<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, 2001

                                       or

            Transition Report Pursuant to Section 13 or 15(d) of the
                         Securities Exchange Act of 1934

                  For the Transition period from _____ to _____

                         COMMISSION FILE NUMBER 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 (l) 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 were $27,000 for the two month period ended December
31, 2001.

      As of April 10, 2002, the number of shares that are estimated to be
outstanding under the issuance of new common stock is approximately 20,000,000
shares.

      As of April 10, 2002, the market value of the issuer's common stock held
by non-affiliates was approximately $100,000.

      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>
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Page
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<S>                                                                        <C>
ITEM 1 DESCRIPTION OF BUSINESS...........................................   4
ITEM 2 DESCRIPTION OF PROPERTIES.........................................   8
ITEM 3 LEGAL PROCEEDINGS.................................................   8
ITEM 4 SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS...............   8
ITEM 5 MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDERS MATTERS.........   8
ITEM 6 MANAGEMENT DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS...............................................   11
ITEM 7 FINANCIAL STATEMENTS AND SUPPLEMENTAL DATA.......................   22
ITEM 8 CHANGE IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING
AND FINANCIAL DISCLOSURE................................................   22
ITEM 9 DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS,
COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE ACT.......................   22
ITEM 10 EXECUTIVE COMPENSATION..........................................   24
ITEM 11 SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS.................   25
ITEM 12 CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS..................   26
EXHIBITS AND REPORTS ON FORM 8-K........................................   26
SIGNATURES..............................................................   27
INDEX TO FINANCIAL STATEMENTS...........................................   28
EXHIBIT INDEX...........................................................   46
</TABLE>
<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,

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

      -     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,

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


Page 5 of 48
<PAGE>
PART I

INTRODUCTION: SIGNIFICANT 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 preceding 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 "Confirmation Date"). 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.)

      As a result of the confirmation of the Company's Plan of Reorganization
and the application of fresh-start reporting (Item 1. Description of Business),
consolidated financial statements for the Company for the periods subsequent to
the Confirmation Date are referred to the "Reorganized Company" and are not
comparable to those for the periods prior to the Confirmation Date which are
referred to as the "Predecessor Company." Under fresh-start reporting, the
reorganization value of the Company was allocated to our assets, the majority of
our unsecured creditors converted into common stock, our accumulated deficit was
eliminated, our old common stock was eliminated and new equity in the
Reorganized Company was recorded. For financial reporting purposes, the
effective date of the adoption of fresh-start reporting is considered to be
October 31, 2001, although the Company's confirmation date was November 6, 2001.
The results of operations from November 1 to November 6, 2001 were not
significant.

      EFFECTIVE APRIL 10, 2002, OUR STOCK BEGAN TRADING UNDER THE NEW SYMBOL
ENCU. AS PART OF THE DISTRIBUTION OF THE NEW COMMON STOCK UNDER THE PLAN OF
REORGANIZATION, SHAREHOLDERS SHALL HAVE BEEN INSTRUCTURED TO TENDER THEIR OLD
COMMON STOCK TO THE REORGANIZED COMPANY'S DESIGNATED STOCK TRANSFER AGENT NO
LATER THAN OCTOBER 15, 2002, IN ACCORDANCE WITH WRITTEN INSTRUCTIONS TO BE
PROVIDED TO SUCH HOLDERS. ANY SHAREHOLDER WHO DOES NOT SUBMIT ITS CERTIFICATES
FOR EXCHANGE PRIOR TO OCTOBER 15, 2002 SHALL HAVE ITS CLAIM OR INTEREST AND ITS
DISTRIBUTION PURSUANT TO THE PLAN OF REORGANIZATION ON ACCOUNT OF SUCH OLD
COMMON STOCK DISCHARGED AND SHALL BE FOREVER BARRED FROM ASSERTING ANY SUCH
CLAIM OR INTEREST AGAINST THE REORGANIZED COMPANY OR THEIR RESPECTIVE PROPERTY.

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.


                                       6
<PAGE>
      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.

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
                  is 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 old common stock was traded on the electronic bulletin board of the
"over the counter" market under the symbol ENCS. Our stock is now traded under
the sybol ENCU.

      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.


Page 7 of 48
<PAGE>
      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 in Seattle,
Washington, and Telos Distributing, Inc. operating in 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 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 for the year ended
December 31, 2000.

      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. The new
shares of common stock issued pursuant to the Plan by the Reorganized Company
shall be referred to as "New Common Stock".

      As a result of the confirmation of the Company's Plan of Reorganization on
November 6, 2001, we adopted fresh-start reporting as required by Statement of
Position 90-7 "Financial Reporting by Entities in Reorganization under the
Bankruptcy Code" ("SOP 90-7"). Under fresh-start reporting, the Company's assets
and liabilities were adjusted to fair values and a reorganization value for the
entity was determined by the Company based upon the estimated fair value of the
enterprise before considering values allocated to debt to be settled in the
reorganization. The portion of the reorganization value which could not be
attributed to specific tangible or identified intangible assets for the
Reorganized Company is referred to as reorganization value in excess of amounts
allocable to identifiable assets and is reported as "Goodwill" in the financial
statements. Fresh-start reporting resulted in the creation of a new reporting
entity for accounting purposes (the "Company" or the "Reorganized Company") with
no accumulated deficit as of November 1, 2001. As a result of adopting SFAS No.
142 (see "Recent Accounting Pronouncements"), the goodwill recognized in
fresh-start reporting will not be amortized, but will be reviewed annually for
impairment. We have determined that the goodwill is not impaired as of December
31, 2001, however future impairment of the recorded goodwill may result if
actual results of operations or changes in economic or industry conditions
differ significantly from assumptions used to derive the reorganization value.

      The financial statements for the Company for the periods subsequent to
October 31, 2001 are referred to the "Reorganized Company" and are not
comparable to those for the periods prior to October 31, 2001 which are referred
to as the "Predecessor Company."

      The reorganization value of the Company was based upon the consideration
of many factors and various valuation methods, including discounted cash flow
analysis using projected financial information, selected publicly traded company
market multiples and other applicable ratios and valuation techniques that we
believe to be representative of our business and industry. The valuation was
based upon a number of estimates and assumptions, which are inherently subject
to significant uncertainties and contingencies beyond our control. Accordingly,
there can be no assurance that the values reflected in the valuation will be
realized, and actual results could vary


Page 8 of 48
<PAGE>
materially. Moreover, the value of our New Common Stock, as traded on the
national exchange, may differ materially from the reorganization valuation.

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 events.

      -     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.


Page 9 of 48
<PAGE>
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

      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.

      We are from time to time a party to various legal actions arising in the
normal course of business. 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.

ITEM 4 SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

      No matters were submitted to a vote of security holders during the fourth
quarter of 2001.

PART II

ITEM 5 MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDERS MATTERS

      Pursuant to the our Plan of Reorganization, we filed an Amended and
Restated Certificate of Incorporation with the Delaware Secretary of State. In
accordance with the Plan, all outstanding shares of old common stock and
warrants and options to purchase old common stock were cancelled. As the April
10, 2002, we have not yet


Page 10 of 48
<PAGE>
distributed shares of New Common Stock and therefore have reported the entire
value of common stock as "New Common Equity-Issuable". Under the Plan,
approximately 7.4 million shares of common stock will be issued in exchange for
unsecured creditor debt and existing common stock outstanding. Additionally,
there are up to approximately 14 million shares issuable pursuant to the Plan of
Reorganization. OUR COMMON STOCK WILL NOW BE TRADED ON THE OTC BULLETIN BOARD
UNDER THE SYMBOL ENCU.

      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 not reflective of our 1 for 6 reverse stock split. Our common
stock previously traded 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. Effective April 10, 2002, the Company's new stock symbol is
ENCU.

<TABLE>
<CAPTION>
                                                    COMMON STOCK
                                                    ------------
PERIOD                                              LOW BID        HIGH BID
------                                              -------        --------
<S>                                                 <C>            <C>
2002
1st Quarter                                         $0.00100       $0.05000

2001
1st Quarter                                         $0.13000       $0.23000
2nd Quarter                                         $0.00100       $0.18000
3rd Quarter                                         $0.00100       $0.07000
4th Quarter                                         $0.00100       $0.03000

2000
1st Quarter                                         $2.50000       $5.75000
2nd Quarter                                         $1.50000       $3.25000
3rd Quarter                                         $0.28120       $1.81250
4th Quarter                                         $0.12500       $0.71870
</TABLE>

      The approximate number of record holders of our common stock on October
31, 2001 was 1,375. As of April 10, 2002 we have not yet distributed shares of
New Common Stock. Effective April 10, 2002, our stock began trading under the
new symbol ENCU. As part of the distribution of the New Common Stock under the
Plan of Reorganization, shareholders are to tender their Old Common Stock to the
Reorganized Company designated Stock Transfer Agent no later than October 15,
2002, in accordance with written instructions to be provided to such holders.
Any shareholder who does not submit its certificates for exchange prior to
October 15, 2002 shall have its claim or interest and its distribution pursuant
to the Plan of Reorganization on account of such Old Common Stock discharged and
shall be forever barred from asserting any such claim or interest against the
Reorganized Company or their respective property.

