<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 March 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.
                            (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 March 31,
               2001 and December 31, 2000.
          Condensed Consolidated (Unaudited) Statements of Operations for the
               three months ended March 31, 2001 and 2000.
          Condensed Consolidated (Unaudited) Statements of Cash Flows for the
               three months ended March 31, 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


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                                                                          Page 2
<PAGE>
PART I
                              FINANCIAL INFORMATION


ITEM 1.   FINANCIAL STATEMENTS

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


<TABLE>
<CAPTION>
                                                                       MARCH 31,         DEC. 31,
                                                                         2001              2000
                                                                      -----------      -----------
<S>                                                                   <C>                <C>
ASSETS
Current assets:
  Cash............................................................    $       523        $   1,452
  Accounts receivable, net........................................         48,472           69,866
  Other current assets............................................        179,321          159,839
                                                                      -----------      -----------
    Total current assets..........................................        228,316          231,157
                                                                      -----------      -----------

  Property and equipment, net.....................................      1,422,899        1,492,434
  Goodwill, net...................................................        751,588          782,339
                                                                      -----------      -----------
    Total assets..................................................    $ 2,402,803      $ 2,505,930
                                                                      ===========      ===========

LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
  Senior notes payable .........                                      $ 6,104,000      $ 6,104,000
  Lines of credit.................................................        499,444          499,444
  Notes payable...................................................        777,060          321,950
  Accounts payable................................................      2,912,066        2,790,093
  Related party payables due to officers..........................        764,441          675,848
  Accrued expenses................................................      1,987,929        1,922,339
  Net liabilities of discontinued companies.......................      1,284,986        1,248,681
                                                                      -----------      -----------
    Total current liabilities.....................................     14,329,926       13,562,355
                                                                      -----------      -----------

  Long-term liabilities...........................................             --               --
                                                                      -----------      -----------
    Total liabilities.............................................     14,329,926       13,562,355
                                                                      -----------      -----------

  Redeemable securities...........................................        279,143          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 March 31, 2001 and December 31, 2000,
    respectively).................................................         13,620           12,905
  Additional paid-in capital......................................     22,607,440       22,542,262
  Stock warrants..................................................        727,349          727,349
  Treasury stock..................................................       (651,838)        (651,838)
  Accumulated deficit.............................................    (34,902,837)     (33,924,689)
                                                                      -----------      -----------
    Total stockholders' equity (deficit)..........................    (12,206,266)     (11,294,011)
                                                                      -----------      -----------

  Total liabilities and stockholders' equity (deficit)............    $ 2,402,803      $ 2,505,930
                                                                      ===========      ===========
</TABLE>


       See accompanying notes to condensed unaudited financial statements.


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


<TABLE>
<CAPTION>
                                                  THREE MONTHS     THREE MONTHS
                                                      ENDED            ENDED
                                                  March 31, 2001  March 31, 2000
                                                  --------------  --------------
<S>                                               <C>             <C>
Revenue ......................................     $   178,936      $        --
Cost of revenue ..............................         105,931               --
                                                   -----------      -----------
  Gross profit ...............................          73,005               --

Operating expenses ...........................         499,595        1,506,476
Stock based compensation expense .............          82,500          108,500
Depreciation and amortization expense ........         147,368            5,166
                                                   -----------      -----------
  Operating loss from
    continuing operations ....................        (656,458)      (1,620,142)

Interest and other income (expenses), net ....        (321,690)        (477,258)
                                                   -----------      -----------
Income from continuing operations ............        (978,148)      (2,097,400)

Loss from discontinued operations ............              --          (99,865)
Loss on disposal of discontinued
  operations .................................              --               --
                                                   -----------      -----------
  Net loss ...................................     $  (978,148)     $(2,197,265)
                                                   ===========      ===========

Basic and diluted loss per common share
  from continuing operations .................     $     (0.07)     $     (0.21)
                                                   ===========      ===========

Basic and diluted loss per common share
  from discontinued operations ...............     $     (0.00)     $     (0.01)
                                                   ===========      ===========

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

Basic and diluted net loss per common
  share ......................................     $     (0.07)     $     (0.22)
                                                   ===========      ===========
Weighted average shares outstanding -
  basic and diluted ..........................      13,238,321       10,074,177
                                                   ===========      ===========
</TABLE>


       See accompanying notes to condensed unaudited financial statements.


