<PAGE>

================================================================================

                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549

                                   ----------

                                  FORM 10-KSB

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

                  FOR THE FISCAL YEAR ENDED DECEMBER 31, 2000

                                       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 0-14039

                                 eNUCLEUS, INC.
                 (Name of small business issuer in its charter)

       DELAWARE                                           11-2714721
(State of incorporation)                    (I.R.S. Employer Identification No.)

         15545 S. 71st COURT
        ORLAND PARK, ILLINOIS                                60462
(Address of principal executive offices)                  (Zip Code)

                                 (708) 444-7300
               (Registrant telephone number, including area code)

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

          Securities registered pursuant to Section 12(g) of the Act:

                         COMMON STOCK, $.001 PAR VALUE

      Check whether the issuer (1) filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such
shorter periods 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 | |

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

      The issuer's revenues for its most recent fiscal year. $261,000.

      As of March 15, 2002, the market value of the issuer's common stock held
by non-affiliates was $130,000.

      As of March 15, 2002, the number of outstanding shares of common stock was
12,905,432 shares.

      Transitional Small Business Disclosure Format (check one) Yes | | No |X|

                   DOCUMENTS INCORPORATED BY REFERENCE--None.
<PAGE>
                                 eNUCLEUS, INC.

                                  FORM 10-KSB

                               TABLE OF CONTENTS

<TABLE>
<CAPTION>
                                                                            Page
                                                                            ----
<S>                                                                         <C>
ITEM 1 DESCRIPTION OF BUSINESS ...........................................     4
ITEM 2 DESCRIPTION OF PROPERTIES .........................................     7
ITEM 3 LEGAL PROCEEDINGS .................................................     7
ITEM 4 SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS ...............     8
ITEM 5 MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDERS MATTERS .........     8
ITEM 7 MANAGEMENT DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
       AND RESULTS OF OPERATIONS .........................................     9
ITEM 8 FINANCIAL STATEMENTS AND SUPPLEMENTAL DATA ........................    20
ITEM 9 CHANGE IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING
       AND FINANCIAL DISCLOSURE ..........................................    20
ITEM 10 DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS,
       COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE ACT .................    20
ITEM 11 EXECUTIVE COMPENSATION ...........................................    22
ITEM 12 SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS ..................    22
ITEM 13 CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS ...................    23
EXHIBITS AND REPORTS ON FORM 8-K .........................................    24
SIGNATURES ...............................................................    24
INDEX TO FINANCIAL STATEMENTS ............................................    25
EXHIBIT INDEX ............................................................    41
</TABLE>


                                       2
<PAGE>
           CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING INFORMATION

            Some of the statements contained in this Form 10-KSB under the
captions "Business" and "Management Discussion and Analysis of Financial
Condition and Results of Operations" and in other places are "forward-looking
statements." Forward-looking statements include statements that relate to our
beliefs or expectations as to future events and statements that are not
historical facts. In some cases, you can identify these statements by
forward-looking words such as "may", "might", "will", "should", "expects",
"plans", "anticipate", "believe", "estimate", "intend", the negative of these
terms and other comparable terminology. Because forward-looking statements
involve this risk and uncertainty, there are important factors that could cause
actual results, level of activity, performance or achievements to differ
materially and adversely from those expressed or implied by the forward-looking
statements. These factors, which should be carefully considered by you, include,
among other things:

            -     general effects of our restructuring and emergence from
                  Chapter 11 reorganization,

            -     continuing development of our products and solutions,

            -     successful build out of out distribution channels,

            -     general economic and business condition, both nationally and
                  regionally,

            -     competition from others in the industry, whether existing or
                  new,

            -     the experience level of our management team,

            -     changes in our business strategy or growth plans,

            -     our ability to attract and retain qualified personnel,

            -     the availability and terms of capital to finance our
                  operations, and

            -     other factors discussed under "Management Discussion and
                  Analysis of Financial Condition and Results of Operations --
                  Factors Affecting Future Operations."


                                       3
<PAGE>
                                     PART I

INTRODUCTION: SIGNIFICANT SUBSEQUENT EVENT

            On May 10, 2001, eNucleus, Inc. filed a voluntary petition for
reorganization under chapter 11 of the U.S. Bankruptcy Code in the U.S.
Bankruptcy Court for the Northern District of Illinois, Eastern Division, Case
No. 01B17108. During the Chapter 11 proceeding, we continued to operate the
business of the Company as debtor-in-possession under the supervision of the
Bankruptcy Court. The Company's operations immediately preceeding the filing of
the Chapter 11 petition and during the pendency of the Chapter 11 proceeding
were substantially limited to negotiating the with its secured and unsecured
creditors and securing the financing needed to enable the Company to emerge from
Bankruptcy. On November 6, 2001, the Company's Plan of Reorganization was
confirmed thereby enabling the Company to successfully emerge from the Chapter
11 proceeding. The confirmed Plan of Reorganization provides for, among other
things, the following: (i) the issuance to holders of certain allowed claims of
1 share of our common stock for every $3.00 of allowed claim; and (ii) a 1 for 6
reverse stock split resulting in current stockholders receiving 1 share of new
common stock for every 6 shares of old common stock currently owned. (See Item
1. Description of Business.)

            Due to various circumstances, including but not limited to the
voluntary filing of the Chapter 11 reorganization petition, eNucleus, Inc. did
not file its FORM 10-KSB for the fiscal year ending December 31, 2000, (or its
interim reports on the Form 10-QSB) prior hereto. Accordingly, the following
discussion of eNucleus, Inc. is presented from a historical perspective and
includes a description of the business of eNucleus, Inc. after the emergence
from the Chapter 11.

ITEM 1 DESCRIPTION OF BUSINESS

GENERAL

            eNucleus is a wholesaler of Internet infrastructure. Our target
market is comprised of system integrators, web developers, software providers
and telecom resellers. Our core product offerings include co-location,
high-speed Internet access, data storage, and application delivery. Together,
this offering provides our clients with a scaleable and brandable platform for
the development of their ebusiness initiatives.

STRATEGY

            eNucleus' strategy is to deliver e-business components (space,
access, monitoring, storage and email) on a flexible per unit basis. Our target
customer has budgeted $100,000 to $2,500,000 per year for their Internet
infrastructure needs.

            By leveraging our technology investments through widespread
aggregation of client usage, we can deliver a more robust product and service
offering for a smaller fixed monthly expenditure.

            Because of the tailored support, scalability, flexibility and the
ability to private label our product offerings; our clients can quickly enter
the managed service and co-location marketplace with little capital outlay.
Through this philosophy eNucleus fills the current gap between traditional
co-location providers and managed service offerings.

            We also back these offerings with service level guarantees supported
by our Network Operations Center.


                                       4
<PAGE>
PRODUCTS AND SERVICES

eNUCLEUS POWERED SOLUTION

            Our products and services include:

                  -     Co-location hosting -- We deliver co-location and
                        monitoring services to customers requiring a unique
                        platform for custom hosting services. Customers are able
                        to acquire space in our data center on (a). Per U (U =
                        1.75 inches within a co-location cabinet), (b). Per
                        Cabinet (44U), (c). Per square foot and (d). Per
                        dedicated suite basis. The center meets all the criteria
                        of the Class A Internet service center by delivering
                        state-of-the art reliability, security, and scalable
                        capacity with exacting control.

                  -     Internet access and high-speed routing - eNucleus
                        delivers high speed and burstable Internet access to its
                        client's premise and hosting environments.

                  -     Application Delivery - We deliver and manage
                        applications and computer services from a centralized
                        location to multiple users over the Internet and/or a
                        private network. This provides our resellers and their
                        clients with the ability to access software applications
                        anywhere, anytime via the Internet. Applications are
                        accessed just as if they were installed on the local
                        system. Within this environment, we provide "FusionMail"
                        - a robust multi layered virus protection and email
                        management tool and "Office ASPx" - our Microsoft Office
                        and Exchange Mail Internet based application system.
                        This provides our resellers with a cost-effective
                        solution to the demands of ownership, maintenance and
                        upgrades providing a comprehensive alternative to
                        building and managing internal information operations.

                  -     Data Storage - eNucleus also provides data storage
                        services offering web, database, and application backup
                        capacity that's scalable in network storage volume.

HISTORY

            eNucleus began business operations in 1984 in Colorado Springs,
Colorado, as a provider of computer systems and componentry. We adopted the name
Nucleus, Inc. in December 1998 and reorganized in April 1999 when Nucleus merged
with Nucleus Holding Corporation, a privately-held Illinois corporation based in
Chicago, Illinois. In July, 2000 our shareholders approved our re-incorporation
into Delaware from Nevada and changing our name to eNucleus, Inc. from Nucleus,
Inc. Our common stock is and was traded on the electronic bulletin board of the
"over the counter" market under the symbol ENCS. We anticipate a new symbol to
be issued pursuant to our emergence from bankruptcy and the reverse stock split.

            Beginning in December, 1999, we engaged Roth Capital Partners
(formerly Cruttenden Roth Incorporated) to provide financing by privately
placing short term bridge notes of $3 million to $5 million, to consummate our
pending acquisitions and initiate a private placement of approximately $15 - $25
million of securities and a follow-on public offering of approximately $50
million. To help facilitate our growth strategy and to consummate pending
acquisitions, we raised the bridge financing facility limit and closed the
bridge financing at $6.1 million in March 2000.

            During 1999, we acquired four computer systems and service companies
(Comp-Pro Computers, Inc. and Young Data Systems, Inc. both operating in
Illinois, Innovative Technology Solutions, Inc. operating out of Seattle,
Washington, and Telos Distributing, Inc. operating out of Denver, Colorado). In
2000, we acquired one company (Webnet.com, Inc. operating in Atlanta, Georgia),
whose operations primarily focused on providing dedicated Internet access and
hosting solutions to middle market companies. Aggregate consideration paid for
these five acquisitions were 2,086,000 shares of common stock and an unsecured
notes for $1,000,000 and the assumption of debt.

            In August 2000, due to the inability of Roth Capital to complete the
Private Placement and the Internet industry suffering a dramatic and precipitous
valuation collapse, the Company decided to strategically focus on only


                                       5
<PAGE>
the Internet infrastructure offerings of our business plan (including
co-location, connectivity and email services) and elected to discontinue
offering non-related computer equipment and supplies sales and associated
professional services. As part of this decision, we closed our Seattle and
Denver offices as well as discontinued certain operations of our Chicago and
Atlanta offices. Revenue from these discontinued operations were approximately
$7.2 million and $10.8 million for the years 2000 and 1999 respectively.

            On May 10, 2001, as a result of dramatic changes in the Internet
industry and financing markets, delays in reaching accord with our short term
note holders and other creditors in restructuring our debts and our inability to
cure defaults under our data center lease and the landlord's attempts to seize
Company assets, we filed a voluntary petition for reorganization under Chapter
11 of the United States Bankruptcy Code in the U.S. Bankruptcy Court for the
Northern District of Illinois, Eastern Division.. We continued to operate as a
debtor-in-possession under the supervision of the Bankruptcy Court. On November
6, 2001, the Company's Plan of Reorganization was confirmed thereby enabling the
Company to successfully emerge from its Chapter 11 reorganization. Pursuant to
the confirmed Plan of Reorganization, among other things, holders of certain
allowed claims will receive 1 share of common stock for every $3.00 of debt.
Also pursuant to the Plan, the Company's common stock has undergone a 1 for 6
reverse stock split resulting in current stockholders receiving 1 share of new
common stock for every 6 shares of old common stock currently owned.

MARKET OPPORTUNITY

            The rapid growth of the Internet as a means of communicating and
conducting commerce has been fueled by the ability of companies to interact
efficiently and effectively to large numbers of geographically dispersed
employees, vendors and customers.

            Demand for the basic tools of the Internet; software and hosting is
increasing dramatically. While many businesses have realized the benefits of the
Internet, many middle market businesses have not been able to realize the full
benefits due to the following reasons: scarcity of technical skills,
performance, speed of implementation, security and capacity. Forcing company's
to continue to outsource the development and maintenance of their ebusiness
systems to system integrators, web developers and software providers. Currently,
these outsourced agents are forced to work within the expensive and inflexible
constraints of today's co-location and managed service environments. Leaving
little room for profitability.

            eNucleus, through its years of experience with resellers and
outsourced agents has developed a wholesale platform that delivers flexible
utility grade service at below market cost on a per unit basis. Support for
building the outsourced agents business is also cornerstone to our business.

SALES AND MARKETING

            Our sales and marketing efforts are dedicated to increasing the
awareness of our Internet-based solution opportunity and the eNucleus brand. We
are implementing a brand development program designed to portray us as a
national company with a local presence providing utility grade Internet
infrastructure.

            Our sales and marketing group consists of sales professionals and
technicians teamed within our regional operations. We intend to add sales and
marketing personnel. We employ a team selling approach, whereby our account
executives partner with our resellers to identify prospects, conduct sales and
manage client relationships. Our account executives work extensively with our
resellers to understand their infrastructure needs and deliver the most
appropriate solution.

            We intend to use a mix of programs to deliver our message and create
a demand for our products and services. Marketing programs will include:

            -     Public relations -- leveraging the experience and reputation
                  of our senior management team in pursuing public relations
                  opportunities, speaking engagements and eNucleus-sponsored
                  event management.


                                       6
<PAGE>
            -     Central lead management programs -- generated by local
                  advertising programs in industry specific publications and
                  general public media,

            -     Regional awareness programs -- in which corporate templates
                  are personalized for local offices and multiple forms of
                  media, including direct mail and radio advertising, are
                  utilized to drive demand directly to that office,

            -     eNucleus marketing materials -- a collection of marketing and
                  sales materials to be used by account executives in their
                  business generation efforts. These materials include
                  brochures, reprints of articles, fact sheets, white papers,
                  client success stories, PR handbooks, business development
                  guides and client presentation templates.

