in Canadian dollar while projected  revenues are to be in US
          dollars,  a  significant  exchange  benefit  accrues  to our  benefit.
          However,  these  advantages  may not continue at present  levels or at
          all.


          The trading price of our common stock could be subject to  significant
          fluctuations.


          The common shares of Milinx began trading on the NASD Over the Counter
          Bulletin  Board  ("OTCBB")  on June 8,  2000.  While to date our share
          price has  fluctuated  between  a high of $7.50  and a low of  $4.125,
          stock  trading  on  the  OTCBB  is  generally   more   susceptible  to
          considerably wider price changes, there is no assurance this could not
          happen to us.


          The  substantial  number of future  shares  available  for sale  could
          adversely effect the market price of our common stock.


          As of August 31,2000,  Milinx had 15,926,915 shares outstanding but if
          all of the  preferred  shares  convertible  to common and  options and
          warrants are  exercised,  that would  increase the number of shares to
          approximately  35,000,000.  We cannot predict the effect, if any, that
          future sales of common stock would have on our share price.
<PAGE>




Item 10. Directors and Executive Officers of the Registrant.

(a)      Listing and biographies
<TABLE>
<CAPTION>

Name                              Age          Position
<S>                             <C>           <C>

Maynard Dokken                     37          President and Chief Executive Officer
Mikiko Fujisawa                    33          Corporate Secretary, Treasurer & Director
John Burns                         59          Director
James Medley                       59          Director
Barry Phillips                     61          Director
James W Summers                    55          Chief Financial Officer
Douglas A. Hicks                   36          Executive Vice President of Business Development
Clare Cremer                       58          Senior Vice President of IT
Edwin Mark                         33          Senior Vice president, Legal and Corporate Counsel
Jonathan Myers                     53          Senior Vice President of Client Operations
Grenfell Featherstone              50          Vice President of Intellectual Property
Lance Drozda                       29          Vice President Emerging Technologies
Gary MacDonald                     32          Vice President of Investor Relations
Rafeh Hulays                       43          Vice president of R&D/Advanced Services
Bill J. Bilic                      40          Chief Software Architect
James B. Maedel                    38          Manager of Human Resources
Rudi Epp                           49          Director of Web Development
Allan Wong                         31          Manager of Infrastructure Applications
Pamela Oram                        52          Manager of the Client Contact Center
David G. Libby                     50          Group Controller
Eric B. Westra                     40          Project Manager and Presales Engineer
</TABLE>

Maynard L. Dokken, President, CEO, and Corporate Director

He is the  founder  of the  Company  and  was  experienced  in the  real  estate
development  business prior to his interest in Internet related  businesses.  He
commenced  researching  the  feasibility of introducing a new unique credit card
product in 1994.  After spending in excess of US$1,000,000 on the project,  here
engineered the idea of offering  another  consumer card to the general public in
1997. He turned his energies to the Internet and telecommunications  industries.
He is currently the majority  shareholder of Milinx Business Group, Inc. He also
controls two  Companies  that have licenses or other  arrangements  with Milinx:
Milinx  International  and Credit  Assure  International,  Inc. He is married to
Mikiko Fujisawa, Director,  Secretary, and Treasurer.

Mikiko Fujisawa, Corporate Director,  Secretary,  and  Treasurer

After four years of experience as an executive  assistant at Lapine  Corporation
and Osaka Gas Co. Ltd,  Ms.  Fujisawa  returned to college for a brief period of
study.  After her graduation in 1996, she worked briefly at the daily  newspaper
Chugoku  Shinbun-Sya  before  moving to North  America  in 1997 and  becoming  a
Director  of  545731  BC Ltd,  She was  responsible  for most of the  day-to-day
management of that company.  She has been a Director and the Corporate Secretary
of Milinx Business Group since its incorporation in 1998, and as of May 10, 2000
has added the duties of  Treasurer.  She has been a Director  and the  Corporate
Secretary of Milinx  Business  Services  since its  incorporation  in 1999,  and
Corporate Secretary of Credit Assure International,  Inc. since incorporation in
1999. She is the wife of Maynard L. Dokken.

John S.  Burns, Director

John S. Burns Q.C.,  a Director  since June 2000,  has been a partner of the law
firm Bennett Jones in Calgary, Alberta since October 1990. His areas of practice
are principally corporate,  corporate finance and securities law. Mr. Burns acts
for public and private  corporations,  securities issuers and underwriters.  His
practice  focuses on mergers and  acquisitions,  public and  private  offerings,
corporate  restructurings,  cross-border  financings  and oil,  gas and  banking
transactions.  He has  participated in conferences and panels and has authored a
number of papers and  articles  with  respect to these areas of law.  Mr.  Burns
served as a Public  Governor of the Alberta Stock Exchange from 1983 to 1998. He
has also served as a member of the Board of  Governors  of the Olympic  Trust of
Canada,  Strathcona-Tweedsmuir  School and is a member of the law  societies  of
Alberta and Upper  Canada and the Calgary and  Canadian  Bar  Associations.  Mr.
Burns  graduated for the University of Alberta with a Bachelor of Arts degree in
1963 and a law degree from Dalhousie Law School in 1966. He is a board member of
the following publicly held companies:  AdvantEDGE  International Inc., Canadian
88 Energy Corp.,  Crispin Resources Limited,  Fossil Bay Resources Ltd., Glacier
Ventures  International  Corporation  ,  Gulfstream  Resources  Canada  Limited,
International  Utility  Structures Inc., JAWS Technologies Inc., Milinx Business
Group,  Inc.,  PetroSantander  Inc.,  Superior  Propane Income Fund,  World Wide
Warranty Inc., and Xentel Interactive Inc.

James R. Medley, Chairman of the Audit Committee and Director

A Director  since December 1999, Mr. Medley is the founder and president of Laux
Medley Norris, Inc.,  investment advisors and business counselors since 1976. He
currently serves as Director, Treasurer and CFO for Leading-Edge Earth Products,
Inc., a publicly traded  development  stage company.  Mr. Medley has 25 years of
experience  in diverse  areas of financial  management  and  analysis,  managing
portfolios  including  precious metals,  securities and real estate. He develops
financial  plans and  strategies,  proformas,  financial  analysis and cash flow
forecasting for businesses,  advises companies on Securities Exchange Commission
reporting matters and produces financial proformas for start-up  companies.  Mr.
Medley  graduated  from  Naval  Air  Training  Command,  Maintenance  Management
Information Systems at Ohio University, University of Washington Graduate School
of Business Administration,  and Wentworth Institute as a Mechanical Engineer in
Machine  Design.  He spent  ten  years in the  United  States  Navy  becoming  a
Standardization  Officer in Naval Air advance  Training Command and as a Carrier
Aircraft Commander before starting Laux Medley Norris, Inc. in Seattle,  WA. Mr.
Medley is  President,  Investment  Advisor and  Director  of Leading  Edge Earth
Products,  and  Treasurer/Director  of Laux  Medley  Norris

Barry W.  Phillips, Director

Mr.  Phillips was employed  with the Canadian  Imperial Bank of Commerce both in
Canada  and  internationally,  from  1956 to 1977 and his  experience  included:
operations,  human resource management,  executive training,  corporate lending,
branch management,  corporate marketing and international  money management.  He
has been working at his own management  consulting firm since it was established
in  1977  in  Winnipeg,   Manitoba,   specializing  in  corporate   finance  and
reorganizations,  mergers  and  acquisitions,  succession  planning  and sale of
businesses  and the  implementation  of  financial  and  management  information
systems.  He is on the advisory board of five private  companies,  a director of
three  private  mining  companies  and has retired from the Boards of two public
companies. Mr. Phillips was a Director,  Treasurer, and CFO of the Company since
its inception in February 1999 until April 2000. He retired as Treasurer and CFO
in April 2000 but remains as a Director.  Mr. Phillips is a Director of Sterling
Resources,  Inc., Baker Lake Gold Mines,  Inc.,  Mirador Mining Ltd., and Global
Games, Ltd.

James W. Summers, Chief Financial Officer

Prior to joining  Milinx in April 2000, Mr. Summers career spanned than 28 years
of experience as a CEO, CFO, and director and senior officer of substantial real
estate  investment,  development,  and  construction  firms  and  was one of the
founders of two financial  institutions in the State of Washington.  In 1997, as
Executive Vice President of First Wellington Crown  Corporation (a subsidiary of
The Triple Five Group),  he established  the Washington  State office of a major
multinational  real  estate  development  firm.  Prior to that,  he was  General
Manager of the real estate operations of Sundquist Homes, Inc from 1993 to 1997.
Mr. Summers was President/Owner of Pennhill Corporation, a management consulting
and real estate  development  firm. From 1974 to 1990, he was Chairman,  CEO and
CFO of the largest residential builder/developer based in the Pacific Northwest.
He graduated  from the University of Scranton with dual majors in Accounting and
English,  and  studied  finance  at The  Stern  School of  Business  at New York
University.

Douglas R. Hicks, Executive Vice President of Business Development

Mr.  Hicks came to Milinx in July 2000  after two years as a  Regional  Business
Manager for iPlanet E-Commerce Solutions,  a Sun-Netscape Alliance. He handled a
broad portfolio of Internet  infrastructure and e-commerce applications software
and  services,  helping  Fortune  2000 and  well-funded  startup  firms  grow by
leveraging  the  Internet.  His  specialty is  addressing  the needs of business
through the enabling of innovative technology solutions and building markets for
technology-oriented  companies.  Before his  sojourn at iPlanet,  Mr.  Hicks was
Manager,  Western  Region at Rogers from 1996 to 1998.  From  1994-1996,  he was
Strategic Accounts Manager at AT&T. Clarence C. Cremer, Senior Vice President of
Information  Technology Mr. Cremer joined Milinx in June 2000 after an extensive
career in Information  Technology  management and  implementation.  From 1989 to
1998, he was the Regional Vice President of the Internet  consulting firm of LGS
Group,  Inc.  From 1998 to 2000, he was  President of C-Log  Business  Solutions
Inc., an independent consulting company in Winnipeg, Manitoba.

Edwin Mark, Senior Vice President, Legal and Corporate Counsel

Specializing  in corporate and  commercial  law, Mr. Mark came to Milinx in July
1999  after  seven  years with the law firm of Mair,  Jensen and Blair.  He also
brings with him experience as a co-founder of the Entrepreneurs  Business Group,
and has held the position of Legal Chair with the United Way (Kamloops, B.C.) as
well as  directorships  with the  University  College of the Cariboo Sports Task
Force and the Kamloops Foundation.

Jonathan Myers, Senior Vice President of Client Operations

In  addition  to his  Master's  Certificate  in Project  Management  from George
Washington  University,  Mr. Myers brings a wealth of experience  to Milinx.  He
joined  the  Company  in 1999 after 30 years  experience  with BC  Telecom  (now
Telus). In his 18 years there as a Regional and National Service Manager, he was
responsible  for the Western  Canadian Data Network of the Royal Bank  Financial
Group,  the  National  Network of the Hong Kong Bank  (HSBC),  and the Year 2000
conversion program for the Insurance Corporation of B.C.

Grenfell  Featherstone, Vice President of Intellectual Property

With an extensive academic background,  Mr. Featherstone taught English, History
of Ideas and Debating for 20 years before retiring in 1996. He has  considerable
experience  in academic  administration  and spent the years since his  teaching
career as a consultant specializing in Board/CEO policy,  strategic planning and
communications,  before joining Milinx in 1999.

Lance Drozda,  Vice President of Emerging  Technologies

Before joining Milinx Mr. Drozda worked for two years at
iPlanet E-Commerce  Solutions,  a Sun/Netscape  Alliance,  where he was a System
Engineer and post-sales  Account  Manager  specializing  in Internet  e-commerce
technologies. He was involved with selling and implementing iPlanet products and
services with telecommunications companies, Internet Service Providers and ASPs.
Prior to iPlanet , he spent four years with EDS  Systemhouse as a Senior Systems
Analyst   and   Project    Manager   for   multiple    initiatives,    including
two-and-three-tier client/server based applications.

Gary MacDonald, Vice President of Investor Relations

Gary  MacDonald  possesses an extensive  background in both the  securities  and
entertainment  industries,  with more than 12 years  experience  as a securities
trader on the Vancouver  and New York Stock  Exchanges and as a partner in Dimac
Capital  Corp.   (financings,   acquisitions   and  local  and  foreign   market
management/compliances). Since 1993, Mr. MacDonald has worked for, and currently
serves  on the  boards  of, a number  of online  companies,  while his  previous
investor  relations  experience  includes  senior  positions  with a  number  of
publicly  traded  companies.  He has also consulted  extensively in the areas of
financing,  investor,  corporate,  and exchange  relations,  and marketing.  Mr.
MacDonald has six years experience in the film and television  industries,  from
full  production of his own programs to executive  producing,  with more than 70
film and  television  productions  to his  credit.  He  received a  Bachelor  of
Commerce  Degree,  with an  economics  major,  from the  University  of  British
Columbia.

