<PAGE>


                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549
                                   FORM 10-QSB

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

                For the quarterly period ended September 30, 2001

                                       OR

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

             For the Transition period from __________ to __________

                         COMMISSION FILE NUMBER 0-14039

                                 eNUCLEUS, INC.
                             (DEBTOR IN POSSESSION)
                 (Name of Small Business Issuer in its charter)



                 DELAWARE                             11-2714721
       (State or other jurisdiction      (I.R.S. Employer Identification No.)
      of corporation or organization)

                             15545 South 71st Court
                              Orland Park, IL 60462
                    (ADDRESS OF PRINCIPAL EXECUTIVE OFFICES)

        REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (708)444-7300

     Check whether the Registrant (l) filed all reports required to be filed by
Section 13 or 15(d) of the Securities and 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 [X] No [_]


     As of March 15, 2002 the company had outstanding 12,905,432 shares of its
common stock, par value $0.001 per share.

     Transitional Small Business Disclosure Format (check one) Yes [_] No [X]



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                                                                         Page 1
<PAGE>
PART I

                              FINANCIAL INFORMATION


ITEM 1.   FINANCIAL STATEMENTS

          Condensed Consolidated (Unaudited) Balance Sheets as of September 30,
               2001 and December 31, 2000.
          Condensed Consolidated (Unaudited) Statements of Operations for the
               nine months ended September 30, 2001 and 2000 and for the three
               months ended September 30, 2001 and 2000.
          Condensed Consolidated (Unaudited) Statements of Cash Flows for the
               nine months ended September 30, 2001 and 2000.
          Notes to Condensed Consolidated (Unaudited) Financial Statements.


ITEM 2.   MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
          RESULTS OF OPERATIONS


                                     PART II
                                OTHER INFORMATION

ITEM 1.   LEGAL PROCEEDINGS

ITEM 2.   CHANGES IN SECURITIES AND USE OF PROCEEDS

ITEM 3.   DEFAULTS UPON SENIOR SECURITIES

ITEM 4.   SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

ITEM 5.   OTHER INFORMATION

ITEM 6.   EXHIBITS AND REPORTS ON FORM 8-K

FORM 10-QSB SIGNATURE PAGE


--------------------------------------------------------------------------------
                                                                         Page 2
<PAGE>
PART I

                              FINANCIAL INFORMATION


ITEM 1.   FINANCIAL STATEMENTS

                                 eNUCLEUS, INC.
                             (DEBTOR IN POSSESSION)
                      CONDENSED CONSOLIDATED BALANCE SHEETS
                                   (UNAUDITED)


<TABLE>
<CAPTION>
                                                                           SEPT 30,               DEC. 31,
                                                                             2001                   2000
                                                                         ------------           ------------
<S>                                                                      <C>                    <C>
ASSETS
Current assets:
  Cash ........................................................          $     47,888           $      1,452
  Accounts receivable, net ....................................                40,744                 69,866
  Other current assets ........................................                82,462                159,839
                                                                         ------------           ------------
    Total current assets ......................................               171,094                231,157
                                                                         ------------           ------------

  Property and equipment, net .................................             1,208,181              1,492,434
  Goodwill, net ...............................................               690,085                782,339
                                                                         ------------           ------------
    Total assets ..............................................          $  2,069,360           $  2,505,930
                                                                         ============           ============

LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
  Senior notes payable (net of debt discount of $910,246) .....          $         --           $  6,104,000
  Lines of credit .............................................                    --                499,444
  Notes payable ...............................................                79,223                321,950
  Accounts payable ............................................                26,022              2,790,093
  Related party payables due to officers ......................                    --                675,848
  Accrued expenses ............................................               421,789              1,922,339
  Net liabilities of discontinued companies ...................                    --              1,248,681
                                                                         ------------           ------------
    Total current liabilities .................................               527,034             13,562,355

Long-term liabilities .........................................                    --                     --
                                                                         ------------           ------------
    Total liabilities .........................................               527,034             13,562,355
                                                                         ------------           ------------

Liabilities Subject to Compromise .............................            16,686,008                     --
                                                                         ------------           ------------