COMPETITION

            The market for Internet-based technology solutions is intensely
competitive, rapidly evolving and subject to rapid technological change. We
expect competition to persist, intensify and increase in the future. We believe
that the principal competitive factors in our market are single source,
strategic expertise, technical knowledge, best of breed products and services,
reliability, client service and price. Most of our current and potential
competitors have longer operating histories, larger installed client bases,
longer relationships with clients and significantly greater financial,
technical, marketing and public relations resources than us and could decide at
any time to increase their resource commitments to our market. In addition, the
market for Internet solutions is relatively new and subject to continuing
definition, and, as a result, the core business of certain of our competitors
may better position them to compete in this market as it matures. Competition of
the type described above could materially adversely affect our ability to
realize our goals.

            There are relatively low barriers to entry into our business. There
can be no assurance that existing or future competitors will not develop or
offer services that provide significant performance, price, creative or other
advantages over those offered by us, which could have a material adverse effect
on our business, results of operations and financial condition.

ITEM 2 DESCRIPTION OF PROPERTIES

            eNucleus' maintains its executive office at 15545 S. 71st Court,
Orland Park, IL 60462. We also lease roughly 5,000 sq ft. in Roswell, Georgia
serving as our branch office and data center/operating facility. The leases for
our facilities expire through 2008.

ITEM 3 LEGAL PROCEEDINGS

            We are from time to time a party to various legal actions arising in
the normal course of business. On May 10, 2001, as a result of dramatic changes
in the Internet industry and financing markets, delays in reaching accord with
our short term note holders and other creditors in restructuring our debts and
our inability to cure defaults under our data center lease and the landlord's
attempts to seize Company assets, we filed a voluntary petition for
reorganization under Chapter 11 of the United States Bankruptcy Code in the U.S.
Bankruptcy Court for the Northern District of Illinois, Eastern Division.. We
continued to operate as a debtor-in-possession under the supervision of the
Bankruptcy Court. On November 6, 2001, the Company's Plan of Reorganization was
confirmed thereby enabling the Company to successfully emerge from its Chapter
11 reorganization. Pursuant to the confirmed Plan of Reorganization, among other
things, holders of certain allowed claims will receive 1 share of common stock
for every $3.00 of debt. Also pursuant to the Plan, the Company's common stock
has undergone a 1 for 6 reverse stock split resulting in current stockholders
receiving 1 share of new common stock for every 6 shares of old common stock
currently owned.

            Prior to our filing for protection under bankruptcy, we were a party
to several creditor collection actions. However, as a result of our bankruptcy
filing, these matters and many other threatening proceedings have been resolved
and terminated. We believe that there is no proceeding threatened or pending
against us which, if


                                       7
<PAGE>
determined adversely, would have a material adverse effect on the financial
condition or results of operations of eNucleus.

ITEM 4 SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

            Our last Annual Shareholder Meeting was held on July 14, 2000. Five
proposals, with one of the proposals including seven sub-proposals were
submitted to stockholders as described in our proxy dated June 12, 2000. Each of
the proposals and sub-proposals received more than 51% of the votes cast by
shareholders, which was the required percentage for shareholder approval for
each of these proposals and sub-proposals.

            Subsequent to the shareholder meeting, and as a result or
restructuring and filing of the Chapter 11 petition, each of the directors
previously elected to serve (except Mr. John C. Paulsen) resigned from the Board
of Directors. Replacement directors were not installed. Pursuant to Plan of
Reorganization, a new Board of Directors will be installed (see Item 10).

                                    PART II

ITEM 5 MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDERS MATTERS

            The following table sets forth, for the periods indicated, the range
of high and low bid quotations per share of common stock as reported by NASD on
the OTC Bulletin Board. Our common stock trades under the symbol ENCS. The
quotations reflect inter-dealer prices, without retail mark-up, mark-down or
commission, and may not represent actual transactions. Prior to December 8,
1999, eNucleus, Inc. was known as American General Ventures, Inc. and traded
under the symbol AMGV and prior to July, 2000, eNucleus, Inc. was known as
Nucleus, Inc. and traded under the symbol NCLS.

<TABLE>
<CAPTION>
                                                           COMMON STOCK
                                                           ------------
PERIOD                                               LOW BID          HIGH BID
------                                               -------          --------
<S>                                                 <C>               <C>
1999
    1st Quarter                                     $0.62500          $0.68750
    2nd Quarter                                     $0.62500          $4.75000
    3rd Quarter                                     $2.00000          $4.37500
    4th Quarter                                     $2.37500          $4.28125
2000
    1st Quarter                                     $2.50000          $5.75000
    2nd Quarter                                     $3.25000          $1.50000
    3rd Quarter                                     $1.81250          $0.28120
    4th Quarter                                     $0.71870          $0.12500
</TABLE>

            The approximate number of record holders of our common stock on
December 31, 2000 was 1,375.

            We have paid no dividends on our common stock. There are no
contractual restrictions on our ability to pay dividends. We have not had
earnings that indicate an ability to pay cash dividends. We do not expect to pay
dividends in the foreseeable future.

            Recent Sales of Unregistered Securities. We made the following sales
of unregistered securities during the year ended December 31, 2000:

            On January 20, 2000, we issued 100,000 shares of common stock to
sophisticated investors in transactions not involving a public offering for an
aggregate amount of $150,000. The sale was exempt from registration under
Section 4(2) of the Securities Act. The recipients of securities represented
their intentions to acquire the securities for investment only and not with a
view to or for sale in connection with any distribution thereof. In each
instance, offers and sales were made without any public solicitation. The
securities were placed with the services of a broker-dealer, which was paid a
cash fee of $7,500 and warrants to purchase $6,000 shares of our common stock at
$1.50


                                       8
<PAGE>
per share which expired in two years from issue date. All recipients had
adequate access to information about eNucleus.

            In various transactions not involving public offerings, in January
and February, 2000, we issued a total of 265,365 shares of our common stock to
sophisticated investors for an aggregate amount of $398,048. These sales were
exempt from registration under Section 4(2) of the Securities Act. The
recipients of securities represented their intentions to acquire the securities
for investment only and not with a view to or for sale in connection with any
distribution thereof. In each instance, offers and sales were made without any
public solicitation. No underwriter or broker-dealer was involved in the
transactions and no commission was paid. All recipients had adequate access to
information about eNucleus.

            On January 20, 2000, we issued a warrant to purchase 200,000 shares
of our common stock at $2.12 per share to a financial consultant. The warrant
expired on August 23, 2000.

            Beginning in December, 1999, we engaged Roth Capital Partners
(formerly Cruttenden Roth Incorporated) to provide financing by privately
placing short bridge notes of $3 million to $5 million, to consummate our
pending acquisitions and initiate a private placement of approximately $15 - $25
million of securities and a follow-on public offering of approximately $50
million. To help facilitate our growth strategy and to consummate pending
acquisitions, we raised the bridge financing facility limit and closed the
bridge financing at $6.1 million in March 2000 (see further discussion below).
Due to delays in starting to raise the $15 - $25 million private placement and
the Internet industry suffering a dramatic and precipitous valuation collapse,
the private placement was not raised.

            On March 21, 2000, we received $6,104,000 through the sale of senior
bridge notes. Pursuant to the terms of this financing, we issued 1,692,172
shares of common stock. The sale was exempt from registration under Section 4(2)
of the Securities Act. The recipients of securities represented their intentions
to acquire the securities for investment only and not with a view to or for sale
in connection with any distribution thereof. In each instance, offers and sales
were made without any public solicitation. The securities were placed with the
services of a broker-dealer, which was paid a cash fee equal to 10% of the
offering amount, out-of-pocket expenses, and warrants equal to 10% of the number
of shares issued to the note investors. All recipients had adequate access to
information about eNucleus. All of these shares and warrants have registration
rights.

            On May 11, 2000 we issued 661,000 in connection with our acquisition
of WebNet.com, Inc ("WebNet"). WebNet shareholders also received a put option to
require eNucleus to repurchase 60,000 shares at $5.00 per share on May 11, 2001.
Subsequent to year-end, we received notice of their intent to exercise this put
arrangement. eNucleus did not repurchase the shares and as a result of our
bankruptcy filing the put option was resolved and terminated.

            On July 17, 2000, we issued 76,915 shares of common stock to an
ex-employee per conditions of his employment agreement. We recorded additional
compensation expense of approximately $96,000 associated with this grant.

            On September 25, 2000, we issued 300,000 shares of common stock to
an ex-employee and certain shareholders of the previously acquired Webnet.com,
Inc. per conditions of his employment agreement and the acquisition agreement.
We recorded additional compensation expense of approximately $112,500 associated
with this grant.

            From October, 2000 through December 2000, we issued 182,857 shares
of our common stock in exchange for services provided by certain vendors of
approximately $38,000.


                                       9
<PAGE>
ITEM 7 MANAGEMENT DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS

            The following discussion should be read in conjunction with the
financial statements of eNucleus appearing later in this Form 10-KSB. This
discussion and analysis contains forward-looking statements that involve risks,
uncertainties and assumptions. Our actual results may differ materially from
those anticipated in these forward-looking statements as a result of certain
factors, including, but not limited to, those set forth under the caption "--
Factors Affecting Future Results."

            eNucleus is a carrier of Internet infrastructure. Our target market
is comprised of system integrators, web developers and software providers. Our
core product offerings include co-location - secured data center space,
high-speed Internet access, data storage, and email and virus scanning services.
Together, this offering provides our clients with a scaleable, brand able and
cost effective platform for the development of their ebusiness initiatives.

            We presently earn revenues from the following product and service
offerings: set up fees, leasing of data center space, Internet transport, data
storage, monitoring and email services. We recognize revenue for set up fees
over the contract terms. Clients are billed for the services over the course of
an engagement at a measured rate or on a recurring fixed-price basis. Fees
typically range from $250 to $20,000 for set-up and installation and recurring
revenue of $250 to $50,000 per month. Cost of revenues includes the costs of
services and material directly related to the revenues, including direct labor
and benefits, subcontracted labor or other outside services, and other direct
costs associated with revenues, as well as an allocation of certain indirect
costs. Operating expenses consist primarily of salaries, commissions, and
benefits for our marketing, sales and support personnel, advertising costs,
consultants' fees, provision for doubtful accounts and other miscellaneous
expenses. Depreciation and amortization expense consists primarily of the
amortization of intangible assets recorded in connection with our acquisition
and depreciation of our fixed assets. We expect these expenses to increase in
the future due to the growth of the company.

            In August 2000 with the installation of our new management team, we
decided to strategically focus only on higher margin Internet infrastructure
services and elected to discontinue offering certain non-related client premise
equipment sales and associated professional services. As part of this decision,
we closed our Seattle and Denver offices as well as discontinued certain
operations of our Chicago and Atlanta offices. Revenue from these discontinued
operations were approximately $7.2 million and $10.8 million for the years
ending December 31, 2000 and 1999 respectively. We recorded a charge of
approximately $7.1 million representing the loss on disposal of these operations
resulting from the write off of un-amortized goodwill, fixed assets and the
present value of estimated unrecoverable lease payments associated with these
offices. Additionally, we discontinued reselling long-distance telephone
services. Upon the conclusion of these transactions, we remain focused on our
core business offering of co-location - secured data center space, high-speed
Internet access, data storage, and email and virus scanning services.

            On May 10, 2001, as a result of dramatic changes in the Internet
industry and financing markets, delays in reaching accord with our short term
note holders and other creditors in restructuring our debts and our inability to
cure defaults under our data center lease and the landlord's attempts to seize
Company assets, we filed a voluntary petition for reorganization under Chapter
11 of the United States Bankruptcy Code in the U.S. Bankruptcy Court for the
Northern District of Illinois, Eastern Division.. We continued to operate as a
debtor-in-possession under the supervision of the Bankruptcy Court. On November
6, 2001, the Company's Plan of Reorganization was confirmed thereby enabling the
Company to successfully emerge from its Chapter 11 reorganization. Pursuant to
the confirmed Plan of Reorganization, among other things, holders of certain
allowed claims will receive 1 share of common stock for every $3.00 of debt.
Also pursuant to the Plan, the Company's common stock has undergone a 1 for 6
reverse stock split resulting in current stockholders receiving 1 share of new
common stock for every 6 shares of old common stock currently owned.

EXPANSION

            We are pursuing a strategy to deliver our products and services on a
national scale. We expect to complement our internal growth by continuing to
evaluate acquisition opportunities whose services can complement


                                       10
<PAGE>
our existing services and enable us to offer a more comprehensive range of
Internet-based technology solutions to our clients.

OPERATING RESULTS 1999 TO 2000

            The following table sets forth our results of operations for the
periods indicated.

<TABLE>
<CAPTION>
                                                            YEAR ENDED DECEMBER 31,
                                                            -----------------------
                                                       1999                        2000
                                                       ----                        ----
<S>                                       <C>                   <C>    <C>               <C>
Revenue                                   $        --           --     $    260,785       100.0%
Cost of revenue                                    --           --          141,461         54.2
                                          ------------------------------------------------------
Gross profit                                       --           --          119,324         45.8

Operating expenses                         (3,526,031)          --       (4,960,599)     (1902.2)
Stock based compensation expense           (1,177,500)          --       (1,591,913)      (610.4)
Depreciation and amortization
expense                                       (30,322)          --         (401,840)      (154.1)
                                          ------------------------------------------------------
Operating loss                             (4,733,853)          --       (6,835,028)     (2620.9)

Interest expense                             (209,246)          --       (8,564,848)     (3284.3)
                                          ------------------------------------------------------
Net income from continuing
operations before extraordinary items      (4,943,099)          --      (15,399,876)     (5905.2)
Loss from discontinued operations          (1,448,177)          --       (1,602,474)      (614.5)
Loss on disposal of discontinued
operations                                         --           --       (7,132,447)     (2735.0)
                                          ------------------------------------------------------

Net loss                                  $(6,391,276)          --     $(24,134,797)     (9254.7)
                                          ======================================================
</TABLE>

YEAR ENDED DECEMBER 31, 2000 COMPARED TO THE YEAR ENDED DECEMBER 31, 1999

            Revenues and cost of revenues. Revenues were $261,000 in 2000
representing operations from our managed services. Costs of revenues for 2000
were $141,000 or 54.2% of revenue. During 1999, the Company did not report any
sales from operations. Sales revenues and cost of revenues previously reflected
in the financial statements for 1999 have been reclassified, as required, within
a single caption titled "Loss from discontinued operations."

