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

                                    Form 10-K
(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



                                       2
<PAGE>

<TABLE>
<CAPTION>



                                    TABLE OF CONTENTS


Part   Item(s)                                                                                   Page No.
-----  -------                                                                                   --------
<S>    <C>          <C>                                                                          <C>
I        1          Business ......................................................................  4
         2          Properties ....................................................................  8
         3          Legal Proceedings .............................................................  8
         4          Submission of Matters to a Vote of Security Holders ...........................  9

II       5          Market for Registrant's Common Equity and Related Stockholder Matters ........   9
         6          Selected Financial Data ......................................................  10
         7          Management's Discussion and Analysis of Financial Condition and
                       Results of Operations .....................................................  11
         7A         Quantitative and Qualitative Disclosure About Market Risk ....................  14
         8          Financial Statements and Supplementary Data ..................................  15
         9          Changes in and Disagreements with Accountants on Accounting and
                         Financial Disclosure ....................................................  15

III      10         Directors and Officers of the Registrant .....................................  15
         11         Executive Compensation .......................................................  18
         12         Security Ownership of Certain Beneficial Owners and Management ...............  20
         13         Certain Relationships and Related Transactions ...............................  21

IV       14         Exhibits, Financial Statement Schedules and Reports on Form 8-K ..............  23

                    Signatures ...................................................................  24

                    Index to Consolidated Financial Statements ...................................  25

</TABLE>


<PAGE>


                                     PART I

                           FORWARD -LOOKING STATEMENTS

Except for the historical  information  presented in this document,  the matters
discussed  in  this  Form  10-K,  and  specifically  in  the  sections  entitled
"Business" and "Management's  Discussion and Analysis of Financial Condition and
Results  of  Operations,"  or  otherwise  incorporated  by  reference  into this
document  contain  "forward-looking  statements" (as such term is defined in the
Private  Securities  Litigation  Reform Act of 1995).  These  statements  can be
identified  by the  use  of  forward-looking  terminology  such  as  "believes,"
"expects,"  "may," "will," "should," or "anticipates" or the negative thereof or
other  variations  thereon  or  comparable  terminology,  or by  discussions  of
strategy that involve  risks and  uncertainties.  The safe harbor  provisions of
Section 21E of the Securities Exchange Act of 1934, as amended,  and Section 27A
of the Securities Act of 1933, as amended,  apply to forward-looking  statements
made by the Registrant.  You should not place undue reliance on  forward-looking
statements.   Forward-looking   statements   involve  risks  and  uncertainties,
including those  identified  within the section  entitled  "Outlook:  Issues and
Uncertainties  " and elsewhere in, or  incorporated by reference into, this Form
10-K. The actual results that the Company  achieves may differ  materially  from
any  forward-looking  statements  due to such  risks  and  uncertainties.  These
forward-looking  statements are based on current  expectations,  and the Company
assumes no obligation to update this information. Readers are urged to carefully
review and  consider  the various  disclosures  made by the  Registrant  in this
Annual Report on Form 10-K and in the Registrant's  other reports filed with the
Securities and Exchange  Commission that attempt to advise interested parties of
the risks and factors that may affect the Registrant's business.

                              OTHER MATTERS OF NOTE

Unless otherwise  indicated or the context  otherwise  requires,  all references
herein to "Milinx" "MBG" or the "Company" are to Milinx Business Group,  Inc., a
Delaware corporation,  and its consolidated wholly-owned subsidiaries:  580880BC
Ltd.  (dba  Milinx  Business   Services,   Inc.)  ("MBS"),  a  British  Columbia
corporation;  Milinx Business Systems Inc., a Nevada coropration; ASP Technology
One  Inc.,  a Nevada  corporation;  Credit  Assure  Financial  Corp.,  a British
Columbia corporation;  and Milinx ASP Inc., a Delaware corporation. In addition,
MBG is the majority shareholder in Milinx Wireless Inc.

ITEM 1:  BUSINESS
-----------------

CORPORATE BACKGROUND

Milinx  Business  Group,  Inc. was  incorporated  under the laws of the State of
Delaware on December 10, 1998. On December 9, 1999,  Milinx entered into a stock
exchange agreement with Forestay  Corporation,  a public company incorporated in
Delaware.  Under the  agreement,  Forestay  became a wholly owned  subsidiary of
Milinx,  and Milinx elected  successor  status under the Securities and Exchange
Act of 1934 Rule 12g-3.

INITIAL OPERATIONS

Milinx initially  functioned as an application  service provider ("ASP") for the
Small Office/Home Office ("SOHO") and Small/Medium Enterprise ("SME") markets in
North America.  ASPs are companies that remotely host software  applications and
provide access and use of those applications to clients over a secure network on
a recurring fee or subscription  basis. These services are delivered over a Wide
Area Network or Virtual Private Network, usually over the Internet.

Milinx  conducted  its  principal  operations as an ASP through its wholly owned
subsidiary,  580880BC Ltd. (formerly Milinx Business Services,  Inc.), a British
Columbia  corporation.   Milinx's  primary  asset,  a  data  center  located  in
Vancouver,  British Columbia,  houses Sun Microsystems  servers,  Cisco routers,
Oracle software and proprietary  company-created middleware in a fire protected,
electronically   secure  operations  center  that  is  backed  up  by  ancillary
generators.  Milinx invested  significant capital in the development of its data
center and other software applications in anticipation of a market launch.


                                       4
<PAGE>

In June 2001,  due, in part, to a general  economic  downturn in the  technology
industry,  Milinx was unable to obtain the  additional  capital it  required  to
launch its  products.  In an attempt to reduce  operating  expenses and conserve
capital,  Milinx  laid  off  substantially  all  of  its  workforce  and  ceased
operations of its data center.

REORGANIZATION OF MATERIAL SUBSIDIARY

In  September  2001,  Milinx's  current  management  team took over as part of a
turnaround 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  reorganization  filing in British
Columbia, Canada by its subsidiary, 580880BC Ltd., dba Milinx Business Services,
Inc.  580880BC  Ltd.'s 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 court.
Milinx  bases its  turnaround  initiative  on  obtaining  approval  of a plan of
reorganization,  because its  business  model  contemplates  using two  material
assets of 580880BC Ltd.

On October 12, 2001, Milinx's  subsidiary,  580880BC Ltd., filed with the Office
of the  Superintendent  of Bankruptcy  ("OSOB") in British  Columbia,  Canada, a
Notice of Intention.  580880BC Ltd. has until  December 24, 2001, to file a plan
of   reorganization   with  the  court.   If  the  court  accepts  the  plan  of
reorganization, the OSOB and 580880BC Ltd.'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 unsecured  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 580880BC  Ltd.'s
general  unsecured  creditors  and the  court  approve  the plan,  it  becomes a
contract  between  580880BC Ltd. and its general  unsecured  creditors,  and the
balance of general  unsecured debt is  extinguished  if 580880 BC Ltd.  performs
according to the plan.

580880BC  Ltd.'s plan of  reorganization  will have to ultimately  address three
discrete groups of creditors: secured creditors, preferred creditors and general
unsecured creditors.

580880BC  Ltd.'s  two  major  secured   creditors  are  Cisco  Systems  and  Sun
Microsystems.  These secured claims amount to  approximately  $1,600,000.  These
claims  must be  negotiated  outside  the formal  plan filed with the court,  as
secured  creditors  are not bound by a plan of  reorganization  approved  by the
general  unsecured   creditors  and  the  court.   580880BC  Ltd.  is  currently
negotiating with these secured creditors to arrange for a plan of payment on the
secured claims.