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

Stockholders' equity (deficit):

  Common stock - $0.001 par value, 900,000,000 shares
    authorized; shares issued and outstanding (13,620,432
    and 12,905,432 on September 30, 2001 and December 31, 2000,
    respectively) .............................................                13,620                 12,905
  Additional paid-in capital ..................................            22,586,950             22,542,262
  Stock warrants ..............................................               727,349                727,349
  Treasury stock ..............................................              (651,838)              (651,838)
Accumulated deficit ...........................................           (37,819,763)           (33,924,689)
                                                                         ------------           ------------
    Total stockholders' equity (deficit) ......................           (15,143,682)           (11,294,011)
                                                                         ------------           ------------

  Total liabilities and stockholders' equity (deficit) ........          $  2,069,360           $  2,505,930
                                                                         ============           ============
</TABLE>


       See accompanying notes to condensed unaudited financial statements.


--------------------------------------------------------------------------------
                                                                         Page 3
<PAGE>
                                 eNUCLEUS, INC.
                             (DEBTOR IN POSSESSION)
                 CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
                                   (UNAUDITED)

<TABLE>
<CAPTION>
                                                THREE MONTHS       THREE MONTHS        NINE MONTHS        NINE MONTHS
                                                    ENDED              ENDED               ENDED               ENDED
                                               SEPT. 30, 2001      SEPT. 30, 2000      SEPT. 30, 2001      SEPT. 30, 2000
                                                ------------        ------------        ------------        ------------
<S>                                            <C>                 <C>                 <C>                 <C>
Revenue .................................       $     79,537        $     87,654        $    398,448        $    136,347
Cost of revenue .........................             45,136              53,276             232,252              82,132
                                                ------------        ------------        ------------        ------------
  Gross profit ..........................             34,401              34,378             166,196              54,215

Operating expenses ......................            181,724           1,058,653             934,918           3,580,456
Stock based compensation expense ........                 --             373,614              82,500           1,610,011
Depreciation and amortization expense ...            147,368             133,123             442,104             143,454
                                                ------------        ------------        ------------        ------------
  Operating loss from
    continuing operations ...............           (294,691)         (1,531,012)         (1,293,326)         (5,279,706)

Interest and other income (expenses), net                516          (3,384,106)           (523,257)         (6,998,367)
                                                ------------        ------------        ------------        ------------
Income from continuing operations .......           (294,175)         (4,915,118)         (1,816,583)        (12,278,073)
Reorganization Items ....................           (185,513)                 --          (2,078,492)                 --
Loss from discontinued operations .......                 --            (500,422)                 --          (1,465,444)
Loss on disposal of discontinued
operations ..............................                 --          (6,566,835)                 --          (6,566,835)
                                                ------------        ------------        ------------        ------------
  Net loss ..............................       $   (479,688)       $(11,982,375)       $ (3,895,075)       $(20,310,352)
                                                ============        ============        ============        ============

Basic and diluted loss per common share
  from continuing operations ............       $      (0.02)       $      (0.53)       $      (0.14)       $      (1.64)
                                                ============        ============        ============        ============

Basic and diluted loss per common share
  from reorganization items .............       $      (0.01)       $      (0.00)       $      (0.15)       $      (0.00)
                                                ============        ============        ============        ============

Basic and diluted loss per common share
  from discontinued operations ..........       $      (0.00)       $      (0.06)       $      (0.00)       $      (0.19)
                                                ============        ============        ============        ============

Basic and diluted loss per common share
  from disposal of discontinued
  operations ............................       $      (0.00)       $      (0.73)       $      (0.00)              (0.88)
                                                ============        ============        ============        ============

Basic and diluted net loss per common
  share .................................       $      (0.03)       $      (1.32)       $      (0.29)       $      (2.71)
                                                ============        ============        ============        ============

Weighted average shares outstanding -
  basic and diluted .....................         13,620,432           9,052,753          13,494,461           7,491,181
                                                ============        ============        ============        ============
</TABLE>


       See accompanying notes to condensed unaudited financial statements.