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


<TABLE>
<CAPTION>
                                                             THREE MONTHS ENDED      THREE MONTHS ENDED
                                                               MARCH 31, 2001          MARCH 31, 2000
                                                             -------------------     ------------------
<S>                                                          <C>                     <C>
Cash Flows from operating activities:
  Net loss ..............................................    $          (978,148)    $      (2,197,265)
Adjustments to reconcile net loss to net cash provided by
  (used in) operating activities:
  Loss from discontinued operations .....................                     --                99,865
  Depreciation and amortization .........................                147,368                 5,166
  Compensation expense related to issuance of equity
    security ............................................                 82,500               108,500
  Amortization of deferred financial costs and debt
    discount ............................................                     --               311,870
  Changes in operating assets and liabilities ...........                214,423              (207,475)
                                                             -------------------     -----------------
  Net cash used in continuing operations ................               (533,857)           (1,879,339)
  Net cash used in discontinued operations ..............                 36,306              (967,275)
  Net cash used in operating activities .................               (497,551)           (2,846,614)
                                                             -------------------     -----------------
Cash flows from investing activities:
  Capital expenditures ..................................                (47,081)              (91,198)
                                                             -------------------     -----------------
    Net cash used for investing activities ..............                (47,081)              (91,198)
                                                             -------------------     -----------------

Cash flows from financing activities:
  Proceeds from the issuance of senior notes payable ....                     --             6,104,000
  Repayments of notes payable ...........................                455,110               (26,260)
  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 ......                 88,593               (80,252)
                                                             -------------------     -----------------
    Net cash provided by financing activities ...........                543,703             5,168,298
                                                             -------------------     -----------------

  Increase (decrease) in cash ...........................                   (929)            2,230,486
  Cash, beginning of period .............................                  1,452               176,481
                                                             -------------------     -----------------
  Cash, end of period ...................................    $               523     $       2,406,967
                                                             ===================     =================

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 debt facility ...........                     --             1,029,425
  Stock issued to effect acquisition ....................                     --                    --
                                                             ===================     =================
</TABLE>


       See accompanying notes to condensed unaudited financial statements.


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                                                                          Page 5
<PAGE>
                                 eNUCLEUS, INC.
                             (DEBTOR IN POSSESSION)
        NOTES TO CONDENSED CONSOLIDATED (UNAUDITED) FINANCIAL STATEMENTS
                                 March 31, 2001

INTRODUCTION: SIGNIFICANT SUBSEQUENT EVENT

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

           Due to various circumstances, including but not limited to the
voluntary filing of the Chapter 11 reorganization petition, eNucleus, Inc. did
not file its 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 three months ended March 31, 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. As of March 31, 2001, our working capital was a
negative $14.1 million, a decrease of $0.8 million from a deficit of $13.3
million at December 31, 2000. We have incurred net losses of $1.0 million for
the three months ended March 31, 2001, and $24.1 million for the year ended
December 31, 2000.

           Our recurring losses raise substantial doubt about our ability to
continue as a going concern. Our financial statements do not reflect any
adjustments that might result from the outcome of this uncertainty. Our cash
resources are presently not adequate for us to continue operating. Unless we
raise additional cash from outside resources, we will not be able to satisfy our
current operating obligations.

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

           The satisfaction of our cash requirements hereafter will depend in
large part on our ability to successfully generate revenues from operations and
raise capital to fund operations. There can, however, be no assurance that
sufficient cash will be generated from operations or that unanticipated events
requiring the expenditure of funds within our existing operations will not
occur. We expect to aggressively pursue additional sources of funds, the form of
which will vary depending upon prevailing market and other conditions and may
include high-yield financing vehicles, short or long-term borrowings or the
issuance of equity securities. We cannot assure you that we will be able to
obtain such funding, or if such funding is available, that it will be on
favorable terms. 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 John Paulsen's father). 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 March 31, 2001, eNucleus had borrowed $643,000
from Sunami under this facility.


