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


                                   Form 10-K/A




(Mark one)

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

                     For the fiscal year ended June 30, 2001
                                               -------------

                                       OR

     [ ]  TRANSITION  REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
          EXCHANGE ACT OF 1934

                   For the transition Period from_______to_______

                       Commission file number: 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
incorporation or organization)                               Identification No.)

         1037 Yorkshire Pl.
         Danville, California                                       94506
         ---------------------                                      -----
(Address of principal executive offices)                          (Zip Code)

        Registrant's telephone number, including area code (925) 736-7111
                                                          ---------------

            1001 Fourth Avenue Plaza, Suite 3827, Seattle, WA 98154
            -------------------------------------------------------
         (Former name or former address, if changed since last report.)

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


           Title of Class                   Name of exchange on which registered
               None                                         None
 ----------------------------------         ------------------------------------

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

                         Common Stock, $0.001 par value
                       ----------------------------------
                                (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. Yes No _X__

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. [ ]

As of September 28, 2001, the aggregate market value of the voting common equity
held by  non-affiliates  of the registrant was $4,424,000,  based on the closing
trade reported on the NASD Over the Counter  Bulletin  Board National  Quotation
System.  Shares of common  stock held by each  officer and  director and by each
person who owns five percent or more of the  outstanding  common stock have been
excluded  from  this  calculation  as  such  persons  may  be  considered  to be
affiliated with the Company.

<PAGE>

As of September 28, 2001, the registrant's outstanding common stock consisted of
27,010,067 shares, $0.01 par value per share.

Documents incorporated by reference:  None


EXPLANATORY NOTE:


THIS  AMENDMENT  TO OUR  ANNUAL  REPORT ON FORM 10-K FOR THE YEAR ENDED JUNE 30,
2001,  REFLECTS AN IMMATERIAL  CORRECTION TO A DOLLAR AMOUNT PRESENTED IN ITEM 3
TO CONFORM TO THE FINANCIAL  STATEMENT  ACCRUAL.  THIS  AMENDMENT  ALSO CORRECTS
TYPOGRAPHICAL  ERRORS IN ITEMS 6 AND 10. IN ADDITION,  THIS  AMENDMENT  CORRECTS
CERTAIN  CHANGES TO THE FINANCIAL  STATEMENTS IN ITEM 8,  PRINCIPALLY TO REFLECT
INADVERTENT  OMISSIONS  CONCERNING  THE  EFFECT  OF  A  DEEMED  PREFERRED  STOCK
DIVIDEND.

WE  HAVE  MADE NO  FURTHER  CHANGES  TO THE  PREVIOUSLY  FILED  FORM  10-K.  ALL
INFORMATION  IN THIS FORM 10-K/A IS AS OF JUNE 30,  2001,  AND DOES NOT REFLECT,
UNLESS  OTHERWISE  NOTED,  ANY  SUBSEQUENT  INFORMATION OR EVENTS OTHER THAN THE
AFOREMENTIONED CHANGES.



                                       2
<PAGE>

<TABLE>
<CAPTION>



                                    TABLE OF CONTENTS


Part  Item(s)                                                                    Page No.
----  -------                                                                    --------
<S>   <C>      <C>                                                               <C>
I       3      Legal Proceedings ..................................................  4

II      6      Selected Financial Data ...........................................   5
        8      Financial Statements and Supplementary Data .......................   5

III    10      Directors and Officers of the Registrant ..........................   6
               Signatures ........................................................   9


</TABLE>

                                       3
<PAGE>


                                     PART I


ITEM 3:  LEGAL PROCEEDINGS
--------------------------

On April 6, 2001 Milinx Business Group and Milinx Business Services filed a Writ
of Summons in the Supreme Court of British  Columbia  against Sun  Microsystems,
Inc., Netscape  Communications  Canada,  Inc., Netergy Networks,  Inc. Intraware
Canada,  Inc. and  Burntsand  Inc.  claiming for damages in excess of 10,000,000
Canadian  dollars  for  misrepresentations  and  breach  of  contract.   Sunrise
International  Leasing  Corporation  (with  all  correspondence  under  the  SUN
Microsystems  letterhead)  filed  a  Summons  and  Complaint  in  the  State  of
Minnesota,  County of Hennepin against Milinx Business Group and Milinx Business
Services,  for two Counts,  Breach of Equipment Lease by Services:  in excess of
$50,000 in damages and  immediate  possession  of equipment  and Breach of Lease
Guaranty by Group: in excess of $50,000 damages and seizure of equipment. Milinx
takes the position that this is in reaction to the Writ of Summons issued in the
Supreme  Court of British  Columbia and  therefore  the  jurisdiction  and claim
should be part of and in the same jurisdiction of British Columbia.  These suits
have been settled  pending payment of certain sums by the defendants with mutual
releases executed by all parties.

After reaching an out of court settlement with Milinx Business Services on April
18,  2001,  Tantalus  Communications  Inc.  filed a  Notice  of  Discontinuance,
releasing Milinx Business Services from further action. Milinx Business Services
was not  required to pay any more than the  invoices  outstanding  before  their
claim.

On October 4, 2000, three former employees of Milinx Business  Services advanced
separate  actions in the British  Columbia Supreme Court against Milinx Business
Services alleging breach of their employment  severance  agreements and claiming
unspecified  damages.  One of the  claimants has since  discontinued  the action
against  Milinx  Business  Services and  Employment  Standards  has  dismissed a
vacation wage claim of one of the two remaining employees.  The proposed plan of
reorganization will address these remaining claims.

There are  numerous  unsecured  creditors of Milinx  Business  Services who have
filed suit or threatened actions against Milinx Business Services. These matters
will be resolved in the reorganization plan to be approved by the court.


On August 15, 2001, the  Government of Canada,  through the divisions of Revenue
Canada and  Employment  Standards  have filed  superpriority  liens  against the
Company and certain  directors and officers for unpaid employee  wages,  accrued
vacation,  payroll  taxes and  severance  pay.  The Company has  recorded  these
claims,  totaling $750,000 in accrued liabilities.  The amount in question is in
dispute,  and the Company has filed an appeal to  determine  the correct  amount
owing. The claims will be addressed in the pending reorganization, and it is the
intention of the Company to meet its  obligations  as confirmed by the plan.  If
the Company  cannot confirm the plan,  the  superpriority  claim would allow the
Government to execute on its lien against the assets of the Company.


To the  knowledge of the officers  and  directors of Milinx,  there are no other
pending legal  proceedings or litigation and none of its property is the subject
of a pending legal  proceeding.  Further,  except as discussed  above,  Milinx's
officers  and  directors  know of no legal  proceedings  against  Milinx  or its
property contemplated by any governmental authority.




                                       4
<PAGE>

                                     PART II


ITEM 6:  SELECTED FINANCIAL DATA
--------------------------------

<TABLE>
<CAPTION>



                                                                                 6 mos
                                                          Year ending            ending
                                                      June 30,     June 30,     June 30,
                                                        2001         2000        1999
                                                 ----------------------------------------
<S>                                               <C>             <C>          <C>
Net Sales                                              126,462      197,193       43,424
Loss - available to common stockholders             18,011,206    6,636,452      844,250
Loss per share - available to common stockholders         1.12         0.74         0.32
Total assets                                         1,184,946    8,993,249    1,107,537
Capital lease obligations,                           1,588,678    1,463,868         --
</TABLE>







ITEM 8:  FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
----------------------------------------------------
<TABLE>
<CAPTION>

Description                                                                       Page
-----------                                                                       ----
<S>                                                                             <C>
Independent Auditors' Report dated November 15, 2001                               F-1

Consolidated Balance Sheets as of June 30, 2001 and 2000                           F-2

Consolidated  Statements of Operations for the years ended June 30, 2001,
   2000 and the six months ended June 30, 1999                                     F-4

Consolidated  Statement of  Stockholders'  Equity  (deficit) for the
   years ended June 30, 2001, 2000 and the six months ended June 30, 1999          F-5

Consolidated  Statements of Cash Flows for the years ended June 30, 2001,
   2000 and the six months ended June 30, 1999                                     F-7

Notes to Consolidated Financial Statements                                         F-8
</TABLE>



                                       5

<PAGE>


               Report of Independent Certified Public Accountants





Board of Directors and Stockholders
Milinx Business Group, Inc.