--------------------------------------------------------------------------------
                                                                         Page 4
<PAGE>
                                 eNUCLEUS, INC.
                             (DEBTOR IN POSSESSION)
                 CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
                                   (UNAUDITED)


<TABLE>
<CAPTION>
                                                                 NINE MONTHS ENDED     NINE MONTHS ENDED
                                                                   SEPT 30, 2001         SEPT 30, 2000
                                                                 ------------------    -----------------
<S>                                                              <C>                   <C>
Cash Flows from operating activities:
  Net loss ..............................................          $ (3,895,075)         $(20,310,352)
Adjustments to reconcile net loss to net cash provided by
  (used in) operating activities:
  Loss from discontinued operations .....................                    --             1,465,444
  Loss on disposal of discontinued operations ...........                    --             6,566,835
  Non-cash reorganization expense .......................             2,824,020                    --
  Depreciation and amortization .........................               442,104               143,454
  Compensation expense related to issuance of equity
    security ............................................                82,500             1,610,011
  Amortization of deferred financial costs and debt
    discount ............................................                    --             5,399,675
  Changes in operating assets and liabilities ...........               579,260             1,528,984
                                                                   ------------           -----------
  Net cash used in continuing operations ................                32,809            (3,595,949)
  Net cash used in discontinued operations ..............                    --            (1,616,952)
  Net cash used in operating activities .................                32,809            (5,212,901)
                                                                   ------------           -----------
Cash flows from investing activities:
  Capital expenditures ..................................               (65,597)             (541,984)
                                                                   ------------           -----------
    Net cash used for investing activities ..............               (65,597)             (541,984)
                                                                   ------------           -----------

Cash flows from financing activities:
  Proceeds from the issuance of senior notes payable ....                    --             6,104,000
  Repayments of notes payable ...........................                79,224                 2,194
  Decrease in lines of credit ...........................                    --                    --
  Proceeds from the sale of common stock ................                    --               548,048
  Purchase of treasury stock ............................                    --              (651,838)
  Payments of deferred finance costs ....................                    --              (725,400)
  Proceeds from issuance of related party payables ......                    --               330,842
                                                                   ------------           -----------
    Net cash provided by financing activities ...........                79,224             5,607,846
                                                                   ------------           -----------

  Increase (decrease) in cash ...........................                46,436              (147,039)
  Cash, beginning of period .............................                 1,452               176,481
                                                                   ------------           -----------
  Cash, end of period ...................................          $     47,888           $    29,442
                                                                   ============           ===========

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                350,280                    --
  Fixed assets acquired through capital lease ...........             1,029,425                    --
  Stock issued to effect acquisition ....................          $  1,735,125                    --
                                                                   ============           ===========
</TABLE>


       See accompanying notes to condensed unaudited financial statements.


--------------------------------------------------------------------------------
                                                                         Page 5
<PAGE>
                                 eNUCLEUS, INC.
                             (DEBTOR IN POSSESSION)
        NOTES TO CONDENSED CONSOLIDATED (UNAUDITED) FINANCIAL STATEMENTS
                               September 30, 2001


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 preceeding the filing of
the Chapter 11 petition and during the pendency of the Chapter 11 proceeding
were substantially limited to negotiating the with its secured and unsecured
creditors and securing the financing needed to enable the Company to emerge from
Bankruptcy. On November 6, 2001, the Company's Plan of Reorganization was
confirmed thereby enabling the Company to successfully emerge from the Chapter
11 proceeding. The confirmed Plan of Reorganization provides for, among other
things, the following: (i) the issuance to holders of certain allowed claims of
1 share of our common stock for every $3.00 of allowed claim; and (ii) a 1 for 6
reverse stock split resulting in current stockholders receiving 1 share of new
common stock for every 6 shares of old common stock currently owned. (See Item
1. Description of Business.)

      Due to various circumstances, including but not limited to the voluntary
filing of the Chapter 11 reorganization petition, eNucleus, Inc. did not file
its interim reports on the Form 10-QSB prior hereto. Accordingly, the following
discussion of eNucleus, Inc. is presented from a historical perspective and
includes a description of the business of eNucleus, Inc. after the emergence
from the Chapter 11.

NOTE 1. 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.