      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 years ended December 31, 2001 and 2000:

      In the first quarter 2001, we issued 165,000 shares of our common stock in
exchange for services rendered and amounts due to various vendors.

      On February 23, 2001, we issued 550,000 shares of common stock to two
ex-employees per conditions of their employment agreements and other matters. We
recorded additional compensation expense of approximately $82,000 associated
with this grant.


Page 11 of 48
<PAGE>
      On May 11, 2001, we entered into agreements with certain employees of the
Company whereby the individuals would agree to be employed by the Company and
provide their best efforts in assisting the Company through the reorganization
process. The individuals also agreed to a substantially reduced salary during
such period and other certain terms and conditions including a period of
non-compete. Under these agreements, the Company would provide a stock grant to
manage the reorganization, reduction in salary, non-compete agreement and other
matters. A total of approximately 2.5 million shares of common stock have been
reserved to be issued under these agreements. The agreements contain a claw-back
feature whereby if the individual does not continue employment through March 31,
2002 certain shares of common stock would be forfeited. The agreements also
contain a provision whereby the Company, at its sole discretion may buy back the
shares for $0.10 per share prior to June 30, 2002.

      In accordance with the Plan of Reorganization, we granted options to
purchase up to 2 million shares of New Common Stock to key employees and
management. Such options vested on the confirmation date (November 6, 2001) with
an exercise price equal to the price of the common stock at that date and have a
ten year life .

      In accordance with the Plan of Reorganization, we agreed to issue warrants
to purchase 1 million shares of common stock to certain unsecured creditors pro
rata in accordance with the amount of their allowed claims. The Warrants give
the holders thereof the right to purchase, at any time for a period of seven
years from the date of issuance (i.e., the effective date of the Plan), one
share of the New Common Stock at a price of Twenty Cents ($0.20) per share. The
Warrants also contain a "Cashless Exercise" provision which provide that in the
event the stock has traded at an average price in excess of $2.00 per share for
at least 30 days preceding an exercise of any warrants, the holders thereof may
elect to exercise the Warrants in whole or in part and instruct the Company to
withhold from the securities issuable upon exercise, a number of securities,
valued at the current fair market value on the date of exercise, as the payment
of the exercise price.

      In October 2001, we entered into a collocation/lease agreement with Sunami
Ventures, LLC ("Sunami") (a related party), 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. Associated with this agreement, we were required to
provide a $100,000 security deposit, which has been financed under the Sunami
borrowing facility and 1.0 million shares of common stock as compensation for
Sunami $1.9 million lease exposure.

      As part of our Plan of Reorganization, we entered into a borrowing
facility with Sunami for $1.5 million, of which $1.0 million of this facility is
designated for the purpose of financing equipment on behalf of customers. Sunami
shall receive on account of the borrowings, five shares of New Common Stock for
every dollar loaned and a Senior Secured Note for the amount of the borrowings.
As of December 31, 2001, eNucleus has received approximately $321,000 under this
facility the proceeds of which have been used to satisfy certain petitions
resulting from the bankruptcy and post-petition operating requirements. Pursuant
to the Sunami financing agreement, in December, 2001, we entered into a
three-year $545,000 secured demand loan agreement with Capital Equity Group. The
note agreement is secured by certain our assets, guaranteed by Mr. Paulsen and
bears interest at the rate of 16%. As of December 31, 2001, eNucleus has
received approximately $62,000 under this facility and subsequent to year end we
have received an additional $145,000 through March 31, 2002.

      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 per share which expired in two years from issue date. All recipients had
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


Page 12 of 48
<PAGE>
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.

ITEM 6 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, brandable and cost
effective platform for the development of their ebusiness initiatives.


Page 13 of 48
<PAGE>
      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, 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.

      As a result of the confirmation of the Company's Plan of Reorganization on
November 6, 2001, we adopted fresh-start reporting as required by Statement of
Position 90-7 "Financial Reporting by Entities in Reorganization under the
Bankruptcy Code" ("SOP 90-7"). Under fresh-start reporting, the Company's assets
and liabilities were adjusted to fair values and a reorganization value for the
entity was determined by the Company based upon the estimated fair value of the
enterprise before considering values allocated to debt to be settled in the
reorganization. The portion of the reorganization value which could not be
attributed to specific tangible or identified intangible assets for the
Reorganized Company is referred to as reorganization value in excess of amounts
allocable to identifiable assets and is reported as "Goodwill" in the financial
statements. Fresh-start reporting resulted in the creation of a new reporting
entity (the "Company" or the "Reorganized Company") with no accumulated deficit
as of October 31, 2001. As a result of adopting SFAS No. 142 (see "Recent
Accounting Pronouncements"), the goodwill recognized in fresh-start reporting
will not be amortized, but will be reviewed annually for impairment. We have
determined that the goodwill is not impaired as of December 31, 2001, however
future impairment of the recorded goodwill may result if actual results of
operations or changes in economic or industry conditions differ significantly
from assumptions used to derive the reorganization value.

      The financial statements for the Company for the periods subsequent to
October 31, 2001 are referred to the "Reorganized Company" and are not
comparable to those for the periods prior to October 31, 2001 which are referred
to as the "Predecessor Company."


Page 14 of 48
<PAGE>
      The reorganization value of the Company was based upon the consideration
of many factors and various valuation methods, including discounted cash flow
analysis using projected financial information, selected publicly traded company
market multiples and other applicable ratios and valuation techniques that we
believe to be representative of our business and industry. The valuation was
based upon a number of estimates and assumptions, which are inherently subject
to significant uncertainties and contingencies beyond our control. Accordingly,
there can be no assurance that the values reflected in the valuation will be
realized, and actual results could vary materially. Moreover, the value of our
New Common Stock, as traded on the national exchange, may differ materially from
the reorganization valuation.

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

OPERATING RESULTS 2000 TO 2001

      The financial statements after the Confirmation Date are those of a new
reporting entity (the "Reorganized Company") and are not comparable to the
pre-confirmation periods of the old reporting entity (the "Predecessor Company".
The following table sets forth our results of operations for the periods
indicated.

<TABLE>
<CAPTION>
                                 Reorganized Company                          Predecessor Company
                             -----------------------------    --------------------------------------------------------------
                               Two Months                      Ten Months                      For the year
                                 Ending                          Ending                           ending
                             Dec. 31, 2001                    Oct 31, 2001                     Dec 31, 2000
                             -------------                    ------------                     ------------
<S>                          <C>                   <C>        <C>                  <C>         <C>                  <C>
Revenue                      $     26,981           100.0%    $    398,056           100.0%    $    260,785           100.0%
Cost of revenue                    14,975            55.5          232,034            58.3          141,461            54.2
                             ----------------------------------------------------------------------------------------------
Gross profit                       12,006            44.5          166,022            41.7          119,324            45.8

Operating expenses                144,995          (537.4)       1,052,144          (264.3)       4,960,599         (1902.2)
Stock based compensation                0              --           82,500           (20.7)       1,591,913          (610.4)
 expense
Net reorganization expense              0              --        3,268,326          (821.1)              --
Depreciation and                   62,564          (231.9)         432,700          (108.7)         401,840          (154.1)
 amortization expense
                             ----------------------------------------------------------------------------------------------
Operating loss                   (195,553)         (724.8)      (4,669,648)        (1173.1)      (6,835,028)        (2620.9)

Interest and other expense         (6,841)          (25.3)        (486,605)         (122.3)      (8,564,848)        (3284.3)
                             ----------------------------------------------------------------------------------------------
Net income from continuing
 operations before               (202,394)         (750.1)      (5,156,253)        (1295.4)     (15,399,876)        (5905.2)
 extraordinary items
Loss from discontinued                 --              --               --              --       (1,602,474)         (614.5)
 operations
Loss on disposal of
 discontinued operations               --              --               --              --       (7,132,447)        (2735.0)
                             ----------------------------------------------------------------------------------------------

Net loss                     $   (202,394)         (750.1)    $ (5,156,253)        (1295.4)    $(24,134,797)        (9254.7)
                             ============          ======     ============         =======     ============         =======
                             ----------------------------------------------------------------------------------------------
</TABLE>


Page 15 of 48
<PAGE>
TWO MONTHS ENDING DECEMBER 31, 2001 (REORGANIZED COMPANY)

      Revenues and cost of revenues. Revenues were $27,000 for the two months
ending December 31, 2001 representing operations from our managed services. Due
to our delays in financing, we have not been able to fully implement our sales
and marketing strategy. Costs of revenues were $15,000 or 55.5% of revenue,
which include costs associated with providing such services including data
center colocation space rental, communication charges, engineering salaries and
other related expenses.