580880BC Ltd.'s preferred creditors include its landlord for the data center and
several  former  employees  with  wage  claims.  The  amount  of  the  preferred
creditors'  claims that must be paid immediately upon court approval of the plan
is approximately  $117,000,  which is broken down into approximately  $75,000 of
unpaid wage claims and $42,000 of rental arrears claims. Within six months after
court  approval of the plan,  580880BC Ltd.  must pay an additional  $140,000 in
back withholding taxes. The amount of the preferred claims is not negotiable.

580880BC Ltd.'s general  unsecured  creditors have claims of approximately  $1.8
million.  This amount excludes any  indebtedness of 580880BC Ltd. to its parent,
Milinx.  In crafting the plan of  reorganization  it will file with the court on
December 24, 2001,  580880BC  Ltd. must fashion a proposal that will attract the
votes of a majority  in number  and more than 66% in  dollars  of valid  general
unsecured  claims.  The  proposal  must  treat all  claimants  equally.  In some
instances  equal  treatment  could  consist  of an equal per claim  payment.  In
others, it could consist of a pro-rata payment based on the amount of a claim. A
proposal could combine these approaches.  The proposal may also include payments
over time.  The critical  consideration,  however,  is that the proposal must be
attractive  enough to the  claimants  that it secures  the  necessary  votes for
approval.  The final  amount of the claims that  580880BC  Ltd.  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.

                                       5
<PAGE>

During the course of the  reorganization,  Milinx has been and will  continue to
pay  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 580880BC Ltd. does not perform  according to its terms,  580880 Ltd. will be
forced into a deemed bankrutpcy.

PLANNED FUTURE OPERATIONS

If 580880BC  Ltd.'s plan of  reorganization  is  approved  and if 580880BC  Ltd.
performs according to the plan's terms, 580880BC Ltd.'s two major assets will be
free and clear,  which will allow  Milinx the  opportunity  to  reestablish  its
operations, assuming it can obtain adequate capital. These two assets consist of
unified messaging software and 580880BC Ltd.'s data center.



Unified Messaging Software through SOHO or SME Portal

Milinx's  turnaround  initiative  contemplates  using unified messaging software
through a SOHO or SME Portal as the initial  core  product from which it derives
revenues.  Unified  messaging  software  is  designed  to combine  and  organize
messages received via a variety of media,  including fax, voice mail, e-mail and
pagers,  into a universal  inbox that  customers may access  through a dedicated
link on the world wide web that  launches  the SOHO or SME  portal.  The unified
messaging  software  is  designed to provide  customers  with secure  access and
control over all communications through a single-point  provider,  accessible to
the customer over the Internet from  anywhere in the world.  The new  management
team has retained  software  experts to examine 580880BC Ltd.'s existing unified
messaging software and SOHO or SME portal, and they have concluded that the core
coding  forms the  basis  for a good  product.  Additional  coding is  required,
however, and a graphical user interface will need to be developed and integrated
into the hosted operating system.

Data Center

The data center is an integral part of running the unified  messaging  software,
portal and hosted operating system,  as it is designed to automatically  receive
and digitize messages,  organize,  store,  relate,  display and transmit digital
information on a fully hosted  operating  system.  The Company  occupies  14,000
square feet of highly improved space specially suited for a robust, reliable and
secure data center. The data center is fire protected, electronically secure and
backed up by ancillary  generators.  It houses state of the art Sun Microsystems
servers,   Cisco   routers   and  Oracle   software,   along  with   proprietary
company-created middleware. It will be run twenty four hours a day, seven days a
week.


Acquisition of Distressed Companies

In the long-term,  Milinx's goal is to add additional  software  technologies to
its product mix,  principally  through the  acquisition of distresssed  software
companies.  Milinx feels the benefit of this strategy will be the acquisition of
target companies at highly  discounted bases. By acquiring  distressed  software
companies,  Milinx  believes  it will be able to grow  its  technology  base and
derive revenue without incurring  significant  development costs.  Additionally,
Milinx  hopes  that this  growth  will open new  doors of  distribution,  as the
companies these products are purchased from may conceivably  bring target and/or
existing  customers  with them. The products that Milinx  envisions  bringing to
market under this strategy will focus first on the SOHO market,  followed by the
SME market,  both of which Milinx considers  underserved by larger existing data
management software providers such as SAP and Oracle.

                                       6
<PAGE>

MARKETING AND SALES

Milinx  intends to  initially  target the SOHO market and will off its  products
through  various  reseller  distribution  channels and/or  strategic  alliances.
Milinx perceives the need for specific  products within the SOHO segment,  which
Milinx will create, acquire and/or strategically license in an effort to address
this target market.

More  specifically,  the following are some of the ways Milinx anticipates being
able reach the SOHO target market with its unified messaging  software offering:
(1) Sell its products to strategic  alliances,  which can tap directly  into the
data  center and sell  directly or  indirectly  Milinx's  branded or  re-branded
products and services;  (2) Indirectly sell products to individual users through
reseller networks; (3) Indirectly sell products and services to large user bases
such as clubs, associations and affiliations;  and (4) Sell directly and/or take
orders via a small call center.

COMPETITION

Milinx  will  face  substantial  competition  in most of the  areas  in which it
intends to offer its  services.  Many of the  competitors  are  well-funded  and
well-staffed.  There is no assurance Milinx will be able to effectively  compete
with these companies, which include:

|_|      Systems  Integrators.  Milinx will compete  with many well  established
         --------------------
         commercial  systems  integrators who bundle their  consulting  services
         with  hardware and software  providers to provide  outsourcing  for the
         customer.   Examples  of  these  include   Andersen   Consulting,   iXL
         Enterprises, EDS, KPMG, PricewaterhouseCoopers, and MCI Systemhouse.

|_|      ISPs and Web Hosting Companies.  Milinx expects that  business-oriented
         ------------------------------
         North  American  ISPs and web  hosting  companies  have begun to expand
         their product line to include  service  offerings with Internet and Web
         Hosting  on a  subscription  basis.  Among  these  are AOL,  Concentric
         Networks, Frontier Corporation,  MindSpring Enterprises, NETCOM On-Line
         Communications  Services,  Verio, Exodus, UUNet Technologies,  Verizon,
         PSINet, and Digex.

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

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

As a  company  effectively  trying  to  emerge  from  a  reorganization,  Milinx
obviously  faces high hurdles  competing with such  formidable  and  well-funded
competition.  Milinx believes its  competitive  advantage lies in its pursuit of
market segments not yet pursued by many of these competitors,  including the SME
and the SOHO markets.  Milinx sees the SME as a market  segment that is not well
attended  to.  Most  large  software  companies  ignore  this  segment,  instead
targeting  large  enterprises  such as the Fortune  2000 as they attempt to land
large accounts with large fees for their services. Milinx believes that the SOHO
market is typically addressed by competitors with low-priced,  low-value turnkey
solutions with no flexibility.  Milinx believes its competitive advantage in the
SOHO  market  lies in the fact that it will offer the SOHO  market a  high-value
solution at a competitive  price.  Milinx believes its competitive  advantage in
the SME market lies in the fact that it will offer the SME market an  enterprise
solution with  flexibility at an affordable  price that the competition does not
currently offer.