NOTE 2.   BASIS OF PRESENTATION

      The accompanying unaudited condensed consolidated financial statements
have been prepared in accordance with generally accepted accounting principles
for interim financial information, the instructions to Form 10-QSB and Article
10 of Regulation S-X. Accordingly, they do not include all of the information
and footnotes required by generally accepted accounting principles for complete
financial statements. Certain amounts have been reclassified from the previously
reported financial statements in order to conform to the financial statement
presentation of the current period. In the opinion of management, all
adjustments (consisting only of normal recurring adjustments) considered
necessary for a fair presentation have been included.

      Operating results for the nine months ended September 30, 2001 are not
necessarily indicative of the results that may be expected for the fiscal year
ending December 31, 2001. Certain prior period amounts have been reclassified to
conform to the current period presentation. These financial statements should be
read in conjunction with our audited consolidated financial statements and
footnotes for the year ended December 31, 2000 that are included in our annual
report on Form 10-KSB.

NOTE 3. FINANCIAL RESULTS AND LIQUIDITY

      Since we have only recently begun to execute on our business plan, we face
all the risks common to companies in their early stages of development,


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                                                                         Page 6
<PAGE>
including undercapitalization and uncertainty of funding sources, high initial
expenditure levels and uncertain revenue streams, an unproven business model,
difficulties in managing growth, and difficulties in managing operations in
different geographic locations. On May 10, 2001, we filed a voluntary petition
for reorganization under Chapter 11 of the United States Bankruptcy Code. We
continued to operate as a debtor-in-possession under the supervision of the
Bankruptcy Code. On November 6, 2001, the Company's Plan of Reorganization was
confirmed thereby enabling the Company to successfully emerge from its Chapter
11 reorganization. Pursuant to the confirmed Plan of Reorganization, among other
things, holders of certain allowed claims will receive 1 share of common stock
for every $3.00 of debt. Also pursuant to the Plan, the Company's common stock
has undergone a 1 for 6 reverse stock split resulting in current stockholders
receiving 1 share of new common stock for every 6 shares of old common stock
currently owned.

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

NOTE 4. DISCONTINUED OPERATIONS

      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.


NOTE 5. FINANCING ARRANGEMENTS

      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
September 30, 2001, eNucleus had borrowed $643,000 from Sunami under this
facility.

      eNucleus and Sunami Ventures, LLC ("Sunami") entered into a post-petition
financing agreement for borrowings up to $1,500,000 comprised of $500,000 for
working capital and $1,000,000 for equipment financing. As part of the funding
for this facility, Sunami has entered into private sales agreements of certain
eNucleus securities currently held by Sunami, the proceeds of which will be used
as funding under this facility. Also pursuant to the Sunami financing, in
January, 2002, we entered into a nine-year $500,000 secured demand loan
agreement with Capital Equity Group. The note agreement is secured by our
assets, guaranteed by Mr. Paulsen and bears interest at the rate of 16%. To
date, eNucleus has received approximately $363,000 under these facilities. The
proceeds of these loan agreements will be used to satisfy certain petitions
resulting from the bankruptcy and post-petition operating expenses.


--------------------------------------------------------------------------------
                                                                         Page 7
<PAGE>
      In the first quarter 2001, we issued 715,000 shares of our common stock to
various parties in exchange for services rendered and amounts due.

      In various transactions not involving public offerings, in January and
February, 2000, we issued 365,365 shares of our common stock to sophisticated
investors for an aggregate amount of $548,000 in cash. We paid a broker-dealer
$9,000 in cash and warrants to purchase 6,000 shares of our common stock at
$1.50 per share related to certain of these sales. These sales were exempt from
registration under Section 4(2) of the Securities Act. The recipients of
securities represented their intentions to acquire the securities for investment
only and not with a view to or for sale in connection with any distribution
thereof. In each instance, offers and sales were made without any public
solicitation. All recipients had adequate access to information about eNucleus.

      In August, 2000, eNucleus entered into a demand loan facility with Sunami.
The facility provides for borrowings of up to $750,000, bears interest at the
rate of twelve percent and was payable no later than August, 2001. As of
September 30, 2001, eNucleus had borrowed $643,000 from Sunami under this
facility.