We have audited the accompanying  consolidated balance sheets of Milinx Business
Group, Inc. (a Delaware  corporation) and its Subsidiaries,  (the Company) as of
June 30, 2001 and 2000 and the related  consolidated  statements of  operations,
stockholders'  equity  (deficit)  , and cash flows for the years  ended June 30,
2001 and 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 consolidated  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, 2001 and 2000, and the
results of their  consolidated  operations and their consolidated cash flows for
the year ended June 30, 2001 and 2000,  and the six months  ended June 30, 1999,
in conformity with accounting principles generally accepted in the United States
of America.


The  accompanying  financial  statements  have been  prepared  assuming that the
Company  will  continue  as a  going  concern.  As  discussed  in  note B to the
financial statements,  the Company has incurred recurring losses from operations
and a stockholders' deficit of $3,890,318. In addition, on October 12, 2001, the
Company's  operating  subsidiary  filed a Notice of Intention with the Office of
the  Superintendent  of Bankruptcy in British Columbia,  Canada.  These matters,
among others, raise substantial doubt about the Company's ability to continue as
a going  concern.  Management's  plans  in  regard  to  these  matters  are also
described in note B. The  financial  statements  do not include any  adjustments
that might result from the outcome of this uncertainty.


/s/ GRANT THORNTON LLP

Seattle, Washington
November 15, 2001

                                       F-1


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

                                           CONSOLIDATED BALANCE SHEETS

                                               Year ended June 30,

                                                     ASSETS

                                                                                       2001            2000
                                                                                   ------------    ------------
<S>                                                                                <C>             <C>
CURRENT ASSETS
        Cash and cash equivalents                                                  $     33,680    $  2,162,430
        Receivables
           Trade                                                                           --             9,334
           Subscriptions                                                                   --           323,721
           Goods and services tax                                                        35,039         327,149
           Employee and stockholders                                                       --            20,692
                                                                                   ------------    ------------
                   Total receivables                                                     35,039         680,896

        Due from Milinx Marketing Group                                                    --            82,644

   Security deposits                                                                         75         209,362
   Prepaid rent and other                                                                 5,355          43,549
                                                                                   ------------    ------------

                      Total current assets                                               74,149       3,178,881

PROPERTY AND EQUIPMENT - NET                                                          1,100,226       3,572,168

OTHER ASSETS AND DEFERRED CHARGES
        Licenses                                                                           --         2,036,985
        Capital lease deposits                                                           10,571         205,215
                                                                                   ------------    ------------

                                                                                   $  1,184,946    $  8,993,249
                                                                                   ============    ============

                                 LIABILITIES AND STOCKHOLDERS' EQUITY (DECIFIT)

CURRENT LIABILITIES
        Accounts payable                                                           $  1,582,188    $    981,233
        Accrued liabilities                                                           1,456,368         279,758
        Due to Milinx Management Corporation                                              3,586           3,586
        Capital lease obligations - current portion                                   1,588,678         536,061
        Convertible note payable                                                        444,444            --
        Customer deposits                                                                  --             2,529
                                                                                   ------------    ------------

                      Total current liabilities                                       5,075,264       1,803,167

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

COMMITMENTS AND CONTINGENCIES                                                              --              --


STOCKHOLDERS' EQUITY (DEFICIT)
        Series A 10% non-cumulative, voting convertible preferred stock - $0.001
          par value, liquidation preference of $1,611,000
                                                                                          3,675           3,675
        Series B voting convertible preferred stock - no par value,
          liquidation preference of $0 and $5,043,000, respectively                        --             1,681
        Series C voting convertible preferred stock - no par value,
          liquidation preference of $1,392,000 and $2,207,000, respectively               1,016           2,207
        Common stock - $0.001 par value                                                  23,078           9,671
        Shares subscribed                                                                10,000            --
        Additional paid in capital                                                   21,803,465      14,908,291
        Unearned compensation                                                              --        (1,102,626)
        Accumulated deficit                                                         (25,492,701)     (7,480,702)
        Cumulative translation adjustment                                              (238,851)        (79,923)
                                                                                   ------------    ------------
                                                                                     (3,890,318)      6,262,274
                                                                                   ------------    ------------


                                                                                   $  1,184,946    $  8,993,249
                                                                                   ============    ============
</TABLE>
The accompanying notes are an integral part of these statements.

                                                        F-2
<PAGE>

<TABLE>
<CAPTION>





                            Milinx Business Group, Inc. and Subsidiaries

                               CONSOLIDATED STATEMENTS OF OPERATIONS





                                                                                 Six months
                                                                                 ended June
                                                     Year ended June 30,             30,
                                                    2001            2000            1999
                                                ------------    ------------    ------------
<S>                                             <C>             <C>             <C>
Net sales                                       $    126,462    $    197,193    $     43,424

Cost of sales                                        186,112         365,449          48,112
                                                ------------    ------------    ------------
Gross loss                                           (59,650)       (168,256)         (4,688)
                                                ------------    ------------    ------------

Selling, general and administrative expenses      12,133,905       6,442,914         839,192
Losses due to impairment                           3,361,048            --              --
                                                ------------    ------------    ------------

Net loss from operations                          15,554,603       6,611,170         843,880

Other expenses (income)
   Interest                                          535,614          31,515            --
   Miscellaneous, net                                220,989          (6,233)            370
                                                ------------    ------------    ------------
                                                     756,603          25,282             370
                                                ------------    ------------    ------------

Net loss                                         (16,311,206)   $ (6,636,452)   $   (844,250)


Deemed preferred stock dividend                   (1,700,000)            -             -
                                                ------------    ------------    ------------



Net loss available to common stockholders       $(18,011,206)   $ (6,636,452)       (844,250)



NET LOSS PER COMMON SHARE AVAILABLE TO
   COMMON STOCKHOLDERS - BASIC AND DILUTED      $      (1.12)   $      (0.74)   $      (0.32)
                                                ============    ============    ============




</TABLE>




The accompanying notes are an integral part of these statements.

                                        F-3


<PAGE>

<TABLE>
<CAPTION>

                                            Milinx Business Group, Inc. and Subsidiaries

                                      CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY (DEFICIT)

                                        For the six months ended June 30, 1999 and the years
                                                    ended June 30, 2000 and 2001



                                    Series A preferred stock      Series B preferred stock          Series C Preferred stock
                                    Shares            Amount      Shares            Amount          Shares            Amount
<S>                                 <C>           <C>            <C>             <C>             <C>             <C>
Balance at January 1,                     --      $       --     $       --      $       --      $       --      $       --


Issuances of common
        stock through
        series of
        private                           --              --             --              --              --              --
        placements

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

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

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

Issuance of Class A
        units to                          --              --             --              --              --              --
        various
        investors

Foreign currency
        translation
        adjustment                        --              --             --              --              --              --

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

Balance at June 30,                  3,675,000           3,675           --              --              --              --


Issuances of common
        stock in asset
        purchase
        transaction                       --              --             --              --              --              --

Issuance of common
        stock as part
        of reverse                        --              --             --              --              --              --
        transaction

Issuance of Class A
        units to                          --              --             --              --              --              --
        various
        investors

Issuance of class D
        units to                          --              --             --              --              --              --
        various
        investors

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

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

Issuance of common
        stock to an
        investor
        through a
        conversion of                     --              --             --              --              --              --
        Class D
        warrants

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

Issuance of common
        stock to                          --              --             --              --              --              --
        employees

Grant of warrants for
        legal services                    --              --             --              --              --              --

Grant of stock options
        to employees                      --              --             --              --              --              --

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

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


Net loss for the 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

    Exercise of
           employee
           stock
           options                        --              --             --              --              --              --

    Stock options
           forfeited
           by employees                   --              --             --              --              --              --

    Amortization of
           deferred
           compensation
           net of
           prior year
           forfeitures ,                  --              --             --              --              --              --

    Issuance of common
           stock to
           employees                      --              --             --              --              --              --

    Shares issued in
           lieu of
           cancellation
           fees                           --              --             --              --              --              --

    Sale of common
           stock
           shares at
           $4.50 per
           share                          --              --             --              --              --              --

    Additional shares
           issued to $4.50
           subscribers
           to roll
           $4.50 offering
           into
           Millennium
           offering                       --              --             --              --              --              --

    Issuance of common
           shares as
           part of
           Millennium
           units in
           consideration
           for services                   --              --             --              --              --              --

    Issuance of common
           shares
           through
           Millennium
           Units,
           including
           finder fees
           paid in
           units                          --              --             --              --              --              --