            Operating expenses. Operating expenses increased $1.5 million or
43%, from $3.5 million in 1999 to $5.0 million in 2000. The increase in
operating expenses was incurred as part of our growth strategy, including the
addition of key executive management and back office personnel to support the
growth of the business and the development and marketing of our brand and
product offering. We expect that our growth strategy will continue to require
significant sales and marketing activities, including an expansion of our sales
force and further development of brand name recognition. In addition, we will
continue to build our personnel base to support our growth strategy in the
rapidly evolving industry of manage services. As a result , we believe that our
selling , general and administrative expenses will continue to increase in the
future.

            Stock based compensation expense. Stock based compensation expense
increased $0.4 million, from $1.2 million in 1999 to $1.6 million in 2000.
During 2000, we granted stock warrants to attract and retain employees,
directors and consultants. The majority of these options and warrants vest over
a three-year period. We expect to continue to incur such charges in future
periods to attract and retain key employees, directors and consultants.

            Depreciation and amortization expense. Depreciation and amortization
expense increased $372,000 from $30,000 in 1999 to $402,000 in 2000. The
increase was a result of $271,000 in depreciation expense associated with


                                       11
<PAGE>
the build-out of the Atlanta Data Center and the remaining represented an
increase to amortization expense associated with the intangibles recorded with
our acquired companies.

            Interest Expense. Interest expense increased $8.4 million, from $0.2
million in 1999 to $8.6 million in 2000. Included in interest expense for 2000
was approximately $7.5 million in non-cash interest expense associated with the
stock and warrants issued in conjunction with the senior notes.

            Loss from Discontinued Operations. The loss from discontinued
operations represents revenues less expenses associated with the operations
discontinued, including the operations of our Seattle and Denver offices as well
as certain operations of our Chicago and Atlanta offices. Revenue from these
discontinued operations were $10.8 million and $7.2 million for the year ending
December 31, 1999 and 2000 respectively.

            Loss from Disposal of Discontinued Operations. The loss from
disposal includes the write-off of intangible assets of $6.4 million, valuation
losses of $600,000 related to assets disposed of or sold and a charge of
approximately $200,000 representing the present value of estimated unrecoverable
lease payments associated with the closed offices.

            Net Loss. Net loss increased $17.7 million, from $6.4 million in
1999 to $24.1 million in 2000. As more fully discussed above, the increased net
loss is attributable to growth strategy costs in excess of current period
revenues, substantial non-cash interest expense associated with our senior notes
financing, losses incurred in our discontinued operations including the
write-off of intangible assets associated with the discontinued operations and
non-cash stock based compensation.

LIQUIDITY AND CAPITAL RESOURCES

            As shown in our results of operations, we incurred a net loss of $24
million during the fiscal year 2000 and have incurred losses in each of the
previous years. As of December 31, 2000, current liabilities exceed current
assets by $13.3 million. During 2000, net cash used in continuing operating
activities totaled $4.2 million and was primarily the result of operating
losses. Cash flow from financing activities provided $6.0 million in cash,
primarily as a result of our borrowing under the senior bridge notes. Net cash
used for investing activities was $250,000 for purchases of fixed assets. During
1999, operating activities from continued operations used $2.2 million.
Investing activities provided $66,000 in cash as a result of receiving $169,000
from acquisitions net of cash paid less cash used for acquisition of fixed
assets. Net cash provided by financing activities in 1999 was $3.0 million
primarily as a result of proceeds from the sale of common stock and borrowings
under the line of credit..

            Subsequent to year end, on May 10, 2001, we filed a voluntary
petition for reorganization under Chapter 11 of the United States Bankruptcy
Code. We continued to operate as a debtor-in-possession under the supervision of
the Bankruptcy Code. On November 6, 2001, the Company's Plan of Reorganization
was confirmed thereby enabling the Company to successfully emerge from its
Chapter 11 reorganization. Pursuant to the confirmed Plan of Reorganization,
among other things, holders of certain allowed claims will receive 1 share of
common stock for every $3.00 of debt. Also pursuant to the Plan, the Company's
common stock has undergone a 1 for 6 reverse stock split resulting in current
stockholders receiving 1 share of new common stock for every 6 shares of old
common stock currently owned.

            The satisfaction of our cash requirements hereafter will depend in
large part on our ability to successfully generate revenues from operations and
raise capital to fund operations. There can, however, be no assurance that
sufficient cash will be generated from operations or that unanticipated events
requiring the expenditure of funds within our existing operations will not
occur. We expect to aggressively pursue additional sources of funds, the form of
which will vary depending upon prevailing market and other conditions and may
include high-yield financing vehicles, short or long-term borrowings or the
issuance of equity securities. We cannot assure you that we will be able to
obtain such funding, or if such funding is available, that it will be on
favorable terms.

            eNucleus and Sunami Ventures, LLC ("Sunami") entered into a
post-petition financing agreement for borrowings up to $1,500,000. As part of
the funding for this facility, Sunami has entered into private sales agreements
of certain eNucleus securities currently held by Sunami, the proceeds of which
will be used as funding


                                       12
<PAGE>
under this facility. Also pursuant to the Sunami financing, in January, 2002, we
entered into a three-year $500,000 secured demand loan agreement with Capital
Equity Group. The note agreement is secured by our assets, guaranteed by Mr.
Paulsen and bears interest at the rate of 16%. To date, eNucleus has received
approximately $275,000 under these facilities. The proceeds of these loan
agreements will be used to satisfy certain petitions resulting from the
bankruptcy and post-petition operating expenses.

            In August, 2000, eNucleus entered into a demand loan facility with
Sunami. The facility provides for borrowings of up to $750,000, bears interest
at the rate of twelve percent and was payable no later than August, 2001. As of
December 31, 2000, eNucleus had borrowed $188,000 from Sunami under this
facility. Subsequent to year end, eNucleus borrowed an additional $550,000 under
this facility.

            On May 11, 2000 we issued 661,000 in connection with our acquisition
of WebNet.com, Inc ("WebNet"). WebNet shareholders also received a put option to
require eNucleus to repurchase 60,000 shares at $5.00 per share on May 11, 2001.
Subsequent to year-end, we received notice of their intent to exercise this put
arrangement. eNucleus did not repurchase the shares and as a result of our
bankruptcy filing the put option was resolved and terminated.

            Beginning in December, 1999, we engaged Roth Capital Partners
(formerly Cruttenden Roth Incorporated) to provide financing by privately
placing senior bridge notes of $3 million to $5 million, to begin a private
placement of approximately $15 - $25 million of securities and a follow-on
public offering of approximately $50 million. To help facilitate our growth
strategy and to consummate pending acquisitions, we raised the bridge financing
facility limit and closed the bridge financing at $6.1 million in March 2000
(see further discussion below). Due to delays in starting to raise the $15 - $25
million private placement and the Internet industry suffering a dramatic and
precipitous valuation collapse, the private placement was not raised.

            On March 21, 2000, the Company issued senior bridge notes in the
aggregate principal amount of $6,104,000. The note investors also received
1,692,172 shares of common stock. The notes were due on July 6, 2000 and pay
interest of 12% per annum on a monthly basis. The Company elected to extend the
maturity date of these notes to November 3, 2000 pursuant to the terms. Pursuant
to the issuance of the notes, we paid Roth Capital Partners $725,000 including
expenses and issued them approximately 170,000 warrants with an exercise price
of $3.625 per share. We have also agreed to engage Roth Capital in connection
with future private or public capital raising activities, for which we have
negotiated fees payable upon the closing of any such financings. The net
proceeds of $5.3 million was used to fund approximately $1.2 million of
acquisition related debt; professional fees of $1.1 million related to our
acquisition, reincorporation, financings and other general corporate matters;
and $3.0 million was used for operating activities including insurance, vendors
and payroll.

            On July 23, 1999, we entered into a $500,000 secured demand loan
agreement with Bank of America. The line of credit is secured by our assets and
the assets of Mr. Paulsen, bears interest monthly at the rate of prime plus one
hundred basis points, and principal is payable on demand. As of December 31,
2000, the entire amount under the line of credit was outstanding.

            Effective June 30, 1999, in connection with the acquisition of ITS,
we issued 1,000,000 shares of our common stock and a $1,000,000 subordinated
note. The note bears interest at the rate of prime plus one percent, and is
secured by 375,000 shares of the common stock owned by our President and Chief
Executive Officer, John C. Paulsen. The note, which was originally due on
October 8, 1999, was extended by ITS shareholders in consideration for 100,000
additional shares of our common stock. We retired $600,000 out of the bridge
financing.

            On March 12, 1999, ITS entered into an agreement with NationsCredit
Distribution Finance to provide for the financing of inventory purchases.
Payments related to the NationsCredit agreement were guaranteed by the personal
assets of the former shareholders of ITS. We repaid the entire outstanding
balance under the NationsCredit agreement from proceeds of the bridge financing.


                                       13
<PAGE>
RECENT ACCOUNTING PRONOUNCEMENTS

            In December 1999, the SEC issued Staff Accounting Bulletin ("SAB")
No. 101, "Revenue Recognition in Financial Statements." SAB No. 101 provides
specific guidance on revenue recognition. The Company adopted the accounting
guidance of the Staff Accounting Bulletin during 2000 realizing no impact to the
Company's consolidated statement of operations.

            In July 2001, the FASB issued Statement of Financial Accounting
Standards ("SFAS") No. 141, "Business Combinations," and SFAS No.142, "Goodwill
and Other Intangible Assets." SFAS 141 requires that the purchase method of
accounting be used for all business combinations initiated after June 30, 2001.
SFAS 141 also specifies criteria that intangible assets must meet in order to be
recognized and reported separately from goodwill. SFAS 142 requires that
goodwill and intangible assets with indefinite useful lives will no longer be
amortized to expense, but instead will be tested for impairment at least
annually. Intangible assets with definite useful lives will be amortized to
expense. The Company is required to adopt the provisions of SFAS 141 immediately
and SFAS 142 effective January 1, 2002. As of January 1, 2002, the Company will
be required to reassess the useful lives of all acquired intangible assets and
make any necessary amortization period adjustments by December 31, 2002. The
Company will also be required to perform an assessment of whether there is an
impairment of goodwill as of January 1, 2002, and at least annually thereafter.
The Company is evaluating the impact of adopting SFAS 142, but because of the
extensive effort required, it is not practicable to reasonably determine, at the
date of this report, whether a goodwill impairment charge will be recorded upon
adoption of the new standards.

            In August 2001, the FASB issued SFAS No. 144, "Accounting for the
Impairment or Disposal of Long-Lived Assets," which supersedes both SFAS No.
121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived
Assets to Be Disposed Of" and the accounting and reporting provisions of APB
Opinion No. 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 the disposal of a segment of a business.
SFAS 144 provides a single accounting model for long-lived assets to be disposed
of. Although retaining many of the fundamental recognition and measurement
provisions of SFAS 121, the new rules change the criteria to be met to classify
an asset as held-for-sale. The new rules also broaden the criteria regarding
classification of a discontinued operation.

QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

            The Company is exposed to changes in interest rates as a result of
significant financing through its issuance of variable-rate and fixed-rate debt.
If market interest rates were to increase 1% in fiscal 2001, there would be an
approximate $1.0 million material impact on the Company's consolidated results
of operations or financial position.

FACTORS AFFECTING FUTURE RESULTS

General effects of a bankruptcy filing

            The filing of our bankruptcy petition, and the publicity attendant
thereto, may adversely affect our business. Due to delays in our financing, we
will need to negotiate payment terms with some of our administrative claim
holders. There can be no assurance that we will reach agreement with these
parties or be able to satisfy their indebtedness in a timely manner acceptable
to them. Our competitive advantage may also be hindered because of the taint and
stigma associated with a bankruptcy petition filing. We believe that such taint
and stigma is especially true for companies providing ebusiness infrastructure,
including managed hosting services, because of the fear from potential customer
that the company will go out of business and not be able to provide the valuable
services. Additionally, although we believe that we have good relationships with
our suppliers and vendors, there can be no assurance that such suppliers and
vendors will continue to provide such goods and services to us due to the
concerns regarding credit worthiness resulting from the chapter 11 proceeding.
Also it may be difficult for us to obtain financing (whether debt or equity) as
we may require to fund operations and/or growth.


                                       14
<PAGE>
We are in the early stages of implementing our business plan

            We have only recently begun to execute on our business plan. We face
all of the risks common to companies in their early stages of development,
including:

      -     undercapitalization and uncertainty of funding sources,
      -     high initial expenditure levels and uncertain revenue streams,
      -     an unproven business model,
      -     difficulties in managing operations offering different products and
            services in different geographic locations, and
      -     difficulties in managing growth.

            Because we commenced implementing our plan in April 1999, you have
no relevant operating history upon which you can evaluate our performance or our
ability to achieve our goals.

We have been sustaining losses and have an accumulated deficit

            Our revenue to date has not been sufficient to offset the expenses
incurred in our business activities. We had a net loss of $24.1 for the year
ended December 31, 2000 and $6.4 million for the year ended December 31, 1999.
We cannot assure you that we will ever achieve profitability.

We may be unable to manage our growth effectively

            To manage our anticipated growth, we must be able to implement and
improve our operational and financial systems and train and manage an expanding
employee base. Further, we must be able to manage multiple relationships among
various financial institutions, investors, suppliers, strategic partners,
technology distributors and other third parties. Our systems, procedures, and
controls are not currently sufficient to support current or future operations.
Our management team may be unable to deal with this expansion to achieve the
rapid execution necessary to fully exploit the opportunities we see in our
targeted market. We also cannot assure you that we will be able to successfully
compete with the more extensive and well-funded operations of our competitors.
We may be unable to manage growth, integrate operations effectively or achieve
the rapid expansion necessary to fully exploit the market window for our
services in a timely and cost-effective manner.