Mr.  MacDonald  is a  Director  of the  following  companies:  Authenticorp.com,
Boomerama.com,  Eye2buy.com,  World Best Buy.com, Valley High Ventures, Metallex
Ventures,  Sovereign Chief Ventures,  Consolidated  AGX Corp., and Dimac Capital
Corporation.

Rafeh Hulays, Vice President of Research and  Development/Advanced Services

Doctor Rafeh Hulays is the R&D/Advance Services Vice President,  responsible for
next generation  services and products.  He received his Ph.D. in Electrical and
Computer Engineering from the University of British Columbia. At the University,
Dr.  Hulays  had a  leading  role  in  the  Advanced  Communications  Technology
Satellite (ACTS)  propagation  experiment (A NASA-JPL-CRC  project).  Dr. Hulays
also worked as a prime  Research  Assistant on several  contracts  funded by the
Communications Research Center to study the effect of precipitation on broadband
wireless  communication  systems.  From  1995 to 1997 Dr.  Hulays  worked at PCS
Wireless, Inc. - initially as a Systems Design Engineer, and later as Technology
and Advanced R&D Manager.  He was involved in an  electronics  commerce  startup
(MediaLink  Communications  Limited)  from  1997 to 1999,  where he acted as the
Managing Director.  His responsibilities  also included business development and
project management. As a Program Manager at Elcombe Systems Limited (A Newbridge
networks  spin-off)  from 1999 until joining Milinx in June 2000, Dr. Hulays was
responsible for the overall development of the company's new generation product.
Dr. Hulays has nine scientific  papers published in Journals and conferences,  a
patent  application and his research was the basis of a Canadian  recommendation
to  the  International  Telecommunications  Union.

Rudi  Epp,  Director  of Web Development

Mr. Epp brings 25 years of varied experience in technical management in numerous
roles,  specializing in Applications  Development and  Applications  Management.
Before joining Milinx in February 2000, he spent 3 years at Information  Systems
Management  (ISM-BC),  where he worked as a Business Systems Analyst and Project
Manager for initiatives that included a web-based  Contract  Management  system.
Before his years at ISM-BC,  Mr. Epp worked at BC Telecom  (now Telus) from 1989
to 1995.  He has a Diploma  in  Computer  Programming  with a  Business  Systems
Option.

 James B. Maedel,  Manager of Human Resources

Prior to  joining  Milinx  in March  1999,  Mr.  Maedel  has 12 years of  senior
management  experience  specializing  in  human  resources,  operations,  sales,
business development,  and call center.. After graduating from the University of
Waterloo,  he spent 1 year  managing the Call Centre for Future  Shop,  handling
issues from over 100 stores  throughout Canada and the US. He spent 5 years as a
Regional Manager with Interactive  Media  Corporation,  during which time he was
responsible for the operation of 9 branch offices, primarily handling HR issues.
Before  coming to  Milinx,  Mr.  Maedel  spent 6 years at  Agency  Rent A Car in
various   business   development   roles  from  both  a  sales  and  operational
perspective.

Bill J. Bilic,

Prior to joining Milinx in October 2000,  Mr. Bilic was a Technical  Director at
Blast  Radius Inc.  since 1999..  He  specialized  in the  software  development
management,  software  architecture and deployment of e-business  solutions.  In
addition to establishing and maintaining  technical direction of the company, he
has been instrumental in designing and building global brands online presence to
enable their business and services over the Internet, such as Nintendo, Kenwood,
Nike,  etc.  Before Blast Radius,  Mr. Bilic was with United Nations until 1995,
Kellogg's  from 1995 to 1996,  NBTel from 1996 to 1998, and Irving Oil from 1998
to 1999.

Allan Wong, Manager of Infrastructure Applications

Mr.  Wong  joined  Milinx in July 2000 after two years with  iPlanet  E-Commerce
solutions,  a Sun/Netscape  Alliance.  He was a Senior  Consultant for Worldwide
Professional  Services and  specialized  in the  architecture  and deployment of
infrastructure and e-commerce  solutions.  He has helped global Internet Service
Providers,  telecommunications  companies and major financial enterprises enable
their business and services over the Internet. As a solution expert, he believes
the key to  infrastructure  deployment is the easy  integration  of software and
hardware.  His focus is on security,  reliability,  scalability  and efficiency.
Before  his stint at  iPlanet,  he worked at InfoNet  from 1994 to 1998.

Pamela Oram, Manager of the Client Sales and Contact Center

Ms. Orem has more than 20 years  experience  in  management  including  business
development,  operations, sales and marketing, customer service, call center and
help desk. As call center  manager for  Multiactive  Software from 1998 to 1999,
she presided over an eight-fold expansion of the center. As President of her own
consulting  firm from 1979  until  coming to Milinx in  September  2000,  Pamela
assisted  several small,  medium and large  companies  develop client  services,
inside sales, after-sales implementation and customer service.

David G. Libby, Group Controller

Prior to joining  Milinx in August 1999,  Mr. Libby was  Controller  of Surfwood
Supply Ltd. since 1995 with full responsibilities for all accounting matters and
the  audited  financial  statements.  He  implemented  a new  financial  control
software system including  inventory  control and detailed  tracking of services
and  rentals.  He is a graduate of the  University  of British  Columbia  with a
Bachelor of Commerce.

Eric.  B.  Westra,  Project  Manager and  Presales  Engineer

A 1995  graduate  in  Computer  Information  Systems  from  Okanagan  University
College, Mr. Westra's technical background includes working as a Systems Analyst
for BC Trade Development  Corporation and the Vancouver office of the BC Premier
from 1995 to 1996,  as well as Network  Support  Analyst  for a leading  network
solutions  provider from 1996 to 1997. In 1997, he returned to work in the media
as a journalist and news anchor until joining  Milinx in 1999. His  broadcasting
experience  includes  radio and  television  hosting,  program  direction,  news
anchoring,  and acting as  corporate  spokesperson  for various  clients  over a
15-year period. (b) Beneficial Ownership Reporting Compliance

Maynard Dokken,  President,  Forms 3 and 5, one transaction  filed late.
Mikiko Fujisawa, Corporate Secretary, Forms 3 and 5, one transaction filed late.
James Medley,  Director,  Forms 3 and 5, one transaction  filed late.
Barry Phillips, Director,  Forms 3 and 5, one transaction  filed late.
James W. Summers,  Chief Financial  Officer,  Forms 3 and 5, one transaction
     filed late.
Edwin Mark, Vice President & Corporate Counsel,  Forms 3 and 5, one
     transaction filed late.
Clare Cremer,  Forms 3 and 5, one transaction  filed late.
Doug Hicks,  Forms 3 and 5, one transaction filed late.
Max W. Tomaszewski, Form 3.

all persons  above are now  believed by the Company to be current as of the date
of this filing.





<PAGE>
Item 11. Executive Compensation.

(b)      Summary Compensation Table
<TABLE>
<CAPTION>

                               Annual Compensation
                                   Fiscal                                                  Securities
                                     Year                                Other Annual      Underlying       All Other
  Name and Principal Position                 Salary ($)    Bonus ($)    Compensation       Options        Compensation
---------------------------------------------------------------------------------------------------------------------------
<S>                                  <C>      <C>          <C>           <C>              <C>             <C>
Maynard L. Dokken                    2000     $ 118,367
President, CEO, and Director         1999     $  29,554
Douglas A. Hicks                     2000                   $  17,006
Executive Vice President (1)
James W. Summers                     2000                                $    21,400          39,000   (2) 39,000 Shares
Chief Financial Officer (2)                                                                             of common stock
Clarence C. Cremer                   2000     $     6,216                $    21,839          80,000
Senior Vice President(3)
Mikiko Fujisawa                      2000     $    85,714
Secretary, Treasurer, and Director   1999     $    19,702
Edwin Mark                           2000     $    73,376                                               (4)39,000 shares
Senior Vice President(4)                                                                                of common stock

(d)  Aggregated Option/SAR Exercises and Fiscal Year-End Option/SAR Value Table.
</TABLE>

                     OPTIONS GRANTED IN THE LAST FISCAL YEAR

In the fiscal year ended June  30,2000,  the Company  granted  options under the
1997-9 Option Plan or Resolutions of the Board of Directors  totaling  4,905,250
common shares of Milinx stock.

<TABLE>
<CAPTION>

                                                                 % of Total Options
                                                                     Granted to
                                         # of Securities            Employees in          Exercise          Expiration
              Name                     Underlying Options            Fiscal Year            Price              Date
----------------------------------  -------------------------- ----------------------- ---------------  -------------------
<S>                                 <C>                         <C>                    <C>              <C>

Maynard L. Dokken                              250000                    5%                     $2.00        1/31/02

Douglas A. Hicks                               108000                    2%                     $2.00        5/31/04
Douglas A. Hicks                               650000                   13%                     $3.00        6/30/03
James W. Summers (1)                           100000                    2%                     $4.50        12/31/01
Clarence C. Cremer                             150000                    3%                     $2.00        5/31/03
Clarence C. Cremer                              10000                    0%                     $2.00        5/31/02
Mikiko Fujisawa                                150000                    3%                     $2.00        1/31/02
Edwin Mark                                      50000                    1%                     $2.00        5/31/01
                                               200000                    4%                    $0.001        5/31/05
</TABLE>

TOTAL EMPLOYEE OPTIONS ISSUED IN FISCAL 2000: 4,905,250
<PAGE>

Closing Share Price At October 12,2000: 4.75

(1)  James  W.  Summers  is  the  Beneficiary  of a  Trust  administered  by  an
Independent trustee.

(g)  Compensation of Directors.

     The Company has three outside  Directors,  Barry W. Phillips,  and James R.
     Medley,  and  John  S.  Burns.  The  compensation  for  each  is  different
     reflecting  tenure  with  Milinx,  prior  services  to us or the  time  the
     Director  has been able to devote in  advising  Management  on its  ongoing
     operations.

     For his  services to Milinx as a  consultant  in the fiscal year ended June
     30,2000,  Mr. Phillips was paid $38,682.  No cash payments to him since his
     retirement  as CFO and  Treasurer  in April 2000.  He has 70,000  shares of
     common stock,  250,000  Employee  Options at $2.00,  and 500,000 Internal A
     warrants exchangeable at $4.00 per share and expiring on January 31,2001.

     Mr.  Medley is paid  $3,000  monthly  for his advice to the Company and has
     Warrants  for 180,000  fully  vested  shares at a price of $4.50 per common
     share expiring on January  31,2002.  Mr. Burns is to be granted Warrants on
     180,000  shares  of  common  stock  at the  market  price  on date of grant
     expiring on January 31,2002. During the fiscal year ended June 30,2000, the
     law firm of which Mr.  Burns is a partner  was paid  $70,734  for  services
     rendered the Company.

(h)  Employment  Contracts and  Termination of Employment and  Change-in-Control
     Arrangements.  We have entered into employment  agreements with each of our
     named  executive  officers.  Each  agreement  has a fixed  base  salary and
     bonuses or stock grants that were approved by our Board of Directors. Among
     other  terms  and  conditions,  each  employee  agrees  that  title  to all
     intellectual property while in the employ of Milinx is the sole property of
     the Company. There are restrictive covenants in the agreements ranging from
     six months to two years during which time the employee  cannot  solicit any
     business from any present or former  customers of the Company,  solicit the
     services  of anyone in the  employ of  Milinx,  or  compete  with us in any
     respect.

     Our Employment  Agreements with our Executive Officers can be summarized as
     follows:

     Maynard L. Dokken---A new employment  agreement is being negotiated between
     Mr.  Dokken and the Board of  Directors.  The terms and  conditions of this
     agreement will be fully disclosed in our next regular  filing.  His present
     salary is $118,367 per annum.

     Douglas A.  Hicks---A  signing  bonus of $17,006 plus an annual  salary and
     monthly  cash  bonuses  aggregating  $316,898.  An option to purchase up to
     108,000  shares of common stock at $2.00 per share vesting  equally over 36
     months with an  expiration  of May 31,2004.  These shares will  continue to
     vest  whether or not he is an employee of Milinx.  An option to purchase up
     to 650,000 shares of common stock at a price of $3.00 vesting  quarterly in
     12 equal installments  commencing July 1,2000. James W. Summers---An annual
     salary of $192,000  plus 3,250  shares of common  stock at par value for 12
     months commencing June 1,2000. Also,

     Mr.  Summers  is the  beneficiary  of a Support  Trust  administered  by an
     Independent  Trustee  with an option to  purchase  up to  100,000 of Milinx
     common shares at a price of $4.50 vesting  quarterly in equal  installments
     over 6 quarters.

     Clarence C.  Cremer---An  annual  salary of  $146,041.  He has an option to
     purchase up to 150,000 shares of common stock at a price of $2.00 per share
     vesting  quarterly in 12 equal  installments  and an  additional  option to
     purchase up to 10,000  common  shares at $2.00 per share  expiring  May 31,
     2002.