    Issuance of Series C
           preferred stock
           and class D warrants
           to investors
           through a conversion
           of Class D
           Units                          --              --             --              --         2,364,511           2,365

    Issuance of common
           stock to
           investors
           through a
           conversion
           of Series C
           preferred                      --              --             --              --        (3,556,312)         (3,556)

    Issuance of common
           stock to
           investors
           through a
           conversion
           of Class D
           warrants                       --              --             --              --              --              --

    Issuance of common
           stock to
           investors
           through a
           conversion
           of Series B
           preferred                      --              --       (1,681,250)         (1,681)           --              --


    Deemed preferred stock
           divided in
           connection with
           Millennium units
           placement                      --              --             --              --              --              --


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

    Net loss for the
           year ended
           Jun 30, 2001                   --              --             --              --              --              --

    Balance at June
           30, 2001                  3,675,000    $      3,675           --      $       --         1,015,611    $      1,016

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


                                                                                              Additional                  Cumulative
                                      Common stock              Subscribed Stock               Paid In     Unearned      Translation
                                 Shares           Amount      Shares        Amount             Capital    Compensation    Adjustment
Balance at January 1,                         $     --                     $    --           $

       1999

Issuances of common
        stock through
        series of
        private                  8,470,000          8,470        --             --          592,825            --              --
        placements

Issuance of Series A
        preferred
        stock to
        officers and                  --             --          --             --             --              --              --
        legal counsel

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

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

Issuance of Class A
        units to                      --             --          --             --          590,000            --              --
        various
        investors

Foreign currency
        translation
        adjustment                    --             --          --             --             --              --           (20,523)

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

Balance at June 30,              8,470,000          8,470        --             --        1,209,275            --           (20,523)

       1999

Issuances of common
        stock in asset
        purchase
        transaction                425,000            425        --             --          174,700            --              --

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

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

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


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


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


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

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


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

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

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

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

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




Net loss for the year
        ended
        June 30, 2000                 --             --          --             --             --              --             --



    Balance at June
           30, 2000              9,670,500          9,671        --             --       14,908,291      (1,102,626)        (79,923)
                               -----------
    Exercise of
           employee
           stock
           options                 558,500            558        --             --           31,373            --              --


    Stock options
           forfeited
           by employees               --             --          --             --       (1,065,882)      1,065,882            --


    Amortization of
           deferred
           compensation
           net of
           prior year
           forfeitures ,              --             --          --             --            --             36,744            --

    Issuance of common
           stock to
           employees                 1,000              1        --             --             --              --              --

    Shares issued in
           lieu of
           cancellation
           fees                     50,000             50        --             --           79,950            --              --

    Sale of common
           stock
           shares at
           $4.50 per
           share                    44,886             45        --             --          181,743            --              --

    Additional shares
           issued to $4.50
           subscribers
           to roll
           $4.50 offering
           into
           Millennium
           offering                792,864            793        --             --             --              --              --

    Issuance of common
           shares as
           part of
           Millennium
           units in
           consideration
           for services            300,000            300        --             --          149,700           --               --

    Issuance of common
           shares
           through
           Millennium
           Units,
           including
           finder fees
           paid in
           units                 4,639,617          4,640      20,000         10,000      2,254,359            --              --

    Issuance of Series C
           preferred stock
           and class D warrants
           to investors
           through a conversion
           of Class D
           Units                      --             --          --             --             --              --              --

    Issuance of common
           stock to
           investors
           through a
           conversion
           of Series C
           preferred             3,556,312          3,556        --             --             --              --              --

    Issuance of common
           stock to
           investors
           through a
           conversion
           of Class D
           warrants              1,782,857          1,783        --             --        3,563,931            --              --

    Issuance of common
           stock to
           investors
           through a
           conversion
           of Series B
           preferred             1,681,250          1,681        --             --             --              --              --


    Deemed preferred stock
           divided in
           connection with
           Millennium units
           placement                  --             --          --             --        1,700,000             --             --


    Change in
           cumulative
           translation
           adjustment                 --             --          --             --             --              --          (158,928)

    Net loss for the
           year ended
           Jun 30, 2001               --             --          --             --             --              --               --


    Balance at June
           30, 2001             23,077,786   $     23,078      20,000   $     10,000   $ 21,803,465    $       --     $   (238,851)


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


                                 Accumulated
                                   Deficit              Total
Balance at January 1,             $                  $
       1999

Issuances of common
        stock through
        series of
        private                           --           601,295
        placements

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

Issuance of Series A
        preferred
        stock through
        exercise of
        stock options                     --            27,000
        by Credit
        Assure

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

Issuance of Class A
        units to                          --           590,000
        various
        investors

Foreign currency
        translation
        adjustment                        --           (20,523)

Net loss for the six
        months ended
        June 30, 1999                 (844,250)       (844,250)

Balance at June 30,                   (844,250)        356,647

       1999

Issuances of common
        stock in asset
        purchase
        transaction                       --           175,125

Issuance of common
        stock as part
        of reverse                        --               500
        transaction

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

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

Issuance of Series C
        preferred
        stock and
        Class D
        Warrants to
        various
        investors
        through a                         --             2,625
        conversion of
        Class D units

Issuance of common
        stock to
        investors
        through a
        conversion of                     --              --
        Series C
        preferred

Issuance of common
        stock to an
        investor
        through a
        conversion of                     --            75,000
        Class D
        warrants

Issuance of  Series B
        preferred  stock
        and 1999 International
        A warrants to
        various investors
        through a conversion of           --             1,682
        Class A Units

Issuance of common
        stock to                          --            35,550
        employees

Grant of warrants for
        legal services                    --           122,000

Grant of stock options
        to employees                      --              --

Current year
        amortization
        of deferred                       --           318,835
        compensation

Change in cumulative
        translation                                    (59,400)


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



    Balance at June
           30, 2000                 (7,480,702)      6,262,274
                                  ------------
    Exercise of
           employee
           stock
           options                        --            31,931

    Stock options
           forfeited
           by employees                   --              --

    Amortization of
           deferred
           compensation
           net of
           prior year
           forfeitures ,                                36,744

    Issuance of common
           stock to
           employees                      --                 1

    Shares issued in
           lieu of
           cancellation
           fees                           --            80,000

    Sale of common
           stock
           shares at
           $4.50 per
           share                          --           181,788

    Additional shares
           issued to $4.50
           subscribers
           to roll
           $4.50 offering
           into
           Millennium
           offering                       (793)           --

    Issuance of common
           shares as
           part of
           Millennium
           units in
           consideratio
           for servicesn                  --           150,000

    Issuance of common
           shares
           through
           Millennium
           Units,
           including
           finder fees
           paid in
           units                          --         2,268,999

    Issuance of Series C
           preferred stock
           and class D warrants
           to investors
           through a conversion
           of Class D
           Units                          --             2,365

    Issuance of common
           stock to
           investors
           through a
           conversion
           of Series C
           preferred                      --              --

    Issuance of common
           stock to
           investors
           through a
           conversion
           of Class D
           warrants                       --         3,565,714

    Issuance of common
           stock to
           investors
           through a
           conversion
           of Series B
           preferred                      --              --


    Deemed preferred stock
           dividend in
           connection with
           Millennium units
           placement                (1,700,000)           --


    Change in
           cumulative
           translation
           adjustment                     --          (158,928)


    Net loss for the
           year ended              (16,311,206)    (16,311,206)
           June 30, 2001

    Balance at June
           30, 2001               $(25,492,701)   $ (3,890,318)
</TABLE>



The accompanying notes are an integral part of this statement.