Our quarterly operating results could vary dramatically

            Our revenues, gross profit, operating income and net income are
likely to vary in the future from quarter to quarter, perhaps substantially.
Factors that may affect this quarter-to-quarter variability include:

      -     disruption or degradation of our network infrastructure and data
            centers,
      -     loss of significant strategic alliances, such as with InterNAP and
            Intel,
      -     the short-term nature of certain client commitments,
      -     fluctuations in Internet and IT spending and bandwidth used by
            clients,
      -     loss of a major client,
      -     seasonality that may accompany budget cycles,
      -     the timing, size and mix of service and product offerings,
      -     the timing and size of significant software sales,
      -     the timing and size of new projects,
      -     the timing and magnitude of required capital expenditures,
      -     pricing changes and increases in capital expenditures in response to
            various competitive factors,
      -     market factors affecting the availability of network
            interconnectivity and bandwidth for our clients and qualified
            technical personnel,
      -     timing and client acceptance of new service offerings,
      -     changes in the trends affecting the outsourcing of Internet-based IT
            services,
      -     additional selling, general and administrative expenses to acquire
            and support new business,
      -     increased levels of technological change in the industry, and
      -     general economic conditions.


                                       15
<PAGE>
            Our operating results will be affected by changes in our network
charges, Colocation charges and equipment costs.

Network and data center failures could lead to significant costs

            We must protect our network and data center infrastructure and
equipment against damage from human error, physical or electronic security
breaches, power loss and other facility failures, fire, earthquake, flood,
telecommunications failure, sabotage, vandalism and similar events. Despite
precautions, a natural disaster, security breach or other unanticipated problems
at one or more of our telecommunication switches, POP connections or data
centers could result in interruptions in our services or significant damage to
our equipment. In addition, failure of any of our telecommunication or data
providers, such as InterNAP or Intel, to provide consistent communications and
data capacity could result in interruptions in our services. Any damage to or
failure of our systems or service providers could result in reductions in, or
terminations of, services supplied to our clients, which could have a material
adverse effect on our business. We may experience interruptions in specific
circuits within our network resulting from events outside our control, which
could lead to short-term degradation in the level of performance of our network.

Client satisfaction with our services is critical to our success

            Our clients demand a very high level of service. Our clients
generally require service on a 24 hours per day, seven days per week basis. If
we incur significant service level commitment obligations in connection with
system downtime, our liability insurance may not be adequate to cover these
expenses. If we do not meet required service levels, we may have to provide
credits to our clients, which could significantly reduce our revenues. As
clients outsource more mission-critical operations to us, we are subject to
increased liability claims and client dissatisfaction if our systems fail or our
clients otherwise become unsatisfied. In the event of any resulting harm to
clients, we could be held liable for damages. Awards for such damages might
exceed our liability insurance by an unknown but significant amount and could
seriously harm our business.

Protection of our intellectual property and proprietary rights

            Our ability to develop new technology and technology solutions will
depend on the continued innovation, technical expertise and know-how of our
employees and consultants. We intend to establish a policy of requiring our
employees and consultants to execute confidentiality agreements, however, there
can be no assurance that this procedure will be adequate to prevent
misappropriation of our technology nor can we be assured that our competitors
will not independently develop technologies that are substantially equivalent or
superior to those of ours.

Our ability to implement and expand our network is unproven and will require
substantial financial, operational and managerial resources

            To satisfy client requirements, we must implement, expand and adapt
our ePS infrastructure. We are dependent on service providers for our network
capacity. The expansion and adaptation of our infrastructure will require
substantial financial, operational and management resources. Our ability to
connect and manage a substantially larger number of clients is unknown. We have
yet to prove our infrastructure's ability to be scaled up to higher client
levels while maintaining superior performance. Furthermore, it may be difficult
for us to increase quickly our network capacity in light of current necessary
lead times within the industry to purchase circuits and other critical items. If
we fail to achieve or maintain high capacity data transmission circuits, client
demand could diminish because of possible degradation of service. In addition,
as we upgrade our infrastructure to increase bandwidth available to our clients,
we expect to encounter equipment or software incompatibility which may cause
delays in implementation.

We depend on network interconnections provided by third parties that may raise
their fees or deny access

            We rely on a number of public and private network interconnections
to allow our clients to connect to other networks. If the networks with which we
interconnect were to discontinue their interconnections, our ability to


                                       16
<PAGE>
exchange traffic would be significantly constrained. Furthermore, our business
will be harmed if these networks do not add more bandwidth to accommodate
increased traffic. Many of the companies with which we maintain interconnections
are our competitors. There is nothing to prevent any networks, many of which are
significantly larger than we are, from charging high usage fees or denying
access. In the future, networks could refuse to continue to interconnect
directly with us, might impose significant costs on us or limit our clients'
access to their networks. In this event, we may not be able to access
alternative networks to exchange our clients' traffic on a cost-effective basis.
In addition, we may not be able to pass through to our clients any additional
costs of utilizing these networks. In these cases, our business could be harmed.

If we are unable to continue to receive cost-effective service from our
providers, we may not be able to provide our services on profitable terms

            In delivering our services, we rely on network and services, which
are built and operated by others. In order to be able to provide optimal routing
to our clients through our infrastructure facilities, we must purchase
connections from several providers. We cannot assure you that these providers
will continue to provide service to us on a cost-effective basis, if at all, or
that these providers will provide us with additional capacity to adequately meet
client demand.

Our brand is relatively new, and failure to develop brand recognition could hurt
our ability to compete effectively

            To successfully execute our strategy, we must create and strengthen
our brand awareness. If we do not build our brand awareness, our ability to
realize our strategic and financial objectives could be hurt. Many of our
competitors have well-established brands associated with the provision of
Internet network services. In order to build our brand awareness, we intend to
significantly increase our marketing efforts, which may not be successful, and
we must continue to provide high quality services. As part of our brand building
efforts, we expect to increase our marketing budget substantially as well as our
marketing activities, including advertising, tradeshows, direct response
programs and new switch and POP site launch events.

The work we perform for clients may expose us to liability

            The nature of the services and products we offer expose us to risks.
Many of our engagements involve projects that are critical to the operations of
our clients' businesses. Our failure or inability to meet a client's needs or to
do so in the time frame required by such clients could result in a claim for
substantial damages against us, regardless of our responsibility for such
failure. Although we intend to obtain general liability and errors and omissions
insurance coverage, there can be no assurance that such coverage will be
available on reasonable terms or in sufficient amounts to cover one or more
large claims, or that the insurer will not disclaim coverage as to any future
claim. The successful assertion of one or more large claims against us that
exceed available insurance coverage or results in changes to our insurance
policies, including premium increases or the imposition of large deductible or
co-insurance requirements, could have a material adverse effect on our business.

We depend on our suppliers

            Although we have not experienced significant problems with our
suppliers of services, hardware, software and componentry, there can be no
assurance that such relationships will continue or that, in the event of a
termination of our relationships with any given supplier, we would be able to
obtain alternative sources of supply without a material disruption in our
ability to provide products and services to our clients.

We are uncertain as to sources of the additional financing we will need

            We may use our common stock to fully or partially finance future
acquisitions. In the event that our common stock does not maintain a sufficient
market value, or potential acquisition candidates are otherwise unwilling to
accept our common stock as part of the consideration for the sale of their
businesses, we may be required to utilize our cash resources, if available, in
order to pursue acquisitions. If we do not have sufficient cash resources, our
growth may be limited unless we are able to obtain additional capital through
debt or equity financings. We presently do not have any immediate source of cash
other than cash generated from operations. We


                                       17
<PAGE>
may be unable to obtain a working capital line of credit or other financing we
may need for acquisitions or to keep operating. If our financial resources are
inadequate, we may be unable to successfully implement our business strategy.

We are dependent on our management team

            We are dependent on the continued efforts of our executive officers,
in particular John C. Paulsen, our President and Chief Executive Officer. We do
not maintain key person life insurance on any of our executive officers. If any
of these people become unable to continue in his or her role with us, or if we
are unable to attract and retain other qualified employees, our financial
performance and business prospects will probably be negatively impacted.

We could be subject to claims of infringement by third parties

            We rely upon a combination of nondisclosure and other contractual
arrangements and trade secret, copyright and trademark laws to protect our
proprietary rights and the proprietary rights of third parties from whom we
license intellectual property. We enter into confidentiality agreements with our
employees and limit distribution of proprietary information. There can be no
assurance that these steps will be adequate to deter misappropriation of
proprietary information or that we will be able to detect unauthorized use and
take appropriate steps to enforce our intellectual property rights.

            We believe that our services do not infringe on the intellectual
property rights of others and that we have all rights necessary to utilize the
intellectual property employed in our business. However, we are subject to the
risk of claims alleging infringement of third-party intellectual property
rights. Any such claims could require us to spend significant sums in
litigation, pay damages, develop non-infringing intellectual property or acquire
licenses to the intellectual property which is the subject of asserted
infringement.

We operate in a relatively new and evolving market with uncertain prospects for
growth

            The market for Internet networks and related services has only
recently begun to develop and is evolving rapidly. Although certain industry
analysts project significant growth for this market, their projections may not
be realized. Our future growth, if any, will depend on the continued trend of
businesses migrating toward use of the Internet and our ability to market our
services effectively. There can be no assurance that the market for our services
will grow, that our services will be adopted, or that businesses will use these
Internet-based services to the degree or in the manner that we expect. If we are
unable to react quickly to changes in the market, if the market fails to
develop, or develops more slowly than expected, or if our services do not
achieve market acceptance, then we are unlikely to become or remain profitable.

We face strong competition

            The market for the products and services we offer is highly
competitive. Our competitors vary in size and in the scope of the products and
new services that they offer. Primary competitors generally include:

      -     complete solution providers,
      -     ISPs (Internet service providers),
      -     web hosting firms,
      -     application hosting firms,
      -     strategic consulting firms,
      -     in-house IT departments of clients, and
      -     computer hardware and service vendors.

            Traditionally, the largest service providers have principally
focused on providing solutions to international Fortune 500 companies. A large
number of smaller service companies and a growing number of larger companies
compete in the middle market segment.


                                       18
<PAGE>
            There are relatively low barriers to entry into our target market.
We expect to face competition from established and new companies. Increased
competition may result in greater pricing pressure, which could adversely affect
our gross margins. In addition, many of our competitors have greater financial,
development, technical, marketing and sales resources than we do. As a result,
our competitors may be able to adapt more quickly to new or emerging
technologies and to changes in client requirements or to devote greater
resources than us for the development, promotion, sale and support of
Internet-based products and services. In addition, there is a risk that clients
may elect to increase their internal IT resources to satisfy their IT solutions
needs. We may also enter new markets and offer new services, and expect to face
intense competition from existing and new competitors, particularly since
barriers of entry in the IT service industry are relatively low. We cannot
assure you that we will continue to provide IT services and products demanded by
our target market or be able to compete successfully with existing or new
competitors. An inability to compete in our market effectively would negatively
impact our financial performance and business prospects.

We are dependent on hiring and retaining skilled personnel

            We must attract, hire and retain personnel who possess the skills
and experience necessary to operate our business and serve our clients.
Competition for individuals with proven skills is intense. In addition, the
Internet-based IT service industry in general experiences a high rate of
turnover. We compete for such individuals with Internet companies, systems
integrators, providers of outsourcing services, temporary personnel agencies,
computer systems consultants, clients and potential clients. Many large
competitors have extensive campaigns to hire additional technical personnel or
have full time recruiters on staff. Competition for quality technical personnel
has continued to intensify, resulting in increased personnel costs for many IT
service providers. There can be no assurance we will be able to recruit or
retain the technical personnel necessary to execute our strategy. Failure to do
so would have a material adverse effect on our financial performance and
business.

Our industry is changing rapidly and new solutions are constantly being
introduced

            The Internet-based IT service and e-commerce industries are
characterized by rapid technological change, evolving industry standards,
changing client preferences and new product and service introductions. Our
success will depend in part on our ability to develop Internet-based IT
solutions that keep pace with continuing changes in the IT service and
e-commerce industries. There can be no assurance that we will be successful in
adequately addressing these developments on a timely basis or that, if these
developments are addressed, we will be successful in the marketplace. In
addition, there can be no assurance that products or technologies developed by
others will not render our services non-competitive or obsolete. Our failure to
address these developments could have a negative impact on our financial
performance and business prospects.

Potential clients may not widely adopt Internet solutions, and, if they do, may
not outsource such projects

            The market for our products and services will depend upon the
adoption of Internet, intranet, extranet and web site solutions by clients. If
clients and potential clients choose not to implement such solutions, we will
address a smaller market and our revenues could be adversely affected. Some
critical unresolved issues concerning the use of Internet solutions are
security, reliability, cost, ease of deployment and administration and bandwidth
of the Internet itself. These issues may affect the use of such technologies to
solve business problems. Some entities would have to change significantly the
way they do business to adapt to the Internet. Even if these issues are
resolved, businesses might not elect to outsource the design, development and
maintenance of their Internet, intranet, extranet and web site solutions to
firms such as eNucleus.


                                       19
<PAGE>
ITEM 8 FINANCIAL STATEMENTS AND SUPPLEMENTAL DATA

            The following financial statements for eNucleus and independent
auditors' report for the year ended December 31, 2000 and 1999 are filed as part
of this report on Form 10-KSB beginning on page F-1.

           Report of Independent Public Accountants
           Balance Sheets as of December 31, 2000 and 1999
           Statements of Operations for the years ended December 31, 2000 and
                1999
           Statements of Stockholders' Equity (Deficit) for the years ended
                December 31, 2000 and 1999
           Statements of Cash Flows for the years ended December 31, 2000 and
                1999
           Notes to the Financial Statements

ITEM 9 CHANGE IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL
       DISCLOSURE

            On August 4, 2000, eNucleus filed a Current Report on Form 8-K
indicating a change in its certifying accountant Andersen to KPMG LLP. In
January, 2002, we notified KPMG that the Board of Directors had decided to
change auditors to Bujan & Associates, Ltd.

            During their tenure, Andersen issued reports on our financial
statements up to December 31, 1999 that neither contained an adverse opinion or
disclaimer of opinion, nor was qualified or modified as to audit scope or
accounting principles. The 1999 report was modified for a going concern
uncertainty. During the period of Andersen's engagement and for the period of
the two most recent fiscal years and any subsequent interim period preceding
this action, there was no disagreement between us and Andersen on any matter of
accounting principals or practices, financial statement disclosures or audit
scope and procedure.

            During their tenure, KPMG provided certain consulting and advisory
services to us. Prior to August, 2000, we did not consult with KPMG regarding
the application of accounting principles or the type of audit opinion that may
be rendered with respect to our financial statements. During the period of
KPMG's services, there was no disagreement between us and KPMG on any matter of
accounting principals or practices, financial statement disclosures or audit
scope and procedure.