--------------------------------------------------------------------------------
                                                                          Page 7
<PAGE>
           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 three-year $500,000 secured
demand loan agreement with Capital Equity Group. The note agreement is secured
by our assets, guaranteed by Mr. Paulsen and bears interest at the rate of 16%.
To date, eNucleus has received approximately $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.

           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
March 31, 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.


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                                                                          Page 8
<PAGE>
NOTE 6.   RELATED-PARTY TRANSACTIONS

         At March 31, 2001 eNucleus recorded amounts due to John C. Paulsen, our
President and CEO, of $764,000, including $502,000 for cash loans made to
eNucleus during the third and forth quarters of 2000 and $262,000 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 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 March 31, 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.


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                                                                          Page 9
<PAGE>
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,"
"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


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                                                                         Page 10
<PAGE>
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.

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. Revenues were $179,000 for the first quarter 2001 representing
operations from our managed services. Cost of revenue for the first quarter 2001
was $106,000 or 59.2% or revenue. During 1999, the Company did not report any
sales from operations. Sales revenues and cost of revenues previously reflected
in the financial statements for 1999 have been reclassified, as required, within
a single caption titled "Loss from discontinued operations".

         Operating expenses. For the first quarter 2001, operating expenses
decreased approximately $1.0 million to $500,000 from $1.5 million in the first
quarter 2000. 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 quarter 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. For the first quarter 2001, stock
based compensation expense was $82,500 compared to $108,500 for the first
quarter of 2000. We grant stock options and/or warrants to attract certain
management personnel and/or advisors. These options/warrants vest over periods
ranging from zero to three years and included certain grants with an exercise
price below the market price at date of grant.

         Depreciation and amortization expense. Depreciation and amortization
expense increased $142,000 to $147,000 in the first quarter 2001 as compared to
the first quarter 2000. 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. Interest and other expenses decreased
$156,000 to $322,000 in the first quarter 2001 and 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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                                                                         Page 11
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         Net loss from continuing operations. Our net loss from continuing
operations decreased $1.1 million to $1.0 million in the first quarter 2001
compared to a loss of $2.1 million in the first quarter 2000. As discussed
above, the Company was substantially downsizing and reducing personnel, salaries
and other operating expenses as part of our business restructuring late 2000 and
early 2001. During the first quarter 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.

         Loss from discontinued operations. Our net loss from discontinued
operations was $100,000 during the first quarter 2000. This loss represents the
operational activity of the segments of business that we have discontinued,
including Seattle, Denver and parts of Chicago and Atlanta.

         Net loss. Our net loss decreased $1.2 million to $1.0 million in the
first quarter 2001 compared to a loss of $2.2 million in the first quarter 2000.
As discussed above, this decrease in loss is attributable to the Company's
efforts in downsizing and cost-containment as part of our restructuring late
2000 and early 2001.

LIQUIDITY AND CAPITAL RESOURCES

         As of March 31, 2001, our working capital was a negative $14.1 million,
a decrease of $0.8 million from a deficit of $13.3 million at December 31, 2000.
We have incurred net losses of $1.0 million for the three months ended March 31,
2001, and $24.1 million for the year ended December 31, 2000. Our recurring
losses raise substantial doubt about our ability to continue as a going concern.
Our financial statements do not reflect any adjustments that might result from
the outcome of this uncertainty.

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

         The satisfaction of our cash requirements hereafter will depend in
large part on our ability to successfully generate revenues from operations and
raise capital to fund operations. There can, however, be no assurance that
sufficient cash will be generated from operations or that unanticipated events
requiring the expenditure of funds within our existing operations will not
occur. We expect to aggressively pursue additional sources of funds, the form of
which will vary depending upon prevailing market and other conditions and may
include high-yield financing vehicles, short or long-term borrowings or the
issuance of equity securities. We cannot assure you that we will be able to
obtain such funding, or if such funding is available, that it will be on
favorable terms. 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 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 three-year $500,000 secured
demand loan agreement with Capital Equity Group. The note agreement is secured
by our assets, guaranteed by Mr. Paulsen and bears interest at the rate of 16%.
To date, eNucleus has received approximately $363,000 under these facilities.
The proceeds of these loan agreements will be used


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<PAGE>
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
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.


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                                                                         Page 13
<PAGE>
         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.

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.


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<PAGE>
         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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