RESEARCH AND DEVELOPMENT

     Milinx has incurred no research and development  expenses in the last three
     fiscal years.


                                       7
<PAGE>

EMPLOYEES

In September  2001, the Company brought a new management team on board headed by
Thomas Loker. Mr. Loker's team consists of professionals  and technical  experts
capable of  evaluating  a  distressed  business  and  formulating  a  turnaround
initiative.  At present, the Company's only full time employee is Mr. Loker. The
Company has a written agreement with Mr. Loker and oral  understandings with his
management team, the members of which are currently acting as consultants to the
Company.  The Company intends to reduce these oral  understandings to writing in
the near  future.  The  Company  expects  to pay its  officers  at market  rate,
although  initially,  much of their  salary  will most likely be  deferred.  The
Company  has  tentatively  agreed to issue  options on 500,000  shares of common
stock to each officer. For more information on the backgrounds of key members of
the new  management  team,  please see the  biographies  in the  "Directors  and
Executive Officers" Section.

ITEM 2:  PROPERTIES
-------------------

Milinx leases the data center,  which is a secure 14,005 square foot facility in
Vancouver,  B.C., Canada at 1045 Howe Street.  The monthly rent under this lease
is approximately  $15,000. This facility houses Milinx's data center operations,
client  services,  web team and IT  department.  Milinx has  vacated its offices
located at 1080 Howe Street and the lease is no longer in effect.  The 1045 Howe
Street  lease has certain  payments in arrears  which will be  addressed  in the
reorganization proceeding.


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 $782,930 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.


                                       8
<PAGE>

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,  except as discussed  above,  Milinx's
officers  and  directors  know of no legal  proceedings  against  Milinx  or its
property contemplated by any governmental authority.


ITEM 4:  SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
------------------------------------------------------------

No matters were submitted to a vote of security holders in fiscal year 2001.


                                     PART II

ITEM 5:  MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
------------------------------------------------------------------------------

                MARKET PRICE OF AND DIVIDENDS ON THE REGISTRANT'S
                  COMMON EQUITY AND RELATED STOCKHOLDER MATTERS

Market Information

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

                                                     Price Range of Common Stock
                                                      --------------------------

                                                         High/Bid   Low/Bid
                                                        ---------- ---------
Fiscal Year Ended June 30, 2001
  First Quarter ......................................   $   7.38  $   4.13
  Second Quarter .....................................   $   5.63  $   0.69
  Third Quarter.......................................   $   1.50  $   0.75
  Fourth Quarter .....................................   $   1.00  $   0.15

Fiscal Year Ended June 30, 2000
  Fourth Quarter.....................................    $   8.00  $   5.62

The above over-the  counter market  quotations  were taken from Nomura  Research
Institute,  Ltd. and FT Interactive Data Corporation.  They reflect inter-dealer
prices, without retail mark-up,  mark-down or commission and may not necessarily
represent actual transactions.

Holders

Common Stock:

On September 28, 2001, the Company's issued and outstanding common stock totaled
27,010,067  shares and was held by approximately  950 shareholders of record and
by an undetermined number of additional  shareholders  through nominee or street
name accounts with brokers.

Preferred Convertible Stock:

As at September 28, 2001, there were four (4) shareholders of record of Series A
Preferred shares.


                                       9
<PAGE>

Dividends

Milinx has not declared any cash  dividends on its common stock since  inception
and does not intend to pay cash dividends in the foreseeable future.

                     RECENT SALES OF UNREGISTERED SECURITIES

During the year ended June 30, 2001, the Company sold unregistered securities as
follows:

            From August 2000  through  June 2001,  the  Company  issued  558,500
shares of its voting common stock for total cash proceeds of $32,000 pursuant to
the exercise of stock options  previously  granted under the Company's  Employee
Stock Option Plan.

            From July 2000 through May 2001, the Company issued 3,556,312 shares
of its voting common stock  pursuant to the  conversion  of 3,556,312  shares of
previously issued Series C preferred stock.

            From July 2000 to  September  2000,  the  Company  issued  2,364,511
shares of Series C preferred  stock and 1,172,256  Class D warrants  pursuant to
conversion of the Company's previously issued Class D units.

            From August 2000 through November 2000, the Company issued 1,782,857
shares of its voting  common  stock  pursuant  to the  conversion  of  1,782,857
previously issued Class D warrants, for total cash proceeds of $3,566,000.

            In August 2000, the Company issued 1,681,250 shares of the Company's
voting common stock pursuant to the conversion of 1,681,250 shares of previously
issued Series B preferred stock.

         In October 2000,  the Company  issued 1,000 shares of its voting common
stock to an  employee as an  incentive  bonus.  The  issuance  was exempt  under
Section 4(2) of the Securities Act of 1933 (the "Securities Act").

            From  December  2000  through  June 2001,  the  Company  completed a
private  placement of 4,639,617  shares of the Company's voting common stock for
total cash proceeds of $2,259,000. The issuance was exempt under Rule 506 of the
Securities Act.

            From May 2001 to June 2001, the Company issued 300,000 shares of its
voting common stock to a consultant in lieu of consulting expenses. The issuance
was exempt under Rule 506 of the Securities Act.

            In June 2001,  the Company issued 20,000 shares of its voting common
stock for total  proceeds of $10,000.  The issuance was exempt under Rule 506 of
the Securities Act.

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


                                                                      6 mos
                                                Year ending           ending
                                            June 30,     June 30,    June 30,
                                              2001         2000        1999
                                        ----------------------------------------
Net Sales
                                              126,462     197,193      43,424
Loss - continuing operations
                                           16,781,172   6,636,452     844,250
Loss per share - continuing operations
                                                 1.04        0.74        0.32
Total assets                                            1,107,537
                                                        1,184,946   8,993,249
Capital lease obligations, long term
                                                 --       927,808        --


                                       10
<PAGE>


ITEM 7: MANAGEMENT'S  DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
--------------------------------------------------------------------------------
OF OPERATIONS
-------------

Overview

Milinx  is   effectively   a  company   trying  to  emerge  from  a   bankruptcy
reorganization.  The  major  assets  that  form  the  basis  for  the  Company's
turnaround initiative are owned by its subsidiary,  580880BC Ltd., which is in a
court-supervised   reorganization   proceeding  in  British  Columbia,   Canada.
Management's  discussion  will focus on the capital  resources  needed to obtain
approval of 580880BC Ltd.'s plan of reorganization.

During  fiscal  year 2000 and the first  half of fiscal  year  2001,  Milinx was
engaged in developing and hosting proprietary business application software that
could be  delivered  over a  network,  such as the  Internet.  As a part of this
strategy, during fiscal year 2001 the Company placed in service a Data Center in
Vancouver, British Columbia. Due to economic conditions, funding constraints and
other factors,  the Company was not able to effectively  launch its  application
software  service  during the  second  half of fiscal  year 2001.  By the end of
fiscal  year 2001,  the Company had lost all of its  employees  but two,  and it
required  substantial  capital  infusions  merely to sustain the lease and other
financial  commitments it had undertaken in  anticipation of its product launch.
The Company was unable to obtain  these  capital  infusions  and as a result was
driven  to  the  solution  of  putting  its   subsidiary   580880BC   Ltd.  into
reorganization.  The  proprietary  software  and the Data  Center  are  owned by
580880BC Ltd.