            Effective January 2002, Bujan & Associates, Ltd. has been retained
as independent auditor. Prior to engagement, we did not consult with Bujan &
Associates, Ltd regarding the application of accounting principles or the type
of audit opinion that may be rendered with respect to our financial statements.

PART III

ITEM 10 DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS, COMPLIANCE
        WITH SECTION 16(A) OF THE EXCHANGE ACT

DIRECTORS AND EXECUTIVE OFFICERS

            The following table contains certain information with respect to our
directors and executive officers:

<TABLE>
<CAPTION>
NAME                 AGE      POSITION AS OF THE YEAR ENDED 12/31/00
----                 ---      --------------------------------------
<S>                  <C>      <C>
John C. Paulsen      39       Chairman of the Board, President and Chief Executive Officer
</TABLE>

            John C. Paulsen has served as Chairman of the Board, President and
Chief Executive Officer of eNucleus since April 1999. Prior thereto, Mr. Paulsen
served as the President of Nucleus Holding Company. From 1995 to


                                       20
<PAGE>
1997 Mr. Paulsen served as President and CEO of MetroLink Communications, Inc. a
long-distance carrier. From 1990 to 1995, Mr. Paulsen served as President and
CEO of American Teletronics Long Distance, Inc. a reseller of long-distance
telecommunications services.

            BOARD OF DIRECTORS

            The board of directors of eNucleus consists of seven members. Mr.
Paulsen is currently serving as the sole Director Directors are elected each
year at the annual meeting of stockholders. Our last Annual Shareholder Meeting
was held on July 14, 2000 of which nominees for the Board of Directors were
approved. Subsequent to the shareholder meeting, and as a result or
restructuring and filing of the Chapter 11 petition, each of the directors
previously elected to serve (except Mr. John C. Paulsen) resigned from the Board
of Directors. Replacement directors were not installed. Pursuant to Plan of
Reorganization, a new Board of Directors will be installed (see Item 10).

            Directors are elected each year at the annual meeting of
stockholders. The board of directors of eNucleus met or took action twice during
2000. Each of the directors participated in 75% of such meetings. The board of
directors has established an audit committee, an executive committee and a
compensation committee.

            The audit committee recommends the annual appointment of eNucleus'
auditors and reviews the scope and results of the audit and other services
provided by our independent auditors. The audit committee did not meet during
2000.

            The compensation committee reviews and approves eNucleus'
compensation and benefits for our executive officers, administers our
compensation and stock option plans and makes recommendations to the board of
directors regarding such matters. The compensation committee took action once in
2000.

            The executive committee manages the business and affairs of
eNucleus. The executive committee did not meet in 2000.

            Section 16(A) Beneficial Ownership Reporting Compliance. Section
16(a) of the Securities Exchange Act of 1934 requires our directors, executive
officers, and persons who own more than 10% of our equity securities, to file
initial reports of ownership and reports of changes in ownership of our common
stock and other equity securities with the Securities and Exchange Commission.
Executive officers, directors and 10% owners are required by SEC regulation to
furnish us with copies of all Section 16(a) forms they file.


                                       21
<PAGE>
ITEM 11 EXECUTIVE COMPENSATION

            The following table summarizes the compensation paid for the years
ended December 31, 2000 and 1999 to the individuals who served as our chief
executive officer during any part of fiscal year 2000 or 1999 and those serving
as executive officers during such periods.

                           SUMMARY COMPENSATION TABLE

<TABLE>
<CAPTION>
                                                                                             SECURITIES
                                                                                             UNDERLYING          ALL OTHER
NAME AND PRINCIPAL POSITION                            YEAR    SALARY ($)     BONUS ($)      WARRANTS (#)    COMPENSATION ($)
---------------------------                            ----    ----------     ---------     ------------     ----------------
<S>                                                    <C>     <C>            <C>           <C>              <C>
John C. Paulsen, Chief Executive Officer               2000     275,000                                          1,195(5)
and President (1)                                      1999     350,000          --               --             3,775(5)

Vincent Sanchez, President and Chief                   2000      54,167                                         59,133(6)
Operating Officer (2)

J. Theodore Hartley, Executive Vice                    2000      84,763
President and Chief Financial Officer (3)              1999     105,590

Steven H. Walker, President and Chief                  1999      42,000
Executive Officer (4)
</TABLE>

----------
(1)   Chief Executive Officer commencing April 15, 1999 and President commencing
      September 8, 2000.

(2)   From May 24, 2000 to September 7, 2000.

(3)   From April 15, 1999 to September 6, 2000

(4)   From January 1, 1999 to April 15, 1999.

(5)   Consists of premiums paid for term life insurance under which Mr. Paulsen
      is the beneficiary.

(6)   Other compensation consists of consulting fees received prior to becoming
      employed by the Company.

COMPENSATION PURSUANT TO STOCK OPTIONS/WARRANTS

            During the fiscal year 2000, Mr. Paulsen was granted options to
purchase 750,000 shares of our common stock at prices ranging from $1.50 to
$2.16 per share. The options expire in May, 2010. Subsequent to year end, all
options and warrants were cancelled as part of the bankruptcy proceedings and a
new Option Program was installed.

AGGREGATE OPTION/WARRANT EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR-END
OPTION/WARRANT VALUES

            As of December 31, 1999, warrants to purchase 11,900 shares of
common stock were held by Mr. Walker.

STOCK PLANS

            We have a Stock Purchase Plan for non-qualified options and an
Incentive Stock Option Plan for incentive stock options. Under the plans, all
our employees, together with other persons who perform substantial services for
us or on our behalf, will be eligible to receive incentive and nonstatutory
options to purchase eNucleus common stock. The plans are administered by the
compensation committee. Under the plans, the exercise price at which the shares
of eNucleus common stock covered by each grant may be purchased will be
determined on the date of grant by the committee, but can be no less than the
par value of such shares and, in the case of incentive stock options, may not be
less than the fair market value of such shares on the date of grant. The number
of shares covered under the options granted under the plans are subject to
adjustments for stock splits, mergers, consolidations, combinations of shares,
reorganizations and other recapitalizations.


                                       22
<PAGE>
ITEM 12 SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS

PRINCIPAL STOCKHOLDERS AND SECURITY OWNERSHIP OF DIRECTORS AND EXECUTIVE
OFFICERS

            The following table sets forth the number of shares of common stock
beneficially owned as of April 10, 2000 by (i) each person known by us to
beneficially own more than 5% of the common stock of eNucleus, (ii) each of our
directors, (iii) our executive officers and (iv) all directors and executive
officers as a group. A beneficial owner of a security includes any person who
has the power to vote or sell the shares. Pursuant to the confirmed Plan of
Reorganization, the Company's common stock has undergone a 1 for 6 reverse stock
split resulting in current stockholders receiving 1 share of new common stock
for every 6 shares of old common stock currently owned and holders of certain
claims will receive 1 share of common stock for every $3.00 of allowed claims.
Also pursuant to the Plan, certain post petition financing will be entitled to
shares in addition to interest as addition compensation for providing financing
to the Company under its current position. The following information has not
been adjusted to reflect such adjustments as of December 31, 2000.

<TABLE>
<CAPTION>
NAME OF BENEFICIAL OWNER                             AMOUNT AND NATURE   PERCENT OF
------------------------                               OF BENEFICIAL        CLASS
                                                         OWNERSHIP          -----
                                                         ---------
<S>                                                  <C>                 <C>
John C. Paulsen (1).                                    4,447,852(2)         34.5%
All directors and executive officers, as a
group (1 persons)                                       4,447,852            34.5%
</TABLE>

----------
*     Less than 1%.
(1)   Mr. Paulsen's mailing address is 15545 S. 71st Court, Orland Park,
      Illinois 60462.

(2)   Includes shares held directly by Mr. Paulsen and indirectly through a
      family trust for which Mr. Paulsen acts as majority general partner.

ITEM 13 CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

            At December 31, 2000 eNucleus recorded amounts due to John C.
Paulsen, our President and CEO, of $676,000, including $502,000 for cash loans
made to eNucleus and $174,000 for deferred compensation and unreimbursed
expenses. During the year, Mr. Paulsen loaned additional monies and received
cash repayments of loans and other monies, which included the repurchase of
264,078 shares of common stock for $1.50 per share. The repurchase of shares of
common stock was approved by the Board of Directors as a method of reimbursement
for unpaid salary, expenses and monies loaned to the Company which had been
previously written off. During 1999, Mr. Paulsen made cash advances, payments to
vendors on behalf of the Company and deferred compensation and reimbursement of
expense totaling $903,000 and received repayments on such amounts totaling
$782,000. As of December 31, 1999, eNucleus carried a payable to Mr. Paulsen of
$121,000, which included monies loaned, deferred compensation and unreimbursed
expenses.

            During 2000, eNucleus repurchased 170,480 shares of common stock for
$1.50 per share from Henry Paulsen, John Paulsen's father. Proceeds paid were
net of the receivable of $26,000 due from Henry Paulsen. The repurchase of
shares of common stock was approved by the Board of Directors as a method of
reimbursement for unreimbursed expenses and other monies loaned to the Company
which had been previously written off. During 1999, Henry Paulsen, made cash
loans to eNucleus and cash payments to vendors totaling $216,000 and received
cash advances from eNucleus of $311,000. As of December 31, 1999, eNucleus
carried a receivable from Mr. Paulsen of $26,000.

            In August, 2000, eNucleus entered into a demand loan facility with
Sunami Ventures, LLC ("Sunami") (a Corporation managed and controlled by Mr.
Henry Paulsen). The facility provides for borrowings of up to $750,000, bears
interest at the rate of twelve percent and was payable no later than August,
2001. As of December 31, 2000, eNucleus had borrowed $188,000 from Sunami under
this facility. Subsequent to year end, eNucleus borrowed an additional $550,000
under this facility.


                                       23
<PAGE>
            As part of our reorganization under bankruptcy, eNucleus and Sunami
entered into a post-petition financing agreement for borrowings up to
$1,500,000. To date, eNucleus has received approximately $100,000 under this
facility. As part of the funding for this facility, Sunami has entered into
private sales agreements of certain eNucleus securities currently held by
Sunami, the proceeds of which will be used as funding under this facility.

            In December, 2001, eNucleus entered into a lease agreement with
Sunami for approximately 5,000 sq ft. in Roswell, Georgia serving as our branch
office and data center/operating facility in Atlanta, Georgia. The lease
provides for monthly payments of approximately $20,000 and expires in 2008.

            EXHIBITS AND REPORTS ON FORM 8-K

(a)         Exhibit Index

            See Exhibit Index beginning on page A-1.

(b)         Reports on Form 8-K

            On May 18, 2000, eNucleus filed a Current Report on Form 8-K
            relating to its merger with WebNet.com, Inc. On July 27, 2000
            eNucleus filed an amendment to such 8-K on Form 8-K/A

            On August 4, 2000, eNucleus filed a Current Report on Form 8-K
relating to a change in its certifying accountant.

            On August 11, 2000, eNucleus filed a Current Report on Form 8-K
relating to changing its name from Nucleus, Inc. to eNucleus, Inc. and
reincorporating into Delaware from Nevada.

                                    SIGNATURE

            In accordance with Section 13 or 15(d) of the Exchange Act, the
Registrant caused this report to be signed by the undersigned, thereunto duly
authorized.


Date: March 19, 2002                    By: /s/ John C. Paulsen
                                            ------------------------------------
                                        John C. Paulsen
                                        President and Chief Executive Officer

            Pursuant to the requirements of the Exchange Act, 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>
/s/ John C. Paulsen     President, Chief Executive Officer and    March 19, 2002
-------------------     Chairman
John C. Paulsen         (principal executive officer)
</TABLE>


                                       24
<PAGE>
                         INDEX TO FINANCIAL STATEMENTS

<TABLE>
<S>                                                                                                       <C>
Report of Bujan & Associates, Ltd, Independent Public Accountants                                         F-2

Consolidated Balance Sheets as of December 31, 2000 and 1999  F-3

Consolidated Statements of Operations for the Years ended December 31, 2000 and 1999                      F-4

Consolidated Statements of Changes in Shareholders' Equity (Deficit) for the Years Ended December 31,
     2000 and 1999                                                                                        F-5

Consolidated Statements of Cash Flows for the Years Ended December 31, 2000 and 1999                      F-6

Notes to Consolidated Financial Statements                                                                F-7
</TABLE>


                                       25
<PAGE>
                    REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS

To the Board of Directors and Stockholders of
eNucleus, Inc. and Chapter 11 Trustee of eNucleus, Inc.:

      We have audited the accompanying consolidated balance sheets of eNucleus,
Inc. (a Delaware corporation) (the Company) as of December 31, 2000 and 1999,
and the related statements of operations, stockholders' (deficit) equity, and
cash flows for the years then ended. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audits.

      We conducted our audits in accordance with auditing standards generally
accepted in the United States. 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 financial position of eNucleus,
Inc. as of December 31, 2000 and 1999 and the results of their operations and
cash flows for the periods then ended, in conformity with accounting principles
generally accepted in the United States.

      As discussed in Note 2, on May 10, 2001, the Company filed for
reorganization under Chapter 11 of the Federal Bankruptcy Code. The accompanying
financial statements do not purport to reflect or provide for the consequences
of the bankruptcy proceedings. In particular, such financial statements do not
purport to show (a) as to assets, their realizable value on a liquidation basis
or their availability to satisfy liabilities; (b) as to prepetition liabilities,
the amounts that may be allowed for claims or contingencies, or the status and
priority thereof, (c) as to stockholder accounts, the effect of any changes that
may be made in the capitalization of the company; or (d) as to operations, the
effect of any changes that may be made in its business.

      The accompanying consolidated financial statements have been prepared
assuming that the Company will continue as a going concern. As discussed in Note
2 to the financial statements, the Company's recurring operating losses and
negative working capital raise substantial doubt about its ability to continue
as a going concern. Note 2 also describes how management plans to address these
matters. The financial statements do not include any adjustments that might
result from the outcome of this uncertainty.