      On May 11, 2000 we issued 661,000 shares of common stock 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. We received notice of their intent to exercise this
put arrangement. eNucleus did not repurchase the shares and as a result of our
bankruptcy filing the put option was resolved and terminated.

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

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


NOTE 6. RELATED-PARTY TRANSACTIONS

            At September 30, 2001 eNucleus recorded amounts due to John C.
Paulsen, our President and CEO, of $797,000, including $502,000 for cash loans
made to eNucleus during the third and forth quarters of 2000 and $295,000 for
deferred compensation and unreimbursed expenses.

      As of January 1, 2000, eNucleus carried a payable to Mr. Paulsen of
$121,000, which included monies loaned, deferred compensation and unreimbursed
expenses. During 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


--------------------------------------------------------------------------------
                                                                         Page 8
<PAGE>
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.

      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
September 30, 2001, eNucleus had borrowed $643,000 from Sunami under this
facility.

      As part of our reorganization under bankruptcy, eNucleus and Sunami
entered into a post-petition financing agreement for borrowings up to $1,500,000
comprised of $500,000 for working capital and $1,000,000 for equipment
financing. To date, eNucleus has received approximately $363,000 under this
facility. As part of the funding for this facility, Sunami has entered into
private sales agreements of certain eNucleus securities currently held by
Sunami, the proceeds of which will be used as funding under this facility.

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


NOTE 7. ACQUISITIONS

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


ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
        OF OPERATIONS

      The following discussion should be read in conjunction with the financial
statements and related notes which are included under Item 1 and with the
Management's Discussion and Analysis Of Financial Condition and Results Of
Operations and the audited financial statements and related notes included in
eNucleus' Form 10-KSB, as filed with the Securities and Exchange Commission on
March 21, 2002.

      This Form 10-QSB contains forward-looking statements within the meaning of
Section 21E of the Securities Exchange Act of 1934 and Section 27A of the
Securities Act of 1933 that involve numerous risks and uncertainties.
Forward-looking statements can be identified by the use of forward-looking
terminology such as "estimates," "projects," "anticipates," "expects,"

--------------------------------------------------------------------------------
                                                                         Page 9
<PAGE>
"intends," "believes," or comparable terminology or by discussions of strategy
that involve risks and uncertainties. In addition, any statements which refer to
expectations, projections or other characterizations of future events or
circumstances are forward-looking statements. Actual results could differ from
such forward-looking statements. We undertake no obligation to revise
forward-looking statements. Readers are encouraged to review and consider
carefully the various disclosures made by us in this report and our other
reports filed with the Securities and Exchange Commission, including our Form
10-KSB for the year ended December 31, 2000. Such risks and uncertainties
include our ability to raise the funds necessary to finance our operations,
general effects of our restructuring and emergence from Chapter 11
reorganization, our ability to successfully execute on our business plan,
competitive factors and attracting new customers.

INTRODUCTION

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

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

      In August 2000 with the installation of our new management team, we
decided to strategically focus only on higher margin Internet infrastructure
services and elected to discontinue offering certain non-related client premise
equipment sales and associated professional services. As part of this decision,
we closed our Seattle and Denver offices as well as discontinued certain
operations of our Chicago and Atlanta offices. Revenue from these discontinued
operations were approximately $7.2 million for the year ending December 31,
2000. 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


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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.

GROWTH STRATEGY

            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.


RESULTS OF OPERATIONS

      Revenue. For the third quarter 2001, revenues were $79,000 compared to
$88,000 in the third quarter 2000. On a year to date basis, revenues increased
approximately $262,000 from $136,000 in 2000 to $398,000 in 2001. The increase
in revenue was a result of our increase sales efforts from our managed services
offering. During 2000, we only begun generating revenue from the managed
services product offering mid second quarter.

      Cost of revenue. For the third quarter 2001, cost of revenue was $53,000
in 2000 and $45,000 in 2001 or 60% compared to 58% of revenue. On a year to date
basis, cost of revenues increased by $150,000 from $82,000 in 2000 to $232,000
in 2001. The increase in cost of revenue was a result of our increase sales
efforts from our managed services offering. During 2000, we only begun
generating revenue from the managed services product offering mid second
quarter.