Results of Operations

Revenues   decreased  to  approximately   $126,000  in  fiscal  year  2001  from
approximately  $197,000  in  fiscal  year  2000.  In both  years  costs of sales
exceeded revenues and the Company had negative gross margins.  Assuming 580880BC
Ltd. successfully reorganizes and the Company subsequently succeeds in launching
the unified messaging service discussed in the Business section, management does
not anticipate  that the products and services that provided  revenues in fiscal
years 2001 and 2000 will contribute to post-reorganization revenues.

Selling,  general and administrative  expenses increased to approximately  $12.1
million in fiscal year 2001 from approximately $6.4 million in fiscal year 2000.
Increased  amortization  expense  from the Data Center and  increased  headcount
accounted for the majority of the increase.  Assuming 580880BC Ltd. successfully
reorganizes  and the  Company  subsequently  succeeds in  launching  the unified
messaging  service discussed in the Business  section,  management  expects that
selling, general and administrative expenses will be significant, but not nearly
of the magnitude seen in fiscal years 2001 and 2000.

Liquidity and Capital Resources

Despite the  institution  of measures to attempt to rein in costs  beginning  in
December 2000, by the end of the third quarter of fiscal year 2001 the Company's
liquidity  problems had reached a crisis point. By May the Company was regularly
missing  payroll  and by the end of fiscal  year 2001 all  employees  were gone,
except  two.   During  the  course  of  fiscal  year  2001,   the  Company  used
approximately $7.3 million of cash in its operating activities and approximately
$1.4  million  in the  acquisition  of fixed  assets  (including  capital  lease
payments),  net of disposals,  and  intangible  assets.  These uses of cash were
supplied by opening  cash  balances of  approximately  $2.1 million and proceeds
from sales of equity and debt  securities  of  approximately  $6.8  million.  In
addition, the Company's net working capital  position--excluding cash on hand of
approximately  $2.1  million  at  June  30,  2000--ballooned  to  a  deficit  of
approximately $5.0 million at June 30, 2001 from a deficit of approximately $0.8
million at June 30, 2000, resulting in a severe liquidity crunch.

During  August 2001 the  Company  conducted a private  placement  of units.  The
securities  offered were not  registered  under the  Securities Act of 1933 (the
"Act")  and were  offered  and  sold  pursuant  to  applicable  exemptions  from
registration requirements. The offering was based on $1000 increments, with each
increment entitling the purchaser to a note for the full value of the increment,
with 12% interest,  due in 120 days, and 2000  restricted  common  shares.  If a
purchaser  invested  $20,000 or more,  the purchaser  received  3000  restricted
common  shares for each $1000  increment  instead of 2000.  The offering  raised
$100,000.  The  proceeds  were used to pay  operating  expenses and hire the new
management team.

                                       11
<PAGE>

During October 2001 the Company  commenced a new private placement of units. The
securities  offered have not been and will not be  registered  under the Act and
may not be  offered  or sold in the  United  States  absent  registration  or an
applicable  exemption from registration  requirements.  The offering is based on
$1000 increments,  with each increment entitling the purchaser to a note for the
full value of the increment,  with 12% interest,  callable by the Company in 120
days, and 5000 restricted common shares. If the Company does not call the notes,
they are due in 300 days but they bear 15% interest from the date of issue.  The
offering  will be open  until  November  30,  2001,  and it seeks to raise up to
$450,000.  As of the filing of this report, the Company had raised approximately
$180,000 in this offering.  The proceeds will be used to pay operating  expenses
and complete the Company's audit and Form 10-K filing. This disclosure is not an
offer of securities or a solicitation of an offer to buy securities.  Sales will
be made only to investors  with  preexisting  contacts  with the Company and its
authorized representatives. 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 $180,000,  plus  statutory
interest.

While  the  Company  proceeds  with  preparing  the plan of  reorganization  for
580880BC  Ltd. it has monthly  expenses of  approximately  $200,000 that it must
meet.  In  addition,   it  has   professional   expenses   associated  with  the
reorganization and its public company status that must be met from time to time.

The notes issued in the August 2001  offering in the amount of $100,000 come due
in December 2001.

Assuming 580880BC Ltd.'s plan of  reorganization  is approved,  the Company will
immediately need to pay approximately $117,000 in preferred claims plus whatever
immediate cash payments the plan calls for.  Management  anticipates  that these
payments would occur sometime in late January 2002.

The Company  will also need to begin paying its secured  creditors  according to
whatever negotiated schedule it works out with them.

Any  deferred  payments  under  the  reorganization  plan  will  have to be paid
according to its terms, and  approximately  $140,000 of preferred claims will be
due no later than six months after plan approval (currently estimated to be July
2002).

Due to the negotiated nature of many of these payments,  management is unable to
determine with reasonable certainty at this time the amount of capital that will
be needed to successfully complete the reorganization.

In  addition  to  these  reorganization-related  cash  requirements,  management
believes  that the  Company  will  require a capital  infusion  of at least $1.7
million to launch the unified messaging service. Additional working capital will
likely be necessary to sustain the unified messaging service until break-even.

The Company is not committed to make any capital  expenditures,  although it may
need to acquire fixed assets from time to time.

The Company  will need  capital in addition to that being raised in the $450,000
offering in order to succeed in having 580880BC Ltd.'s  reorganization  approved
and the unified  messaging  service launched and supported to break-even.  There
can be no assurance that adequate  capital will be available on terms acceptable
to the Company, or at all. If the Company is unable to raise additional capital,
it may  not be  able  to  continue  as a going  concern,  and it  might  have to
reorganize  under   bankruptcy   laws,   liquidate  or  enter  into  a  business
combination.  The Company has not  presently  identified  any probable  business
combination.

Outlook: Issues and Uncertainties

The Company May Not Raise Enough Capital to Permit  580880BC Ltd. to Emerge from
Insolvency,  Which Would Prevent the Company from  Implementing  Its  Turnaround
Initiative and Could Cause the Company's Stock to Become Worthless


                                       12
<PAGE>

Although the precise amount of capital the Company must raise to permit 580880BC
Ltd. to emerge from  insolvency  cannot be determined at this time,  the Company
will  clearly  need to raise a  significant  amount of capital to  complete  the
reorganization. The Company may not be able to raise enough capital even to gain
approval of the plan of reorganization.  Even if 580880BC Ltd. gains approval of
the plan,  the Company may not raise enough  capital to meet all of the payments
that may be due under the plan over time. In either case, 580880BC Ltd. would be
forced into a deemed  bankruptcy,  and the Company  would not have access to the
major assets that form the basis for its turnaround  initiative.  Without access
to these assets the Company's common stock could be rendered worthless.

580880BC  Ltd.  May  Not  Be  Able  to  Obtain  all  Necessary  Approvals  for a
Comprehensive  Plan of  Reorganization,  Which Would  Prevent  the Company  from
Implementing  Its Turnaround  Initiative and Could Cause the Company's  Stock to
Become Worthless

580880BC Ltd. must reach  accommodations  with its secured  creditors as well as
obtain the required  votes for approval of the proposal  being  submitted to the
general  unsecured  creditors.  If  580880BC  Ltd.  cannot  reach  all of  these
accommodations  and get its plan  approved,  it would  be  forced  into a deemed
bankruptcy,  and the Company would not have access to the major assets that form
the basis for its  turnaround  initiative.  Without  access to these  assets the
Company's common stock could be rendered worthless.

Even if 580880BC Ltd. Successfully Emerges from Insolvency,  the Company May Not
Be Able to Raise Enough Capital to Launch Its Unified Messaging  Service,  Which
Could Cause a New Liquidity Crisis for the Company and Severely Impair the Value
of the Company's Common Stock.