      Operating expenses. Operating expenses were $145,000 for two months ending
December 31, 2001. Operating expenses included salaries and benefits, facility
rentals, utility costs, professional fees as well as costs related to our
marketing and business development activities and costs associated with our
brand and product offering.

      Depreciation and amortization expense. Depreciation and amortization
expense was $63,000 for the two months ending December 31, 2001. As part of
adopting fresh-start reporting, the fixed assets were recorded at their fair
values and depreciation was captured based upon their estimated remaining useful
lives of 3-7 years.

      Interest and Other Expense. Interest expense was $7,000 representing
accrued but unpaid interest on our post petition financings.


TEN MONTHS ENDING OCTOBER 31, 2001 (PREDECESSOR COMPANY)

      Revenues and cost of revenues. Revenues were $398,000 for the ten months
ending October 31, 2001 representing operations from our managed services. Costs
of revenues were $232,000 or 58.3% of revenue, which include costs associated
with providing such services including data center colocation space rental,
communication charges, engineering salaries and other related expenses.

      Operating expenses. Operating expenses were $1.1 million for the ten
months ending October 31, 2001. Operating expenses included salaries and
benefits, facility rentals, utility costs, professional fees as well as costs
related to our marketing and business development activities and costs
associated with our brand and product offering.

      Stock based compensation expense. Stock based compensation expense was
$82,500 for the ten months ending October 31, 2001. We grant stock warrants to
attract and retain employees, directors and consultants. The majority of these
options and warrants vest over a three-year period. As of May 10, 2001 as a
result of our bankruptcy, all options and warrants outstanding were cancelled.

      Net reorganization expenses. Reorganization costs recognized during the
ten months ending October 31, 2001 include liabilities for rejected contracts
and lease agreements, professional fees, fees paid to the Unites States
Trustee's Office, fresh-start adjustments and other expenses associated with the
Chapter 11 proceedings.

      Depreciation and amortization expense. Depreciation and amortization
expense was $433,000 . Depreciation and amortization expense included
approximately $389,000 in depreciation expense associated with the build-out of
the Atlanta Data Center.

      Interest and Other Expense. Interest expense was $487,000. Effective May
10, 2001 as a result of our filing for bankruptcy protection, interest and other
expense charges for pre-petition matters were stayed. Included in interest
expense is approximately $5,000 of expense associated with post-petition
financing.


Page 16 of 48
<PAGE>
FOR THE YEAR ENDED DECEMBER 31, 2000 (PREDECESSOR COMPANY)

      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.

      Operating expenses. Operating expenses were $5.0 million in 2000.
Operating expenses included expenses incurred as part of our growth strategy
during the first half of 2000, 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.

      Stock based compensation expense. Stock based compensation expense was
$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.

      Depreciation and amortization expense. Depreciation and amortization
expense was $402,000 in 2000. Depreciation and amortization expense included
approximately $271,000 in depreciation expense associated with the build-out of
the Atlanta Data Center

      Interest and Other Expense. Interest expense was $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 $7.2 million for the year ending 2000.

      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 was $24.1 million in 2000. As more fully discussed
above, the 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

      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.

      Although the Plan resulted in a substantial reduction in debt, further
improvements in our liquidity position will be subject to the success of
initiatives we are undertaking to increase sales, reduce operating expenses and
the effects on our liquidity of market conditions in the industry. Our uses of
capital are expected to include working


Page 17 of 48
<PAGE>
capital for operating expenses and satisfaction of current liabilities, capital
expenditures and payments on outstanding debt facilities.

      As shown in our results of operations, we incurred a net loss of $200,000
during the two month period ending December 31, 2001. During such period in
2001, net cash used in continuing operating activities totaled $87,000 and was
primarily the result of operating losses. Cash flow from financing activities
provided $85,000 in cash, primarily as a result of our borrowing under the post
petition financing arrangements.

      As part of our Plan of Reorganization, we entered into a borrowing
facility with Sunami Ventures, LLC ("Sunami") (a related party) for $1.5
million, of which $1.0 million of this facility is designated for the purpose of
financing equipment on behalf of customers. Sunami shall receive on account of
the borrowings, five shares of New Common Stock for every dollar loaned and a
Senior Secured Note for the amount of the borrowings. As of December 31, 2001,
eNucleus has received approximately $321,000 under this facility the proceeds of
which have been used to satisfy certain petitions resulting from the bankruptcy
and post-petition operating requirements. Pursuant to the Sunami financing
agreement, in December, 2001, we entered into a three-year $545,000 secured
demand loan agreement with Capital Equity Group. The note agreement is secured
by certain our assets, guaranteed by John Paulsen and bears interest at the rate
of 16%. As of December 31, 2001, eNucleus has received approximately $62,000
under this facility.

      The Company's continued existence is dependent on its ability to achieve
future profitable operations and its ability to obtain financial support. The
satisfaction of the Company's cash requirements hereafter will depend in large
part on its 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 its existing operations will not occur.
Management is aggressively pursuing 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. 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 to existing shareholders. 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.

      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.

RECENT ACCOUNTING PRONOUNCEMENTS

      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. In accordance with SOP 90-7 and the application of fresh-start
reporting, we adopted SFAS No. 141 and SFAS No. 142. The adoption of SFAS No.
141 had no impact on our financial statements as we had no recorded goodwill or
intangible assets at adoption. The adoption of SFAS No. 142 results in the
classification of the reorganization intangible recognized in fresh-start
reporting as goodwill with an indefinite life. As a result, the goodwill will
not be amortized, but will be reviewed annually for impairment.


Page 18 of 48
<PAGE>
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

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

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.

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 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,


Page 19 of 48
<PAGE>
      -     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.

      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.


Page 20 of 48
<PAGE>
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
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 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


Page 21 of 48
<PAGE>
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. We 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.


Page 22 of 48
<PAGE>
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.

      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.


Page 23 of 48
<PAGE>
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.

ITEM 7 FINANCIAL STATEMENTS AND SUPPLEMENTAL DATA

      The following financial statements for eNucleus and independent auditors'
report as of December 31, 2001 and 2000 and for the two months ended December
31, 2001, ten months ended October 31, 2001 and the year ended December 31, 2000
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, 2001 and 2000
         Statements of Operations for the two months ended December 31, 2001,
              ten months ended October 31, 2001 and the year ended December 31,
              2000
         Statements of Stockholders' Equity (Deficit) for the two months ended
              December 31, 2001, ten months ended October 31, 2001 and the year
              ended December 31, 2000
         Statements of Cash Flows for the two months ended December 31, 2001,
              ten months ended October 31, 2001 and the year ended December 31,
              2000
         Notes to the Financial Statements

ITEM 8 CHANGE IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL
       DISCLOSURE

      NONE

PART III

ITEM 9 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 12/31/01
----                         ---             --------------------------------------
<S>                          <C>             <C>
John C. Paulsen              39              Chairman of the Board, Chief Executive Officer and
                                             Secretary

Scott Voss                   44              President
</TABLE>

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


Page 24 of 48
<PAGE>
      Scott Voss joined eNucleus following the bankruptcy petition. Prior
thereto, Mr. Voss served as an advisor to the company on various financing,
sales and marketing projects. Mr. Voss has extensive experience in developing
and growing marketing orientated organizations. Before joining eNucleus, Mr.
Voss was President of Sterling Press and Graphics which specialized in
collateral development and printing for high growth businesses.

      BOARD OF DIRECTORS

      In May 2002, we will be installing a new Board of Directors tentatively
comprised of John Paulsen, our Chief Executive Officer; Scott Voss, our
President; James A. Chatz, Eric Stari, Jack Wasserman, Keyvan Akvan, Steve
Green; Edward Skolberg and one individual to be appointed as representative from
Sunami Ventures.

      Prior to the installation date of the new Board of Directors, Mr. Paulsen
is serving as the sole Director. Directors are to be elected each year at the
annual meeting of stockholders, on a rotating term basis.

      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.

      The board of directors of eNucleus met or took action twice during 2000
and once during 2001. 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 or 2001.

      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 or 2001.

      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.


Page 25 of 48
<PAGE>
ITEM 10 EXECUTIVE COMPENSATION

      The following table summarizes the compensation paid for the years ended
December 31, 2001 and 2000 to the individuals who served as our chief executive
officer during any part of fiscal year 2001 or 2000 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,      2001     142,923             --            --                   --
President and Secretary (1)                    2000     275,000             --            --             1,195(5)

Scott Voss, President (2)                      2001       6,382             --            --                   --

Vincent Sanchez, President and Chief           2000      54,167             --            --            59,133(6)
Operating Officer (3)

J. Theodore Hartley, Executive Vice President  2000      84,763             --            --                   --
and Chief Financial Officer (4)
</TABLE>

-------------
(1)   President September, 2000 until December, 2001.
(2)   President beginning in December, 2001, Executive Vice President Sales and
      Marketing May 2001 to December 2001.
(3)   From May 24, 2000 to September 7, 2000.
(4)   From April 15, 1999 to September 6, 2000
(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

      On May 11, 2001, we entered into agreements with Mr. John Paulsen and Mr.
Scott Voss whereby the individuals would agree to be employed by the Company and
provide their best efforts in assisting the Company through the reorganization
process. The individuals also agreed to a substantially reduced salary during
such period and until March 31, 2002 and other certain terms and conditions
including a period of non-compete. Under these agreements, the Company would
provide a stock grant to manage the reorganization process, reduction in salary,
non-compete agreement and other matters equal to 850,000 shares of common stock
each individually. The agreements contain a claw-back feature whereby if the
individual does not continue employment through March 31, 2002 certain shares of
common stock would be forfeited. The agreements also contain a provision whereby
the Company, at its sole discretion may buy back the shares for $0.10 per share
prior to June 30, 2002.