      Operating expenses. For the third quarter 2001, operating expenses
decreased by $900,000 from $1.1 million in 2000 to $182,000 in 2001. On a year
to date basis, operating expenses decreased by $2.7 million from $3.6 million in
2000 to $900,000 in 2001. As part of our business restructuring late 2000 and
early 2001, the Company was substantially downsizing and reducing personnel,
salaries and other operating expenses. During the first half of 2000, the
company had undertaken a significant growth stage incurring substantial expenses
to build our infrastructure and administrative, including sales and marketing,
back office support and the cost of key executive management to support the
development and growth of the business.

      Stock based compensation expense. During the nine months ending September
30, 2000 stock based compensation expense was $82,500. For three months and nine
months ending September 30, 2000, stock based compensation expense was
approximately $0.4 million and $1.6 million respectively. During 2000, we
granted stock options and/or warrants to attract certain management personnel
and/or advisors. These options/warrants vest over periods ranging from zero to
six years and included certain grants with an exercise price below the market
price at date of grant. As a result, we incurred non-cash compensation charges
during 2000. As a result of our bankruptcy, the outstanding options and warrants
were cancelled.

      Depreciation and amortization expense. Depreciation and amortization
expense increased $14,000 and $299,000 in the three and nine month periods
ending September 30, 2001. The increase was primarily a result of increase in
depreciation expense associated with the buildout of the Atlanta data center and
the increase in amortization expense associated with the intangibles recorded
with our acquired company.

      Interest and other expenses. For the third quarter 2001, interest and
other expenses decreased by $3.4 million from $3.4 million in 2000 to $0 in
2001. On a year to date basis, interest and other expenses decreased by $6.5
million from $7.0 million in 2000 to $0.5 million in 2001. The decrease in
expense primarily relates to the amortization of the non-cash costs associated
with the common stock and warrants we issued in connection with our senior
bridge financing that were fully amortized during 2000.


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      Net loss from continuing operations. For the third quarter 2001, our net
loss from continuing operations decreased by $4.6 million from $4.9 million in
2000 to $300,000 in 2001. On a year to date basis, net loss from continuing
operations decreased by $10.5 million from $12.3 million in 2000 to $1.8 million
in 2001. As part of our business restructuring late 2000 and early 2001, the
Company was substantially downsizing and reducing personnel, salaries and other
operating expenses. During the first half of 2000, the company had undertaken a
significant growth stage incurring substantial expenses to build our
infrastructure and administrative, including sales and marketing, back office
support and the cost of key executive management to support the development and
growth of the business. Additionally, 2000 includes approximately $7 million of
non-cash interest charges associated with the bridge financing.

      Reorganization expenses. Reorganization costs recognized during the three
and nine months ended September 30, 2001 represent professional fees, costs
associates with rejected contracts and other expenses associated with the
Chapter 11 proceedings.

      Loss from discontinued operations. This loss represents the operational
activity of the segments of business that we have discontinued, including
Seattle, Denver and parts of Chicago and Atlanta.

      Loss on disposal of discontinued operations. The loss on disposal in 2000
included approximately $6.3 million related to the write off of goodwill
associated with operations discontinued and $300,000 associated with the write
off of fixed assets disposed and the net present value of unrecoverable lease
expenses.

      Net loss. For the third quarter 2001, our net loss decreased by $11.5
million from $12.0 million in 2000 to $0.5 million in 2001. On a year to date
basis, net loss decreased by $16.4 million from $20.3 million in 2000 to $3.9
million in 2001. As discussed above, this improvement in net loss is a result of
our restructuring efforts and other cost-containment matters.