If 580880BC Ltd.  successfully  performs a  reorganization  plan approved by its
creditors,  the Company will have access to the major assets that form the basis
for its  turnaround  initiative.  Even if it gains  such  access,  however,  the
Company  may not raise  enough  capital to meet its ongoing  obligations  and to
complete development of and launch the unified messaging service. If the Company
cannot launch the unified messaging service and begin to earn revenues, it could
experience a new liquidity crisis, which would in turn severely impair the value
of the Company's common stock.

The Company May Encounter  Unforeseen  Hurdles in the Development of the Unified
Messaging  Service That Could Prevent Its Use as  Contemplated  by the Company's
Turnaround Initiative,  Which Could Cause a New Liquidity Crisis for the Company
and Severely Impair the Value of the Company's Common Stock.

The Company has retained  software  development  experts to examine the existing
code that will form the basis for the unified messaging service.  Although these
experts  have  concluded  that the core  coding of  existing  software  owned by
580880BC  Ltd.  will  provide a  platform  for the  unified  messaging  service,
software programs,  and the Internet itself, are complex  interrelated  systems.
The Company could encounter unforeseen  difficulties  completing the development
of the unified  messaging  service that could prevent its use as contemplated by
the Company's  turnaround  initiative.  If the Company cannot launch the unified
messaging  service  and  begin  to earn  revenues,  it  could  experience  a new
liquidity crisis, which would in turn severely impair the value of the Company's
common stock.

Even if the Company  Develops  and  Launches  the Unified  Messaging  Service as
Contemplated by Its Turnaround Initiative, the Unified Messaging Service May Not
Gain Market Acceptance, Which Could Cause a New Liquidity Crisis for the Company
and Severely Impair the Value of the Company's Common Stock.

The Company's  turnaround  initiative is based on launching a unified  messaging
service  that  the  new  management  team  believes  will  be  accepted  by  the
marketplace.  If the unified messaging service does not gain market  acceptance,
whether due to competition, performance issues or some other reason, the Company
would not be able to earn the revenues it needs,  and it could  experience a new
liquidity crisis, which would in turn severely impair the value of the Company's
common stock.

The Company is Subject to all Manner of General Business and Economic Risks, any
of Which Could Create Operational or Financial  Difficulties for the Company and
Lead to an Impairment in the Value of the Company's Common Stock.


                                       13
<PAGE>

Engaging in a business venture is inherently  risky. In addition to the specific
risks set forth above, businesses face competition,  management issues, resource
issues,  asset protection  issues and others,  as well as the effects of broader
general economic conditions.  These risks are not enumerated here, but investors
in  equity  securities  should  familiarize  themselves  with the  business  and
economic  risks  faced by  businesses  generally  and within  particular  market
segments  before  investing.  Any of these general  business and economic  risks
could lead to operational or financial difficulties for the Company, which could
in turn adversely affect the value of the Company's common stock.

The Company's  shares are "penny  stock",  which is more  difficult to sell than
exchange-traded stock.

The Company's  securities are subject to the Securities and Exchange  Commission
rule that imposes special sales practice  requirements upon  broker-dealers that
sell  such  securities  to  other  than  established   customers  or  accredited
investors. For purposes of the rule, the phrase "accredited investors" means, in
general  terms,  institutions  with assets  exceeding  $5,000,000 or individuals
having a net worth in  excess of  $1,000,000  or  having an annual  income  that
exceeds $200,000 (or that,  combined with a spouse's income,  exceeds $300,000).
For  transactions  covered by the rule,  the  broker-dealer  must make a special
suitability  determination for the purchaser and receive the purchaser's written
agreement  to the  transaction  prior to the  sale.  Consequently,  the rule may
affect the ability of holders of the Company's securities to buy or sell them.

In addition,  the  Securities  and Exchange  Commission  has adopted a number of
rules to regulate  "penny  stocks." (A "penny stock" is any equity security that
has a market  price of less than  $5.00 per share or with an  exercise  price of
less than $5.00 per share,  subject to certain  exceptions).  Such rules include
Rules 3a51-1,  15g-1,  15g-2,  15g-3,  15g-4,  15g-5,  15g-6 and 15g-7 under the
Securities  and Exchange Act of 1934, as amended.  The rules may further  affect
the ability of owners of Company shares to sell their  securities.  Shareholders
should be aware that,  according to Securities and Exchange  Commission  Release
No.  34-29093,  the market for penny  stocks has  suffered in recent  years from
patterns of fraud and abuse. Such patterns include:

     o    Control of the market for the security by one or a few broker  dealers
          that are often related to the promoter or issuer;

     o    Manipulation of prices through  prearranged  matching of purchases and
          sales and false and misleading press releases;

     o    "boiler room"  practices  involving  high  pressure  sales tactics and
          unrealistic price projections by inexperienced sales persons;

     o    excessive and undisclosed bid ask differentials and markups by selling
          broker dealers; and

     o    the wholesale  dumping of the same  securities by promoters and broker
          dealers after prices have been  manipulated to a desired level,  along
          with the inevitable  collapse of those prices with consequent investor
          losses.

ITEM 7A:  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
--------------------------------------------------------------------

The  Company   believes  its  exposure  to  overall  foreign  currency  risk  is
immaterial.  The  Company  does not manage or  maintain  market  risk  sensitive
instruments  for trading or other  purposes  and is,  therefore,  not subject to
multiple  foreign  exchange  rate  exposures.  The  Company  has no  outstanding
long-term  indebtedness for which the Company is subject to the risk of interest
rate fluctuations.

The Company  reports its  operations  in US dollars and its  currency  exposure,
although  considered by the Company as immaterial,  is primarily  between the US
and Canadian  dollars.  Exposure to the  currencies  of other  countries is also
immaterial as international  transactions are settled in US dollars.  Any future
financing undertaken by the Company will be denominated in US dollars.


                                       14
<PAGE>

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

Description                                                                       Page
-----------                                                                       ----
<S>                                                                             <C>
Independent Auditors' Report dated November 15, 2001                               F-3

Consolidated Balance Sheets as of June 30, 2001 and 2000                           F-4

Consolidated  Statements of Operations for the years ended June 30, 2001,
   2000 and the six months ended June 30, 1999                                     F-5

Consolidated  Statement of  Stockholders'  Equity  (deficit) for the
   years ended June 30, 2001, 2000 and the six months ended June 30, 1999          F-6

Consolidated  Statements of Cash Flows for the years ended June 30, 2001,
   2000 and the six months ended June 30, 1999                                     F-8

Notes to Consolidated Financial Statements                                         F-9
</TABLE>


These financial statements may be found immediately following the signature page
of this report.


ITEM  9:  CHANGES  IN AND  DISAGREEMENTS  WITH  ACCOUNTANTS  ON  ACCOUNTING  AND
--------------------------------------------------------------------------------
FINANCIAL DISCLOSURE
--------------------

No changes in and disagreements with accountants are reportable pursuant to this
item.


                                    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.

                                       15
<PAGE>

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

(6)  Mr.  Shiffman was  appointed  Secretary  and Legal Advisor on September 21,
     2001.

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.


                                       16
<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.