      In accordance with the Plan of Reorganization, Mr. Paulsen and Mr. Voss
were each granted options to purchase 500,000 shares of our common stock. Such
options vested on the confirmation date with an exercise price equal to the
price of the common stock upon that date and have a ten year life.

      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. As a result of the bankruptcy, these options were cancelled.


Page 26 of 48
<PAGE>
AGGREGATE OPTION/WARRANT EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR-END
OPTION/WARRANT VALUES

      None

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. All options outstanding at the time
of our filing for bankruptcy were cancelled.

ITEM 11 SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS

      On November 6, 2001 (the "Confirmation Date") the Company's Plan of
Reorganization was confirmed by the Bankruptcy Court. As part of the
distribution of the New Common Stock under the Plan of Reorganization,
shareholders shall tender their Old Common Stock to the Reorganized Company
designated Stock Transfer Agent no later than October 15, 2002, in accordance
with written instructions to be provided to such holders. Those shareholders who
do not submit their certificates for exchange prior to October 15, 2002 shall
have its claim or interest and its distribution pursuant to the Plan of
Reorganization on account of such Old Common Stock discharged and shall be
forever barred from asserting any such claim or interest against the Reorganized
Company or their respective property.

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, 2002 by (i) each person known by us to
beneficially own more than 10% 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 based upon the exchange ratio as outlined in our Plan of
Reorganization. A beneficial owner of a security includes any person who has the
power to vote or sell the shares. The following information reflects the reverse
split on the common stock shares in accordance with the Plan of Reorganization,
as well as shares to be issued pursuant to the plan.

<TABLE>
<CAPTION>
           NAME OF BENEFICIAL OWNER                AMOUNT AND NATURE       PERCENT OF
           ------------------------                  OF BENEFICIAL           CLASS
                                                       OWNERSHIP             -----
                                                       ---------
<S>                                                <C>                     <C>
John C. Paulsen (1).                                   2,068,808(2,3)          10%
Scott Voss (1)                                         1,379,167(3)             7%
All directors and executive officers, as a             3,447,975               17%
group (2 persons)
</TABLE>

(1)   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 and
      1.35 million shares to be issued in accordance with employment agreement
      and exercised options
(3)   Includes 1.35 million shares to be issued in accordance with employment
      agreement and exercised options


Page 27 of 48
<PAGE>
ITEM 12 CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

      As part of our Plan of Reorganization, we entered into a borrowing
facility with Sunami Ventures, LLC ("Sunami") (a limited liability company
managed and controlled by Mr. Henry Paulsen, John Paulsen's father) for $1.5
million, of which $1.0 million of this facility is designated for the purpose of
financing equipment on behalf of customers. Sunami shall receive on account of
the borrowings, five shares of New Common Stock for every dollar loaned and a
Senior Secured Note for the amount of the borrowings. As of December 31, 2001,
eNucleus has received approximately $321,000 under this facility the proceeds of
which have been used to satisfy certain petitions resulting from the bankruptcy
and post-petition operating requirements. Pursuant to the Sunami financing
agreement, in December, 2001, we entered into a three-year $545,000 secured
demand loan agreement with Capital Equity Group. The note agreement is secured
by certain our assets, guaranteed by Mr. Paulsen and bears interest at the rate
of 16%. As of December 31, 2001, eNucleus has received approximately $62,000
under this facility and subsequent to year end we have received an additional
$145,000 through March 31, 2002.

      In October 2001, we entered into a collocation/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. Associated with
this agreement, we were required to provide a $100,000 security deposit, which
has been financed under the Sunami borrowing facility and 1.0 million shares of
common stock as compensation for Sunami $1.9 million lease exposure.

      At May 10, 2001 eNucleus recorded amounts due to John C. Paulsen, our
President and CEO, of $772,000, including $502,000 for cash loans made to
eNucleus and $270,000 for deferred compensation and unreimbursed expenses.
During the year 2000, 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 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
May 10, 2001, eNucleus had borrowed $731,000 from Sunami under this facility.

EXHIBITS AND REPORTS ON FORM 8-K

(a)   Exhibit Index

      See Exhibit Index beginning on page A-1.

(b)   Reports on Form 8-K

      NONE


Page 28 of 48
<PAGE>
      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:  April 15, 2002                   By:/s/ John C. Paulsen
                                           ---------------------------------
                                        John C. Paulsen
                                        Chief Executive Officer and Chairman

      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                             Chief Executive Officer and Chairman             April 15, 2002
----------------------                          (principal executive and financial officer)
John C. Paulsen
</TABLE>


Page 29 of 48
<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, 2001 and 2000                                             F-3

Consolidated Statements of Operations for the Two Month Period Ended December 31, 2001, Ten Month        F-4
     Period Ended October 31, 2001 and the Year Ended December 31, 2000

Consolidated Statements of Changes in Shareholders' Equity (Deficit) for the Two Month Period            F-5
     Ended December 31, 2001, Ten Month Period Ended October 31, 2001 and the Year Ended
     December 31, 2000

Consolidated Statements of Cash Flows for the Two Month Period Ended December 31, 2001, Ten Month        F-6
     Period Ended October 31, 2001 and the Year Ended December 31, 2000

Notes to Consolidated Financial Statements                                                               F-7
</TABLE>
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS

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

      We have audited the accompanying consolidated balance sheets of eNucleus,
Inc. (a Delaware corporation) (the Company) as of December 31, 2001 and 2000,
and the related statements of operations, stockholders' (deficit) equity, and
cash flows for the two month period ended December 31, 2001, ten month period
ended October 31, 2001 and the year ended December 31, 2000. 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, 2001 and 2000 and the results of their operations and
cash flows for the two month period ended December 31, 2001, ten month period
ended October 31, 2001 and the year ended December 31, 2000, in conformity with
accounting principles generally accepted in the United States.

      The accompanying consolidated financial statements have been prepared
assuming that the Company will continue as a going concern. As more fully
discussed in Note 2 to the financial statements, the Company continues to incur
operating losses and must continue to fund negative working capital needs.
Additionally, the Company will need to negotiate payment terms with some of its
administrative claim holders. There can be no assurance that the Company will
reach agreement with these parties or be able to satisfy their indebtedness in a
timely manner acceptable to them These conditions raise substantial doubt about
the Company's ability to continue as a going concern. The financial statements
do not include any adjustments that might result from the outcome of this
uncertainty.


Bujan & Associates, Ltd

Palos Heights, Illinois
April 15, 2002
<PAGE>
                                 eNUCLEUS, INC.
                           CONSOLIDATED BALANCE SHEETS
                               AS OF DECEMBER 31,

<TABLE>
<CAPTION>
                                                           REORGANIZED     PREDECESSOR
                                                             COMPANY         COMPANY
                                                               2001            2000
                                                               ----            ----
<S>                                                        <C>             <C>
ASSETS:
Current assets:
Cash                                                       $        808    $      1,452
Accounts receivable                                              13,339          69,866
Other current assets                                             51,348         159,839
                                                           ------------    ------------
Total current assets                                             65,495         231,157
                                                           ------------    ------------

Property and equipment, net                                   1,850,597       1,492,434
Goodwill and other intangibles, net                          15,202,356         782,339
Other assets                                                    100,000              --
                                                           ------------    ------------
Total assets                                               $ 17,218,448    $  2,505,930
                                                           ============    ============

LIABILITIES & STOCKHOLDERS' EQUITY (DEFICIT):
Current liabilities:
Bridge notes payable                                       $         --    $  6,104,000
Line of credit                                                       --         499,444
Notes payable                                                   633,431         321,950
Accounts payable                                                188,405       2,790,093
Related party payables                                               --         675,848
Accrued expenses                                                639,201       1,922,339
Net liabilities of discontinued operations                           --       1,248,681
                                                           ------------    ------------
Total current liabilities                                     1,461,037      13,562,355
                                                           ------------    ------------

Long term liabilities                                         1,272,069              --
                                                           ------------    ------------
Total liabilities                                             2,733,106      13,562,355
                                                           ------------    ------------

                                                           ------------    ------------
Redeemable securities                                                --         237,586
                                                           ------------    ------------