     Mikiko  Fujisawa---A new employment  agreement is being negotiated  between
     Ms.  Fujisawa and the Board of Directors.  The terms and conditions of this
     agreement will be fully disclosed in our next regular  filing.  Her present
     salary is $85,714 per annum. Edwin Mark---An annual salary of $112,245. Mr.
     Mark also has an option to  purchase  up to 50,000  common  shares  vesting
     equally over 4 quarters through June 1,2001 and an option to purchase up to
     200,000  shares at a price of $.001 per share  through  March 31,2005 which
     will fully vested as of March 31,2001.

(i)  Additional  Information with Respect to Compensation  Committee  Interlocks
     and Insider  Participation  in Compensation  Decisions.  At time of filing,
     Milinx Business Group, Inc. has not formed a compensation committee.  Until
     such a committee  can be formed,  the duties  traditionally  considered  to
     belong to the  compensation  committee  have  been  undertaken  by  Maynard
     Dokken,  President and CEO, and James W. Summers,  Chief Financial Officer,
     neither of whom sit on any compensation committee.

(k)  Performance Graph



<PAGE>


    CARIO PERFORMANCE GRAPH
       [GRAPHIC OMITTED]



     USINTERNETWORKING PERFORMANCE GRAPH
             [GRAPHIC OMITTED]




<PAGE>





    FUTURELINK PERFORMANCE GRAPH
        [GRAPHIC OMITTED]





<PAGE>
Item 12. Security Ownership of Certain Beneficial Owners and Management.

(a)      Beneficial Ownership

The following table sets forth information regarding the beneficial ownership of
our common stock as of September 30, 2000 for the following:

o    each person who is known to us to be the  beneficial  owner of more than 5%
     of the outstanding common stock;
o    each of our Directors;
o    each of our named Executive Officers;
o    all of our Directors and Executive Officers as a group.

Shares of common  stock that a person has the right to  acquire  under  options,
warrants or other  arrangements  within 60 days of September 30, 2000 are deemed
outstanding for purposes of computing the percentage ownership of the person who
has the right to acquire the shares but are not deemed outstanding for computing
the  percentage  ownership  of any other  person.  Except as provided  for under
applicable  community  property  laws or as  indicated  in the  footnotes to the
table,  each  stockholder  identified  in the table  possesses  sole  voting and
investment   power  with  respect  to  all  shares  of  common  stock  shown  as
beneficially owned by that stockholder.


The number and percentage of shares  beneficially  owned are based on 16,600,644
shares of common stock outstanding as of September 30, 2000.


Beneficial  ownership is determined in general, as a person who has voting power
or investment  power with respect to  securities  and is treated as a beneficial
owner of those securities.


Unless otherwise indicated, addresses for the beneficial owners of 5% or more of
the Company's  voting  securities  are in care of the  registrant at Suite 3827,
1001 Fourth Avenue, Seattle, Washington, 98154.
<TABLE>
<CAPTION>

                              Name and Address of                     Amount and Nature of             Percent of
Title of Class                 Beneficial Owner                   Beneficial Ownership (1)(2)          Class (3)
---------------    ------------------------------------------    -------------------------------    -----------------
<S>                <C>                                            <C>                               <C>
Common             Maynard Dokken                                           8,250,000       (4)           34%
Common             Mikiko Fujisawa                                          3,600,000       (5)           18%
Common             Dr. Bruce Butcher                                          913,989       (6)            5%
Common             Credit Assure International Inc.                         2.300,000       (7)           12%
Common             Millennium Three Holdings Ltd.                           1,158,750       (8)            7%
Common             Trans Research International Ltd.                          935,250       (9)            6%
Common             North American Funding Limited                             920,625      (10)            6%
Common             Bountiful Prosperity Limited                               409,342      (11)            2%
<PAGE>
<FN>

Notes:

(1)  Includes Warrants, Options and Preferred as converted to common.
(2)  Preferred  shares Series A vote two times the common shares into which they
     may be converted on all matters.
(3)  Based on 16,600,644  common shares.  Where beneficial  shares are included,
     beneficial shares are added to the common to calculate the % of class.
(4)  Maynard Dokken owns 2,250,000  Series A Preferred shares and 300,000 common
     shares,  and is married to Mikiko  Fujisawa;  and he controls Credit Assure
     International  Ltd, which owns 750,000 Series A Preferred shares and 50,000
     common shares.  He also has 400,000 1999 Internal B warrants,  exchangeable
     at $6.00 per share for 400,000  Series A Preferred  shares.  Shares include
     600,000  preferred  series A  shares  in Trust  for Ms.  Fujisawa.  All but
     300,000 shares are beneficially owned.
(5)  Mikiko  Fujisawa owns 850,000 Series A Preferred  shares and 300,000 common
     shares and is married to Maynard  Dokken;  and she has a minor  interest in
     Credit Assure  International  Ltd.  Mikiko also has 250,000 1999 Internal B
     warrants,  exchangeable  at $6.00 per share for 250,000  Series A Preferred
     shares;  all but 300,000  shares are  beneficially  owned.  Shares  include
     600,000 preferred series A shares held in Trust for Mr. Dokken.
(6)  Dr.  Butcher owns 75,000 Series A Preferred  Shares,  88,989 common shares,
     500,000 1999 Internal A Warrants @ $/share, expiring 1/31/2001, and 100,000
     2000  Warrants @ approx.  $4.7/share,  expiring  6/30/2002.  All but 88,989
     shares are beneficially owned.
(7)  Credit Assure International Ltd. owns 750,000 Preferred A shares and 50,000
     common  shares.  All but  50,000  shares  are  beneficially  owned.  May be
     considered beneficially owned by Maynard Dokken and Mikiko Fujisawa.
(8)  Millennium  Three  Holdings  Ltd. owns 386,250 1999  International  Class A
     Warrants and 772,500 common shares.  386,250 shares are beneficially owned.
     May be  affiliate  of  other  shareholders  (10-11  below)  but  unable  to
     determine if affiliated.
(9)  Trans  Research  International  Ltd. owns 620,000 common shares and 147,500
     1999 International Class A Warrants, and 167,750 Class D Warrants. See Note
     (9). 315,250 shares are beneficially owned.
(10) North  American  Funding  Ltd.  owns  306,875  1999  International  Class A
     Warrants and 613,750 common shares. See note (9) above.  306,875 shares are
     beneficially owned.
(11) Bountiful  Prosperity  has 409,342 Class E Warrants  convertible to 409,342
     common shares at $2.00 per share.  All are  beneficially  owned.  Affiliate
     status is unknown.

(b)      Management Ownership.
</FN>
</TABLE>

Unless otherwise indicated, addresses for Management owning the Company's voting
securities  are in care of the  registrant  at Suite 3827,  1001 Fourth  Avenue,
Seattle, Washington, 98154.
<PAGE>

<TABLE>
<CAPTION>

                                                                         Amount and Nature of
                                Name and Address of                      Beneficial Ownership          Percent of
Title of Class                   Beneficial Owner                               (1)(2)                  Class (3)
---------------    ----------------------------------------------     ---------------------------    ----------------
<S>                <C>                                                 <C>                            <C>
Common             Maynard Dokken                                           See (a) above                  34%
Common             Mikiko Fujisawa                                          See (a) above                  18%
Common             Douglas Martin                                                 180,000    (1)
Common             Barry W. Phillips                                              720,000    (2)           4%
Common             John Burns                                                                (3)           --
Common             James Medley                                                   180,000    (4)           01%
Common             James W. Summers                                               139,000    (5)           01%
Common             Doug Hicks                                                     758,000    (6)           04%
Common             Clare Cremer                                                   160,000    (7)           01%
Common             Edwin Mark                                                     289,000    (8)           02%
Common             All Officers and Directors as a Group                       14,276,000   (10)           47%
<FN>

Notes:

(1)      Mr.  Martin is a Director  nominee and has not accepted the position as
         of October 12, 2000. All would be beneficially  owned,  and exercisable
         as warrant for a period of three years from  issuance.  Exercise  price
         approximately $4.50 per share.
(2)      Barry Phillips has 70,000 common shares,  250,000  Employee  Options at
         $2.00 per share,  and  400,000  1999  Internal A Warrants  at $4.00 per
         share,  expiring  1/31/2001.  All but 70,000  shares  are  beneficially
         owned.
(3)      Mr. Burns has not yet been awarded Warrants, but is expected to be
         awarded Warrants on the same basis as
         Mr. Martin.  Not included in total.
(4)      Mr. Medley has Warrants at $4.50 per share expiring January 1, 2001.
         All are beneficially owned. Warrants have a cashless exercise feature.
(5)      Mr.  Summer  has  100,000  Warrants  vesting  equally  over 18  months,
         cashless or exercisable  under Form S-8 at $4.50 per share,  and 39,000
         common shares  awarded to be registered  under Form S-8, held in escrow
         and  released  ratably over one year.  Common  Shares have not yet been
         issued. All but 39,000 shares are beneficially owned.
(6)      Mr. Hicks has 108,000 options at $2.00 per share, and 650,000 options
         at $3.00 per share, vesting over time. All are beneficially owned.
(7)      Mr.Cremer has 10,000 options at $2.00 per share expiring May 31, 2002,
         and 150,000 options at $2.00 per share expiring May 31, 2005.  All
         shares are beneficially owned.
(8)      Mr.  Mark has  200,000  employee  options  exercisable  over  time at a
         nominal amount,  and 50,000 options at $2.00 per share expiring May 31,
         2002; he also has 39,000 shares  awarded under S-8  Registration  which
         are to be held in escrow and released  ratably  over one year.  None of
         the common  shares  have been  issued.  All but the  39,000  shares are
         beneficially owned.
(9)      Totals are based on those listed above.
<PAGE>

(10)     Does not include Credit Assure shares which is an affiliate of Mr.
         Dokken and Ms Fujisawa
</FN>
</TABLE>

(c)      Changes in Control of Registrant

There are no arrangements that would result in a change of control.



<PAGE>


Item 13. Certain Relationships and Related Transactions.


The Company's majority stockholder and President has controlling interest in the
following  companies:  Milinx Marketing Group,  Inc.  (Texas),  Milinx Marketing
Group, Inc. (British  Columbia),  Milinx Management  Corporation,  Credit Assure
International, Inc., and Assured Card Corporation (currently inactive).


Effective April 1, 1999, Milinx Marketing Group,  Inc.  (British  Columbia) sold
all of its  tangible  and  intangible  assets to Milinx - BC,  in  exchange  for
$96,948 (CND) or approximately  $65,900 (US) promissory note that bears interest
at 10% per annum.  The full amount was repaid to Milinx Marketing Group prior to
June 30, 2000.


On February 12, 1999,  the Company  entered  into a  management  agreement  with
Milinx  Management  Corporation  ("Milinx  Management").  Under the terms of the
agreement  Milinx  Management  was to  provide  management,  administrative  and
marketing  services  to the Company in  consideration  for payment of all of the
associated  expenses to be  incurred by Milinx  Management  in  connection  with
providing  the  services,   including  personnel  costs.  In  addition,   Milinx
Management  was  entitled to a  management  fee equal to fifteen  percent of the
expenses to be billed to the Company.  Before this  agreement was  terminated on
April 1, 1999, the Company received  services from Milinx  Management,  totaling
approximately  $44,800.  By June 30,  2000,  the Company  paid all but $3,586 of
these fees. The balance bears no interest and is due on demand.


On October  15,  1999 the Company  acquired  substantially  all assets of Milinx
International, Inc. for consideration of 375,000 of the Company's common shares.
Due to unavailability of the information related to the cost of assets acquired,
the Company  valued  shares  exchanged  based on the present value of the future
payments due under the original license agreement (see note E). The value of the
consideration  paid  and the  unamortized  book  value of the  original  license
agreement were written off at the time of acquisition.


On October 15, 1999,  Credit Assure  International,  Inc. received 50,000 common
shares from Milinx  Business  Group in exchange  for  intellectual  property and
trademarks.  Due  to  unavailability  of the  cost  information  related  to the
intangibles acquired,  the Company valued transaction using estimated fair value
of the shares exchanged of $25,000.  Acquisition costs were immediately  written
off as an expense.


During the year ended June 30, 2000,  Milinx - BC also incurred various expenses
on behalf of Milinx Marketing Group, Inc. (Milinx  Marketing)  totaling $82,644.
At June 30, 2000,  the entire  balance was recorded as a receivable  from Milinx
Marketing.


During the year ended June 30, 2000,  the Company  entered into a management and
financial consulting services agreement with a company controlled by a director.
The  agreement  expired  March  31,  2000 and  required  up to  $1,200 in weekly
payments for services  rendered by this director.  The Company  incurred $48,800
under this agreement during the year ended June 30, 2000. The entire balance was
paid in full prior to June 30, 2000.
<PAGE>

Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K.