Bujan & Associates, Ltd

Chicago, Illinois
March 15, 2002


                                       26
<PAGE>
                                 eNUCLEUS, INC.
                             (DEBTOR-IN-POSSESSION)
                          CONSOLIDATED BALANCE SHEETS
                               AS OF DECEMBER 31,

<TABLE>
<CAPTION>
                                                                  2000              1999
                                                                  ----              ----
<S>                                                           <C>               <C>
ASSETS:
Current assets:
Cash                                                          $      1,452      $    176,481
Accounts receivable                                                 69,866                --
Other current assets                                               159,839            28,530
                                                              ------------------------------
    Total current assets                                           231,157           205,011
                                                              ------------------------------

Property and equipment, net                                      1,492,434           106,251
Goodwill and other intangibles, net                                782,339                --
Net long-term assets of discontinued operations                         --         6,482,363
                                                              ------------------------------
    Total assets                                              $  2,505,930      $  6,793,625
                                                              ==============================

LIABILITIES & STOCKHOLDERS' EQUITY
    (DEFICIT):
Current liabilities:

Senior notes payable                                          $  6,104,000      $         --
Line of credit                                                     499,444           499,444
Notes payable                                                      321,950           131,756
Accounts payable                                                 2,790,093         1,218,066
Related party payables                                             675,848           151,220
Accrued expenses                                                 1,922,339           426,702
Net liabilities of discontinued operations                       1,248,681         1,518,986
                                                              ------------------------------
    Total current liabilities                                   13,562,355         3,946,174
                                                              ------------------------------

Long term liabilities                                                   --                --
                                                              ------------------------------
    Total liabilities                                           13,562,355         3,946,174
                                                              ------------------------------
Redeemable securities                                              237,586                --
                                                              ------------------------------

STOCKHOLDERS' EQUITY (DEFICIT):
Common stock, $0.001 par value, 900,000,000 shares
authorized, shares issued and outstanding (12,905,432 and
9,610,104 on December 31, 2000 and December 31, 1999,
respectively)                                                       12,905             9,610
Additional paid-in capital                                      22,542,262        12,250,664
Stock warrants                                                     727,349           377,069
Treasury stock                                                    (651,838)               --
Accumulated deficit                                            (33,924,689)       (9,789,892)
                                                              ------------------------------

Total stockholders' equity (deficit)                           (11,294,011)        2,847,451
                                                              ------------------------------

Total liabilities and stockholders' equity (deficit)          $  2,505,930      $  6,793,625
                                                              ==============================
</TABLE>

          See accompanying notes to Consolidated Financial Statements.


                                       27
<PAGE>
                                 eNUCLEUS, INC.
                             (DEBTOR-IN-POSSESSION)
                     CONSOLIDATED STATEMENTS OF OPERATIONS
                        FOR THE YEARS ENDED DECEMBER 31,

<TABLE>
<CAPTION>
                                                              2000              1999
                                                              ----              ----
<S>                                                       <C>               <C>
Revenue                                                   $    260,785      $        --
Cost of revenue                                                141,461               --
                                                          -----------------------------
Gross profit                                                   119,324               --

Operating expenses                                           4,960,599        3,526,031
Stock based compensation expense                             1,591,913        1,177,500
Depreciation and amortization expense                          401,840           30,322
                                                          -----------------------------
Operating income (loss) from continuing operations          (6,835,028)      (4,733,853)

Interest and other income (expenses), net                   (8,564,848)        (209,246)
                                                          -----------------------------
Loss from continuing operations before income taxes        (15,399,876)      (4.943,099)

Income tax expense                                                  --               --
                                                          -----------------------------
Loss from continuing operations                            (15,399,876)      (4,943,099)

Loss from discontinued operations                           (1,602,474)      (1,448,177)
Loss on disposal of discontinued operations                 (7,132,447)              --
                                                          -----------------------------
Net loss                                                  $(24,134,797)     $(6,391,276)
                                                          =============================

Basic and diluted loss per common share from
continuing operations                                     $      (1.30)     $     (0.62)
                                                          =============================

Basic and diluted loss per common share from
  discontinued operations                                 $      (0.14)     $     (0.18)
                                                          =============================

Basic and diluted loss per common share from disposal
  of discontinued operations                              $      (0.60)     $        --
                                                          =============================

Basic and diluted net loss per common share               $      (2.04)     $     (0.80)
                                                          =============================

Weighted average shares outstanding - basic and
diluted                                                     11,809,830        7,961,809
                                                          =============================
</TABLE>

          See accompanying notes to Consolidated Financial Statements.


                                       28
<PAGE>
                                 eNUCLEUS, INC.
                             (DEBTOR-IN-POSSESSION)
      CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY (DEFICIT)
                   FOR YEARS ENDED DECEMBER 31, 1999 AND 2000

<TABLE>
<CAPTION>
                                            COMMON STOCK         PAID-IN       STOCK      TREASURY     ACCUMULATED
                                         SHARES      AMOUNT      CAPITAL      WARRANTS     STOCK         DEFICIT          TOTAL
                                         ------      ------      -------      --------     -----         -------          -----
<S>                                    <C>          <C>       <C>             <C>        <C>          <C>             <C>
Balance, December 31, 1998              6,436,936   $ 6,437   $  2,777,220    $     --   $      --    $ (3,398,616)   $   (614,959)
Common stock and warrant
sold for cash                           1,594,335     1,594      1,935,337     377,069          --              --       2,314,000
Common stock issued in
exchange for warrants                       8,000         8         19,992          --          --              --          20,000
Issuance of common stock for
acquisitions                            1,425,000     1,425      5,876,700          --          --              --       5,878,125
Issuance of common stock for
conversion of debt                         45,833        46        189,015          --          --              --         189,061
Common stock issued for
extension of debt agreement               100,000       100        274,900          --          --              --         275,000
Compensation value of
warrants and options issued                    --        --      1,177,500          --          --              --       1,177,500
Net loss                                       --        --             --          --          --      (6,391,276)     (6,391,276)
                                       ----------   -------   ------------    --------   ---------    ------------    ------------
Balance, December 31, 1999              9,610,104     9,610     12,250,664     377,069          --      (9,789,892)      2,847,451
                                       ==========   =======   ============    ========   =========    ============    ============

Common stock and warrants
sold for cash                             365,366       365        547,683          --          --              --         548,048
Issuance of common stock for
acquisitions                              661,000       661      1,734,464          --          --              --       1,735,125
Issuance of common stock in
conjunction with debt offering          1,692,172     1,692      6,102,308     350,280                          --       6,454,280
Issuance of common stock for
services                                  576,790       577        245,816                                                 246,393
Compensation value of
warrants and options issued                                      1,591,913                                               1,591,913
Fair value of assets received                  --        --        307,000          --          --              --         307,000
Accretion of Redeemable Common Stock                              (237,586)                                               (237,586)
Repurchase of common stock                                                                (651,838)                       (651,838)
Net loss                                       --        --             --          --          --     (24,134,797)    (24,134,797)
                                       ----------   -------   ------------    --------   ---------    ------------    ------------
Balance, December 31, 2000             12,905,432   $12,905   $ 22,542,262    $727,349   $(651,838)   $(33,924,689)   $(11,294,011)
                                       ==========   =======   ============    ========   =========    ============    ============
</TABLE>

          See accompanying notes to Consolidated Financial Statements.


                                       29
<PAGE>
                                 eNUCLEUS, INC.
                             (DEBTOR-IN-POSSESSION)
                     CONSOLIDATED STATEMENTS OF CASH FLOWS
                        FOR THE YEARS ENDED DECEMBER 31,

<TABLE>
<CAPTION>
                                                                                                      2000             1999
                                                                                                      ----             ----
<S>                                                                                              <C>               <C>
Cash flows from operating activities:
Net loss                                                                                         $(24,134,797)     $(6,391,276)
   Adjustments to reconcile net loss to net cash provided by (used in) operating activities:
      Loss from discontinued operations                                                             1,602,474        1,448,177
      Loss on disposal of discontinued operations                                                   7,132,447               --
      Depreciation and amortization                                                                   401,840           30,322
      Compensation expense from issuance of equity securities                                       1,591,913        1,177,500
      Amortization of deferred financial costs and debt discount                                    6,104,000               --
      Accretion of redeemable common stock                                                            234,586               --
      Changes in operating assets and liabilities--
         Changes in accounts receivables                                                              (69,866)              --
         Changes in other assets                                                                     (131,309)         (11,715)
         Changes in payables                                                                        1,572,027        1,110,972
         Changes in accrued expenses                                                                1,495,637          407,444
                                                                                                 ------------------------------
      Net cash in continuing operations                                                            (4,201,048)      (2,228,576)
      Net cash in discontinued operations                                                          (1,707,638)        (710,512)
                                                                                                 ------------------------------
      Net cash used in operating activities                                                        (5,908,686)      (2,939,088)
                                                                                                 ------------------------------

Cash flows from investing activities:
      Cash received from acquisitions, net                                                                 --          168,550
      Capital expenditures                                                                           (256,975)        (102,449)
                                                                                                 ------------------------------

      Net cash (used in)/provided by investing activities                                            (256,975)          66,101
                                                                                                 ------------------------------

Cash flows from financing activities:
      Proceeds from senior notes payable                                                            6,104,000               --
      Borrowings (repayments) on notes payable                                                        191,194          119,304
      Increases in lines of credit                                                                         --          499,444
      Proceeds from sale of common stock                                                              548,048        2,334,000
      Purchase of treasury stock                                                                     (651,838)              --
      Payments of deferred finance costs                                                             (725,400)              --
      Increase in officer loan                                                                        524,628           91,603
      Payments to former owners                                                                            --               --
                                                                                                 ------------------------------
      Net cash provided by financing activities                                                     5,990,632        3,044,351
                                                                                                 ------------------------------

Increase in cash                                                                                     (175,029)         171,364

Cash, beginning of period                                                                             176,481            5,117

Cash, end of period                                                                              $      1,452      $   176,481
                                                                                                 ------------------------------

Non-cash investing and financing activities:
      Common stock issued with senior notes payable                                              $  6,104,000      $        --
      Fair value of stock warrants issued with debt facility                                          305,200               --
      Fixed assets acquired through credit facilities                                               1,029,425               --
      Fixed assets contributed to company                                                             307,000               --
      Stock issued to effect acquisitions                                                           1,735,125               --
                                                                                                 ------------------------------
</TABLE>

          See accompanying notes to Consolidated Financial Statements.


                                       30
<PAGE>
                                 eNUCLEUS, INC.
                             (DEBTOR-IN-POSSESSION)
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                           DECEMBER 31, 2000 AND 1999

(1) Description of the Business

      eNucleus (the Company) is a wholesaler of Internet infrastructure aimed at
system integrators, web developers, software providers and telecom resellers.
Our core product offerings include co-location, high-speed internet access, data
storage, and application delivery. Together, this offering provides our clients
with a scaleable and brandable platform for the development of their ebusiness
initiatives.

(2) Financial Results and Liquidity

      On May 10, 2001, as a result of dramatic changes in the Internet industry
and financing markets, delays in reaching accord with our short term note
holders and other creditors in restructuring their debts and our inability to
cure defaults under our data center lease and the landlord's attempts to seize
Company assets, we filed a voluntary petition for reorganization under Chapter
11 of the United States Bankruptcy Code in the U.S. Bankruptcy Court for the
Northern District of Illinois, Eastern Division. We continued to operate as a
debtor-in-possession under the supervision of the Bankruptcy Court. On November
6, 2001, the Company's Plan of Reorganization was confirmed by the Bankruptcy
Court. Pursuant to the confirmed Plan of Reorganization, among other things,
holders of certain allowed claims will receive 1 share of common stock for every
$3.00 of debt. Also pursuant to the Plan, the Company's common stock has
undergone a 1 for 6 reverse stock split resulting in current stockholders
receiving 1 share of new common stock for every 6 shares of old common stock
currently owned.

      The Company's continued existence is dependent on its ability to achieve
future profitable operations and its ability to obtain financial support. The
Company has only recently begun to execute its business plan and faces all the
risks common to companies in their early stages of development, including:
undercapitalization and uncertainty of funding sources, high initial expenditure
levels and uncertain revenue streams. The uncertainty related to these matters
and the Company's bankruptcy status raise substantial doubt about its ability to
continue as a going concern. The financial statements do not include adjustments
that might result from the outcome of this uncertainty.

      Subsequent to year end and filing of the bankruptcy petition, the Company
entered into Loan Agreements with certain entities to provide for post-petition
borrowings. The first loan facility entered into December, 2001 in the amount of
$545,000, has been partially drawn down by the Company, and will be payable in
monthly installments of approximately $19,000 through 2005. The second facility,
entered into with a related party in December 2001, provides for borrowings
under a line of credit facility up to $1.5 million provided certain conditions
have been met. The Company will continue to pursue long-term financial support
including seeking strategic investors, lenders and/or technology partners to
execute its business plan. There can be no assurances that management's efforts
in these regards will be successful. Under any of these scenarios, management
believes that the Company's common stock would likely be subject to substantial
dilution.

      Management believes that, despite the financial hurdles and funding
uncertainties going forward, it has under development a business plan that, if
successfully funded and executed, can significantly improve operating results.
The support of the Company's vendors, customers, lenders, stockholders and
employees will continue to be key to the Company's future success.

(3) Discontinued Operations

      In August, 2000, with the installation of a new management team, the
Company decided to strategically focus on higher margin Internet infrastructure
services and elected to discontinue offering certain non-related client premise
equipment sales and associated professional services. As part of this decision,
the Company closed its Seattle and Denver offices as well as discontinued
certain operations of its Chicago and Atlanta offices. The Company recorded a
charge of approximately $7.3 million representing the loss on disposal of these
operations resulting from the write off of unamortized goodwill, fixed assets
and the present value of estimated unrecoverable


                                       31
<PAGE>
lease payments associated with these offices. Additionally, the Company
discontinued reselling long distance telephone services.