STOCKHOLDERS' EQUITY (DEFICIT):
Common stock, $0.001 par value, 900,000,000 shares                   --          12,905
authorized, shares issued and outstanding (12,905,432 on
December 31, 2000)
Additional paid-in capital                                           --      22,542,262
New common equity - issuable                                 14,687,736              --
Stock warrants                                                       --         727,349
Treasury stock                                                       --        (651,838)
Accumulated deficit                                            (202,394)    (33,924,689)
                                                           ------------    ------------

Total stockholders' equity (deficit)                         14,485,342     (11,294,011)
                                                           ------------    ------------

Total liabilities and stockholders' equity (deficit)       $ 17,218,448    $  2,505,930
                                                           ============    ============
</TABLE>

          See accompanying notes to Consolidated Financial Statements.
<PAGE>
                                 eNUCLEUS, INC.
                      CONSOLIDATED STATEMENTS OF OPERATIONS

<TABLE>
<CAPTION>
                                                                              PREDECESSOR COMPANY
                                                                              -------------------
                                                          REORGANIZED
                                                            COMPANY        TEN MONTHS
                                                        TWO MONTHS ENDED      ENDED        YEAR ENDED
                                                          DEC 31, 2001    OCT. 31, 2001   DEC. 31, 2000
                                                          ------------    -------------   -------------
<S>                                                     <C>               <C>             <C>
Revenue                                                   $     26,981    $    398,056    $    260,785
Cost of revenue                                                 14,975         232,034         141,461
                                                          ------------    ------------    ------------
Gross profit                                                    12,006         166,022         119,324

Operating expenses                                             144,995       1,052,144       4,960,599
Stock based compensation expense                                    --          82,500       1,591,913
Net reorganization expense                                          --       3,268,326              --
Depreciation and amortization expense                           62,564         432,700         401,840
                                                          ------------    ------------    ------------
Operating loss from continuing operations                     (195,553)     (4,669,648)     (6,835,028)

Interest and other income (expenses), net                       (6,841)       (486,605)     (8,564,848)
                                                          ------------    ------------    ------------
Loss from continuing operations before income taxes           (202,394)     (5,156,253)    (15,399,876)

Income tax expense                                                  --              --              --
                                                          ------------    ------------    ------------
Loss from continuing operations                               (202,394      (5,156,253)    (15,399,876)
Loss from discontinued operations                                   --              --      (1,602,474)
Loss on disposal of discontinued operations                         --              --      (7,132,447)
                                                          ------------    ------------    ------------
Net loss                                                  $   (202,394)   $ (5,156,253)   $(24,134,797)
                                                          ============    ============    ============

Basic and diluted loss per common share from continuing
operations                                                $      (0.01)   $      (0.38)   $      (1.30)
                                                          ------------    ------------    ------------
Basic and diluted loss per common share from
 discontinued operations                                            --              --          $(0.14)
                                                          ------------    ------------    ------------
Basic and diluted loss per common share from disposal
 of discontinued operations                                         --              --          $(0.60)
                                                          ------------    ------------    ------------
Basic and diluted net loss per common share               $      (0.01)   $      (0.38)   $      (2.04)
                                                          ============    ============    ============
Weighted average shares outstanding - basic and diluted     20,009,898      13,507,307      11,809,830
                                                          ============    ============    ============
</TABLE>

          See accompanying notes to Consolidated Financial Statements.
<PAGE>
                                 eNUCLEUS, INC.
      CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' (DEFICIT) EQUITY

<TABLE>
<CAPTION>
                                                                 New         Additonal
                                      Common Stock              Common        Paid in         Stock        Treasury
                                  Shares         Amount         Equity        Capital        Warrants        Stock
                               ------------   ------------   ------------   ------------   ------------  ------------
<S>                               <C>         <C>            <C>            <C>            <C>           <C>
Balance, December 31, 1999
(Predecessor)                     9,610,104   $      9,610   $         --   $ 12,250,664   $    377,069  $         --
                               ============   ============   ============   ============   ============  ============
Common stock and warrants           365,366            365             --        547,683             --            --
sold for cash
Issuance of common stock for        661,000            661             --      1,734,464             --            --
acquisitions
Issuance of common stock in
conjunction with debt             1,692,172          1,692             --      6,102,308        350,280            --
offering
Issuance of common stock for        576,790            577             --        245,816                           --
services
Compensation value of
warrants and options issued              --             --             --      1,591,913             --            --
Fair value of assets received            --             --             --        307,000             --            --
Accretion of Redeemable                                                --       (237,586)
Common Stock
Repurchase of common stock               --             --             --             --             --      (651,838)
Net loss                                 --             --             --             --             --            --
                               ------------   ------------   ------------   ------------   ------------  ------------
Balance, December 31, 2000
(Predecessor)                    12,905,432         12,905             --     22,542,262        727,349      (651,838)
                               ============   ============   ============   ============   ============  ============
Issuance of common stock for
services                            715,000            715             --        106,735             --            --
Accretion of Redeemable
Common Stock                             --                            --        (62,047)            --            --
Net loss                                 --             --             --             --             --            --
Effect of reorganization and
fresh-start reporting           (13,620,432)       (13,620)    14,687,736    (22,586,950)      (727,349)      651,838
                               ------------   ------------   ------------   ------------   ------------  ------------
Balance, October 31, 2001
(Predecessor)                            --             --     14,687,736             --             --            --
                               ============   ============   ============   ============   ============  ============
Net loss                                 --             --             --             --             --            --
                               ------------   ------------   ------------   ------------   ------------  ------------
Balance, December 31, 2000
(Reorganized)                  $         --   $         --   $ 14,687,736   $         --   $         --  $         --
                               ============   ============   ============   ============   ============  ============
</TABLE>

<TABLE>
<CAPTION>
                                Accumulated
                                  Deficit          Total
                               ------------   ------------
<S>                            <C>            <C>
Balance, December 31, 1999
(Predecessor)                  $ (9,789,892)  $  2,847,451
                               ============   ============

Common stock and warrants                --        548,048
sold for cash
Issuance of common stock for             --      1,735,125
acquisitions
Issuance of common stock in
conjunction with debt                    --      6,454,280
offering
Issuance of common stock for             --        246,393
services
Compensation value of
warrants and options issued              --      1,591,913
Fair value of assets received            --        307,000
Accretion of Redeemable                           (237,586)
Common Stock
Repurchase of common stock               --       (651,838)
Net loss                        (24,134,797)   (24,134,797)
                               ------------   ------------
Balance, December 31, 2000
(Predecessor)                   (33,924,689)   (11,294,011)
                               ============   ============
Issuance of common stock for
services                                 --        107,450
Accretion of Redeemable
Common Stock                             --        (62,047)
Net loss                         (5,156,253)    (5,156,253)
Effect of reorganization and
fresh-start reporting            39,080,942     31,092,597
                               ------------   ------------
Balance, October 31, 2001
(Predecessor)                            --     14,687,736
                               ============   ============
Net loss                           (202,394)      (202,394)
                               ------------   ------------
Balance, December 31, 2000
(Reorganized)                  $   (202,394)  $ 14,485,342
                               ============   ============
</TABLE>


          See accompanying notes to Consolidated Financial Statements.
<PAGE>
                                 eNUCLEUS, INC.
                      CONSOLIDATED STATEMENTS OF CASH FLOWS

<TABLE>
<CAPTION>
                                                                REORGANIZED      PREDECESSOR COMPANY
                                                                  COMPANY        -------------------
                                                                TWO MONTHS      TEN MONTHS    YEAR ENDED
                                                                   ENDED           ENDED
                                                               DEC 31, 2001   OCT. 31, 2001  DEC. 31, 2000
                                                               ------------   -------------  -------------
<S>                                                            <C>            <C>            <C>
Cash flows from operating activities:
Net loss                                                       $   (202,394)  $ (5,156,253)  $(24,134,797)
Adjustments to reconcile net loss to net cash provided by
     (used in) operating activities:
Loss from discontinued operations                                        --             --      1,602,474
Loss on disposal of discontinued operations                              --             --      7,132,447
Net adjustment to assets & liabilities related to Fresh-Start
  Reporting                                                              --        258,302             --
Non-cash reorganization expense                                          --      2,824,020             --
Depreciation and amortization                                        62,564        432,700        401,840
Compensation expense from issuance of equity securities                  --         82,500      1,591,913
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                                      19,376         37,151        (69,866)
Changes in other assets                                              (9,284)       117,776       (131,309)
Changes in payables                                                   9,790        178,615      1,572,027
Changes in accrued expenses                                          32,895        606,305      1,495,637
                                                               ------------   ------------   ------------
Net cash in continuing operations                                   (87,053)      (618,884)    (4,201,048)
Net cash in discontinued operations                                      --             --     (1,707,638)
                                                               ------------   ------------   ------------
Net cash used in operating activities                               (87,053)      (618,884)    (5,908,686)
                                                               ------------   ------------   ------------

Cash flows from investing activities:
Capital expenditures                                                     --        (65,597)      (256,975)
                                                               ------------   ------------   ------------

Net cash (used in)/provided by investing activities                      --        (65,597)      (256,975)
                                                               ------------   ------------   ------------