(k)      List the following documents filed as a part of the report:
<TABLE>
<CAPTION>

   Exhibit
   Number                                                    Description
--------------    ---------------------------------------------------------------------------------------------------

<S>              <C>

     2.1          Stock exchange agreement between Forestay and Milinx Business Group, Inc.

     3.1          Articles of incorporation of Milinx Business Group, Inc.

     3.2          Corporate by-laws of Milinx Business Group, Inc.

     3.3          Instruments defining the Rights of Security Holders

    10.1          Lease agreement between 356535 B.C. LTD and Milinx Marketing Group, Inc.

    10.2          Lease agreement between 356535 B.C. LTD and Milinx Marketing Group, Inc.

    10.3          Lease agreement between Chung Ping Cheng and Milinx Marketing Group, Inc.

    10.4          Lease agreement between Great Northwest Inc. and Milinx Business Services, Inc.

    10.5          Lease agreement between 1045 Howe Street ??? Inc. .? Ltd.? and Milinx Business Services, Inc.

    10.6          Addendum to lease agreement between 1045 Howe Street ??? Inc.? Ltd.? and Milinx Business
                  Services, Inc.

    10.7          Offer to sublease between Bema Gold Corp. and Milinx Business Services, Inc.  (To Be Added By Amendment)

    10.8          Offer to lease between Bentall Properties and Milinx Business Services, Inc. (To Be Added By Amendment)

    10.9          Schedule B - attachment to 10.8 above - Three Bentall Centre Sample Lease (To Be Added By Amendment)

    10.10         Agreement between AOL Inc. and Milinx Business Services, Inc. (To Be Added By Amendment)

    10.11         Private Label Partnership Agreement between Tornado, Inc. and Milinx Business Services, Inc.
                  (To Be Added By Amendment)

    10.12         Executive Services Agreement between Milinx Business Services Inc. and Clare Cremer (To Be Added By Amendment)

    10.13         Executive Services Agreement between Milinx Business Services Inc. and James W. Summers (To Be Added By Amendment)

    10.14         Executive Services Agreement between Milinx Business Services Inc. and Doug Hicks (To Be Added By Amendment)

    10.15         Employment Agreement between Milinx Business Services Inc. and Edwin Mark (To Be Added By Amendment)

    10.16         Compensatory Contract (Options) - Maynard Dokken (To Be Added By Amendment)

    10.17         Compensatory Contract (Options) - Mikiko Fujisawa (To Be Added By Amendment)

    10.18         Compensatory Contract (Options) - Doug Hicks(To Be Added By Amendment)

    10.19         Compensatory Contract (Options) - Edwin Mark (To Be Added By Amendment)

    10.20         Compensatory Contract (Options) - Barry Phillips (To Be Added By Amendment)

    10.21         Compensatory Contract (Options) - James W. Summers (To Be Added By Amendment)

    10.22         Compensatory Contract (Options) - Clare Cremer (To Be Added By Amendment)

    10.23         Compensatory Contract (Warrants) - Bruce Butcher (To Be Added By Amendment)

    10.24         Compensatory Contract (Warrants) - James Medley (To Be Added By Amendment)

    10.25         Compensatory Contract (Warrants) - Maynard Dokken (To Be Added By Amendment)

    10.26         Compensatory Contract (Warrants) - Mikiko Fujisawa (To Be Added By Amendment)

    10.27         Compensatory Contract (Warrants) - TPG Capital Corporation (To Be Added By Amendment)

    10.28         Compensatory Contract (Warrants) - Barry Phillips (To Be Added By Amendment)

    10.30         Compensatory Contract (Warrants) - Frank Birkholz (To Be Added By Amendment)

    10.31         Compensatory Contract (Warrants) - Jim Summers (To Be Added By Amendment)

    21.1          Subsidiary List(To Be Added By Amendment)

    23.1          Consent by Grant Thornton(To Be Added By Amendment)

    27.1          Financial Data Schedule
</TABLE>

Item 15. Signatures

Pursuant to the  requirements of Section 13 or 15(d) of the Securities  Exchange
Act of 1934,  the registrant has duly caused this annual report 10K to be signed
on its behalf by the  undersigned,  thereunto  duly  authorized on the 12 day of
October, 2000.
                               Milinx Business Group, Inc.

                             By:                       /s/  Maynard Dokken
                                   --------------------------------------
                                                           Maynard Dokken,
                                   President and Chief Executive Officer

Pursuant to the  requirements  of the Securities  Act of 1934, as amended,  this
Annual Report on Form 10-K has been signed below by the following persons in the
capacities and on the dates indicated.

                                                           /s/  Maynard Dokken
                                                               Maynard Dokken,
                                         President and Chief Executive Officer
                                                              October 12, 2000


                                                          /s/  Mikiko Fujisawa
                                                              Mikiko Fujisawa,
                                  Corporate Secretary, Treasurer and Director
                                                              October 12, 2000


                                                       /s/         Jim Summers
                                                                  Jim Summers,
                                                       Chief Financial Officer
                                                              October 12, 2000


                                                     /s/            Dave Libby
                                                                   Dave Libby,
                                                                    Controller
                                                              October 12, 2000

                                                       /s/      Barry Phillips
                                                               Barry Phillips,
                                                                      Director
                                                              October 12, 2000


                                                          /s/     James Medley
                                                                 James Medley,
                                                                      Director
                                                              October 12, 2000
<PAGE>








             Consolidated Financial Statements and Report of
                Independent Certified Public Accountants

              MILINX BUSINESS GROUP, INC. AND SUBSIDIARIES

                         June 30, 2000 and 1999



<PAGE>





                                 C O N T E N T S



                                                                   Page


REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS                  3


FINANCIAL STATEMENTS

         CONSOLIDATED BALANCE SHEETS                                4

         CONSOLIDATED STATEMENTS OF OPERATIONS                      5

         CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY             6

         CONSOLIDATED STATEMENTS OF CASH FLOWS                      8

         NOTES TO CONSOLIDATED FINANCIAL STATEMENTS                 9



<PAGE>






               Report of Independent Certified Public Accountants





Board of Directors and Stockholders
Milinx Business Group, Inc.

We have audited the accompanying  consolidated  balance sheet of Milinx Business
Group, Inc. (a Delaware  corporation) and its Subsidiaries,  (the Company) as of
June 30, 2000 and 1999 and the related  consolidated  statements of  operations,
stockholders'  equity,  and cash flows for the year ended June 30,  2000 and the
six months ended June 30, 1999. These consolidated  financial statements are the
responsibility of the Company's management.  Our responsibility is to express an
opinion on these financial statements based on our audits.

We conducted our audits in accordance with auditing standards generally accepted
in the  United  States of  America.  Those  standards  require  that we plan and
perform the audit to obtain  reasonable  assurance  about  whether the financial
statements are free of material misstatement.  An audit includes examining, on a
test basis,  evidence  supporting  the amounts and  disclosures in the financial
statements.  An audit also includes assessing the accounting principles used and
significant  estimates  made by  management,  as well as evaluating  the overall
financial  statement  presentation.   We  believe  that  our  audits  provide  a
reasonable basis for our opinion.

In our opinion,  the financial  statements  referred to above present fairly, in
all material  respects,  the consolidated  financial position of Milinx Business
Group, Inc. and its Subsidiaries,  as of June 30, 2000 and 1999, and the results
of their  consolidated  operations  and their cash flows for the year ended June
30, 2000 and the six months ended June 30, 1999, in conformity  with  accounting
principles generally accepted in the United States of America.

GRANT THORNTON LLP

Seattle, Washington
August 29, 2000


                                       3
<PAGE>
<TABLE>
<CAPTION>


                                          Milinx Business Group, Inc. and Subsidiaries

                                                  CONSOLIDATED BALANCE SHEETS



                                                             ASSETS

                                                                                         June 30,             June 30,
                                                                                           2000                 1999
                                                                                       -------------      ---------------
<S>                                                                                    <C>                <C>

CURRENT ASSETS
    Cash                                                                               $  2,162,430       $        4,522
    Receivables
        Trade                                                                                 9,334               17,151
        Subscriptions                                                                       323,721                    -
        Goods and services tax                                                              327,149                    -
        Employee and stockholders                                                            20,692                    -
        Other                                                                                     -               50,675
                                                                                       -------------      ---------------
           Total receivables                                                                680,896               67,826

       Due from Milinx Marketing Group                                                       82,644                    -

       Security deposits                                                                    209,362                    -
       Prepaid rent and other                                                                43,549               34,873
                                                                                       -------------      ---------------

           Total current assets                                                           3,178,881              107,221

PROPERTY AND EQUIPMENT-AT COST, net of accumulated depreciation                           3,572,168              714,232

OTHER ASSETS
    Licenses                                                                              2,036,985              261,250
       Capital lease deposits                                                               203,915                    -
    Security deposits                                                                         1,300               24,834
                                                                                       -------------      ---------------

                                                                                       $  8,993,249       $    1,107,537
                                                                                       =============      ===============

                                              LIABILITIES AND STOCKHOLDERS' EQUITY

CURRENT LIABILITIES
    Accounts payable                                                                   $    981,233       $      391,412
    Accrued liabilities                                                                     279,758              105,079
    Due to Milinx Marketing Group, Inc.                                                           -               25,813
    Due to Milinx Management Corporation                                                      3,586                3,586
    Due to Milinx International, Inc. - current portion                                           -               25,000
    Capital lease obligations - current portion                                             536,061                   -
    Customer deposits                                                                         2,529                   -
                                                                                        ------------      ---------------

           Total current liabilities                                                      1,803,167              550,890

CAPITAL LEASE OBLIGATIONS, net of current portion                                           927,808                    -

DUE TO MILINX INTERNATIONAL, INC., less current portion                                           -              200,000

COMMITMENTS                                                                                       -                    -

STOCKHOLDERS' EQUITY
    Series A 10% non-cumulative, voting convertible preferred stock, liquidation              3,675                3,675
        value of $1,176,000
    Series B 10% non-cumulative, voting convertible preferred stock, liquidation              1,681                    -
        value of $3,362,500
    Series C 10% non-cumulative, voting convertible preferred stock, liquidation              2,207                    -
        value of $2,207,412
    Common stock                                                                              9,671                8,470
    Additional paid in capital                                                           14,908,291            1,209,275
    Unearned compensation                                                                (1,102,626)                   -
    Accumulated deficit                                                                  (7,480,702)            (844,250)
    Accumulated other comprehensive deficit                                                 (79,923)             (20,523)

                                                                                        ------------      ---------------
                                                                                          6,262,274              356,647
                                                                                        ------------      ---------------


                                                                                       $  8,993,249       $    1,107,537
                                                                                        ============      ===============
</TABLE>

The accompanying notes are an integral part of these statements.

                                       4
<PAGE>
<TABLE>
<CAPTION>


                            Milinx Business Group, Inc. and Subsidiaries

                               CONSOLIDATED STATEMENTS OF OPERATIONS




                                                             Year ended              Six months ended
                                                            June 30, 2000              June 30, 1999
                                                          ------------------      ----------------------
<S>                                                       <C>                     <C>
Net sales                                                 $       197,193         $              43,424

Cost of sales                                                     365,449                        48,112
                                                          ------------------      ----------------------

Gross profit (loss)                                              (168,256)                       (4,688)
                                                          ------------------      ----------------------

Selling, general and administrative expenses                    6,442,914                       839,192

Other expenses (income)
    Interest                                                       31,515                             -
    Miscellaneous                                                  (6,233)                          370
                                                          ------------------      ----------------------
                                                                   25,282                           370

Net loss                                                  $    (6,636,452)        $            (844,250)
                                                          ==================      ======================

Net loss per common share - basic and diluted             $        (0.74)         $               (0.32)
                                                          ==================      ======================

</TABLE>









The accompanying notes are an integral part of these statements.