The following is summary financial information for the Company's discontinued
operations:

<TABLE>
<CAPTION>
                                                     2000                1999
                                                     ----                ----
<S>                                               <C>                <C>
Revenue                                           $7,166,000         $10,779,000
                                                  ==========         ===========
Net loss from discontinued
operations                                        $1,602,000         $ 1,448,000
                                                  ==========         ===========
Loss on disposal of
discontinued operation                            $7,132,000         $         0
                                                  ==========         ===========
</TABLE>

(4) Summary of the Company's Significant Accounting Policies

Use of Estimates

      The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.

Revenue Recognition

      The Company recognizes revenue upon providing of service or delivery to
client. Billings made or payments received in advance of providing services are
deferred until the period these services are provided.

      Certain of the Company's contracts, include up-front charges for
installation services. In accordance with Staff Accounting Bulletin ("SAB") No.
101, "Revenue Recognition in Financial Statements", the Company defers the
revenue and corresponding costs and recognizes such over the contract terms. The
cumulative effect of this adoption had no net effect on the accompanying
consolidated statements of operations.

      Certain contracts with customers may contain service level commitments,
which may required the Company to provide credits if required service level
commitments are not met. These amounts, if any, are accounted for in cost of
sales. To date, credits issued under these arrangements have been immaterial.

Financial Instruments and Concentration of Credit Risk

      The carrying value of the Company's financial instruments, including cash
and cash equivalents, accounts receivable, bank borrowings and debt approximates
their fair market value. The Company's customer base is composed of businesses
throughout the United States. The Company performs ongoing credit evaluations of
its customers and maintains reserves for potential losses.

Property and Equipment

      Property and equipment are stated at cost and depreciated on a
straight-line basis over their respective estimated useful lives, which are
generally three to five years. Equipment utilized for specific client
applications are depreciated over the life of that clients contract. Leasehold
improvements are amortized over the shorter of the lease period or their
estimated useful life using the straight-line method. Maintenance and repairs
are charged to expense as incurred, improvements are capitalized.

Income Taxes

      The Company uses the asset and liability method of accounting for income
taxes. Under this method, deferred tax assets and liabilities are determined
based on the difference between the financial statement and tax bases of assets
and liabilities using enacted tax rates in effect for the year in which the
differences are expected to affect taxable income. Valuation allowances are
established when necessary to reduce deferred tax assets to the amounts expected
to be recovered.


                                       32
<PAGE>
Stock-Based Compensation

      The Company uses the intrinsic value-based method to account for its
employee stock-based compensation grants and provides pro forma disclosures of
net loss as if the fair value method had been applied in measuring compensation
expense. Expense associated with stock-based compensation is being amortized
over the vesting period of the individual options. Charges for non-employee,
stock-based compensation are measured using fair value-based methods.

Impairment of Long-Lived Assets

      The Company evaluates its long-lived assets, including goodwill, for
impairment whenever events or change in circumstances indicate that the carrying
amount of such assets or intangibles may not be recoverable. Recoverability of
assets to be held and used is measured by a comparison of the carrying amount of
an asset to future net cash flows expected to be generated by the asset. If such
assets are considered to be impaired, the impairment to be recognized is
measured by the amount by which the carrying amount of the assets exceed the
fair value of the assets. Assets to be disposed of are reported at the lower of
the carrying amount or fair value less costs to sell. In conjunction with its
discontinued operations charge, the Company recorded an impairment loss of
approximately $6.5 million for the year ended December 31, 2000.

Goodwill and Other Intangible Assets

      Goodwill and other intangible assets are comprised of amounts recorded in
business acquisitions and are being amortized on a straight-line basis over
periods ranging from 3 to 7 years. Intangible assets include the value of excess
purchase price over net assets acquired, less those assets discarded as part of
the discontinued operations treatment and thus primarily consist of goodwill and
are shown net of accumulated amortization of $355,000 for the years ended
December 31, 2000.

Net Loss Per Share

      Basic and diluted net loss per share has been computed by dividing the net
loss attributable to common stockholders by the weighted-average number of
shares of common stock outstanding during the period. Diluted net loss per share
does not include the effect of the following common equivalent shares as the
effect of their inclusion is antidilutive during each period:

<TABLE>
<CAPTION>
                                                        YEAR ENDED DECEMBER 31,
                                                        -----------------------
                                                         2000            1999
                                                         ----            ----
<S>                                                    <C>             <C>
Shares issuable under stock options                    3,932,000         423,000
Shares issuable pursuant to warrants to
purchase common stock                                    798,070       2,044,732
</TABLE>

Pursuant to the confirmed Plan of Reorganization, the Company's common stock has
undergone a 1 for 6 reverse stock split resulting in current stockholders
receiving 1 share of new common stock for every 6 shares of old common stock
currently owned and holders of certain claims will receive 1 share of common
stock for every $3.00 of allowed claims. Also pursuant to the Plan, certain post
petition financing will be entitled to shares in addition to interest as
addition compensation for providing financing to the Company under its current
position. As such, there is a potential for additional substantial dilution to
the currently existing shareholders. Per share amounts do not reflect the impact
of the bankruptcy petition and associated approved conditions.


                                       33
<PAGE>
Reclassifications

      Certain prior year amounts have been reclassified to conform with the
current year presentation, primarily to take into consideration the effect of
the discontinued operations as discussed in Note 2.

(5) Business Combinations

      On April 15, 1999, Nucleus Holdings Corporation ("NHC") merged with
Nucleus, Inc. (formerly American General Ventures, Inc.) whereby all of the
outstanding shares of NHC were exchanged for 5,307,109 newly issued Nucleus
shares. The merger qualified as a tax-free reorganization as permitted by the
Internal Revenue Code and was treated as a pooling-of-interests for accounting
and financial reporting purposes. The financial statements presented herein have
been retroactively restated to reflect this transaction. The merged company is
called eNucleus, Inc.

      On May 11, 2000, we completed the acquisition of WebNet.com, Inc. WebNet
is an Atlanta-based provider of dedicated Internet access and hosting solutions
to middle market companies. As acquisition consideration, we issued 661,000
shares of our common stock to WebNet's shareholders and have agreed to issue an
additional 300,000 shares if the WebNet operation meets certain revenue targets
or other specified conditions are met. WebNet shareholders also received a put
option to require eNucleus to repurchase 60,000 shares at $5.00 per share on May
11, 2001. The purchase price of 661,000 shares, valued at $1,735,125, has been
allocated to the acquired assets and liabilities based on their respective
carrying values, as these carrying values (net value of $13,053) are deemed to
represent fair market value of these assets and liabilities and to goodwill. As
part of the Company's reorganization in the third quarter of 2000, the company
discontinued offering client premise equipment sales and associated professional
services. As part of this decision, the Company recorded a charge of
approximately $800,000 related to the write-off of goodwill resulting from this
transaction. Additionally, as a result of the discontinuation of certain
business and the release of certain personnel, the shareholders of WebNet were
granted the additional 300,000 shares.

      This acquisition has been accounted for using the purchase method of
accounting and, therefore, its operations have been consolidated from the date
of their acquisitions. The following summary, prepared on an unaudited pro forma
basis, combines the Company's consolidated results of operations with the
results of operations of the acquisition, as if it had been consummated as of
January 1, 2000 (dollars in thousands, except per share data):

<TABLE>
<CAPTION>
                                                           YEAR ENDED
                                                          DECEMBER 31,
                                                          ------------
                                                    2000                1999
                                                    ----                ----
<S>                                             <C>                 <C>
Revenues                                        $        141        $       245
Net loss                                             (24,096)            (6,482)
Basic and diluted net loss per share            $      (2.00)       $     (0.75)
                                                ================================
Shares used in pro forma per share
calculation                                       12,047,066          8,629,618
                                                ================================
</TABLE>

      The pro forma results are not necessarily indicative of what would have
occurred if the acquisition had been in effect for the periods presented. In
addition, they are not intended to be a projection of future results and do not
reflect any synergies that might be achieved from combined operations.

      During 1999, the Company completed four acquisitions primarily of
providers of client premise equipment and professional services. The Company
accounted for these business combinations as purchases and recorded excess
purchase price over net assets acquired of approximately $7 million. As part of
the Company's reorganization in the third quarter of 2000, the company
discontinued offering client premise equipment sales and associated professional
services which primarily was associated with these transaction. As part of this
decision, the Company recorded a charge of approximately $7.3 million
representing the loss on disposal of these operations resulting from the write
off of $6.5 million of unamortized goodwill, $600,000 fixed assets and the
present value of estimated unrecoverable lease payments associated with these
offices of $250,000.


                                       34
<PAGE>
(6) Financial Statement Components

Accounts Receivable

Accounts receivables are shown net of the allowances for doubtful accounts of
$45,365 and $0 for 2000 and 1999, respectively.

Property and Equipment

      Property and equipment consisted of furniture, fixtures, and computer
equipment and are net of accumulated depreciation of $355,130 and $21,619 as of
December 31, 2000 and 1999, respectively.

Accrued Expenses

      Accrued expenses consisted of the following:

<TABLE>
<CAPTION>
                                                              DECEMBER 31,
                                                              ------------
                                                         2000             1999
                                                         ----             ----
<S>                                                   <C>               <C>
Accrued fees for registration rights                  $  655,384        $172,000
on stock issued
Debt Extension fee to be converted                       305,200              --
into common stock
Accrued interest                                         354,586           4,059
Accrued payroll and commissions                          196,192          80,454
Short term loans                                               0          88,331
Tax liabilities                                          164,870           4,358
Professional fees                                         50,000          50,000
Other                                                    196,109          27,500
                                                      --------------------------
                                                      $1,922,341        $426,702
                                                      ==========================
</TABLE>

(7) Bank Borrowings and Debt

      On March 21, 2000, the Company issued senior bridge notes in the aggregate
principal amount of $6,104,000. The note investors also received 1,692,172
shares of common stock. The notes were due on July 6, 2000 and pay interest of
12% per annum on a monthly basis. The Company elected to extend the maturity
date of these notes for another 120 days pursuant to the terms. On November 3,
2000 the senior bridge notes came due. We have defaulted on the notes.

      In July, 1999 the Company entered into a $500,000 line of credit facility
with a bank which is secured by the assets of the Company and personally
guaranteed by the Company's President and primary shareholder. The line of
credit bears interest at the rate of prime plus one percent and is payable upon
demand. As of year end, the entire amount of this facility was outstanding. This
demand loan agreement has expired and we are currently in default.

      The Company entered into an inventory financing facility with
NationsCredit Distribution Finance ("Nations"). Borrowings under this facility
(approximately $357,000 at December 31, 2000), are included within accounts
payable and are personally guaranteed by the former shareholders of ITS. This
facility was paid in full from proceeds of the bridge financing.

      In conjunction with the acquisition of ITS, the Company issued a
$1,000,000 subordinated note. The note bears interest at the rate of prime plus
one percent, and is secured by 400,000 shares of common stock of the Company's
majority shareholder. The note, which was originally due on October 10, 1999,
was extended by ITS shareholders in consideration for 100,000 additional shares
of the Company's common stock. The aggregate value of these shares ($275,000)
was recorded as additional interest expense. The note is due on June 30, 2000.
During 2000, the Company retired $600,000 of the note with proceeds from the
bridge financing.


                                       35
<PAGE>
      During 1999, the Company agreed to convert approximately $360,000 of
accounts payable to a vendor into a note payable. The note is payable in monthly
amounts of approximately $22,000 through July, 2001 and bears interest at 10%.
In August, 2000, the Company agreed to sell the assets of the long-distance
reselling business to the vendor holding the note payable, in exchange for the
balance outstanding under the note.

(8) Stockholders' Equity

      During the year ended December 31, 2000, the Company issued an aggregate
of 365,366 shares of its common stock to third parties for cash aggregating
$548,048 in private sale transactions. The shares were sold at $1.50 per share.
The Company issued 576,790 on various dates in satisfaction of services
performed for $246,393. The Company also issued to the senior bridge notes
1,692,172 shares of common stock. The value of these shares of $6,104,000 was
amortized into interest expense over the life of the notes.

      At various dates during 2000 the Company issued warrants to purchase
approximately 185,000 shares of the Company's common stock at exercise prices
ranging from $2.75 per share to $3.625 per share. The Company recorded expenses
of approximately $350,000 associated with these grants.

      At various dates during 2000, the Company granted options to purchase an
aggregate of 6,014,500 shares of the Company's common stock to employees and
certain members of the board of directors at exercise prices ranging from
$0.1875 to $4.00 per share.

      During the year ended December 31, 1999, the Company issued an aggregate
of 1,594,335 shares of its common stock to third parties for cash aggregating
$2,314,000 (net of $136,000 in fees) in private sale transactions. The shares
were sold at prices between $1.50 per share and $2.00 per share. Attached to
certain sales of securities were 473,332 warrants to purchase common stock with
an exercise price of $1.50. The warrants were valued under the fair value
methodology and $377,069 of the proceeds received were allocated to those
warrants.

      At various dates during 1999 the Company issued warrants to purchase
approximately 1,214,500 shares of the Company's common stock to employees and
consultants at exercise prices ranging from $1.50 per share to $3.875 per share.
Compensation and other expense of $1,177,500 was recognized related to these
grants.

      At various dates during 1999, the Company granted options to purchase an
aggregate of 423,000 shares of the Company's common stock to employees and
certain members of the board of directors at exercise prices ranging from $1.50
to $2.25 per share.

Fair Value Disclosures

      The Company uses the intrinsic value method in accounting for its employee
stock-based compensation plans. Had compensation cost been determined in
accordance with SFAS No. 123 for all of the Company's employee stock-based
compensation plans, net loss and net loss per share would have been changed to
the amounts indicated below (in thousands, except per share data):

<TABLE>
<CAPTION>
                                                     YEAR ENDED DECEMBER 31,
                                                     -----------------------
                                                        2000          1999
                                                        ----          ----
<S>                                                  <C>            <C>
Net loss
  As reported                                        $ (24,135)     $ (6,391)
  Pro forma                                            (24,285)       (6,482)
Basic and diluted net loss per share:
 As reported                                         $   (2.04)     $  (0.80)
 Pro forma                                               (2.06)        (0.75)
</TABLE>

      The fair value of each stock option and warrant is estimated on the date
of grant using the Black-Scholes option pricing model with no expected
dividends, expected lives of the contractual term (generally 10 years),
risk-free interest rates of 4.2-6.5% and volatility of 260%.