Cash flows from financing activities:
Proceeds from senior notes payable                                       --             --      6,104,000
Borrowings (repayments) on notes payable                             85,424        685,466        191,194
Proceeds from sale of common stock                                       --             --        548,048
Purchase of treasury stock                                               --             --       (651,838)
Payments of deferred finance costs                                       --             --       (725,400)
Increase in officer loan                                                 --             --        524,628
                                                               ------------   ------------   ------------
Net cash provided by financing activities                            85,424        685,466      5,990,632
                                                               ------------   ------------   ------------

Increase in cash                                                     (1,629)           985       (175,029)

Cash, beginning of period                                             2,437          1,452        176,481

Cash, end of period                                            $        808   $      2,437   $      1,452
                                                               ------------   ------------   ------------

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.
<PAGE>
                                 eNUCLEUS, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                           DECEMBER 31, 2001 AND 2000

(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.
The Company's core product offerings include co-location, high-speed internet
access, data storage, and application delivery. Together, this offering provides
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 short term note holders
and other creditors in restructuring their debts and the Company's inability to
cure defaults under its data center lease and the landlord's attempts to seize
Company assets, the Company 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. The Company 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. As part of the distribution of the New Common Stock under the
Plan of Reorganization, shareholders shall tender their Old Common Stock to the
Reorganized Company designated Stock Transfer Agent no later than October 15,
2002, in accordance with written instructions to be provided to such holders.
Those shareholders who do not submit their certificates for exchange prior to
October 15, 2002 shall have its claim or interest and its distribution pursuant
to the Plan of Reorganization on account of such Old Common Stock discharged and
shall be forever barred from asserting any such claim or interest against the
Reorganized Company or their respective property.

      As a result of the confirmation of the Company's Plan of Reorganization
and the application of fresh-start reporting (see Note 3), consolidated
financial statements for the Company for the periods subsequent to the
Confirmation Date are referred to the "Reorganized Company" and are not
comparable to those for the periods prior to the Confirmation Date which are
referred to as the "Predecessor Company." Under fresh-start reporting, the
reorganization value of the Company was allocated to its assets, the majority of
the Company's unsecured creditors converted into common stock, accumulated
deficit was eliminated, old common stock was eliminated and new equity in the
Reorganized Company was recorded. For financial reporting purposes, the
effective date of the adoption of fresh-start reporting is considered to be
October 31, 2001, although the Company's confirmation date was November 6, 2001.
The results of operations from November 1 to November 6, 2001 were not
significant.

      As part of the Company's Plan of Reorganization, the Company entered into
a borrowing facility with Sunami Ventures, LLC ("Sunami") (a related party) for
$1.5 million, of which $1.0 million of this facility is designated for the
purpose of financing equipment on behalf of customers. Sunami shall receive on
account of the borrowings, five shares of New Common Stock for every dollar
loaned and a Senior Secured Note for the amount of the borrowings. As of
December 31, 2001, eNucleus has received approximately $321,000 under this
facility the proceeds of which have been used to satisfy certain petitions
resulting from the bankruptcy and post-petition operating requirements. Pursuant
to the Sunami financing agreement, in December, 2001, the Company entered into a
three-year $545,000 secured demand loan agreement with Capital Equity Group. The
note agreement is secured by certain assets, guaranteed by Mr. John Paulsen and
bears interest at the rate of 16%. As of December 31, 2001, eNucleus has
received approximately $62,000 under this facility.

      The Company's continued existence is dependent on its ability to achieve
future profitable operations and its ability to obtain financial support.
Additionally, the Company will need to negotiate payment terms with some of its
administrative claim holders. There can be no assurance that the Company will
reach agreement with these parties or be able to satisfy their indebtness in a
timely manner acceptable to them. The satisfaction of the Company's cash
requirements hereafter will depend in large part on its 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 its existing operations will not occur. Management is aggressively
pursuing additional sources of funds, the form of which will vary depending upon
prevailing market and other conditions and may include high-yield financing
<PAGE>
vehicles, short or long-term borrowings or the issuance of equity securities.
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 to existing
shareholders. 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.

      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) Fresh-Start Reporting

      In accordance with the provisions of Statement of Position 90-7 "Financial
Reporting by Entities in Reorganization under the Bankruptcy Code" ("SOP 90-7"),
the Company adopted fresh-start reporting upon confirmation of the Company's
Plan of Reorganization. The Company adopted fresh-start reporting because, as a
result of implementation of the Plan, holders of the Company's existing common
stock immediately before filing and confirmation of the Plan retained less than
50% of the common stock of the emerging entity and the Company's reorganization
value at emergence was less than its post-petition liabilities and allowed
claims. Under fresh-start reporting, the Company's assets and liabilities were
adjusted to fair values and a reorganization value for the entity was determined
by the Company based upon the estimated fair value of the enterprise before
considering values allocated to debt to be settled in the reorganization. The
portion of the reorganization value which could not be attributed to specific
tangible or identified intangible assets for the Reorganized Company is referred
to as reorganization value in excess of amounts allocable to identifiable assets
and is reported as "Goodwill" in the financial statements. The adjustment of
assets and liabilities to fair values is included in net reorganization expense
in the financial statements.

      Fresh-start reporting resulted in the creation of a new reporting entity
(the "Company" or the "Reorganized Company") with no accumulated deficit as of
November 1, 2001. The goodwill recognized in fresh-start reporting will not be
amortized, but will be reviewed annually for impairment in accordance with
Statement of Financial Accounting Standards ("SFAS") No.142, "Goodwill and Other
Intangible Assets." The Company determined that the goodwill is not impaired as
of December 31, 2001, however future impairment of the recorded goodwill may
result if actual results of operations or changes in economic or industry
conditions differ significantly from assumptions used to derive the
reorganization value.

      For financial reporting purposes, the effective date of the adoption of
fresh-start reporting is considered to be October 31, 2001, although the
Company's confirmation date was November 6, 2001. The results of operations from
November 1 to November 6, 2001 were not significant. The financial statements
for the Company for the periods subsequent to October 31, 2001 are referred to
the "Reorganized Company" and are not comparable to those for the periods prior
to October 31, 2001 which are referred to as the "Predecessor Company."

      The reorganization value of the Company was based upon the consideration
of many factors and various valuation methods, including discounted cash flow
analysis using projected financial information, selected publicly traded company
market multiples and other applicable ratios and valuation techniques that
management believes to be representative of the business and industry.
Specifically, the Company considered the conversion price of $16.6 million of
creditor debt at $3.00 per share and utilized a net present value cash flow
analysis of the Company's three year financial projections using a discount rate
of 16%. Based upon their assumptions and other analysis performed, the Company
concluded that a Reorganization Value as determined was an appropriate value.
The valuation was based upon a number of estimates and assumptions, which are
inherently subject to significant uncertainties and contingencies beyond the
Company's control. Accordingly, there can be no assurance that the values
reflected in the valuation will be realized, and actual results could vary
materially. Moreover, the value of our New Common Stock, as traded on the
national exchange, may differ materially from the reorganization valuation.
<PAGE>
      The effect of the Plan and the implementation of Fresh-Start Reporting on
the Company's balance sheet as of October 31, 2001 was as follows:

<TABLE>
<CAPTION>
                                        PREDECESSOR        REORGANIZATION      FRESH-START        REORGANIZED
                                          COMPANY               PLAN           ADJUSTMENTS          COMPANY
                                       OCT. 31, 2001         ADJUSTMENTS                         OCT. 31, 2001
<S>                                    <C>                 <C>                 <C>               <C>
ASSETS:

Cash                                           2,437                  --                --              2,437
Accounts receivable                           32,715                  --                --             32,715
Other current assets                          42,063                  --                --             42,063
                                        ------------        ------------      ------------       ------------
  Total current assets                        77,215                  --                --             77,215
                                        ------------        ------------      ------------       ------------

Property and equipment, net                1,169,308                  --           743,853 (a)      1,913,161
Other Assets                                 100,000                  --                --            100,000
Goodwill                                          --                  --        15,202,356 (b)     15,202,356
                                        ------------        ------------      ------------       ------------
  Total assets                             1,346,523                            15,946,209         17,292,732
                                        ============        ============      ============       ============

LIABILITIES & STOCKHOLDERS' EQUITY:

Notes payable                                608,630                  --                --            608,630
Accounts payable                              95,842              82,773                -- (c)        178,615
Accrued expenses                             606,306                  --                --            606,306
                                        ------------        ------------      ------------       ------------
  Total current liabilities                1,310,778              82,773                --          1,393,551
                                        ------------        ------------      ------------       ------------

Long term liabilities                             --           1,211,445                -- (d)      1,211,445
                                        ------------        ------------      ------------       ------------
  Total liabilities                        1,310,778           1,294,218                --          2,604,996
                                        ------------        ------------      ------------       ------------

                                        ------------        ------------      ------------       ------------
Liabilities subject to compromise         16,440,605         (16,440,605)               -- (e)             --
                                        ------------        ------------      ------------       ------------

STOCKHOLDERS' EQUITY:
Common stock                                  13,620             (13,620)               -- (f)             --
Additional paid-in capital                22,586,950         (22,586,950)               -- (f)             --
Stock warrants                               727,349                  --          (727,349)(f)             --
Treasury stock                              (651,838)                 --           651,838 (f)             --
New common equity - issuable                      --          37,746,957       (23,059,221)(f)     14,687,736
Accumulated deficit                      (39,080,941)                 --        39,080,941 (f)             --

                                        ------------        ------------      ------------       ------------
Total stockholders' equity
(deficit)                                (16,404,860)         15,146,387        15,946,209         14,687,736
                                        ------------        ------------      ------------       ------------
Total liabilities and
stockholders' equity                    $  1,346,523        $         --      $ 15,946,209       $ 17,292,732
                                        ============        ============      ============       ============
</TABLE>

      (a)   Reflects the adjustment of property and equipment to fair value

      (b)   Reflects the establishment of Goodwill representing the excess of
            the reorganization value over the aggregate fair value of the
            Company's tangible and identifiable assets

      (c)   Reflects the reclassification of convenience class and employee
            class payments to be paid under the Plan

      (d)   Reflects the reclassification of secured creditor debt,
            administrative and tax claims which have been converted into long
            term notes payable.