                                       5
<PAGE>
<TABLE>
<CAPTION>


                                          Milinx Business Group, Inc. and Subsidiaries

                                         CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY

                            For the six months ended June 30, 1999 and the year ended June 30, 2000

                                                                                           Common Stock       Additional
                         Series A Preferred   Series B Preferred   Series C Preferred                          Paid in
                               Stock                Stock               Stock                                  Capital

                         Shares     Amount     Shares    Amount     Shares      Amount     Shares    Amount
<S>                     <C>        <C>        <C>       <C>        <C>         <C>       <C>        <C>       <C>
 Balance at January 1,      -      $     -         -    $   -           -      $              -     $    -    $     -
         1999

  Issuance of common
 stock through series
 of private placements                                                                   8,470,000  $  8,470     592,825

 Issuance of Series A
  preferred stock to
  officers and legal
        counsel         2,925,000     2,925

 Issuance of Series A
    preferred stock
  through exercise of
   stock options by                                                                                               26,250
     Credit Assure      750,000         750

 Issuance of Internal
    Warrants A to a
  director and legal                                                                                                 200
        counsel

  Issuance of Class A
   units to various                                                                                              590,000
       investors

   Foreign currency
translation adjustment

 Net loss for the six
 months ended June 30,
         1999
                        ----------  -------- ---------  --------  ---------  --------  -----------  -------- -----------

Balance at June 30,     3,675,000      3,675      -          -         -          -      8,470,000     8,470   1,209,275
1999

  Issuance of common
    stock in asset
 purchase transactions      -          -          -          -         -          -        425,000       425     174,700

  Issuance of common
   stock as part of
  reverse acquisition       -          -          -          -         -          -        250,000       250         250

  Issuance of Class A
   units to various         -          -          -          -         -          -          -          -      2,772,500
       investors


  Issuance of Class D
   units to various         -          -          -          -         -          -          -          -      9,097,662
       investors

 Issuance of Series C
  preferred stock and
  Class D Warrants to
   various investors
 through a conversion       -          -          -          -     2,624,412      2,624       -          -             1
   of Class D units

  Issuance of common
  stock to investors
 through a conversion
 of Series C preferred      -          -          -          -      (417,000)      (417)   417,000       417      -

  Issuance of common
 stock to an investor
 through a conversion
  of Class D warrants       -          -          -          -         -          -         37,500        38      74,962

 Issuance of Series B
  preferred stock and
 1999 International A
  warrants to various
  investors through a       -          -      1,681,250    1,681      -           -          -          -              1
 conversion of Class A
         Units

  Issuance of common
  stock to employees        -          -          -          -         -          -         71,000        71      35,479

 Grant of warrants for
    legal services          -          -          -          -         -          -          -          -        122,000

Grant of stock options
     to employees           -          -          -          -         -          -          -          -      1,421,461

     Current year
    amortization of         -          -          -          -         -          -          -          -         -
 deferred compensation

 Change in cumulative
translation adjustment      -          -          -          -         -          -          -          -         -

   Net loss for year
  ended June 30, 2000       -          -          -          -         -          -          -          -         -
                        ----------  -------- ---------  --------  ---------    --------  ---------  -------- -----------
  Balance at June 30,
         2000           3,675,000  $   3,675  1,681,250 $  1,681   2,207,412   $  2,207  9,670,500  $  9,671  $14,908,291
                        ========== =========  ========= ========  ==========   ========  =========  ========  ===========
</TABLE>

The accompanying notes are an integral part of this statement.

                  Milinx Business Group, Inc. and Subsidiaries

                 CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY

     For the six months ended June 30, 1999 and the year ended June 30, 2000

                                  (CONTINUED)
<TABLE>
<CAPTION>

                                Unearned             Accumulated         Accumulated          Total
                                Compensation           Deficit             Other
                                                                         Comprehensive
                                                                           Deficit
<S>                        <C>                     <C>               <C>                     <C>


Balance at Jan. 1, 1999     $         -            $      -                $       -         $        -

Issuance of common
stock through series
of private placements                                                                            601,295

Issuance of Series A
preferred stock to
officers and legal
counsel                                                                                            2,925

Issuance of Series A
Preferred stock through
Exercise of stock options
By Credit Assure                                                                                  27,000


Issuance of Internal
Warrants A to a
director and legal
counsel                                                                                              200

Issuance of Class A
units to various
investors                                                                                        590,000

Foreign currency
Translation adjustment                                                          (20,523)         (20,523)



Net loss for the
Six months ended
June 30, 1999                                            (844,250)                              (844,250)
                            -----------------      --------------            -----------     ------------
Balance at
June 30, 1999                                            (844,250)              (20,52)          356,647


Issuance of common
Stock in asset
Purchase transactions                  -                     -                      -            175,125

Issuance of common
Stock as part of
Reverse acquisition                    -                     -                      -                500

Issuance of Class A
Units to various
Investors                              -                     -                      -          2,772,500

Issuance of Class D
Units to various
Investors                              -                     -                      -          9,097,662

Issuance of Series C
Preferred stock and
Class D Warrants to
Various investors
Through a conversion
Of Class D units                       -                     -                      -              2,625


Issuance of common stock
To an investor through a
Conversion of Class C
Preferred                              -                     -                      -                -

Issuance of common stock
To an investor through
Conversion of  Class D
Warrants                               -                     -                      -             75,000

Issuance  of Series B
Preferred  stock and 1999
International  A  warrants
To various investors
Through a conversion of
Class A units                          -                     -                      -              1,682

Issuance of common
Stock to employees                                           -                                    35,550

Grant of warrants
For legal services                      -                                           -            122,000

Grant of stock options
To employees                       (1,421,461)               -                      -                -

Current year amortization
Of deferred compensation              318,835                -                      -            318,835

Change in cumulative
Translation adjustment                  -                    -                   (59,400)        (59,400)

Net loss for year ended
June 30, 2000                           -              (6,636,452)                   -        (6,636,452)

                            -----------------      --------------            -----------     ------------
Balance at                         (1,102,626)     $   (7,480,702)           $   (79,923)    $  6,262,27
June 30, 2000               =================      ==============            ===========     ===========

</TABLE>

The accompanying notes are an integral part of this statement.

<PAGE>









                                       7
<PAGE>
<TABLE>
<CAPTION>
                                        Milinx Business Group, Inc. and Subsidiaries

                                             CONSOLIDATED STATEMENTS OF CASH FLOWS



                                                                                Year ended             Six months ended
                                                                               June 30, 2000             June 30, 1999
<S>                                                                            <C>                  <C>

Increase (Decrease) in cash


Cash flows from operating activities
    Net loss                                                                   $ (6,636,452)         $         (844,250)
    Adjustments to reconcile net loss to net cash used in operating
      activities:
        Depreciation and amortization                                               450,814                      42,362
        Write off of license and trademark costs                                    304,500                           -
        Employee stock and stock option compensation                                350,835                           -
        Warrants issued for services                                                122,000                           -
        Changes in assets and liabilities
                   Receivables                                                     (289,349)                    (67,826)
                   Security deposits and prepaid expenses                          (194,504)                    (34,873)
                   Accounts payable, accrued liabilities and customer               447,756                     496,491
                   deposits
                   Related party receivables                                        (82,644)                    (36,282)
                                                                               --------------        ----------------------

                   Net cash used in operating activities                         (5,527,044)                   (444,378)

Cash flows from investing activities
    Acquisition of fixed assets                                                  (1,782,659)                   (677,163)
    Increase in licenses                                                         (1,843,525)                    (50,000)
    Cash acquired through Forestay                                                      500                           -
    Capital lease deposits                                                         (203,915)                    (24,834)
                                                                               --------------        ----------------------

                   Net cash used in investing activities                         (3,829,599)                   (751,997)

Cash flows from financing activities
    Proceeds from issuance of common stock                                           75,000                     601,295
    Proceeds from issuance of preferred stock                                         4,307                       2,925
    Proceeds from issuance of Class A Units                                       2,772,500                     590,000
    Proceeds from issuance of Class D Units                                       8,773,941                           -
    Proceeds form issuance of 1999 Internal Warrants A                                    -                         200
    Proceeds from exercise of stock options                                               -                      27,000
    Proceeds from sale of common stock to employees                                   3,550                           -
    Payments on capital lease obligations                                           (55,347)                          -
                                                                               --------------        ----------------------

                   Net cash provided by financing activities                     11,573,951                   1,221,420

Effect of the exchange rate changes on cash                                         (59,400)                    (20,523)
                                                                               --------------        ----------------------

Net increase in cash and cash equivalents                                         2,157,908                       4,522

Cash and cash equivalents at beginning of year                                        4,522                           -
                                                                               --------------        ----------------------

Cash and cash equivalents at end of year                                       $  2,162,430          $            4,522
                                                                               ==============        ======================

Cash paid for
                        Interest                                               $      8,272          $            1,652

                        Taxes                                                           -                           -

Non-cash disclosures:
                         Equipment under capital lease                         $    2,016,198                       -

                         Note issued in connection with asset acquisition      $        -                        65,681

</TABLE>

The accompanying notes are an integral part of these statements.

                                       8
<PAGE>




                  Milinx Business Group, Inc. and Subsidiaries

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                             June 30, 2000 and 1999

NOTE A - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Milinx Business Group, Inc. (Milinx - Delaware) was incorporated on December 10,
1998 in the state of Delaware as Milinx Marketing Group,  Inc. and commenced its
operations on February 10, 1999.  Effective  April 1, 1999, the Company formed a
wholly-owned Canadian subsidiary,  Milinx Business Services,  Inc. (Milinx - BC)
to develop and market its product in Canada. Both companies have adopted June 30
fiscal year ends.  Effective May 5, 1999,  Milinx - Delaware changed its name to
Milinx Business Group, Inc.

On December 9, 1999, through a transaction  structured as a reverse acquisition,
Milinx - Delaware acquired Forestay Corporation,  a reporting company registered
in  Delaware.  The Company  elected  successor  status  under  Exchange Act Rule
12g-3(a) and became a reporting company effective February 15, 2000. The Company
began trading in the OTC market on June 8, 2000.

Milinx Business Group, Inc. and its subsidiaries  (collectively referred thereto
as "the  Company") are developing and marketing  business  application  products
including Unified Messaging, Virtual Office Systems, and supplying communication
productivity,  and e-commerce functionality.  The Company is targeting Small and
Medium  Enterprises  (SMEs) in the business  Application  Service Provider (ASP)
market in North America.


1.       Principles of Consolidation
         ---------------------------

The financial  statements  include the accounts of the Milinx - Delaware and its
wholly  owned   Subsidiaries.   All   significant   intercompany   balances  and
transactions have been eliminated.

2.       Revenue Recognition
         -------------------

Revenue  from  month-to-month  subscriber  contracts  is  recognized  monthly as
earned.

3.       Property and Equipment
         ----------------------

Property and equipment are stated at cost,  less  accumulated  depreciation  and
amortization. Depreciation and amortization are computed using the straight-line
method over the estimated useful life ranging as follows:

Computer hardware and telecommunication
equipment                                    2 - 3 years
Computer software                            3 years
Furniture and fixtures                       2 - 3 years
Leasehold improvements                       The lesser of the lease term or the
                                             estimated useful life of the asset


                                       9
<PAGE>


                  Milinx Business Group, Inc. and Subsidiaries

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                             June 30, 2000 and 1999

NOTE A - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Continued

4.       Licenses
         --------

The Company  capitalizes  costs of software  licenses  acquired from third party
vendors.  Amortization  is  computed  using the ratio of current  users over the
estimated  total number of users during  estimated  useful life of each license.
The  estimated  useful life is  determined  as the lesser of the license term or
estimated  life of the  license  and  generally  ranges  from 2 to 3 years.  The
Company evaluates  capitalized  licensing costs quarterly to determine potential
impairment.

5.       Loss per share
         --------------

Basic loss per share is based on the weighted  average  number of common  shares
outstanding  during the period.  The weighted  average  number of common  shares
outstanding  during the year ended June 30,  2000 and the six months  ended June
30, 1999 was  8,972,958  and  2,656,040,  respectively.  Diluted  loss per share
includes  the  effect of all  potentially  dilutive  common  stock  equivalents.
Diluted loss per share for the year ended June 30, 2000 and the six months ended
June 30, 1999  equaled  basic loss per share due to  antidilutive  effect of the
common stock equivalents.

6.       Translation Adjustments
         -----------------------

The Company  considers the U.S.  dollar its functional  currency.  Milinx - BC's
functional currency is the Canadian dollar.  Translation  adjustments  resulting
from the process of translating the subsidiaries  financial statements into U.S.
dollars  for  consolidation  purposes is  reported  as a separate  component  of
stockholders' equity.

7.       Comprehensive Income
         --------------------

The Company  adopted SFAS 130,  Reporting  Comprehensive  Income.  The statement
requires  inclusion  of  foreign  currency  translation  adjustments,   reported
separately in stockholders'  equity, in other comprehensive  income. The Company
had no other comprehensive income items for the year ended June 30, 2000 and the
six months ended June 30, 1999. The Company's total  comprehensive  loss for the
year ended June 30, 2000 and the six months  ended June 30, 1999 was  $6,695,852
and $864,773, respectively.

8.       Accounting Estimates
         --------------------

In preparing the Company's financial statements,  management is required to make
estimates  and  assumptions  that  affect  the  reported  amounts  of assets and
liabilities,  the disclosure of contingent assets and liabilities at the date of
the  financial  statements,  and the  reported  amounts of revenue and  expenses
during the reporting period. Actual results could differ from those estimates.

9.       New Accounting Pronouncements
         -----------------------------

In December 1999, The Securities and Exchange Commission issued Staff Accounting
Bulletin No. 101 (SAB 101), Revenue Recognition in Financial Statements. SAB 101
provides  guidance on  applying  generally  accepted  accounting  principles  to
revenue recognition issues in financial statements. The Company has not assessed
the effect that such adoption may have on its consolidated results of operations
and financial position.