                                       17
<PAGE>



ITEM 11:  EXECUTIVE COMPENSATION
--------------------------------


                           Summary Compensation Table

The  following  table sets forth the  compensation  paid to the Named  Executive
Officers of the Company during the past three fiscal years. The Company does not
currently  have a long term  compensation  plan and does not grant any long term
compensation to its executive officers or employees.  The table does not reflect
certain personal  benefits,  which in the aggregate are less than ten percent of
each Named  Executive  Officer's  salary and bonus.  No other  compensation  was
granted for the periods covered.
<TABLE>
<CAPTION>

                                                                                Long Term Compensation
                                                                --------------------------------------------------------
                                  Annual Compensation                     Awards                      Payouts
------------------------ -------------------------------------- ---------------------------- ---------------------------
     Name                                             Other      Restricted     Securities
      and                                            Annual         Stock       Underlying                  All Other
   Principal                                         Compen-      Award(s)       Options/        LTIP      Compen-sation
   Position      Year      Salary ($)    Bonus     sation ($)        ($)         SARs (#)    Payouts ($)       ($)
                                           ($)
---------------- ------- --------------- --------- ------------ -------------- ------------- ------------- -------------
<S>              <C>     <C>             <C>       <C>          <C>            <C>           <C>           <C>
Maynard L.       2001    $ 194,750 (1)     -0-         -0-           -0-           -0-           -0-           -0-
Dokken (CEO      2000    $ 118,367         -0-         -0-           -0-       250,000 (2)       -0-           -0-
and Chairman)    1999    $   29,554        -0-         -0-           -0-           -0-           -0-           -0-
---------------- ------- --------------- --------- ------------ -------------- ------------- ------------- -------------
Mikiko           2001    $ 143,083 (3)     -0-         -0-           -0-           -0-           -0-           -0-
Fujisawa         2000    $   85,714        -0-         -0-           -0-       150,000 (4)       -0-           -0-
(Secretary and   1999    $   19,702        -0-         -0-           -0-           -0-           -0-           -0-
Treasurer)
---------------- ------- --------------- --------- ------------ -------------- ------------- ------------- -------------
<FN>
(1) Mr. Dokken received $120,000 in salary in the form of cash. In addition,  on
August 27, 2001,  the Board  approved  the issuance of 325,000  shares of common
stock to Mr. Dokken as compensation for services rendered during the period from
April 1, 2001  through June 30, 2001.  On August 27,  2001,  the closing  market
price of the Company's common stock was $0.23.

(2) On June 1,  2000,  the  Company  granted  Mr.  Dokken an option to  purchase
250,000  shares of common  stock of the  Company at $2.00  vesting in five equal
installments of 50,000 shares. The option will expire on January 31, 2002.

(3) Ms. Fujisawa received $87,500 in salary in the form of cash. In addition, on
August 27, 2001,  the Board  approved  the issuance of 241,667  shares of common
stock to Ms.  Fujisawa as compensation  for services  rendered during the period
from April 1, 2001 through June 30, 2001. On August 27, 2001, the closing market
price of the Company's common stock was $0.23.

(4) On June 1, 2000,  the  Company  granted  Ms.  Fujisawa an option to purchase
150,000  shares of common  stock of the  Company at $2.00  vesting in five equal
quarterly  installments of 30,000 shares.  The option will expire on January 31,
2002.
</FN>
</TABLE>

                                  Option Grants

There were no stock option grants to the Named Executive Officers in fiscal year
2001.

                                       18
<PAGE>

              Aggregated Option / SAR Exercises in Last Fiscal Year
                         and FY-End Option / SAR Values

The following table provides  information on option  exercises in fiscal 2001 by
the Named Executive Officers and the value of such officers' unexercised options
at June 30, 2001.
<TABLE>
<CAPTION>

-------------------------- ---------------------- ---------------------- ---------------------- ----------------------
                                                                               Number of
                                                                              Securities              Value of
                                                                              Underlying             Unexercised
                                                                              Unexercised           In-the-Money
                                                                            Options / SARs         Options / SARs
                                                                             at FY-End (#)          at FY-End ($)

                              Shares Acquired                                Exercisable /          Exercisable /
          Name                on Exercise (#)      Value Realized ($)        Unexercisable         Unexercisable *
-------------------------- ---------------------- ---------------------- ---------------------- ----------------------
<S>                        <C>                    <C>                    <C>                    <C>
Dokken, Maynard                     -0-                    $0              200,000 / 50,000       $53,000 / $13,250
-------------------------- ---------------------- ---------------------- ---------------------- ----------------------
Fujisawa, Mikiko                    -0-                    $0              120,000 / 30,000       $31,800 / $7,950
-------------------------- ---------------------- ---------------------- ---------------------- ----------------------

* On June 29,  2001,  the  average  of the high and low sale price of the stock  trading on the OTC BB was  $0.265.
Mr. Dokken and Ms. Fujisawa have an exercise price of $2.00 on their exercisable stock options.
</TABLE>

                            COMPENSATION OF DIRECTORS

Currently,  directors are not  compensated  for their service as directors other
than with securities.  In the past, directors were compensated for their service
as directors as follows: $3,000 to James Medley (former director). All directors
are reimbursed for any reasonable  expenses incurred in the course of fulfilling
their duties as a director of the Company.

             EMPLOYMENT CONTRACTS AND TERMINATION OF EMPLOYMENT AND
                         CHANGE-IN-CONTROL ARRANGEMENTS

Milinx  entered  into an  employment  agreement  with its CEO Maynard  Dokken on
October 16, 2000. Under the terms of the agreement,  Mr. Dokken is to receive an
annual salary of $CN175,000  per year,  with an annual bonus to be determined by
the Board of Directors.  Under the terms of the agreement,  Mr. Dokken received,
in lieu of an  increase  in salary or bonus for the  fiscal  year ended June 30,
2000, the option to purchase up to 250,000 shares of the company's  common stock
at an exercise price of $2.00 per share.

The Company  entered into an  employment  contract  with its President and Chief
Operating  Officer,  Thomas W. Loker,  on August 16, 2001.  Under the agreement,
Milinx will pay Mr. Loker $40,000 for his first 60 days of employment. After Mr.
Loker's  60th day of  employment,  his annual  salary  will be set at  $250,000,
$75,000 of which is to be deferred until the company can obtain further funding.
The  agreement  entitles  Mr.  Loker to a  $150,000  performance  bonus upon the
achievement of specific  milestones within his first 60 days of employment.  Mr.
Loker was also granted  1,500,000  stock options,  which vest on three different
schedules over the course of a year.

The Company has oral  understandings with certain members of its management team
that were  recently  brought in, and expects to commit these  understandings  to
writing in the near future. These understandings include the commitment to grant
500,000 options to two members of the management team.

                            1999-7 STOCK OPTION PLAN

For a summary of the terms of the Company's 1999-7 Stock Option Plan, see Note H
to the Company's Notes to Consolidated  Financial  Statements  contained in this
Annual Report on Form 10-K and incorporated by reference herein.


                                       19
<PAGE>

                       REPORT ON REPRICING OF OPTIONS/SARs

At no time  during  the last  fiscal  year did the  Company  adjust or amend the
exercise price of stock options granted.

ITEM 12:  SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
------------------------------------------------------------------------

The following  table sets forth  certain  information  regarding the  beneficial
ownership of the common stock as of September 28, 2001 by:

(i)  each person or entity known by the Company to beneficially own more than 5%
     of the common stock;
(ii) each Director of the Company;
(iii) each of the named Executive Officers of the Company; and
(iv) all Directors and executive officers as a group.