      (e)   Reflects the conversion of the Company's prepetition unsecured
            creditors into common stock, less those claims under the convenience
            class or employee class which are included in payables and secured
            claims, administrative and tax claims which have been converted into
            long term notes.

      (f)   Reflects the cancellation of the Predecessor Company's common stock,
            warrants to purchase common stock, treasury stock, and the
            accumulated deficit as of October 31, 2001 and the issuance of
            approximately 7.4 million shares to the shareholders and claimants
            of the Predecessor Company.
<PAGE>
(4) Discontinued Operations

      In August, 2000, 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. Additionally, the Company discontinued reselling long distance
telephone services. 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 lease payments associated with these offices. Revenue and net loss
for the discontinued operations were $7.2 million for the year ended December
31, 2000.

(5) 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 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 seven years. In accordance with the fresh-start reporting,
the value of the fixed assets was adjusted to fair market value. 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.
<PAGE>
Valuation allowances are established when necessary to reduce deferred tax
assets to the amounts expected to be recovered.

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.

Goodwill and Other Intangible Assets

      Goodwill and other intangible assets are comprised of amounts recorded in
business acquisitions and reorganization value in excess of identifiable
tangible assets and was 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. 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.

      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. In accordance with SOP 90-7 and the application of fresh-start
reporting, we adopted SFAS No. 141 and SFAS No. 142. The adoption of SFAS No.
141 had no impact on our consolidated financial statements. The adoption of SFAS
No. 142 results in the classification of the reorganization intangible
recognized in fresh-start reporting as goodwill with an indefinite life. As a
result, the goodwill will not be amortized, but will be reviewed annually for
impairment.

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. For purposes of computing
net loss per share for the two months ended December 31, 2001, the Company used
the estimated number of shares to be issued under the Plan of Reorganization,
including those to be issued to certain holders of unsecured creditor claims,
those to the shareholder of the Predecessor Company reflecting a 1 for 6 reverse
split and other shares issuable under terms of the Plan of Reorganization.

      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          2001
                                               ----          ----
<S>                                         <C>           <C>
Shares issuable under stock options         3,932,000            --
Shares issuable pursuant to warrants to
purchase common stock                         798,070     1,000,000
</TABLE>

Per share amounts for 2000 do not reflect the impact of the bankruptcy petition
and associated approved conditions.
<PAGE>
(6) Business Combinations

      During 2000, the company completed one acquisition, an Atlanta-based
provider of dedicated Internet access and hosting solutions to middle market
companies. As acquisition consideration, the Company issued 661,000 shares of
common stock and agreed to issue an additional 300,000 shares if the operation
meets certain revenue targets or other specified conditions were met.
Additionally, the 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. Assuming the acquisition had been consummated as of
January 1, 2000 the audited pro form results of operations would have been:
Revenue of $141,000, Net Loss of $24.1 million, and Basic and Diluted net loss
per share of $2.00 using 12,047,066 shares in the pro forma per share
calculation. 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.

(7) Financial Statement Components

Accounts Receivable

Accounts receivables are shown net of the allowances for doubtful accounts of
$3,500 and $45,365 for 2001 and 2000, respectively.

Property and Equipment

      Property and equipment consisted of furniture, fixtures, and computer
equipment and are net of accumulated depreciation of $63,000 and $355,000 as of
December 31, 2001 and 2000, respectively.

Accrued Expenses

      Accrued expenses consisted of the following:

      <TABLE>
      <CAPTION>
                                                         DECEMBER 31,
                                                         ------------
                                                      2001           2000
                                                      ----           ----
      <S>                                         <C>            <C>
      Accrued fees for registration rights on     $       --     $  655,384
      stock issued
      Extension fees                                      --        305,200
      Accrued interest                                 6,841        354,586
      Accrued payroll and commissions                 63,062        196,192
      Tax liabilities                                 94,262        164,870
      Professional fees                              388,768         50,000
      Other                                           86,268        196,107
                                                  ----------     ----------
                                                  $  639,201     $1,922,339
                                                  ==========     ==========
      </TABLE>
<PAGE>
(8) Bank Borrowings and Debt

As of December 31, 2001 the Company's total long-term debt outstanding was as
follows:

<TABLE>
<S>                                         <C>
      Reorganized Company--
          Senior Secured Notes Payable        383,476
          Bank Note Payable                   549,998
          Junior Secured Note Payable         500,000
          Tax Claim Notes Payable             330,075
          Duke-Weeks Note Payable             141,951
                                            ---------
                                            1,905,500
      Less current maturities                (633,431)
                                            ---------
                                            1,272,069
                                            =========
</TABLE>

      Upon confirmation of the Company's Plan of Reorganziation, all of the
outstanding indebtedness was restructured. Pursuant to the Plan, the following
notes payables are outstanding.

      As part of our Plan of Reorganization, we entered into a borrowing
facility with Sunami Ventures, LLC ("Sunami") (a related party) for $1.5
million, of which $1.0 million of this facility is designated for the purpose of
financing equipment on behalf of customers. Sunami shall receive on account of
the borrowings, five shares of New Common Stock for every dollar loaned and a
Senior Secured Note for the amount of the borrowings. As of December 31, 2001,
eNucleus has received approximately $321,000 under this facility the proceeds of
which have been used to satisfy certain petitions resulting from the bankruptcy
and post-petition operating requirements. Pursuant to the Sunami financing
agreement, in December, 2001, we entered into a three-year $545,000 secured
demand loan agreement with Capital Equity Group. The note agreement is secured
by certain our assets, guaranteed by Mr. Paulsen and bears interest at the rate
of 16%. As of December 31, 2001, eNucleus has received approximately $62,000
under this facility and subsequent to year end we have received an additional
$145,000 through March 31, 2002.

      The Bank Note Payable of $500,000 plus accrued interest and attorney's
fees shall be restructured into a three year secured note in the amount of the
total allowed claim less $225,000 which is payable by the Company as soon as
reasonably practicable. To date, the Company has paid $50,000 toward the
$225,000 payment due and is in discussions with the bank on restructuring such
remaining amounts due. The note is secured by a first priority lien on all of
the Company's Litigation Claims and a second priority lien on all other assets
of the Company.

      Holders of allowed tax claims, including the Internal Revenue Service and
certain state revenue agencies, received in full satisfaction, settlement of and
in exchange for its tax claim, a six year 6.5% promissory note in an amount
equal to the principal amount of its tax claims, payments of principal and
interest due monthly. We issued notes totaling approximately$330,000 for allowed
tax claims.

      Duke Weeks, the Company's previous landlord for its Atlanta operations,
received a 3 year note payable in the amount of its total allowed claim. Monthly
payments of $1,000 are due with the first payment in each year due of $10,000.
The final payment will include the remaining outstanding principal plus accrued
interest.

      In accordance with the Plan of Reorganization, certain unsecured claimants
elected to invest an additional 10% on a portion of the unsecured claim and
received a Junior Secured Note on the portion of the unsecured claim. Such note
accrues interest at 12% per annum with principal and interest due in twenty-four
months from the date of issuance.

      The following discussion covers bank borrowings and other debt outstanding
of the Predecessor Company.

      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.
<PAGE>
      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. The line of credit bears interest at the rate of prime plus
one percent and was payable upon demand. This facility has been restructured as
a result of the reorganization.

      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. This facility was paid in full from proceeds of the bridge financing in
March 2001.

      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 was due on June 30, 2000.
During 2000, the Company retired $600,000 of the note with proceeds from the
bridge financing.

      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.