LIQUIDITY AND CAPITAL RESOURCES

      As of June 30, 2001, our working capital was a negative $14,000. As of
December 31, 2000 our working capital was a negative $13.3 million. The
improvement in working capital was a result of the reclassification of
liabilities subject to comprise arising out of our filing for bankruptcy
protection. On May 10, 2001, we filed a voluntary petition for reorganization
under Chapter 11 of the United States Bankruptcy Code. We continued to operate
as a debtor-in-possession under the supervision of the Bankruptcy Code. On
November 6, 2001, the Company's Plan of Reorganization was confirmed thereby
enabling the Company to successfully emerge from its Chapter 11 reorganization.
Pursuant to the confirmed Plan of Reorganization, among other things, holders of
certain allowed claims will receive 1 share of common stock for every $3.00 of
debt. Also pursuant to the Plan, the Company's common stock has undergone a 1
for 6 reverse stock split resulting in current stockholders receiving 1 share of
new common stock for every 6 shares of old common stock currently owned.

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

      eNucleus and Sunami Ventures, LLC ("Sunami") entered into a post-petition
financing agreement for borrowings up to $1,500,000 comprised of $500,000 for
working capital and $1,000,000 for equipment financing. As part of the funding
for this facility, Sunami has entered into private sales agreements of certain
eNucleus


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                                                                        Page 12
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securities currently held by Sunami, the proceeds of which will be used as
funding under this facility. Also pursuant to the Sunami financing, in January,
2002, we entered into a nine-year $500,000 secured demand loan agreement with
Capital Equity Group. The note agreement is secured by our assets, guaranteed by
Mr. Paulsen and bears interest at the rate of 16%. To date, eNucleus has
received approximately $363,000 under these facilities. The proceeds of these
loan agreements will be used to satisfy certain petitions resulting from the
bankruptcy and post-petition operating expenses.

QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

      The Company is exposed to changes in interest rates as a result of
significant financing through its issuance of variable-rate and fixed-rate debt.
Reference is made to the quantitative disclosures about market risk as of
December 31, 2000 included under Item 7 of our most recent Annual Report on Form
10-KSB.

PART II

ITEM 1. LEGAL PROCEEDINGS

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

      Prior to our filing for protection under bankruptcy, we were a party to
several creditor collection actions. However, as a result of our bankruptcy
filing, these matters and many other threatening proceedings have been resolved
and terminated. We believe that there is no proceeding threatened or pending
against us which, if determined adversely, would have a material adverse effect
on the financial condition or results of operations of eNucleus.

ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS


      In various transactions not involving public offerings, in January and
February, 2000, we issued a total of 365,365 shares of our common stock to
sophisticated investors for an aggregate amount of $548,000. We paid a
broker-dealer $9,000 in cash and warrants to purchase 6,000 shares of our common
stock at $1.50 per share related to certain of these sales. 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


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<PAGE>
distribution thereof. In each instance, offers and sales were made without any
public solicitation. 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.

      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.

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

      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.


ITEM 3. DEFAULTS UPON SENIOR SECURITIES

      On July 23, 1999, we entered into a $500,000 secured demand loan agreement
(the "Loan") with Bank of America. The Loan is secured by our assets and the
assets of Mr. John Paulsen, bears interest monthly at the rate of prime plus one
hundred basis points, with principal payable on demand. The entire amount under
the loan is outstanding. This demand loan agreement has expired and we are
currently in default.

      On November 3, 2000, the senior bridge notes in the aggregate principal
amount of $6,104,000 came due. These notes were originally issued on March 21,
2000, were due on July 6, 2000. We elected to extend these notes until November
3, 2000, by paying an additional 5% fee in equity. We have defaulted on the
notes.


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ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

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

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


ITEM 5. OTHER INFORMATION

      Due to various circumstances, including but not limited to the voluntary
filing of the Chapter 11 reorganization petition, eNucleus, Inc. did not file
its 2001 interim reports on the Form 10-QSB prior hereto.

ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K

      (A)   Exhibits.

            NONE




      (B)   Reports on Form 8-K.

            NONE










                                    SIGNATURE

      In accordance with the requirements of the Securities and Exchange Act of
1934, the registrant has duly caused this report to be signed on its behalf by
the undersigned hereunto duly authorized.


                                                  eNUCLEUS, INC.

Date:    March 25, 2002                           /s/ JOHN C. PAULSEN
                                                     -------------------
                                                     John C. Paulsen,
                                                     President and CEO




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