Except as noted below,  the Company  believes that the beneficial  owners of the
common stock listed below, based on information  furnished by such owners,  have
sole voting and investment power with respect to such shares.

The number and percentage of shares  beneficially  owned are based on 27,010,067
shares of common stock outstanding as of September 28, 2001.
<TABLE>
<CAPTION>


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

Title of Class     Name and Address                           Amount of Beneficial        Percent of Class
                   Of Beneficial Owner                        Ownership

------------------ ------------------------------------------ --------------------------- -------------------
<S>                <C>                                        <C>                         <C>
                   Maynard Dokken, Chairman, CEO, Director
     Common        300-1045 Howe Street, Vancouver, BC V6Z            14,190,000              35.5% (2)
       (1)         2A9
------------------ ------------------------------------------ --------------------------- -------------------
                   Maynard Dokken, Chairman, CEO, Director
    Series A       300-1045 Howe Street, Vancouver, BC V6Z            4,250,000                 98.3%
  Preferred (3)    2A9
------------------ ------------------------------------------ --------------------------- -------------------
                   Thomas Loker
     Common        President, Chief Operating Officer,
       (4)         Director                                            630,000                   2.3%
                   P.O. Box 2156
                   Danville, California 94526
------------------ ------------------------------------------ --------------------------- -------------------
                   Stanley Mazor, Director
       (5)         70 West Plumeria                                       --                      --
                   San Jose, CA 95134-2134
------------------ ------------------------------------------ --------------------------- -------------------
                   Michael Goldstein, Director
       (6)         1700 North Broadway, Suite 307                         --                      --
                   Walnut Creek, CA 94596
------------------ ------------------------------------------ --------------------------- -------------------
   Common and      Mikiko Fujisawa
    Series A       300-1045 Howe Street, Vancouver, BC V6Z
    Preferred      2A9
       (7)
------------------ ------------------------------------------ --------------------------- -------------------
   Common and      Credit Assure International Inc.
    Series A       300-1045 Howe Street, Vancouver, BC V6Z
    Preferred      2A9
       (8)
------------------ ------------------------------------------ --------------------------- -------------------
                   All  Executive  Officers and Directors as
                   a Group (4 persons)                                14,820,000                36.5%
------------------ ------------------------------------------ --------------------------- -------------------

                                       20
<PAGE>

<FN>
(1) Includes 1,650,000 Series A Preferred shares owned by Mr. Dokken,  with each
Series A Preferred  share  convertible  into 3 shares of common  stock;  600,000
Series A Preferred Shares owned by Mr. Dokken in trust for the benefit of Mikiko
Fujisawa (Mr. Dokken's wife) with each Series A Preferred share convertible into
3 shares of common stock; 250,000 options owned by Mr. Dokken to purchase common
stock that are  currently  exercisable  within 60 days;  400,000 1999 Internal B
Warrants  owned by Mr.  Dokken,  exchangeable  for  400,000  shares  of Series A
Preferred  shares,  with each  share of Series A  Preferred  convertible  into 3
shares of common stock; 441,667 shares of common stock owned by Mikiko Fujisawa;
600,000  Series A  Preferred  shares  owned by Mikiko  Fujisawa in trust for the
benefit of Mr. Dokken,  with each Series A Preferred  share  convertible  into 3
shares of  common  stock;  250,000  1999  Internal  B  Warrants  owned by Mikiko
Fujisawa, exchangeable for 250,000 Series A Preferred Shares, with each share of
Series A Preferred  convertible into 3 shares of common stock;  50,000 shares of
common stock owned by Credit Assure  International Inc., of which Mr. Dokken has
approximately 79% ownership and voting and dispositive  control and Ms. Fujisawa
has  approximately  a 19% interest;  750,000 Series A Preferred  shares owned by
Credit Assure International Inc., with each Series A Preferred share convertible
into 3 shares of common stock.

(2) For purposes of determining  effective  voting  control,  and,  assuming the
conversion  of all  of Mr.  Dokken's  and  Mikiko  Fujisawa's  1999  Internal  B
Warrants,  Mr. Dokken and Mikiko Fujisawa would  collectively  have control over
approximately 51.1% of the Company's voting stock.

(3) Includes  1,650,000 Series A Preferred  shares owned by Mr. Dokken;  600,000
Series A Preferred shares owned by Mr. Dokken in trust for the benefit of Mikiko
Fujisawa (Mr. Dokken's wife);  600,000 Series A Preferred shares owned by Mikiko
Fujisawa  in trust for the  benefit of Mr.  Dokken;  750,000  Series A Preferred
Shares  owned by Credit  Assure  International  Inc.,  of which Mr.  Dokken  has
approximately  79%  ownership  and  dispositive  control  and Ms.  Fujisawa  has
approximately  a 19%  interest;  400,000 1999  Internal B Warrants  owned by Mr.
Dokken,  convertible  into  400,000  Series A  Preferred  shares;  250,000  1999
Internal B Warrants owned by Mikiko Fujisawa,  convertible into 250,000 Series A
Preferred shares.

(4) Includes  630,000  options to purchase  common stock owned by Mr. Loker that
are currently exercisable within 60 days.

(5) Mr.  Stanley  Mazor has an oral  understanding  with the  Company to receive
options,  but a definitive  agreement  with the Company has not yet been reached
and no  corporate  action has been taken to grant  options.  Please see Item 11,
"Executive Compensation - Employment Contracts and Termination of Employment and
Change-In-Control Arrangements" for further discussion.

(6) Mr. Michael Goldstein has an oral  understanding with the Company to receive
warrants for common shares, but a definitive  agreement with the Company has not
yet been reached and no corporate action has been taken to grant options. Please
see Item 13,  "Certain  Relationships  and  Related  Transactions"  for  further
discussion.

(7) Mikiko  Fujisawa  is Mr.  Dokken's  wife.  In order to avoid  confusion  and
duplication, please see Mr. Dokken's holdings described in footnotes (1) and (3)
above.

(8) Mr. Dokken has approximately 79% ownership and dispositive control of Credit
Assure International Inc. and Ms. Fujisawa has approximately a 19% interest.  In
order to avoid  confusion  and  duplication,  please see Mr.  Dokken's  holdings
described in footnotes (1) and (3) above.
</FN>
</TABLE>

There are no arrangements  known to Milinx, the operation of which may result in
a change of control of the company.

ITEM 13:  CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
--------------------------------------------------------

Mr. Maynard Dokken, the Company's majority stockholder,  Chief Executive Officer
and  Director  has  controlling  interest  in the  following  companies:  Milinx
Marketing Group, Inc. (Texas),  Milinx Marketing Group, Inc. (British Columbia),
Milinx Management Corporation,  Credit Assure International,  Inc., Assured Card
Corporation (currently inactive).

                                       21
<PAGE>

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.

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 former
director of the Company. 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.

Based  on  discussions  taking  place  in  August  2001,  the  Company  has oral
understandings  with Mike Goldstein (who would  thereafter  become a director of
the Company) and his wife to issue Mr.  Goldstein  and his wife warrants to each
purchase a 715,834 common shares (a total of 1,431,668) at $0.10 per share.  The
warrants are immediately  exercisable and were issued as part of an agreement in
which the Company engaged Mr.  Goldstein's  and his wife's company,  Teamsearch,
Inc. to hire a president,  chief executive  officer and chief financial  officer
for the Company.