                                        F-4


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


                                             CONSOLIDATED STATEMENTS OF CASH FLOWS

                                                                                               Six months ended June 30,
                                                                                                  Year ended June 30,
                                                                                      --------------------------------------------
                                                                                         2001             2000           1999
                                                                                      ------------    ------------    ------------

                                                                                  <c>              <c>             <c>
Increase (Decrease) in Cash and cash equivalents

Cash flows from operating activities
        Net loss                                                                      $(16,311,206)   $ (6,636,452)   $   (844,250)
        Adjustments to reconcile net loss to net cash
               used in operating activities:
               Depreciation and amortization                                             2,566,409         450,814          42,362
               Losses due to impairment                                                  3,361,048            --              --
               Losses due to abandonment and theft                                         169,700            --              --
               Write off of license and trademark costs                                       --           304,500            --
               Write off of related party balances                                          32,705            --              --
               Employee stock and stock option compensation                                 36,744         350,835            --
               Warrants issued for services                                                   --           122,000            --
               Shares issued in lieu of cancellation fees                                   80,000            --              --
               Millennium units issued for services                                        150,000            --              --
               Changes in assets and liabilities
                      Receivable                                                           322,000        (289,349)        (67,826)
                      Security deposits and prepaid expenses                               262,039        (194,504)        (34,873)
                      Accounts payable, accrued liabilities and customer deposits
                                                                                         1,997,474         447,756         496,491
                      Related party receivables                                               --           (82,644)        (36,282)
                                                                                      ------------    ------------    ------------

                      Net cash and cash equivalents used in operating activities        (7,333,087)     (5,527,044)       (444,378)

Cash flows from investing activities
        Acquisition of fixed assets, net of disposals                                     (648,985)     (1,782,659)       (677,163)
        Acquisition of intangible assets                                                  (218,507)     (1,843,525)        (50,000)
        Cash acquired through Forestay                                                        --               500            --
        Capital lease deposits                                                                --          (203,915)        (24,834)
                                                                                      ------------    ------------    ------------

                      Net cash and cash equivalents used in investing activities          (867,492)     (3,829,599)       (751,997)

Cash flows from financing activities
        Proceeds from issuance of common stock                                                --            75,000         601,295
        Proceeds of Millennium placement                                                 2,450,787           4,307            --
        Proceeds from issuance of preferred stock                                             --              --             2,925
        Proceeds from issuance of 1999 Class A Units                                          --         2,772,500         590,000
        Proceeds from issuance of 1999 Class D Units                                       326,086       8,773,941            --
        Proceeds from conversion of Class D Warrants                                     3,565,714            --              --
        Proceeds from issuance of 1999 Internal Warrants A
                                                                                              --              --               200
        Proceeds from exercise of stock options and sale of common stock to employees
                                                                                            31,932           3,550          27,000
        Proceeds from issuance of convertible debenture                                    400,000            --              --
        Payments on capital lease obligations                                             (543,762)        (55,347)           --
                                                                                      ------------    ------------    ------------

                      Net cash provided by financing activities                          6,230,757      11,573,951       1,221,420

Effect of the exchange rate changes on cash                                               (158,928)        (59,400)        (20,523)
                                                                                      ------------    ------------    ------------

Net increase (decrease) in cash and cash equivalents                                    (2,128,750)      2,157,908           4,522

Cash and cash equivalents at beginning of year                                           2,162,430           4,522            --
                                                                                      ------------    ------------    ------------

Cash and cash equivalents at end of year                                              $     33,680    $  2,162,430    $      4,522
                                                                                      ============    ============    ============


Cash paid for:
  Interest                                                                            $    125,000    $      8,272    $      1,652
  Taxes                                                                               $       --      $       --      $       --

Non-cash disclosures:
  Additions to capital leases                                                         $    540,516    $  2,016,198    $       --
  Note issued in connection with asset acquisition                                    $       --      $       --      $     65,681
</TABLE>

The accompanying notes are an integral part of these statements.

                                        F-5
<PAGE>

                  Milinx Business Group, Inc. and Subsidiaries

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                             June 30, 2001 and 2000

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,  580880BC  Ltd.  doing  business  as  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  Wireless,  Inc.  ("Milinx  Wireless"),   a  subsidiary  of  Milinx,  was
incorporated in the State of Delaware on December 6, 2000. Milinx Wireless, Inc.
was structured to facilitate the  advancement  of  proprietary  technology  into
global wireless  development.  As further discussed,  the Company sold shares of
Milinx Wireless as part of its Millennium units offering ("Millennium Offering")
which resulted in immaterial amount of minority interest.  Due to immateriality,
it was not separately disclosed in the accompanying financial statements. Milinx
Wireless has not yet commenced its operations.

ASP Technology One, Inc. ("ASP Techone") was incorporated in the State of Nevada
on August 4, 2000, as a wholly owned  subsidiary of Milinx Business Group,  Inc.
for the  purposes of  facilitating  the sign-up of  Resellers  to market  Milinx
products and  services  and to act as the  Application  Service  Provider  (ASP)
subsidiary of Milinx. ASP Techone has not yet commenced its operations.

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
amortization and impairment write down.



Depreciation and amortization were 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


                                        F-6
<PAGE>
                  Milinx Business Group, Inc. and Subsidiaries

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                             June 30, 2001 and 2000

NOTE A - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Continued

4.       Licenses
         --------

The Company  capitalizes  costs of software  licenses  acquired from third party
vendors.  Periodically, the Company evaluates its intangibles in accordance with
Statement of Financial  Accounting  Standards (SFAS) No. 121, Accounting for the
Impairment of Long-Lived  Assets and for Long-Lived Assets to Be Disposed Of, to
determine potential impairment.


Amortization  was 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 was  determined  as the  lesser of the  license  term or
estimated life of the license and ranged from 2 to 3 years.



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 years ended June 30,  2001 and 2000,  and the six months
ended June 30,  1999 was  16,013,405,  8,972,958  and  2,656,040,  respectively.
Diluted loss per share includes the effect of all  potentially  issuable  common
stock.  Diluted  loss per share for the years ended June 30, 2001 and 2000,  and
the six  months  ended  June  30,  1999  equaled  basic  loss per  share  due to
antidilutive  effect of the  potentially  issuable  common stock. As of June 30,
2001, there was no potentially issuable common stock.

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

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 Loss
--------------------

The Company has 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 loss items for the years ended June 30, 2001 and 2000
and the six months ended June 30, 1999. The Company's total  comprehensive  loss
for the years  ended June 30, 2001 and 2000,  and the six months  ended June 30,
1999 were $16,237,100, $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 June 2001,  the  Financial  Accounting  Standards  Board issued  Statement of
Financial Accounting Standards No. 141 (SFAS 141), Business  Combinations.  SFAS
141 applies to all business  combinations  initiated  after June 30,  2001.  The
Statement  also applies to all  business  combinations  accounted  for using the
purchase method for which the date of acquisition is July 1, 2001, or later. The
adoption  of SFAS  141  will  not  have an  impact  on the  Company's  financial
statements.

In June 2001,  the  Financial  Accounting  Standards  Board issued  Statement of
Financial Accounting Standards No. 142 (SFAS 142), Goodwill and Other Intangible
Assets.  The  provisions  of SFAS 142 are required to be applied  starting  with
fiscal  years  beginning  after  December  15,  2001  with  earlier  application
permitted for entities with fiscal years beginning after March 15, 2001 provided
that the first interim financial statements have not been previously issued. The
statement is required to be applied at the beginning of the entity's fiscal year
and to be applied to all goodwill and other intangible  assets recognized in its
financial  statements  to that date.  The  adoption of SFAS 142 will not have an
impact on the Company's financial statements.

In October 2001, the Financial  Accounting  Standards Board issued  Statement of
Financial  Accounting  Standard  (SFAS) 144,  Accounting  for the  Impairment or
Disposal of Long-Lived Assets.  SFAS 144 supersedes SFAS 121, Accounting for the
Impairment of Long-Lived Assets and Long-Lived Assets to Be Disposed Of, and APB
Opinion 30,  Reporting  the  Results of  Operations  - Reporting  the Effects of
Disposal of a Segment of a Business, and Extraordinary, Unusual and Infrequently
Occurring Events and Transactions, for segments of a business to be disposed of.
SFAS 144 is effective for fiscal years  beginning  after  December 15, 2001. The
adoption  of SFAS  144  will  not  have an  impact  on the  Company's  financial
statements.

                                       F-7
<PAGE>
                  Milinx Business Group, Inc. and Subsidiaries

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                             June 30, 2001 and 2000


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

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



NOTE B - MANAGEMENT PLANS

The  accompanying  consolidated  financial  statements  are  prepared on a going
concern  basis which  contemplates  continuity  of  operations,  realization  of
assets, and liquidation of liabilities in the ordinary course of business and do
not reflect  adjustments  that might result if the Company is unable to continue
as a going concern.