(9) Stockholders' Equity

      In accordance with the Plan, all outstanding shares of old common stock
and warrants/options to purchase old common stock were cancelled. As the date of
this Report, the Company has not yet distributed shares of New Common Stock and
therefore have reported the entire value of common stock as "New Common
Equity-Issuable". The Company's common stock will now be traded under the symbol
ENCU. Under the Plan, approximately 7.4 million shares of common stock will be
issued in exchange for unsecured creditor debt and existing common stock
outstanding. Additionally, there are approximately 14 million shares issuable
pursuant to the Plan of Reorganization.

      During the first quarter 2001, the Predecessor Company issued 165,000
shares of common stock in exchange for services rendered and amounts due to
various vendors and 550,000 shares of common stock to two ex-employees per
conditions of their employment agreements and other matters. We recorded
additional compensation expense of approximately $82,000 associated with these
grants.

      During the year ended December 31, 2000, the Predecessor 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.

(10) Stock Options and Warrants

      In accordance with the Plan of Reorganization, the Company granted options
to purchase up to 2 million shares of New Common Stock to key employees and
management. Such options vested on the confirmation date (November 6, 2001) with
an exercise price equal to the price of the common stock at that date and have a
ten year life.

      In accordance with the Plan of Reorganization, the Company agreed to issue
warrants to purchase 1 million shares of common stock to certain unsecured
creditors pro rata in accordance with the amount of their allowed claims. The
Warrants give the holders thereof the right to purchase, at any time for a
period of seven years from the date of issuance (i.e., the effective date of the
Plan), one share of the New Common Stock at a price of Twenty Cents ($0.20) per
share. The Warrants also contain a "Cashless Exercise" provision which provide
that in the event the stock has traded at an average price in excess of $2.00
per share for at least 30 days preceding an exercise of any warrants, the
holders thereof may elect to exercise the Warrants in whole or in part and
instruct the Company to withhold from the securities issuable upon exercise, a
number of securities, valued at the current fair market value on the date of
exercise, as the payment of the exercise price.
<PAGE>
      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.

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>
                                                          TWO MONTHS      TEN MONTHS
                                                            ENDED            ENDED         YEAR ENDED
                                                           DEC. 31          OCT. 31         DEC. 31
                                                             2001             2001            2000
                                                             ----             ----            ----
<S>                                                       <C>             <C>             <C>
                Net loss
                As reported                               $     (202)     $   (5,156)     $  (24,135)
                Pro forma                                       (202)         (5,161)        (24,285)
                Basic and diluted net loss per share:
                As reported                               $    (0.01)     $    (0.38)     $    (2.04)
                Pro forma                                      (0.01)          (0.38)          (2.06)
</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, 2001
and 2000 are as follows:

<TABLE>
<CAPTION>
                                                                 DECEMBER 31,
                                                                 ------------
                                                      2001                      2000
                                                      ----                      ----
                                                          WEIGHTED                     WEIGHTED
                                                           AVERAGE                     AVERAGE
                                              SHARES    EXERCISE PRICE    SHARES    EXERCISE PRICE
                                              ------    --------------    ------    --------------
<S>                                          <C>        <C>              <C>        <C>
      Outstanding at beginning of year       3,932,000     $    0.75       423,000     $    1.87
      Granted                                4,050,000          0.07     6,014,500          1.10
      Forfeited/Cancelled                    4,932,000          0.63     2,505,500          1.77
      Exercised                              3,050,000          0.03             0             0
                                             ---------     ---------     ---------     ---------
      Outstanding at the end of the year             0             0     3,932,000     $    0.75
                                             =========     =========     =========     =========


      Exercisable at the end of the year             0             0     1,785,000     $    0.75
                                             =========     =========     =========     =========

</TABLE>

The weighted average fair value of options granted during the years ended
December 31, 2001 and 2000 was $0.01 and $0.77, respectively.

As of December 31, 2001, there were no outstanding options.
<PAGE>
  A summary of the Company's warrant activity for the years ended December 31,
2001 and 2000 are as follows:

<TABLE>
<CAPTION>
                                                                      DECEMBER 31,
                                                                      ------------
                                                        2001                        2000
                                                        ----                        ----
                                                            WEIGHTED                        WEIGHTED
                                                             AVERAGE                        AVERAGE
                                              SHARES      EXERCISE PRICE     SHARES      EXERCISE PRICE
                                              ------      --------------     ------      --------------
<S>                                          <C>          <C>              <C>           <C>
      Outstanding at beginning of year          798,070     $     2.14      2,044,732      $     1.84
      Granted                                 1,000,000           0.20        184,738            3.55
      Forfeited                                 798,070           2.14              0               0
      Exercised                                       0              0     (1,269,500)           1.66
                                              ---------     ----------     ----------      ----------
      Outstanding at the end of the year      1,000,000           0.20        798,070      $     2.14
                                              ---------     ----------     ----------      ----------

      Exercisable at the end of the year      1,000,000           0.20        798,070      $     2.14
                                              ---------     ----------     ----------      ----------
</TABLE>

The weighted average fair value of warrants granted during the years ended
December 31, 2001 and 2000 were $0.01 and $1.68, respectively.

(11) Commitments and Contingencies

Leases

      The Company has entered into an operating leases extending through 2008.
Future minimum lease payments as of December 31, 2001 are as follows:

<TABLE>
<CAPTION>
                             YEAR ENDING DECEMBER 31,
                             ------------------------

<S>                                                                            <C>
                             2002                                                  236,400
                             2003                                                  236,400
                             2004                                                  236,400
                             2005                                                  236,400
                             2006                                                  236,400
                             2007                                                  236,400
                             2008                                                  197,000
                                                                               -----------
                             Total minimum lease payments                      $ 1,615,400
                                                                               ===========
</TABLE>

      The Company's rent expense was $28,000, $196,000 and $529,000 for the two
months ended December 31, 2001, ten months ended October 31, 2001 and the year
ended December 31, 2000 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.

      As part of the bankruptcy filing, all executory contracts and unexpired
leases, which were not previously assumed or rejected by the Company or
otherwise not specifically assumed as part of the Plan of Reorganization, were
deemed rejected. Certain contract providers continued to provide services to the
Company, even though such contract was
<PAGE>
deemed terminated, and have requested payments due for services rendered to the
Company of approximately $250,000. The Company has not recorded such liabilities
in its financial statements and expects to aggressively defend itself against
such payments requested.

(12) Related-party transactions.

      At May 10, 2001 the date of the Company's bankruptcy filing, eNucleus
recorded amounts due to John C. Paulsen, our President and CEO, of $772,000,
including $502,000 for cash loans made to eNucleus and $270,000 for deferred
compensation and unreimbursed expenses. During the year 2000, 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 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
May 10, 2001, eNucleus had borrowed $731,000 from Sunami under this
facility.

      As part of our Plan of Reorganization, we entered into a borrowing
facility with Sunami Ventures, LLC ("Sunami") for $1.5 million, of which $1.0
million of this facility is designated for the purpose of financing equipment on
behalf of customers. Sunami shall receive on account of the borrowings, five
shares of New Common Stock for every dollar loaned and a Senior Secured Note for
the amount of the borrowings. As of December 31, 2001, eNucleus has received
approximately $321,000 under this facility the proceeds of which have been used
to satisfy certain petitions resulting from the bankruptcy and post-petition
operating requirements. Pursuant to the Sunami financing agreement, in December,
2001, we entered into a three-year $545,000 secured demand loan agreement with
Capital Equity Group. The note agreement is secured by certain our assets,
guaranteed by Mr. Paulsen and bears interest at the rate of 16%. As of December
31, 2001, eNucleus has received approximately $62,000 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.

(13) Income Taxes

      As of December 31, 2000, the Company had generated net operating loss
carryforwards of approximately $32 million. The Company recorded a valuation
allowance for the full benefit of the loss carryforward. During 2001 the Company
filed for bankruptcy protection. As a result of the approved Plan of
Reorganization, there will be a substantial change in ownership resulting from
the creditors conversion into common stock and other matters. 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. However, there are certain exceptions related to bankruptcy.
Management has not yet determine the impact of the bankruptcy on its loss
carryforwards, however any amounts that would arise would be fully reserved
through a valuation allowance.
<PAGE>
(14) 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.

(15) 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        $     4        $     0        $     0       $     4
      the two months ending December 31, 2001
      Accounts receivable allowance activity for  $     0        $    22        $     0        $   (22)      $     0
      the ten months ending October 31, 2001
      Accounts receivable allowance activity for  $     0        $     0        $    45        $   (97)      $     0
      the year ending December 31, 1999
</TABLE>
<PAGE>
EXHIBIT INDEX

<TABLE>
<CAPTION>
Exhibit No.       Description
<S>          <C>

2.1          Plan of Reorganization of eNucleus, Inc, and Confirmation Order by
             the U.S. Bankruptcy Court for the Northern District of Illinois
             dated November 8, 2001 (Incorporated by reference to the Company's
             2000 Form 10-KSB filed on March 21, 2002)

23.1         Consent of Bujan & Associates, Ltd.

27.1         Financial Data Schedule

</TABLE>