No director,  nominee for election as director or immediate  family  member of a
director  or director  nominee has been  indebted to the Company in an amount in
excess of $60,000 during the last fiscal year.

                                       22
<PAGE>



                                     PART IV

ITEM 14:  EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
-------------------------------------------------------------------------

1) FINANCIAL STATEMENTS

The following consolidated financial statements of Milinx and the notes thereto,
the related reports thereon of the independent certified public accountants, and
financial statement schedules, are filed pursuant to Item 8 of this Report:
<TABLE>
<CAPTION>

Description                                                                       Page
-----------                                                                       ----
<S>                                                                             <C>
Independent Auditors' Report dated November 15, 2001                               F-3

Consolidated Balance Sheets as of June 30, 2001 and 2000                           F-4

Consolidated  Statements of Operations for the years ended June 30, 2001,
   2000 and the six months ended June 30, 1999                                     F-5

Consolidated  Statement of  Stockholders'  Equity  (deficit) for the
   years ended June 30, 2001, 2000 and the six months ended June 30, 1999          F-6

Consolidated  Statements of Cash Flows for the years ended June 30, 2001,
   2000 and the six months ended June 30, 1999                                     F-8

Notes to Consolidated Financial Statements                                         F-9
</TABLE>

2) REPORTS ON FORM 8-K

No reports on Form 8-K were filed by Milinx during the fourth quarter of 2001.

3) LIST OF EXHIBITS

    Exhibit
     Number        Description
     ------        -----------
      3.1*         Certificate  of  Incorporation

      3.3*         By-laws

      4.1          Specimen Stock Certificate

     10.1*         Lease Agreement between 1045 Howe Street and Milinx Business
                   Services, Inc.

     10.2*         Addendum to Lease Agreement between 1045 Howe Street and
                   Milinx Business Services, Inc.

     10.3          Employment Agreement between Milinx Business Group and
                   Maynard Dokken

     10.4          Employment Agreement between Milinx Business Group and Thomas
                   Loker

     21            List of Subsidiaries


     *    Incorporated  by reference from the Form 10-K of the Registrant  filed
          with the Securities and Exchange Commission on October 13, 2000.


                                       23
<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: November 16, 2001


Pursuant to the  requirements  of the Securities and Exchange Act of 1934,  this
report  has  been  signed  below  by the  following  persons  on  behalf  of the
registrant and in the capacities and on the dates indicated.
<TABLE>
<CAPTION>

          Signature                                 Title                               Date
          ---------                                 -----                               ----
<S>                                <C>                                              <C>
By: /s/ Maynard L. Dokken          Chief Executive Officer, Chairman, Director      November 16, 2001
    ------------------------------
Name:  Maynard L. Dokken


By: /s/ Thomas Loker               President, Chief Operating Officer, Director     November 16, 2001
    ------------------------------
Name:  Thomas Loker

By: /s/ Stanley Mazor              Director                                         November 16, 2001
    ------------------------------
Name: Stanley Mazor


By: /s/ Michael Goldstein          Director                                         November 16, 2001
    ------------------------------
Name:  Michael Goldstein


By: /s/ Steven Price               Chief Financial Officer/Principal Accounting     November 16, 2001
    ------------------------------ Officer
Name:  Steven Price

</TABLE>



                                       24

<PAGE>

                                  EXHIBIT INDEX

    Exhibit
     Number        Description
     ------        -----------
      3.1*         Certificate  of  Incorporation

      3.3*         By-laws

      4.1          Specimen Stock Certificate

     10.1*         Lease Agreement between 1045 Howe Street and Milinx Business
                   Services, Inc.

     10.2*         Addendum to Lease Agreement between 1045 Howe Street and
                   Milinx Business Services, Inc.

     10.3          Employment Agreement between Milinx Business Group and
                   Maynard Dokken

     10.4          Employment Agreement between Milinx Business Group and Thomas
                   Loker

     21            List of Subsidiaries


     *    Incorporated  by reference from the Form 10-K of the Registrant  filed
          with the Securities and Exchange Commission on October 13, 2000.




                                       25

<PAGE>



                  MILINX BUSINESS GROUP, INC. AND SUBSIDIARIES

                             June 30, 2001 and 2000
                                 C O N T E N T S



                                                                   Page


REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS                  F-3


FINANCIAL STATEMENTS


         CONSOLIDATED BALANCE SHEETS                                F-4

         CONSOLIDATED STATEMENTS OF OPERATIONS                      F-5

         CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY             F-6


         CONSOLIDATED STATEMENTS OF CASH FLOWS                      F-8

         NOTES TO CONSOLIDATED FINANCIAL STATEMENTS                 F-9


<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,  factors 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-3


<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 $1,176,000
                                                                                          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 $1,016,000 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
                                                                                   ============    ============

The accompanying notes are an integral part of these statements.
</TABLE>

                                                        4


<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)   $ (6,36,452)   (844,250)

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





</TABLE>




The accompanying notes are an integral part of these statements.

                                        F-5


<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
           consideratio
           for servicesn                  --              --             --              --              --           300,000

    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)           --              --

    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                     --             --          --             --             --              --              --
        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       --             --          --             --             --              --              --
        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                 --             --          --             --             --              --        (6,636,452)


    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            --

    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
           consideratio
           for servicesn               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        --             --             --              --              --

    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   $ 20,103,465    $       --      $   (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                       (6,636,452)      (6,636,452)



    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                      --              --

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

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

    Balance at June
           30, 2001               $(23,792,701)   $ (3,890,318)
</TABLE>


The accompanying notes are an integral part of this statement.


<PAGE>


                                        F-7


<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-8


<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  and
amortization.

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-9


<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 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-10


<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 as a going 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-11


<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.

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-12


<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-13


<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. See note M for subsequent amendments to Series A preferred.


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-14


<PAGE>


NOTE G - STOCKHOLDERS' EQUITY - continued

Series C $0.001 par value, 10% non-cumulative, voting,  convertible  preferred
stock -  10,000,000  shares  authorized.  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 sales of Millennium Units at $2
per share and non cash deemed  dividends of $1.7 million was  recongized for the
year ended June 30, 2001.

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-15


<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.


                                                         16


<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-18


<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  forfeitured 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 forfeitured, 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-19


<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                                 -               1.81
       Options forfeitured                     (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        Exercisable         Exercise Price
--------------------    ---------------    ----------------   ---------------------    -------------    ----------------------
<S>                     <C>                <C>                <C>                      <C>              <C>
   $2.00                   250,000              $2.00                 0.58                  250,000            $2.00


</TABLE>



                                       20


<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           -                         (669,691)
Increase in valuation             (1,266,500)
allowance                          6,801,162                     2,914,623
                                ---------------------  ---------------------

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


                                       F-21


<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             (10,007,040)          (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 10 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-22


<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-23
<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,  2000,  the  Company  has  employment  contracts  with  two of its
officers/directors   requiring  monthly  compensation  payments  of  $17,250  in
aggregate and expiring on December 9, 2002. Total payments due are as follows.

         Year ending June 30,

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

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


Total unpaid  compensation  under contracts as of June 30, 2000 and 1999, 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.

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.

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 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                            (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                               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>


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.


                                      F-24

<PAGE>

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  29,  2001,  the Company  granted  2,500,000  stock  options to its
president and two executive  officers.  The options are  exercisable at $.10 per
share  until  September  29,  2004 and vest as  follows:  40% of each grant - on
November 29, 2001 and then 60% equally over the next ten months.



                                      F-25