In September 2001, the Company's current  management team took over as part of a
restructuring  initiative.  This  management  team  assessed  the  business  and
financial   position  of  the  company  and  determined  that  the  only  viable
alternative was to attempt to reorganize  through a voluntary  bankruptcy filing
by its  subsidiary,  Milinx  - BC.  The  proposed  plan of  reorganization  will
ultimately  need  to  receive  the  support  of its  secured  creditors  and its
unsecured  creditors,  who will meet to approve the plan.  The plan must also be
approved by the bankruptcy court.  Milinx - BC bases its initiative on obtaining
approval of a plan of  reorganization,  because its business model  contemplates
using two material assets of Milinx - BC.

On October  12,  2001,  a Notice of  Intention  was filed with the Office of the
Superintendent of Bankruptcy ("OSOB") in British Columbia,  Canada.  Milinx - BC
has until December 24, 2001, to file a plan of reorganization  with the OSOB. If
the  court  accepts  the plan of  reorganization,  the  OSOB  and  Milinx - BC's
unsecured  creditors  are  notified  of  a  meeting  to  consider  the  plan  of
reorganization. The meeting is to occur within 21 days of the filing of the plan
of reorganization.  If the plan receives approval by the creditors (which occurs
if the plan receives the vote of a majority in number of the creditors  filing a
proof of claim and the vote of 66% of the dollar value of the claims),  then the
plan will be submitted to the court for its  approval,  which is to occur within
15 days. If Milinx - BC's general unsecured  creditors and the court approve the
plan,  it  becomes a  contract  between  Milinx - BC and its  general  unsecured
creditors,  and the  balance  of debt is  extinguished  if Milinx - BC  performs
according to the plan.

The proposal  must be  attractive  enough to the  claimants  that it secures the
necessary  votes for  approval.  The final amount of the claims that Milinx - BC
will  pay to its  unsecured  creditors  will  ultimately  be  determined  if the
creditors  approve the plan of  reorganization.  Milinx's  efforts are currently
focused on developing the plan of  reorganization.  The opposing  constraints on
the plan are the  resources  available  for payment of claims versus what enough
claimants will find  acceptable to approve the plan.  Because of the uncertainty
associated with both of these variables,  Milinx cannot predict at this time the
level of payments that the plan of reorganization will ultimately propose.

During the course of the  reorganization,  Milinx has been and will  continue to
pay continuing expenses of approximately  $15,000 per month for the lease of the
data center, in addition to other general and administrative  costs. If the plan
of reorganization is approved by the creditors and accepted by the court, Milinx
will need to fund the  balance  of the debt  under  the plan of  reorganization.
There can be no assurance that Milinx's plan of reorganization  will be approved
by the  creditors  or by the court or that Milinx will be able to fund the debt.
To obtain  approval,  Milinx will need to  demonstrate  to the creditors and the
court that its plan is viable.  If the plan is not approved or if it is approved
and Milinx - BC does not  perform  according  to its terms,  Milinx - BC will be
forced into an involuntary bankrutpcy.

During  the year  ended  June 30,  2001,  the  Company  raised an  approximately
$6,775,500 in equity  capital and debt  financing.  Subsequent to June 30, 2001,
the  Company  raised  $300,000  through  a  series  of  private   placements  of
convertible  debentures  bearing 12% interest rate. Each debenture also had five
shares of the Company's  voting common stock for each dollar loaned the Company.
The Company is  currently  in the process of raising  additional  funds  through
similar financing arrangements.

The  Company's  negative  cash flow from  operations is expected to continue and
could accelerate in te foreseeable  future. The Company does not expect that its
existing  capital  resources will be adequate to satisfy the requirements of its
current and planned operations during fiscal year 2002. The Company will need to
raise  substantial  additional  capital to fund its operations and may seek such
additional funding through public or private equity or debt financing. There can
be no assurance  that such  additional  funding will be available on  acceptable
terms,  if at all.  The  Company's  continued  existence  as a going  concern is
ultimately   dependent  upon  its  ability  to  secure  additional  funding  for
completing   and  marketing  its  technology  and  the  success  of  its  future
operations.


Continuing  on a going concern  basis is dependent  upon,  amongst other things,
Milinx - BC's formulation of an acceptable plan of reorganization, the Company's
success of future  business  operations,  and the generation of sufficient  cash
from  operation  and  financing  sources  to meet its  obligations.  Other  than
recognizing   impairment  losses  of  its  long-lived   assets,   the  Company's
consolidated  financial  statements do not reflect:  (a) the realizable value if
assets on liquidation  basis or their  availability  to satisfy  liabilities;(b)
aggregate  pre-petition  liabilities  amounts  that may be allowed for claims or
contingencies, or their status and priority; (c)the effect of any changes to the
Company's  capital  structure or in its business  operations  as a result of the
proposed reorganization;  or (d) adjustments to the carrying value of the assets
or liability amounts that may be necessary as the result of actions by the OSOB.


                                       F-8
<PAGE>

                  Milinx Business Group, Inc. and Subsidiaries

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                             June 30, 2001 and 2000


NOTE C - PROPERTY AND EQUIPMENT

As of June 30, the  following is a  composition  of the  Company's  property and
equipment:

                                                        2001          2000
                                                     ----------   -----------
Computer hardware and telecommunication  equipment   $  884,694   $2,763,822
Computer software                                        95,646      395,461
Furniture and fixtures                                    6,571      259,707
Leasehold improvements                                  113,315      625,729
                                                     ----------   ----------
                                                      1,100,226    4,044,719
Accumulated depreciation and amortization                  --        472,551
                                                     ----------   ----------

                                                     $1,100,226   $3,572,168
                                                     ==========   ==========

Continuous losses, failing business model and additional uncertainties triggered
by the  general  state of the  economy  indicated  potential  impairment  of the
Company's property and equipment. In accordance with SFAS 121, the Company wrote
its property and equipment  down to their fair value by utilizing an independent
third  party  appraiser  who used the cost  approach  as the  primary  method in
estimating  the fair market value of a 100 percent  common stock interest in the
Company.  The Cost approach is based on the principle that a buyer would not pay
more for the property and equipment  than what it would cost to create an entity
of equivalent utility.  The application of this approach involves estimating the
replacement cost of the entity. This is typically  accomplished by adjusting all
assets and liabilities,  tangible and intangible, to fair market value, with the
net asset value, assets minus the liabilities,  serving to indicate the value of
the entity's equity. As a result of the valuation and its analysis,  the Company
recorded an impairment loss of $2,042,261 at June 30, 2001.


The Company also incurred an abandonment and theft losses of $169,700 related to
abandoned and misplaced office equipment and leasehold  improvements  originally
located at the Company's previous  corporate  headquarters that it was forced to
vacate in June 2001 due to the rent delinquency.

NOTE D - RELATED PARTY TRANSACTIONS

The Company's majority  stockholder and President has a 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.

                                       F-9


<PAGE>

                  Milinx Business Group, Inc. and Subsidiaries

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                             June 30, 2001 and 2000

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

The Company entered into a licensing agreement with Intraware,  a partner of the
SUN/Netscape  Alliance  (iPlanet) on April 27, 2000. This licensing provided 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 were included in the accounts payable at June 30,
2000. In addition, during the year ended June 30, 2000, the Company entered into
several other licensing  agreements for use in its Data Center,  at a total cost
of $341,870.  The licensing was to be amortized  based on the number of seats in
use. As of June 30, 2000, the Data Center were not fully  operational and, thus,
no amortization was recognized for the year ended June 30, 2000.

Continuous losses, failing business model and additional uncertainties triggered
by the  general  state of the  economy  indicated  potential  impairment  of the
Company's  licenses.  At March  31,2001  and then  June 30,  2001,  the  Company
conducted an impairment  analysis in accordance  with the SFAS No. 121 and wrote
off  $1,318,787,  representing  the  remaining  an  unamortized  balance  of the
capitalized license costs.

NOTE F - ACCRUED LIABILITIES

Accrued liabilities are comprised of the following as of June 30:

                                         2001         2000
                                      ----------   ----------
Compensation                          $  512,447   $   14,029
Legal fee                                387,544         --
Employee benefits and payroll taxes      260,369       70,848
Commissions                                 --        135,187
Others                                   296,008       59,694
                                      ----------   ----------
                                      $1,456,368   $  279,758
                                      ==========   ==========

NOTE G - CONVERTIBLE DEBENTURE

On November 9, 2000,  the Company  sold a $444,4444  convertible  debenture to a
unrelated third party for net proceeds of $400,000.  The debenture was to mature
on March 31, 2001, with 12% interest and was convertible upon demand into shares
of the Company's common stock at $3.00 per share.  Based on the November 9, 2001
opening  price of the  Company's  stock,  there  was no value to the  beneficial
conversion  feature  associated with the debenture.  The $44,000 premium paid on
the debenture, was amortized as an additional interest expense.