A summary of the Company's option activity for the years ended December 31, 2000
and 1999 are as follows:


                                       36
<PAGE>
<TABLE>
<CAPTION>
                                                                DECEMBER 31,
                                                                ------------
                                                     2000                          1999
                                                     ----                          ----
                                                          WEIGHTED                      WEIGHTED
                                                           AVERAGE                       AVERAGE
                                            SHARES     EXERCISE PRICE      SHARES    EXERCISE PRICE
                                            ------     --------------      ------    --------------
<S>                                       <C>          <C>                <C>        <C>
Outstanding at beginning of year            423,000        $  1.87              0        $  0.00
Granted                                   6,014,500           1.10        423,000           1.82
Forfeited                                 2,505,500           1.77              0              0
Exercised                                         0              0              0              0
                                          ------------------------------------------------------
Outstanding at the end of the year        3,932,000        $  0.75        423,000        $  1.82
                                          ======================================================

Exercisable at the end of the year        1,785,000        $  0.75        120,000        $  1.50
                                          ======================================================
</TABLE>

The weighted average fair value of options granted during the years ended
December 31, 2000 and 1999 were $0.77 and $1.15, respectively.

The following table summarizes information about stock options outstanding as of
December 31, 2000:

<TABLE>
<CAPTION>
                                NUMBER OF        WEIGHTED AVERAGE         WEIGHTED AVERAGE
RANGE OF EXERCISE PRICES         SHARES     REMAINING CONTRACTUAL LIFE     EXERCISE PRICE
------------------------         ------     --------------------------     --------------
<S>                             <C>         <C>                           <C>
           0.1875                950,000               9.92                    0.1875
      1.50 - 2.25                835,000               9.64                      1.60
</TABLE>

A summary of the Company's warrant activity for the years ended December 31,
2000 and 1999 are as follows:

<TABLE>
<CAPTION>
                                                                   DECEMBER 31,
                                                                   ------------
                                                      2000                            1999
                                                      ----                            ----
                                                            WEIGHTED                      WEIGHTED
                                                             AVERAGE                       AVERAGE
                                            SHARES       EXERCISE PRICE      SHARES    EXERCISE PRICE
                                            ------       --------------      ------    --------------
<S>                                       <C>            <C>               <C>         <C>
Outstanding at beginning of year           2,044,732         $1.84           367,050       $3.31
Granted                                      184,738          3.55         1,690,832        1.52
Forfeited                                          0             0            (5,150)       3.70
Exercised                                 (1,269,500)         1.66            (8,000)       2.50
                                          ------------------------------------------------------
Outstanding at the end of the year           798,070         $2.14         2,044,732       $1.84
                                          ======================================================

Exercisable at the end of the year           798,070         $2.14         2,044,732       $1.84
                                          ======================================================
</TABLE>

The weighted average fair value of warrants granted during the years ended
December 31, 2000 and 1999 were $1.68 and $2.14, respectively.


                                       37
<PAGE>
The following table summarizes information about stock warrants outstanding as
of December 31, 2000:

<TABLE>
<CAPTION>
                                NUMBER OF        WEIGHTED AVERAGE         WEIGHTED AVERAGE
RANGE OF EXERCISE PRICES         SHARES     REMAINING CONTRACTUAL LIFE     EXERCISE PRICE
------------------------         ------     --------------------------     --------------
<S>                             <C>         <C>                           <C>
       1.50 - 1.60               513,332               2.20                     1.51
      2.75 - 3.625               284,738               8.25                     3.29
</TABLE>

(9) Commitments and Contingencies

Leases

      The Company has entered into a number of operating leases extending
through 2007. Future minimum lease payments as of December 31, 2000 are as
follows:

<TABLE>
<CAPTION>
                            YEAR ENDING DECEMBER 31,
                            ------------------------
<S>                                                                   <C>
2001                                                                     632,000
2002                                                                     624,000
2003                                                                     589,000
2004                                                                     407,000
2005                                                                     393,000
2006                                                                     404,000
2007                                                                     417,000
                                                                      ----------
Total minimum lease payments                                          $3,466,000
                                                                      ==========
</TABLE>

      The Company's rent expense was $529,000 and $41,000 for the years ended
December 31, 2000 and 1999, respectively.

Contingencies

      The Company is engaged in certain legal actions arising in the ordinary
course of business. The Company believes that it has adequate legal defenses and
that the ultimate outcome of these actions will not have a material effect on
the Company's financial position and results of operations. Prior to our filing
for protection under bankruptcy, we were a party to several creditor collection
actions. However, as a result of our bankruptcy filing, these matters and many
other threatening proceedings have been resolved and terminated. We believe that
there is no proceeding threatened or pending against us which, if determined
adversely, would have a material adverse effect on the financial condition or
results of operations of eNucleus.

(10) Related-party transactions.

      At December 31, 2000 eNucleus recorded amounts due to John C. Paulsen, our
President and CEO, of $676,000, including $502,000 for cash loans made to
eNucleus and $174,000 for deferred compensation and unreimbursed expenses.
During the year, Mr. Paulsen loaned additional monies and received cash
repayments of loans and other monies, which included the repurchase of 264,078
shares of common stock for $1.50 per share. The repurchase of shares of common
stock was approved by the Board of Directors as a method of reimbursement for
unpaid salary, expenses and monies loaned to the Company which had been
previously written off. During 1999, Mr. Paulsen made cash advances, payments to
vendors on behalf of the Company and deferred compensation and reimbursement of
expense totaling $903,000 and received repayments on such amounts totaling
$782,000. As of December 31, 1999, eNucleus carried a payable to Mr. Paulsen of
$121,000, which included monies loaned, deferred compensation and unreimbursed
expenses.

      During 2000, eNucleus repurchased 170,480 shares of common stock for $1.50
per share from Henry Paulsen, John Paulsen's father. Proceeds paid were net of
the receivable of $26,000 due from Henry Paulsen. The repurchase of shares of
common stock was approved by the Board of Directors as a method of reimbursement
for unreimbursed expenses and other monies loaned to the Company which had been
previously written off. During 1999, Henry Paulsen, made cash loans to eNucleus
and cash payments to vendors totaling $216,000 and received


                                       38
<PAGE>
cash advances from eNucleus of $311,000. As of December 31, 1999, eNucleus
carried a receivable from Mr. Paulsen of $26,000.

      In August, 2000, eNucleus entered into a demand loan facility with Sunami
Ventures, LLC ("Sunami") (a Corporation managed and controlled by Mr. Henry
Paulsen). The facility provides for borrowings of up to $750,000, bears interest
at the rate of twelve percent and was payable no later than August, 2001. As of
December 31, 2000, eNucleus had borrowed $188,000 from Sunami under this
facility. Subsequent to year end, eNucleus borrowed an additional $550,000 under
this facility.

      As part of our reorganization under bankruptcy, eNucleus and Sunami
entered into a post-petition financing agreement for borrowings up to
$1,500,000. To date, eNucleus has received approximately $100,000 under this
facility. As part of the funding for this facility, Sunami has entered into
private sales agreements of certain eNucleus securities currently held by
Sunami, the proceeds of which will be used as funding under this facility.

      In December, 2001, eNucleus entered into a lease agreement with Sunami for
approximately 5,000 sq ft. in Roswell, Georgia serving as our branch office and
data center/operating facility in Atlanta, Georgia. The lease provides for
monthly payments of approximately $20,000 and expires in 2008.

(11) Income Taxes

      As of December 31, 2000, the Company has generated net operating loss
carryforwards of approximately $32 million. The net operating loss carryforwards
expire through 2014. The Company has recorded a valuation allowance for the full
benefit of the loss carryforward. The net change in the valuation allowance was
an increase of $23 million and $5 million during the years ended December 31,
2000 and 1999, respectively. Federal and state tax laws impose significant
restrictions on the utilization of net operating loss carryforwards in the event
of a shift in the ownership of the Company, which constitutes an "ownership
change" as defined by Internal Revenue Code, Section 382. As a result of the
reorganization under Chapter 11, the new equity structure will constitute an
ownership change and result in material restrictions on the utilization of the
net operating losses against future earnings.

(12) Segment Information

      The Company has no separately reportable segments in accordance with SFAS
No. 131 and therefore does not report operations, identify assets and/or other
resource related to business segments. The Company operates its business and
manages financial information collectively under managed services. Prior to it's
restructuring and discontinuance of operations, the Company reported revenues,
under enterprise-wide disclosure requirements of: reselling of long distance
telecommunications, professional services and sales of client premise equipment.


                                       39
<PAGE>
(13) QUARTERLY FINANCIAL SUMMARY (UNAUDITED)

<TABLE>
<CAPTION>
2000 QUARTERS                                         FIRST           SECOND           THIRD           FOURTH
-------------                                         -----           ------           -----           ------
                                                              (in thousands, except for share data)
<S>                                                  <C>             <C>             <C>              <C>
Net revenue                                          $     0         $    49         $     88         $   124
Loss from continuing operations                        (1620)          (2129)           (1531)          (1555)
Loss before extraordinary item                         (2097)          (5266)           (4915)          (3122)
Loss from discontinued operations                       (100)           (865)            (637)              0
Loss on disposal of discontinued operations                0               0           (7,132)              0
Net income (loss)                                     (2,197)         (6,131)         (12,684)         (3,123)
Net income (loss) per share (basic & diluted)          (0.19)          (0.52)           (1.07)          (0.26)
</TABLE>

<TABLE>
<CAPTION>
1999 QUARTERS                                         FIRST           SECOND           THIRD           FOURTH
-------------                                         -----           ------           -----           ------
                                                              (in thousands, except for share data)
<S>                                                  <C>             <C>             <C>              <C>
Net revenue                                          $     0         $     0         $      0         $     0
Income from continuing operations                       (392)           (498)            (834)          (3010)
Loss before extraordinary item                          (417)           (481)            (835)          (3210)
Loss from discontinued operations                        188            (175)            (167)          (1294)
Loss on disposal of discontinued operations                0               0                0               0
Net income (loss)                                       (229)           (656)          (1,002)         (4,504)
Net loss per share (basic & diluted)                   (0.03)          (0.08)           (0.13)          (0.57)
</TABLE>

(14) VALUATION AND QUALIFYING ACCOUNTS

<TABLE>
<CAPTION>
                                                  BALANCE AT    CHARGES TO      INCREASE                        BALANCE
                                                  BEGINNING      OPERATING       DUE TO          ACCOUNTS        AT END
                                                  OF PERIOD      EXPENSES     DISCONTINUED     WRITTEN-OFF     OF PERIOD
                                                  ---------      --------     ------------     -----------     ---------
                                                                                        (IN THOUSANDS)
<S>                                               <C>           <C>           <C>              <C>             <C>
Accounts receivable allowance activity for            $0            $ 0            $45            $(97)            $0
the year ending December 31, 2000
Accounts receivable allowance activity for            $0            $33            $64            $(97)            $0
the year ending December 31, 1999
</TABLE>


                                       40
<PAGE>
                                 EXHIBIT INDEX

<TABLE>
<CAPTION>
Exhibit
  No.       Description
<S>         <C>
2.1         Agreement and Plan of merger by and between eNucleus, Inc. and
            Webnet.com, Inc. dated May 3, 2000 (incorporated by reference to the
            Company's Current Report on Form 8-K dated filed on May 18, 2000 and
            Form 8-K/A filed on July 27, 2000)

2.2         Plan of Reorganization of eNucleus, Inc. and Confirmation Order of
            the U.S. Bankruptcy Court for the Northern District of Illinois
            dated November 8, 2001.

3.1         Certificate of Incorporation of eNucleus, Inc. (Incorporated by
            reference to the Company's Definitive Proxy Statement filed on May
            12, 2000)

3.2         By-Laws (Incorporated by reference to the Company's Definitive Proxy
            Statement filed on May 12, 2000)

4.1         Form of Securities Purchase Agreement dated January 20, 2000 by and
            among Registrant and certain purchasers. (Incorporated by reference
            to the Company's 1999 Form 10-KSB filed on April 14, 2000)

4.2         Form of Securities Purchase Agreement dated June 2, 1999 by and
            among Registrant and certain purchasers. (Incorporated by reference
            to the Company's 1999 Form 10-KSB filed on April 14, 2000)

4.3         Form of Registration Rights Agreement dated June 2, 1999 by and
            among Registrant and certain investors. (Incorporated by reference
            to the Company's 1999 Form 10-KSB filed on April 14, 2000)

4.4         Form of Securities Purchase Agreement dated June 30, 1999 by and
            among Registrant and certain investors. (Incorporated by reference
            to the Company's 1999 Form 10-KSB filed on April 14, 2000)

4.5         Form of Registrant Rights Agreement dated June 30, 1999 by and among
            Registrant and certain investors. (Incorporated by reference to the
            Company's 1999 Form 10-KSB filed on April 14, 2000)

4.6         Form of Warrant (Incorporated by reference to the Company's 1999
            Form 10-KSB filed on April 14, 2000)

4.7         Form of Securities Purchase Agreement for Senior Bridge Notes.
            (Incorporated by reference to the Company's 1999 Form 10-KSB filed
            on April 14, 2000)

4.8         Form of Senior Bridge Note. (Incorporated by reference to the
            Company's 1999 Form 10-KSB filed on April 14, 2000)

4.9         Form of Registration Rights Agreement among Registrant and Senior
            Bridge Note investors. (Incorporated by reference to the Company's
            1999 Form 10-KSB filed on April 14, 2000)

4.10        Form of Senior Bridge Note. (Incorporated by reference to the
            Company's 1999 Form 10-KSB filed on April 14, 2000)

4.11        Form of Revolver Note with Sunami Ventures LLC dated August 1, 2000

4.12        Form of Revolver Note with John C. Paulsen dated August 1, 2000

10.1        Incentive Stock Option Plan (Incorporated by reference to the
            Company's 1999 Form 10-KSB filed on April 14, 2000)

10.2        Stock Purchase Plan. (Incorporated by reference to the Company's
            1999 Form 10-KSB filed on April 14, 2000)

10.3        Atlanta Lease. (Incorporated by reference to the Company's 1999 Form
            10-KSB filed on April 14, 2000)

23.1        Consent of Bujan & Associates, Ltd.
</TABLE>


                                       41