                                       10
<PAGE>


                  Milinx Business Group, Inc. and Subsidiaries

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                             June 30, 2000 and 1999

NOTE A - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Continued

In  March  2000,  Financial  Accounting  Board  of  Standards  issued  Financial
Interpretation  No. 44 (FIN 44)  Accounting for Certain  Transactions  involving
Stock  Compensation.  The provisions of FIN 44 are effective July 1, 2000,  and,
except for certain types of modifications,  will be applied prospectively to new
awards,   exchanges  of  awards  in  business  combinations,   modifications  of
outstanding  awards,  and changes in grantee  status that occur on or after that
date.  The  adoption  of FIN 44  could  have a  material  effect  on the  future
consolidated results of its operations and financial position.

10.      Reclassifications
         -----------------

Certain  reclassifications  have been made to prior period numbers to conform to
current year classifications.


NOTE B - MANAGEMENT PLANS

The Company's negative cash flow from operations is expected to continue through
the first two quarters of fiscal year 2001. Until  subscription  revenue exceeds
cash  operating  expenditures,  which the Company  expects to occur by the first
calendar quarter of 2001,  substantial additional equity capital will have to be
raised to fund capital expenditures and operations.

In the year  ending June 30,  2000,  the Company  raised  $11,573,951  in equity
capital without the benefit of an operating Data Center,  software  applications
or an ability to market any of its services.

Subsequent to June 30, 2000, the Company raised $1,326,920  (unaudited) from the
conversion  of 663,460 in Class D Warrants to common  shares prior to August 29,
2000.

The Company is in the process of  completing  a private  placement  of 2,500,000
shares of common stock at a price of $4.50 per share for a total of $11,250,000.
While certain expressions of interest have been received, no significant amounts
have been raised prior to August 29, 2000.

Management  believes  that  completion of the private  placement  along with the
ability  since only  August,  2000 to solicit  subscribers  and build  recurring
revenue,  there will be more than  sufficient  funding  for  current  operations
through June 30, 2001. If the private  placement is not successful and projected
revenues do not materialize as forecasted,  the Company will immediately  reduce
operating  expenses as much as necessary and defer or cancel planned  geographic
expansion  and  capital  expenditures.  In  addition,  the  Company  will pursue
aggressively  direct and  intermediary  third party equity funding  sources that
were not required in raising the equity funding to date.


                                       11
<PAGE>



                  Milinx Business Group, Inc. and Subsidiaries

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                             June 30, 2000 and 1999


NOTE C - PROPERTY AND EQUIPMENT

                                                       June 30,       June 30,
                                                         2000           1999
                                                    ------------    ------------

Computer hardware and telecommunication equipment
                                                    $  2,763,822    $   248,137
Computer software                                        395,461        340,296
Furniture and fixtures                                   259,707         75,476
Leasehold improvements                                   625,729         78,935
                                                    ------------    ------------
                                                       4,044,719         742,844
Accumulated depreciation and amortization                472,551          28,612
                                                    ------------    ------------

                                                    $  3,572,168    $    714,232
                                                    ============    ============



NOTE D - RELATED PARTY TRANSACTIONS

The Company's majority stockholder and President has controlling interest in the
following  companies:  Milinx Marketing Group,  Inc.  (Texas),  Milinx Marketing
Group, Inc. (British  Columbia),  Milinx Management  Corporation,  Credit Assure
International, Inc., Assured Card Corporation (currently inactive).

Effective April 1, 1999, Milinx Marketing Group,  Inc.  (British  Columbia) sold
all of its  tangible  and  intangible  assets to Milinx - BC, in exchange  for a
$96,948 (CND) or approximately  $65,900 (US) promissory note that bears interest
at 10% per annum.  The full amount was repaid to Milinx Marketing Group prior to
June 30, 2000.

On February 12, 1999,  the Company  entered  into a  management  agreement  with
Milinx  Management  Corporation  ("Milinx  Management").  Under the terms of the
agreement  Milinx  Management  was to  provide  management,  administrative  and
marketing  services  to the Company in  consideration  for payment of all of the
associated  expenses to be incurred by the Milinx  Management in connection with
providing  the  services,   including  personnel  costs.  In  addition,   Milinx
Management  was  entitled to a  management  fee equal to fifteen  percent of the
expenses to be billed to the Company.  Before this  agreement was  terminated on
April 1, 1999, the Company received  services from Milinx  Management,  totaling
approximately  $44,800.  By June 30,  2000,  the Company  paid all but $3,586 of
these fees. The balance bears no interest and is due on demand.

On October  15,  1999 the Company  acquired  substantially  all assets of Milinx
International, Inc. for consideration of 375,000 of the Company's common shares.
Due to unavailability of the information related to the cost of assets acquired,
the Company  valued  shares  exchanged  based on the present value of the future
payments due under the original license agreement (see note E). The value of the
consideration  paid  and the  unamortized  book  value of the  original  license
agreement were written off at the time of acquisition.




                                       12
<PAGE>




                  Milinx Business Group, Inc. and Subsidiaries

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                             June 30, 2000 and 1999


On October 15, 1999,  Credit Assure  International,  Inc. received 50,000 common
shares from Milinx  Business  Group in exchange  for  intellectual  property and
trademarks.  Due  to  unavailability  of the  cost  information  related  to the
intangibles acquired,  the Company valued transaction using estimated fair value
of the shares exchanged of $25,000.  Acquisition costs were immediately  written
off as an expense.

During the year ended June 30, 2000,  Milinx - BC also incurred various expenses
on behalf of Milinx Marketing Group, Inc. (Milinx  Marketing)  totaling $82,644.
At June 30, 2000,  the entire  balance was recorded as a receivable  from Milinx
Marketing.

During the year ended June 30, 2000,  the Company  entered into a management and
financial consulting services agreement with a company controlled by a director.
The  agreement  expired  March  31,  2000 and  required  up to  $1,200 in weekly
payments for services  rendered by this director.  The Company  incurred $48,800
under this agreement during the year ended June 30, 2000. The entire balance was
paid in full prior to June 30, 2000.

NOTE E - LICENSES

On February 12,  1999,  the Company  signed a ten-year  license  agreement  with
Milinx International, Inc. ("Milinx International"),  an affiliated company (see
note D). The  agreement  granted the Company an exclusive  right to use Internet
and communication  technologies,  software,  trade secrets and marketing systems
for Milinx  products in North  America.  The agreement  called for $50,000 to be
paid by August 12, 1999, and nine yearly payments of $25,000 commencing February
12,  2000.  On October 15, 1999 the Company  acquired  substantially  all of the
assets of Milinx  International  for  consideration  of 375,000 of the Company's
common shares. In connection with the acquisition, the

NOTE E - LICENSES - continued

unamortized  value of the license was written off (see note D).  During the year
ended June 30, 2000 and the six months ended June 30, 1999, amortization expense
on the license was $6,875 and $13,750, respectively.

The Company entered into a licensing agreement with Intraware,  a partner of the
SUN/Netscape  Alliance  (iPlanet) on April 27, 2000. This licensing provides for
500,000 seats of SUN/Netscape  Alliance  software for Virtual Office and Unified
Messaging  and 500,000  seats of U-Force  Unified  Messaging.  The total cost of
$1,695,115  for this  licensing was paid prior to June 30, 2000,  except for two
payments of $146,730,  which are  included in the  accounts  payable at June 30,
2000. The licensing will be amortized based on the number of seats in use. As of
June 30,  2000,  the  Data  Center  was not  fully  operational  and,  thus,  no
amortization was recognized in the consolidated financial statements.

The Company,  in June 2000, entered into several other licensing  agreements for
use in its new Data Center, at a total cost of $341,870. Some of the features of
these licenses are to enable  subscribers to view and to "drill down" into their
statement detail via the Internet.  As of June 30, 2000, the Data Center was not
fully  operational and, thus, no amortization was recognized in the consolidated
financial statements.

                                       13
<PAGE>


                  Milinx Business Group, Inc. and Subsidiaries

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                             June 30, 2000 and 1999

NOTE F - TRADEMARKS

On March 15, 1999,  the Company  entered into an  agreement  with Credit  Assure
International, Inc. ("Credit Assure"), an affiliated company (see note D). Under
the  agreement,   the  Company  was  granted  an  exclusive  right  to  use  the
"CreditAssure"  trademark and serve as its exclusive distributor and marketer in
the United  States and Canada.  In  consideration  of the rights  received,  the
Company  granted  Credit  Assure  an option to  purchase  750,000  shares of the
Company's Preferred A Stock for $27,000.  Options were granted on March 15, 1999
and  exercised  on April 6,  1999.  Due to the  absence  of any  market  for the
Company's preferred stock, value of the option, if any, at the date of grant was
considered  negligible.  On October 15, 1999, the Company acquired substantially
all assets of Credit Assure for  consideration of 50,000 shares of the Company's
common stock (see note D).


NOTE G - STOCKHOLDERS' EQUITY

The Company has the following types of securities authorized and outstanding:

Common Stock - $0.001 par value, 210,000,000 shares authorized, 9,670,500 shares
outstanding.  On June 12, 1999, the Board of directors  resolved to increase the
authorized  shares to  210,000,000  from  45,000,000  and approved a two for one
stock split on the  Company's  common  stock to  facilitate  proposed  financing
plans. However, on November 4, 1999, the Board of Directors voted to reverse the
foregoing stock split and to consolidate  the issued and  outstanding  shares of
common stock at a ratio of one for two, thus, effectively, negating the June 12,
1999 stock split. The number of authorized shares remained at 210,000,000.

Preferred  Stock  -  100,000,000   shares  of  preferred  stock  authorized  and
designated   into   series  as   follows:   Series  A  $0.001  par  value,   10%
non-cumulative,   voting,   convertible  preferred  stock  -  15,000,000  shares
authorized,   3,675,000  shares  issued  and  outstanding.  Series  A  preferred
stockholders are entitled to a non-cumulative 10% cash dividend.  Each share has
a $.32  liquidation  preference in addition to any declared and unpaid dividends
outstanding at the time of liquidation (up to $.32 of accumulated  dividends per
each Series A preferred  share).  Each  preferred  stockholder  is entitled to a
number of votes that  equals  twice the number of common  shares into which said
Series A preferred  stock may be  converted  but no less than six votes for each
Series A preferred share.  General conversion  provisions entitle each preferred
share to be converted  into three common stock shares.  The  agreement  also has
variable conversion

provisions designed to prevent dilution of the preferred stockholders' position.
No shares can be converted  during the twelve  months  following  issuance.  The
agreement also contains automatic  conversion  provisions at the election of the
Company. At June 30, 2000, the conversion ratio of Series A preferred stock into
common stock was 1:3.


Series B no par value voting,  convertible  preferred stock - 10,000,000  shares
authorized,  1,681,250  shares  issued and  outstanding.  Each share of Series B
preferred stock has a $2.00 liquidation  preference.  Each preferred stockholder
is entitled  to a number of votes that  equals the number of common  shares into
which  said  Series B  preferred  stock  may be  converted.  General  conversion
provisions  entitle each  preferred  share to be converted into one common stock
share. The agreement also has variable conversion provisions designed to prevent
dilution of the  preferred  stockholders'  position.  No shares can be converted
until after December 31, 1999. The agreement also contains automatic  conversion
provisions  at the election of the Company.  At June 30,  2000,  the  conversion
ratio of Series B preferred stock into common stock was 1:1.

                                       14
<PAGE>



NOTE G - STOCKHOLDERS' EQUITY - continued

Series C $0.001 par value, 10%  non-cumulative,  voting,  convertible  preferred
stock - 10,000,000 shares  authorized,  2,207,412 shares issued and outstanding.
Series C  preferred  stockholders  are  entitled  to a  non-cumulative  10% cash
dividend.  Each  share  of  Series C  preferred  stock  has a $1.00  liquidation
preference less accumulated  total dividends paid up to the time of liquidation.
Each  preferred  stockholder  is  entitled  to a number of votes that equals the
number  of  common  shares  into  which  said  Series C  preferred  stock may be
converted.  General  conversion  provisions  entitle each preferred  share to be
converted  into  one  common  stock  share.  The  agreement  also  has  variable
conversion   provisions   designed  to  prevent   dilution   of  the   preferred
stockholders'   position.  The  agreement  also  contains  automatic  conversion
provisions at election of the Company.  At June 30, 2000, the  conversion  ratio
Series C preferred stock to common was 1:1.

Of  the  authorized  preferred  stock,  65,000,000  shares  have  not  yet  been
designated to a Series.

Warrants  - As of June  30,  2000  the  Company  has  authorized  the  following
warrants:

         1999 Internal Warrant A, 900,000 warrants authorized
         These  warrants are  exchangeable  for common shares at $4.50 per share
         until  January 31,  2002.  As of June 30, 2000,  900,000 1999  Internal
         Warrants A were issued and outstanding.