On December 29, 2000 the holder of convertible debentures called the outstanding
principal balance by providing the Company with a thirty-day notice.
The Company is currently in a default on the debenture. As of June 30, 2001, the
outstanding  principal  balance was  $444,444.  In  addition,  accrued  interest
expenses include $35,556 of unpaid interest.


                                       F-10

<PAGE>


                  Milinx Business Group, Inc. and Subsidiaries

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                             June 30, 2001 and 2000



NOTE H - STOCKHOLDERS' EQUITY

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

Common Stock - $0.001 par value, 210,000,000 shares authorized.

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. 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, 2001 and 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.  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.  All Series B preferred  shares were
converted into common shares during the year ended June 30, 2001.

                                       F-11


<PAGE>


                  Milinx Business Group, Inc. and Subsidiaries

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                             June 30, 2001 and 2000


NOTE H - STOCKHOLDERS' EQUITY - continued

Series C $0.001 par value, 10% non-cumulative, voting,  convertible  preferred
stock -  10,000,000  shares  authorized.  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, 2001 and 2000, the conversion
ratio Series C preferred stock to common was 1:1.


In  respect to the  anti-dilution  conversion  provisions  of the Series A and C
Convertible  Preferred Stock triggered by the sale of Millennium units  at $2.00
per share (see below),  a non-cash deemed dividend of $1,700,000, to accumulated
deficit in the year ended June 30, 2001, was recognized.


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

Warrants - As of June 30, 2001 and 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, 2001 and 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.   All  warrants  were
     converted into common shares during the year ended June 30, 2001.

     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.


                                       F-12


<PAGE>


                  Milinx Business Group, Inc. and Subsidiaries

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                              June 30, 2000 and1999

NOTE H - STOCKHOLDERS' EQUITY - Continued

     Class  D  Warrants,  5,000,000  warrants  authorized  These  warrants  were
     exchangeable for common shares at $2.00 per common share until November 15,
     2000.  During  the  years  ended  June 30,  2001 and  2000,  1,182,256  and
     1,312,206 Class D warrants,  respectively, were issued through a conversion
     of Class D units. During the years ended June 30, 2001 and 2000,  1,782,857
     and 37,500,  respectively  of Class D warrants were  converted  into common
     shares. The remaining warrants expired unexercised on November 15, 2000.

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

          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 2,364,511
          Class D units  outstanding all of which were converted during the year
          ended June 30, 2001.

          Millennium Units

          From January through June 2001 the Company sold 1,435,213 "Millennium"
          units, consisting of four common shares of Milinx Business Group, Inc.
          and  Milinx  Wireless,  Inc.  at a price of $2.00 per unit.  Each unit
          consists of four common shares of Milinx and 8 common shares of Milinx
          Wireless.  For the first  $7,000,000 in gross  proceeds  received,  an
          additional  bonus  share of  Milinx  Wireless  was be  issued  to each
          subscriber.



                                      F-13



<PAGE>


                  Milinx Business Group, Inc. and Subsidiaries

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                             June 30, 2001 and 2000

         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.
         As of June 30, 2001, none of the warrants have been exercised.

         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. As of June 30,
         2001 and 2000, no warrants have been exercised.

          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 value of the  stock  declining
          substantially  subsequent  to May  10,  2000  remeasurement,  variable
          accounting  required  under FIN 44 had no  effect on the  accompanying
          financial  statements.  As of June 30, 2001 and 2000, no warrants have
          been exercised.

          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. As of June 30, 2001 and 2000, no warrants have
          been exercised.

As of June 30, 2001 and 2000,  there were  250,000 in  outstanding  common stock
warrants  originally  issued in December  1999 in  connection  with the Forestay
acquisition.  The  warrants  are  exercisable  at $4.00 per share and  expire on
December 9, 2004.


                                       F-14


<PAGE>


                  Milinx Business Group, Inc. and Subsidiaries

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                             June 30, 2001 and 2000

NOTE I- STOCK OPTIONS

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,  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
Principles  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.
During the year ended June 30, 2001,  employees  exercised  558,500  options for
total  proceeds to the Company of $31,931 and  forfeited  all but 250,000 of the
remaining  options (due to termination of all of the Company's  workforce).  The
net affect of APB 25 adjustments  related to options vested and exercised during
the year ended June 30, 2001 and options forfeited, was $36,744.


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.

                                       F-15


<PAGE>


                  Milinx Business Group, Inc. and Subsidiaries

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                             June 30, 2001 and 2000



NOTE I - 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, 2001 and 2000 (all option  information  has been adjusted for the
November 1999 reverse stock split).


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

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


       Options granted                                 -                   -
       Options forfeited                       (3,639,750)               1.81
       Options exercised                         (408,500)               0.66
                                              -------------    -----------------


    Options outstanding at June 30, 2001          400,000         $      2.00

    Number of options available for grants      2,551,750

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

The Company  granted no employee  stock  options  during the year ended June 30,
2001.


The following table summarizes information about options outstanding at June 30,
2000.
<TABLE>
<CAPTION>

                                           Options Outstanding                                  Options Exercisable
                        -----------------------------------------------------------    ---------------------------------------
                                              Weighted           Weighted -
                                              Average             Average
     Range of               Number         Exercise Price        Remaining               Number          Weighted Average
  Exercise Prices        Outstanding           Price          Contractual Life (yrs)     Exercisable         Exercise Price
--------------------    ---------------    ----------------   ---------------------    -------------    ----------------------
<S>                     <C>                <C>                <C>                      <C>              <C>
   $2.00                   250,000              $2.00                 0.58                  250,000            $2.00


</TABLE>




                                      F-16



<PAGE>


                  Milinx Business Group, Inc. and Subsidiaries

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                             June 30, 2001 and 2000

NOTE I - 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 during the year ended June 30, 2000, 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)

For the year ended June 30, 2001,  there was no material pro forma effect of the
stock options on the consolidated financial statements due the offsetting effect
of forfeitures.

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. All options were forfeitured during the year
ended June 30, 2001.

NOTE J - 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, 2001
and 2000 were:


                                        2001                  2000
                                ---------------------  ---------------------



Tax benefit at statutory rate   $     (5,545,810)      $        (2,256,393)
Permanent differences                     11,148                    11,461
Canadian tax rate differences         (1,266,500)                 (669,691)
Increase in valuation allowance        6,801,162                 2,914,623
                                ---------------------  ---------------------



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


                                       F-17


<PAGE>


                  Milinx Business Group, Inc. and Subsidiaries

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                             June 30, 2001 and 2000

NOTE J - INCOME TAXES - continued


The components of deferred taxes are as follows at June 30, 2001 and 2000:

                                        2001                   2000
                                ---------------------  ---------------------


Deferred tax asset:
    Net operating loss
  carryforward                  $    8,191,498         $     3,188,633
    Depreciation                       626,239                (169,085)
    Stock options and
      warrants                          12,493                 149,884
    Organization costs                       -                  29,087
    Impairment of fixed assets       1,094,728
    Loss on theft and
      abandonment of fixed assets       57,698
    Other                               24,485                   7,460
    Valuation allowance            (10,007,141)             (3,205,979)
                                ---------------------  ---------------------



                                $         -            $           -
                                =====================  =====================




The Company has established  the above valuation  allowances as of June 30, 2001
and 2000 and due to  uncertainty  of future  realization of deferred tax assets.
Total valuation allowance increased by $6,801,162 from June 30, 2000 to June 30,
2001, primarily due to current year temporary differences. At June 30, 2001, the
Company has $24,100,000 in net operating loss  carryforwards  for federal income
tax purposes  available to offset  future  income which expire in 7 to 20 years.
Potential  changes,   if  any,  in  the  company's  ownership  could  result  in
limitations on the use of its net operating loss carryforwards.




NOTE K - COMMITMENTS AND CONTINGENCIES

1.       Operating Lease

The Company has obligations  under a long term,  non-cancelable  operating lease
for premises.  This lease expires  October 2004.  The aggregate  future  minimum
payments are as follows:

            Year ending June 30,

                    2002                    $ 152,000
                    2003                      152,000
                    2004                      152,000
                    2005                       51,000
                                           -----------

Total minimum lease payments                $ 507,000
                                           ===========



                                      F-18


<PAGE>


                  Milinx Business Group, Inc. and Subsidiaries

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                             June 30, 2001 and 2000

NOTE K- COMMITMENTS AND CONTINGENCIES - continued

Consolidated  rent  expenses  for the years ended June 30, 2001 and 2000 and the
six months  ended June 30,  1999,  were  approximately  $569,000,  $287,000  and
$32,000, respectively.

2.       Capital Leases

In  connection  with the opening of its Data  Center,  the Company  entered into
several capital lease agreements ranging in duration from two to three years. As
of June 30, 2001, the future  minimum lease payments under these  agreements are
as follows.

            Year ending June 30,

                    2002                         $      1,781,093

   Less: interest (at 12%)                                222,415
                                                 ------------------

Present value of capital lease obligations              1,558,678

Current portion of capital lease obligations            1,558,678
                                                 ------------------


As of June 30, 2000, the capitalized  cost of equipment under capital leases was
approximately  $597,000,  which represented its net realizable value computed in
accordance with SFAS 121 (see note C for additional information).

Subsequent to June 30, 2001, the Company entered into settlement agreements with
two lessors  resulting  in  temporary  deferral of  principal  payments on three
leases and cancellation of the other one. 23

                                      F-19
<PAGE>


                  Milinx Business Group, Inc. and Subsidiaries

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                             June 30, 2001 and 2000





NOTE K - COMMITMENTS AND CONTINGENCIES - continued

3.       Employment Agreements


At  June  30,  2001,  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,

                 2002                            120,000
                 2003                             30,000
                                             -------------

                                             $   150,000
                                             =============



Total unpaid  compensation  under  contracts as of June 30, 2001 and 2000,  were
$40,000 and $ 7,590, respectively and was included in accrued liabilities in the
accompanying consolidated balance sheet.


On August 16, 2001,  the Company  entered into an employment  agreement with its
new  officer  and Board  member.  The  agreement  expires on August 17, 2003 and
entitles  the  executive to $40,000 in  compensation  on or prior to October 17,
2001, and then an annual compensation of $250,000.  The agreement also calls for
a $150,000  performance  bonus  upon  achievement  of  specific  milestones.  In
addition  to the  aforementioned  compensation,  fringe  benefits,  and  expense
reimbursement,  the employee was granted  1,000,000  stock  options  exercisable
through  August 16, 2004 at $0.10 per share.  In addition,  the Company  granted
this new officer and Board member  500,000  stock  options  exercisable  through
August 16, 2004 at $0.10 per share.


4.    Legal

 On April 6, 2001 Milinx  Business  Group and Milinx  Business  Services filed a
Writ  of  Summons  in  the  Supreme  Court  of  British   Columbia  against  Sun
Microsystems, Inc., Netscape Communications Canada, Inc., Netergy Networks, Inc.
Intraware  Canada,  Inc. and  Burntsand  Inc.  claiming for damages in excess of
$10,000,000  Canadian  dollars for  misrepresentations  and breach of  contract.
Sunrise International Leasing Corporation (with all correspondence under the SUN
Microsystems  letterhead)  filed  a  Summons  and  Complaint  in  the  State  of
Minnesota,  County of Hennepin against Milinx Business Group and Milinx Business
Services,  for two Counts,  Breach of Equipment Lease by Services:  in excess of
$50,000 in damages and  immediate  possession  of equipment  and Breach of Lease
Guaranty by Group: in excess of $50,000 damages and seizure of equipment. Milinx
takes the position that this is in reaction to the Writ of Summons issued in the
Supreme  Court of British  Columbia and  therefore  the  jurisdiction  and claim
should be part of and in the same jurisdiction of British Columbia.  These suits
have been settled  pending payment of certain sums by the defendants with mutual
releases executed by all parties.

After reaching an out of court settlement with Milinx Business Services on April
18,  2001,  Tantalus  Communications  Inc.  filed a  Notice  of  Discontinuance,
releasing Milinx Business Services from further action. Milinx Business Services
was not  required to pay any more than the  invoices  outstanding  before  their
claim.

On October 4, 2000, three former employees of Milinx Business  Services advanced
separate  actions in the British  Columbia Supreme Court against Milinx Business
Services alleging breach of their employment  severance  agreements and claiming
unspecified  damages.  One of the  claimants has since  discontinued  the action
against  Milinx  Business  Services and  Employment  Standards  has  dismissed a
vacation wage claim of one of the two remaining employees.  The proposed plan of
reorganization will address these remaining claims.

There are  numerous  unsecured  creditors of Milinx  Business  Services who have
filed suit or threatened actions against Milinx Business Services. These matters
will be resolved in the reorganization plan to be approved by the court.



From December 2000 to June 2001, the Company  conducted its Millenium  offering.
Some of the sales may have been made in violation of the Act, creating liability
under the Act. The Company believed that the sales were exempt from registration
under the Act, but facts recently  coming to its attention  created  uncertainty
whether the exemption was fully complied with. If a court were to determine that
the exemption had not been fully complied with, the Company's  maximum  possible
liability  would  be  $306,000,  plus  statutory  interest.  The  Company  would
vigorously  defend any assertion by investors  that it had not complied with the
exemption and would seek contribution from third parties the Company believes to
be responsible for the potential violations.



                                       F-20
<PAGE>


                  Milinx Business Group, Inc. and Subsidiaries

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                             June 30, 2001 and 2000


To the  knowledge of the officers  and  directors of Milinx,  there are no other
pending legal proceedings or litigiation and none of its property is the subject
of a pending legal proceeding.  Further, Milinx's officers and directors know of
no  legal  proceedings  against  Milinx  or  its  property  contemplated  by any
governmental  authority  other than the Canadian  government's  claim for wages,
payroll taxes and accrued vacation discussed under note L.

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 L - QUARTERLY RESULTS OF OPERATIONS (UNAUDITED)

<TABLE>
<CAPTION>


Year ended June 30, 2001

                                                             Quarter
                                             1st           2nd           3rd              4th
                                    -----------    -----------    -----------   -------------
<S>                                 <C>            <C>            <C>            <C>
Net sales                           $    87,689    $    23,794    $   165,031   $     14,979


Gross profit (loss)                     (60,548)      (105,469)        52,362        106,367


Net loss from operations             (3,484,588)    (3,565,444)    (3,529,870)    (9,028,140)
Net loss per common share - basic
  and diluted                       $     (0.27)   $     (0.21)   $     (0.18)


Year ended June 30, 2000
                                                             Quarter
                                             1st           2nd           3rd              4th
                                    -----------    -----------    -----------   -------------
Net sales                           $    45,971    $    53,839    $    56,926   $     40,457


Gross profit (loss)                     (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)



Six months ended June 30, 1999

                                                             Quarter
                                             1st           2nd           3rd              4th
                                    -----------    -----------    -----------   -------------
Net sales                                  N/A           N/A      $    16,740   $     26,684



Gross profit (loss)                        N/A           N/A             (870)        (3,818)


Net loss from operations                   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>


                                      F-21

<PAGE>


                  Milinx Business Group, Inc. and Subsidiaries

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                             June 30, 2001 and 2000

NOTE M - SUBSEQUENT EVENTS

The  Government of Canada through the divisions of Revenue Canada and Employment
Standards  have filed  superpriority  liens  against  the  Company  and  certain
directors  and  officers  for unpaid  employee  wages,  payroll  taxes,  accrued
vacation and severance pay. The Company has recorded  these claims,  totaling an
approximately  $750,000,  in accrued  liabilities.  The amount in question is in
dispute and the  Company has an appeal  filed to  determine  the correct  amount
owing. The claims will be addressed in the pending  reorganization and it is the
intention of the company to meet its  obligations  as confirmed by the plan.  If
the  Company  cannot  confirm the plan the  superpriority  claim would allow the
Government to execute on its lien against the assets of the Company.

On August 27, 2001, the Company  approved the issuance pending a registration of
3,033,670  shares of its voting  common stock to be issued to trade vendors (and
two of the  Company's  officers)  in lieu of payments  for  services  previously
rendered.  The shares are to be issued  subsequent to aplanned S-8  registration
with the Securities and Exchange Commission.