         1999 International Warrant A, 840,625 warrants authorized
         These warrants are  exchangeable  for common shares at $2.00 per common
         share until  September 30, 2000. As of June 30, 2000 there were 840,625
         1999 International Warrants A issued and outstanding. The Company, at a
         nominal sum, may repurchase  these warrants if the common shares of the
         Company  trade  at  $2.40  for five  consecutive  trading  days and the
         warrant is not exercised. None of the warrants have been repurchased by
         the Company.

         1999 Internal Warrant B, 650,000 warrants authorized
         These warrants are  exchangeable for Series A Preferred shares at $6.00
         per share until March 31, 2005.  At June 30,  2000,  there were 650,000
         1999 Internal Warrant B issued and outstanding.


                                       15
<PAGE>


                  Milinx Business Group, Inc. and Subsidiaries

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                              June 30, 2000 and1999

NOTE G - STOCKHOLDERS' EQUITY - Continued

         Class A Warrants, 500,000 warrants authorized
         These warrants are  exchangeable  for common shares at $5.00 per common
         share until  September  30, 2000.  The  Company,  at a nominal sum, may
         repurchase  these warrants if the common shares of the Company trade at
         $7.50  for  five  consecutive  trading  days  and  the  warrant  is not
         exercised. At June 30, 2000, there were no Class A Warrants issued.

         Class B Warrants, 500,000 warrants authorized
         These warrants are  exchangeable  for common shares at $7.50 per common
         share until  September  30, 2000.  The  Company,  at a nominal sum, may
         repurchase  these warrants if the common shares of the Company trade at
         $10.00  for  five  consecutive  trading  days  and the  warrant  is not
         exercised. At June 30, 2000, there were no Class B Warrants issued.

         Class D Warrants, 5,000,000 warrants authorized
         These warrants are  exchangeable  for common shares at $2.00 per common
         share until  November  15,  2000.  The  Company,  at a nominal sum, may
         repurchase  these warrants if the common shares of the Company trade at
         $2.80  for  five  consecutive  trading  days  and  the  warrant  is not
         exercised.  During  the year  ended June 30,  2000,  1,312,206  Class D
         warrants  were  issued  through a  conversion  of Class D units.  After
         conversion  of 37,500  Class D  warrants  into  37,500  common  shares,
         1,274,706 Class D warrants remained outstanding at June 30, 2000.

         Class E Warrants, 1,000,000 warrants authorized
         These warrants are  exchangeable  for common shares at $2.00 per common
         share until  December 31, 2000.  At June 30, 2000 there were no Class E
         Warrants issued.

Units - the Company authorized the following types of hybrid securities:

         1999 Class A Units, 1,681,250 authorized
         Each unit has a right to purchase one Series B preferred  share and 1/2
         1999 International Warrant A at a nominal amount of $0.001001.  At June
         30, 2000, there were no Class A units outstanding.

         1999 Class C Units, 10,000,000 authorized
         These units have a right to purchase one Series B preferred  share, 1/2
         Class A  Warrant,  and 1/2  Class B  Warrant  at a  nominal  amount  at
         $0.001002. At June 30, 2000 there were no Class C Units issued.

         1999 Class D Units, 10,000,000 authorized
         These units have a right to purchase  one Series C preferred  share and
         1/2 Class D Warrant at a nominal amount of $0.001001. At June 30, 2000,
         there were 2,362,511 Class D units outstanding.


Issuances

At June 30, 2000,  the Company  recorded  $323,721 in  subscriptions  receivable
related  to  equity  sales  transactions  further  described.  This  amount  was
collected in full subsequent to June 30, 2000.

                                       16
<PAGE>


                  Milinx Business Group, Inc. and Subsidiaries

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                             June 30, 2000 and 1999

         NOTE G - STOCKHOLDERS' EQUITY - Continued

The Company has issued the following types of securities.

         Common Stock

         During the six months ended June 30, 1999,  the Company sold  8,470,000
         shares of its voting common stock through  several rounds of placements
         under Rules 504 and 701 of Regulation D with prices ranging from $0.001
         to $0.18 for total proceeds of $601,295.

         On  October   15,   1999,   the  Company   issued   375,000  to  Milinx
         International, Inc. in exchange for intellectual property (see note D).
         On the same date,  the Company  issued  50,000  shares to Credit Assure
         International,  Inc. in exchange for  intellectual  trademark and other
         intellectual property (see note D).

         On November  11, 1999 the Company  allotted  71,000  common  shares for
         issuance to  employees of the  subsidiaries.  The shares were issued at
         $0.05 per common share for total cash proceeds of $3,550. In connection
         with the issuance, the Company recorded compensation expense of $32,000
         representing  the excess of fair value of the Company's common stock on
         the date of grant over the employee purchase price.

         On December 9, 1999, the Company issued 250,000 shares to  stockholders
         of Forestay Corporation in a reverse merger transaction (see note A).

         On May 10, 2000, the Company  authorized grant of 39,000 shares each to
         two of its executives.  The shares are to be granted  subsequent to the
         Company's  completing S-2 filing necessary to register its common stock
         shares.

         From May to June 2000,  417,000 shares of Series C preferred stock were
         converted in 417,000  shares of the  Company's  voting  common stock at
         stockholders' request.

         In June 2000, 37,500 Class D warrants were converted into 37,500 common
         stock  shares of the  Company's  voting  common  stock  for total  cash
         proceeds of $75,000.

         Preferred Stock

         On February 12, 1999, the Company issued  2,925,000  Series A preferred
         shares (as a private  placement) to two of the Company's  directors and
         to its legal counsel for cash proceeds of $2,925.

         On March 26, 1999,  Credit  Assure  exercised  its  previously  granted
         option to purchase  750,000  Series A  preferred  shares for total cash
         proceeds to the Company of $27,000.

         In May 2000, 1,681,250 Class A Units were converted to 1,681,250 Series
         B preferred shares and 840,625 1999  International A Warrants resulting
         in cash proceeds to the Company of $1,682.




                                       17
<PAGE>


                  Milinx Business Group, Inc. and Subsidiaries

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                             June 30, 2000 and 1999



NOTE G - STOCKHOLDERS' EQUITY - Continued

         From May to June  2000,  2,624,412  Class D Units were  converted  into
         2,624,412  shares of Series C  preferred  stock and  1,312,206  Class D
         Warrants.  In June  2000,  417,000  shares of Series C  preferred  were
         converted  into  417,000  common  stock  shares  at  the  stockholders'
         request.

         Units

         From June 1999 through  December 31, 1999,  the Company sold  1,681,250
         Class A Units at $2.00 per unit for total  proceeds of  $3,362,500.  In
         May 2000 unit holders exercised their right to convert these units into
         Series  B  preferred  shares  and all  outstanding  Class A Units  were
         converted  into  1,681,250   Series  B  preferred  shares  and  840,625
         International A Warrants.

         From January 1, 2000 to June 30,  2000,  the Company  issued  privately
         4,986,923 1999 Class D units for cash proceeds (net of  commissions) of
         $9,097,662.  During  this same  period,  2,624,412  Class D units  were
         converted to 2,624,412  Preferred C Series shares and 1,312,206 Class D
         Warrants for total proceeds to the Company of $2,625.

         Warrants

         On May 25, 1999,  900,000 1999 Internal Warrant A were privately issued
         to a consultant and the Company's  legal  counsel.  These warrants were
         exercisable  immediately  at $7.50 per common  share until  January 31,
         2003.  The warrants  were issued for cash  proceeds of $200. On May 10,
         2000, the Board authorized reduction of the warrant's exercise price to
         $4.50  and  amended  the  expiration  date  to  January  31,  2002.  In
         connection with this  modification,  the Company  recorded  $108,000 in
         additional consulting and legal expenses. The amount was computed using
         the  Black-Scholes  pricing  model with a risk free rate of 5.67%,  83%
         volatility, 0% dividend rate and estimated remaining life of 1.6 years.

         On July 25, 1999,  650,000 1999  Internal  Warrant B were issued to two
         directors.  These warrants are vested  immediately  and  exercisable at
         $6.00 per Series A preferred share until March 31, 2005.

         On December 9, 1999,  a new director  was awarded  90,000  common stock
         warrants to be vested quarterly over a two year period and exchangeable
         into  common  shares at an  exercise  price of $7.50  per  share  until
         December 31, 2002. On May 10, 2000, the Board  authorized the reduction
         of the warrant's exercise price to $4.50, the increase of the number of
         warrants to 180,000 and to decrease the exercise  period to January 31,
         2002.  Due to the May  10,  2000  modification,  the  warrants  will be
         subject to  quarterly  remeasurement  with  adjustments  in value being
         recorded  as an  increase  or  reduction  in  compensation  expense  in
         subsequent financial statements due to the implementation of FIN 44.

         On May 10, 2000, the Company  granted 100,000 fully vested common stock
         warrants, with an exercise price of $4.50 as an additional compensation
         for legal services performed.  The warrants expire January 31, 2001 and
         were valued  using the Black - Scholes  pricing  model with a risk free
         rate of 5.67%,  83% and 0% volatility and dividend rate,  respectively,
         and estimated life of approximately  0.7 years. In connection with this
         transaction the Company recorded $14,000 in additional legal fees.

                                       18
<PAGE>



                  Milinx Business Group, Inc. and Subsidiaries

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                             June 30, 2000 and 1999

NOTE H- STOCK OPTIONS

Employee-Associates Incentive Warrant Plan
On  March  15,  1999,  the  Company's  Board  of  Directors  approved  the  1999
Employee-Associates   Incentive  Warrant  Plan.  The  plan  was  established  as
compensation incentive for retention and motivation of employees and independent
contractors.  A total of up to 780,000 warrants could be authorized to be issued
(Rule 701) under  this  plan.  The  warrants  could be  purchased  by  qualified
employees  at $0.05 per  warrant.  Each  warrant  entitled  a warrant  holder to
purchase one share of the Company's  voting  common stock at a maximum  exercise
price of $2 per share.  The exercise price varies based on the underlying  stock
performance.  No warrants  were issued under the plan through the period  ending
June 30, 1999, and this plan was subsequently  replaced with the 1999-7 Employee
Stock Option Plan.

1999-7 Employee Stock Option Plan
On July 14, 1999,  the  Directors  approved the creation of the 1999-7  Employee
Stock  Option  Plan (the  Plan) to  replace  the  Employee-Associates  Incentive
Warrant  Plan.  Under this plan,  the Company may grant up to 4,000,000  options
(Rule  701)  to  employees  to  acquire  one  common  share  per  option  of the
Subsidiaries  at an  exercise  price of $0.002  to $2.00  per  share  commencing
December 31, 1999 and expiring  March 31, 2005.  After  November 4, 1999 reverse
stock split (see note G), each option is now  convertible  into 1/2 share of the
Company's  common stock.  On November 10, 1999, the number of options under this
plan was increased to 6,000,000.

The  options  granted  under the Plan have  both  time and  performance  vesting
components.  Time vested  shares vest in  increments  through March 31, 2001 and
have a set exercise price of $0.002 per share.  Performance vested shares have a
exercise price of $2.00 and vest upon  achievement of  predetermined  milestones
through January 1, 2001.

On December 3, 1999, the Board of Directors  modified the options  granted under
the  Plan to time  vest  60% of the  original  performance  vested  shares.  The
modification  had no  effect  on the  June  30,  2000  consolidated  results  of
operations due to the exercise price  exceeding the fair value of the underlying
common stock on the date of the modification.  Upon adoption of FIN 44, modified
options will be remeasured quarterly with adjustments in value being recorded as
increase or decrease in employee compensation expense.

Due to the exercise  price of the time vested  options being below fair value of
the  Company's  stock  on the  date of  grant,  in  accordance  with  Accounting
Principle  Board  ("APB")  Opinion  No.  25,  Accounting  for  Stock  Issued  to
Employees,  the  Company  recorded  $1,421,461  in deferred  compensation.  This
deferred  compensation  is to be  amortized  over  the  vesting  period  of  the
underlying  options.  During the year ended June 30, 2000, the Company  recorded
$318,835 in amortization related to the options vested through June 30, 2000.

Director and Executive Stock Option Plan
On July 25, 1999, the Directors  authorized  1,000,000 options for directors and
executives.  Each  option  would  entitle its holder to acquire one share of the
Company's  common stock per each option  granted.  These options are exercisable
for the period from July 25, 1999 to March 31, 2005.

Option prices are generally  equal to the fair market value of the shares of the
Company's  common stock on the date of grant.  Options,  generally,  vest over a
three-year period and expire three to five years from the date of the grant.

                                       19
<PAGE>



                  Milinx Business Group, Inc. and Subsidiaries

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                             June 30, 2000 and 1999



NOTE H - STOCK OPTIONS - Continued

Summary of stock option activities
The following is a summary of the employee stock option information for the year
ended June 30, 2000 (all option  information  has been adjusted for the November
1999 reverse stock split).