On September  19,  2001,  the Company  granted  2,500,000  stock  options to its
president  and two executive  officers.  Of the options  granted,  1,500,000 are
exercisable  at $0.10 per share for a period of three years from the  respective
officers'  dates of engagement,  and vest as follows:  40% of each grant 60 days
from the date of  engagement,  and 60%  equally  over the next ten  months.  The
remaining  1,000,000 options are exercisable at $0.10 per share until August 16,
2004,  and vest as follows:  200,000  options  vested on October 16,  2001,  and
800,000 options vest 1/12 every month beginning on October 16, 2001.









                                      F-22

<PAGE>



                                    PART III

ITEM 10: DIRECTORS AND EXECUTIVE OFFICERS
-----------------------------------------

Identification of Directors and Executive Officers

The following table contains  information  regarding the members of the Board of
Directors and the Executive Officers of the Company:

--------------------------- ----- ---------------------------------------------
Name                         Age   Position(s)

--------------------------- ----- ---------------------------------------------
Maynard L. Dokken (1)        39   Chairman of the Board of Directors, Chief
                                  Executive Officer
--------------------------- ----- ---------------------------------------------
Thomas Loker (2)             46   President, Chief Operating Officer, Director
--------------------------- ----- ---------------------------------------------
Stanley Mazor (3)            60   Director
--------------------------- ----- ---------------------------------------------
Michael Goldstein (4)        40   Director
--------------------------- ----- ---------------------------------------------
Steven Price (5)             50   Chief Financial Officer
--------------------------- ----- ---------------------------------------------

(1)  Mr.  Dokken was  appointed  as Chairman of the Board of Directors on August
     28, 2001.  He has a three-year  term as Director.  Mr.  Dokken  assumed his
     position as Chief Executive Officer on December 8, 1999.

(2)  Mr. Loker was  appointed as President and Chief  Operating  Officer and was
     elected to serve on the Board of Directors  on August 16, 2001,  for a term
     of one year.

(3)  Mr. Mazor was elected to serve on the Board of  Directors on September  19,
     2001, for a term of one year.

(4)  Mr.  Goldstein  was elected to serve on the Board of Directors on September
     19, 2001, for a term of one year.

(5)  Mr. Price was appointed to serve as Chief Financial Officer on September 4,
     2001.


                                       6
<PAGE>

There are no arrangements or  understandings  between the directors and officers
of Milinx and any other person  pursuant to which any director or officer was or
is to be selected as a director or officer. In addition, there are no agreements
or understandings  for the officers or directors to resign at the request of any
other person and the above-named officers and directors are not acting on behalf
of nor acting at the direction of any other person.

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

Mr.  Dokken has worked for the Company and its  subsidiaries  since 1998. He has
served as a director of the Company  since  December,  1998,  its  president and
chief executive  officer since  February,  1999, and chairman of the board since
August 2001.  His duties  include  oversight of legal,  financial  and corporate
governance  matters.  He  currently  serves  as  director,  president  and chief
executive  officer of Milinx Business  Systems,  Inc., a Nevada  corporation,  a
position  he has held since  August,  2000.  He  currently  serves as  director,
president and chief  executive  officer of ASP  Technology  One,  Inc., a Nevada
corporation,  a position he has held since August,  2000. He currently serves as
director,  president  and chief  executive  officer of Credit  Assure  Financial
(Canada)  Inc.,  a British  Columbia  corporation,  a position he has held since
September, 2000. He currently serves as director,  president and chief executive
officer of Milinx  ASP,  Inc.,  a Delaware  corporation,  a position he has held
since  December,  2000.  He currently  serves as director,  president  and chief
executive officer of Milinx Wireless,  Inc., a Delaware corporation,  a position
he has held since  December,  2000.  He also served as director,  president  and
chief executive  officer of 580880 BC Ltd.  (formerly Milinx Business  Services,
Inc., a British Columbia corporation) from March, 1999 to June, 2001. His duties
included developing  applications for internet services.  From 1995 to 1998, Mr.
Dokken  served as president  and chief  executive  officer of Milinx  Marketing,
Inc.,  the  Company's  predecessor.  His  duties  included  oversight  of legal,
financial and corporate governance matters.


     Mr. Thomas Loker,  President  and Chief  Operational  Officer and Corporate
     Director.

Mr. Loker has served as  President,  Chief  Operating  Officer,  Director of the
Company since August,  2001.  Prior to joining the Company,  Mr. Loker served as
president  and chief  operating  officer of SyberSay  Communications.  Mr. Loker
joined SyberSay as chief operating  officer in February of 2000 with the goal of
establishing  and  structuring  the company.  Mr. Loker took the company from an
initial  staff  of 9 to a  team  of 43  members  and by  July  the  company  had
developed,  manufactured  and released its first  products into the market.  Mr.
Loker was appointed  President & COO in October.  During this period the company
released 4 new products.  Mr. Loker spearheaded raising $7 million of additional
capital during this time frame.  He  successfully  recruited his  replacement in
July  2001.  During  his tenure the  company  raised $11  million in  financing,
released 9 products to the market,  introduced new  technologies in the Wireless
and Wired headset market area, obtained 1 patent and filed for 9 patents and had
an  additional 12 inventions in  disclosure.  From  February,  1992 to February,
2000, Mr. Loker was an independent consultant for Thomas Loker Consulting.

     Stanley Mazor, Director

Mr. Mazor has served as a director of the Company since  September,  2001. He is
also presently  Director of Technical  Services at Numerical  Technology.  Since
March 1998, Mr. Mazor has served as training manager for CADABRA,  a position he
still holds. From March 1997 to March 1998, Mr. Mazor served as training manager
of BEA Systems.  From  February 1996 to February  1997,  Mr. Mazor served as the
training manager for CATS, a software company supporting investment markets with
analysis tools for fixed income securities and their derivatives. Mr. Mazor is a
Senior Member in the IEEE.


                                        7
<PAGE>

     Michael Goldstein, Director

Mr. Goldstein has served as a director of the Company since September,  2001. He
is co-founder and co-chief  executive  officer of TeamSearch Inc., a national IT
and  Computer  Contract  Consultancy  firm  to  Fortune  500  and  Fortune  1000
companies,  where he has worked since 1991. He is also co-founder of Goldstein &
Company, a privately held staffing firm in the computer, electronic publishing /
multi  media  arena.  Michael  holds a Bachelor of Science  degree,  majoring in
Business  Administration  and  Economics  with  emphasis  in  Computer  Science,
Psychology and Philosophy from The College of Notre Dame.

     Steven Price - Chief Financial Officer

Mr.  Price has  served as the  chief  financial  officer  of the  Company  since
September,  2001.  Prior to  joining  the  Company,  he was  self-employed  as a
financial  consultant.  From May 1997 to  August  1998,  he  served as the chief
financial  officer of Personic  Software,  Inc.  From June 1996 to May 1997,  he
served as the chief  financial  officer of Orbit  Network,  Inc.  Mr.  Price has
experience  in both  private  and  public  companies  and has been  involved  in
industries   ranging  from  software  and  web  based  systems   development  to
telecommunications companies and banking. Mr. Price has participated in a number
of turn-arounds,  mergers and acquisitions,  as well as fundraising  activities.
Mr. Price has experience in debt reduction and  consolidation and negotiation of
asset based credit  facilities.  He also has significant  experience in investor
relations and SEC relationship issues.

Relationships Among Directors or Executive Officers

There  are no  family  relationships  among any of the  directors  or  executive
officers of the Company.

             SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE

Section 16(a) of the Securities  Exchange Act of 1934, as amended,  requires the
Company's  Directors,  executive officers and persons who own more than 10% of a
registered  class of the  Company's  securities  to file  with  the SEC  initial
reports of  ownership  and reports of changes in  ownership  of common stock and
other  equity  securities  of the  Company.  Directors,  executive  officers and
greater-than-10%  stockholders  are  required by SEC  regulation  to furnish the
Company with copies of all Section 16(a) reports they file.

To the  Company's  knowledge,  based  solely on a review  of the  copies of such
reports  furnished  to the  Company and  written  representations  that no other
reports were required,  the Company believes that during the year ended June 30,
2001,  its  Directors,  Executive  Officers  and  greater-than-10%  stockholders
complied with all Section 16(a) filing requirements.



                                       8
<PAGE>



                                   SIGNATURES

Pursuant  to the  requirements  of  Section  13 or 15(d) of the  Securities  and
Exchange Act of 1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.

MILINX BUSINESS GROUP, INC.

By:       /s/ Maynard L. Dokken
    ----------------------------------------
Name:  Maynard L. Dokken
Title: Chief Executive Officer

Dated: December 21, 2001





                                       9