                                                                Weighted Average
                                                 Shares          Exercise Price
                                              -------------    -----------------

    Options outstanding at June 30, 1999              -          $        -

       Options granted                         4,666,250               1.81
       Options forfeitured                       218,000               0.66
       Options exercised                               -                  -
                                              -------------    -----------------

    Options outstanding at June 30, 2000       4,448,250         $     1.87

    Number of options available for grants     2,551,750

The following table summarizes information about options granted during the year
ended June 30, 2000.
<TABLE>
<CAPTION>

                                                                             Weighted Average           Weighted Average Fair
                                                                              Exercise Price                    value
<S>                                                                         <C>                         <C>

Exercise price exceeds market price at grant date                                  $2.54                        $0.85
Exercise price equals market price at grant date                                   $2.89                        $1.82
Exercise price is below market price at grant date                                $0.002                        $1.24
</TABLE>

<TABLE>
<CAPTION>


The following table summarizes information about options outstanding at June 30,
2000.

                                           Options Outstanding                                  Options Exercisable
                        -----------------------------------------------------------    ---------------------------------------
                                              Weighted           Weighted
                                              Average             Average
     Range of               Number         Exercise Price        Remaining               Number          Weighted Average
  Exercise Prices        Outstanding           Price           Contractual Life        Exercisable         Exercise Price
--------------------    ---------------    ----------------   ---------------------    -------------    ----------------------
<S>                     <C>                <C>                <C>                     <C>                <C>
   $0.002-$1.00            1,400,125            $0.002                4.75                  280,025            $0.002
   $ 1.01-$2.00            1,776,125            $2.00                 3.94                  643,656            $2.00
   $ 2.01-$3.00              650,000            $3.00                 4.75                        -               -
   $ 4.00-$5.00              622,000            $4.50                 4.18                   15,550             4.50
                        ---------------                                                -------------
                           4,448,250                                                        939,231            $1.45
                        ===============                                                =============

The  weighted  average fair value of the options  granted  during the year ended
June 30, 2000 was $1.28.
</TABLE>

                                       20
<PAGE>



                  Milinx Business Group, Inc. and Subsidiaries

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                             June 30, 2000 and 1999

NOTE H - STOCK OPTIONS - Continued

The Company  accounts for its stock-based  compensation  plan in accordance with
APB Opinion No. 25, under which no compensation is recognized in connection with
options  granted to employees  except if options are granted with a strike price
below fair value of the  underlying  stock.  The Company  adopted the disclosure
requirements SFAS No. 123, Accounting for Stock-Based Compensation. Accordingly,
the  Company is required to  calculate  and present the pro forma  effect of all
awards granted. For disclosure  purposes,  the fair value of each option granted
to  an  employee  has  been  estimated  as  of  the  date  of  grant  using  the
Black-Scholes  option  pricing model with the following  assumptions:  risk-free
interest rate of 5.67%, dividend yield 0%, volatility of 83%, and expected lives
of  approximately  4 to 5 years.  Based on the  computed  option  values and the
number of the options issued, had the Company recognized  compensation  expense,
the following would have been its effect on the Company's net loss:

                                 Year ended
                               June 30, 2000
                            -----------------
     Net loss
---------------------
As reported                 $     6,636,452
Pro forma                         8,033,231

Loss per share
---------------------
As reported                 $        (0.74)
Pro forma                            (0.90)

On April 20, 1999,  200,000 options were granted (under Rule 701) to four of the
Company's non-employee sales associates permitting the purchase of common shares
at $2.00 per share effective July 15, 1999 and expiring on March 31, 2001. Using
an option  valuation  model,  fair value of the options at the date of grant was
determined to be negligible  due to low stock  volatility and options being "out
of the money" at the date of grant.

NOTE I - INCOME TAXES

The Company  accounts for income taxes on the liability  method,  as provided by
Statement of Financial  Accounting  Standards  109,  Accounting for Income Taxes
(SFAS No. 109).  Milinx - Delaware is primarily a United States taxpayer,  while
Milinx - BC primarily files in Canada.  The income tax provisions  reconciled to
the tax computed at the statutory  federal rate for the year ended June 30, 2000
and the six months ended June 30, 1999 were:
<TABLE>
<CAPTION>

                                        2000                   1999                   2000                   1999
                                 Milinx - Delaware      Milinx - Delaware         Milinx - BC             Milinx - BC
                                ---------------------  ---------------------  ---------------------  ----------------------

<S>                             <C>                    <C>                    <C>                    <C>
Tax benefit at statutory rate   $       (483,640)      $        (93,766)      $     (1,772,753)      $          (197,589)
Permanent differences                        627                      -                 10,834                         -

Canadian tax rate differences                  -                      -               (669,691)                        -
Increase in valuation
allowance                                483,013                 93,766              2,431,610                   197,589
                                ---------------------  ---------------------  ---------------------  ----------------------

Total                           $             -        $             -        $             -        $                -
                                =====================  =====================  =====================  ======================


</TABLE>
                                       21
<PAGE>



                  Milinx Business Group, Inc. and Subsidiaries

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                             June 30, 2000 and 1999

NOTE I - INCOME TAXES - continued
<TABLE>
<CAPTION>

The components of deferred taxes are as follows at June 30, 2000 and 1999:

                                        2000                   1999                   2000                   1999
                                 Milinx - Delaware      Milinx - Delaware         Milinx - BC             Milinx - BC
                                ---------------------  ---------------------  ---------------------  ----------------------
<S>                            <C>                     <C>                   <C>                    <C>
Deferred tax asset:
    Net operating loss                                                                                        210,532
    carryforward                $       396,082        $        64,186        $     2,792,551        $
    Depreciation                              -                      -               (169,085)                (12,943)
    Stock options and
    warrants                            149,884                      -                      -                      -
    Organization costs                   29,087                 29,580                      -                       -
    Other                                 1,726                      -                  5,734                       -
    Valuation allowance                 (576,779)              (93,766)             (2,629,200)              (197,589)
                                ---------------------  ---------------------  ---------------------  ----------------------

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


The Company has established  the above valuation  allowances as of June 30, 2000
and 1999 due to uncertainty of future realization of deferred tax assets.  Total
valuation allowance increased by $2,914,624 from June 30, 1999 to June 30, 2000,
primarily  due to current year  temporary  differences.  At June 30,  2000,  the
Company has  $6,841,074 in net operating loss  carryforwards  for federal income
tax purposes available to offset future income which expire in 2020. Included in
this amount is $6,121,329 of net operating loss for Canadian income tax purposes
which,  if  utilized  before  expiring in the next seven  years,  will result in
additional tax savings of approximately $711,000.  Potential changes, if any, in
the  company's  ownership  could  result  in  limitations  on the use of its net
operating loss carryforwards.


NOTE J - COMMITMENTS AND CONTINGENCIES

1.       Operating Leases

The Company has obligations under long term, non-cancelable operating leases for
premises and equipment.  Lease terms range from 4 to 5 years. The future minimum
payments are as follows:

            Year ending June 30,

                    2001                               $ 208,755
                    2002                                 197,085
                    2003                                 200,640
                    2004                                 193,853
                    2005                                  36,332
                                                   ----------------------

Total minimum lease payments                             $ 836,666
                                                   ======================

                                       22
<PAGE>


                  Milinx Business Group, Inc. and Subsidiaries

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                             June 30, 2000 and 1999

NOTE J - COMMITMENTS AND CONTINGENCIES - continued

Consolidated  rent  expenses for the year ended June 30, 2000 and the six months
ended June 30, 1999, were approximately $287,000 and $32,000, respectively.

2.       Capital Leases

In  connection  with the opening of new Data  Center,  the Company  entered into
several capital lease agreements ranging in duration from two to three years. As
of June 30, 2000, the future  minimum lease payments under these  agreements are
as follows.

            Year ending June 30,

                    2001                            $     680,256
                    2002                                  649,912
                    2003                                  377,578
                                                 ------------------
                                                        1,707,746

Less: interest (at 12%)                                 (243,877)
                                                 ------------------

Present value of capital lease obligations
                                                        1,463,869

Current portion of capital lease obligations
                                                          536,061
                                                 ------------------

Long term portion of capital lease
obligations                                         $     927,808
                                                 ==================

As of June 30, 2000, the capitalized  cost of equipment under capital leases was
$2,016,200.  During the year ended June 30, 2000, the Company recorded  $114,865
in amortization expense on equipment under capital leases.

In June 2000, the Company  entered into three other capital lease  agreement and
made downpayments on two of them totaling  $203,915.  Due to equipment not being
delivered  until  subsequent to June 30, 2000, no capital lease  obligation  was
recorded as it relates to these  arrangements and, thus, future payments are not
included in capital lease obligation schedule.  The downpayments made were shown
as other current assets on June 30, 2000 consolidated  balance sheet. New leases
range in duration  from 2 to three years and require  monthly  payments  ranging
from $1,540 to $31,870.

                                       23
<PAGE>


                  Milinx Business Group, Inc. and Subsidiaries

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                             June 30, 2000 and 1999

NOTE J - COMMITMENTS AND CONTINGENCIES - continued

3.       Employment Agreements

At  June  30,  2000,  the  Company  has  employment  contracts  with  two of its
officers/directors   requiring  monthly  compensation  payments  of  $17,250  in
aggregate and expiring on December 9, 2002. Total payments due are as follows.

         Year ending June 30,

                 2001                          $ 207,000
                 2002                            207,000
                 2003                             86,250
                                             -------------

                                             $   500,250
                                             =============


Total unpaid  compensation  under  contracts as of June 30, 2000 and 1999,  were
$7,590 and $51,750,  respectively and was included in accrued liabilities in the
accompanying consolidated balance sheet.

4.       Legal

Two related claims or potential claims  involving  computer  software  licensing
were asserted against the Company. KRP Communications,  Ltd. ("KRP") claimed the
sum of $210,048 Canadian funds for an alleged failure to pay timely license fees
for computer  software.  On January 11,  2000,  Interactive  Intelligence,  Inc.
("Interactive")  advanced a claim through the American  Arbitration  association
for $3,900,000 U.S. funds for an alleged breach of a Software License Agreement.
KRP was Interactive's reseller.  Interactive was the owner of a software program
designed  to  handle  intra  company   telecommunications  and  small  answering
services.  The Company  responded to Interactive's  Arbitration claim by denying
any liability and counterclaimed  against  Interactive for damages stemming from
Interactive's  failure to deliver a workable  system.  On February 2, 2000,  the
Company commenced suit in the Supreme Court of British  Columbia,  (the "British
Columbia  Lawsuit"),  naming as defendants KRP,  Interactive and others.  During
March, 2000, both claims were completely dismissed at no cost to the Company.

From  time  to  time,  the  Company  is a party  to  various  legal  proceedings
incidental  to its  business.  The  Company  believes  that  none  of the  other
presently pending legal proceedings will have a material adverse effect upon its
consolidated financial position, results of operations, or liquidity.

NOTE K - QUARTERLY RESULTS OF OPERATIONS (UNAUDITED)
<TABLE>
<CAPTION>

         Year ended June 30, 2000                                      Quarter
                                                 1st            2nd            3rd             4th
<S>                                           <C>          <C>            <C>            <C>
Net sales                                     $  45,971     $  53,839   $    56,926    $     40,457
Gross profit                                    (54,686)       (5,936)      (56,277)        (51,357)

Net loss from operations                     (1,126,559)   (1,550,732)   (1,580,343)     (2,378,818)
Net loss per common share - basic and
diluted                                       $   (0.13)    $   (0.17)  $     (0.17)   $     ( 0.25)

</TABLE>


                                       24
<PAGE>


                  Milinx Business Group, Inc. and Subsidiaries

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                             June 30, 2000 and 1999

NOTE K - QUARTERLY RESULTS OF OPERATIONS (UNAUDITED) - continued
<TABLE>
<CAPTION>

         Year ended June 30, 1999                                   Quarter
                                                 1st            2nd        3rd          4th
<S>                                            <C>            <C>       <C>          <C>
Net sales                                        N/A            N/A     $  16,740    $    26,684
Gross profit                                     N/A            N/A          (870)        (3,818)

Net loss                                         N/A            N/A       153,316        690,934
Net loss per common share - basic and
diluted                                          N/A            N/A     $   (0.02)   $    (0.08)
</TABLE>

NOTE L - SUBSEQUENT EVENTS

Subsequent  to June 30, 2000,  investors  converted  1,829,111  Class D Units to
1,829,111  Series C  preferred  shares and  914,555  Class D Warrants  for total
proceeds to the Company of $1,829.

Subsequent to June 30, 2000,  investors  converted  2,207,412 Series C preferred
shares to 2,207,412 common shares.

Subsequent to June 30, 2000,  663,460 Class D Warrants were converted to 663,460
common shares for total cash proceeds to the Company of $1,326,920.




                                       25