<PAGE>

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

                                    FORM 10-Q

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

For the period ended MARCH 31, 2001

                                       OR

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


                         Commission File No.: 0-27878

                           MCGLEN INTERNET GROUP, INC.
                 (Name of small business issuer in its charter)

                Delaware                                 13-3779546
      (State or other jurisdiction                      (IRS Employer
    of incorporation or organization)                Identification No.)

              16700 Gale Avenue, City of Industry, California 91745
               (Address of principal executive offices)(Zip code)

                    Issuer's telephone number: (626) 923-6000

Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter
period that the registrant was required to file such reports) and (2) has been
subject to such filing requirements for the past 90 days. Yes [X]  No [ ]

The number of shares outstanding of each of the issuer's classes of publicly
traded common equity; as of May 14, 2001 was 35,850,869 shares of Common Stock.



<PAGE>

                           MCGLEN INTERNET GROUP, INC.

                               INDEX TO FORM 10-Q



PART I - FINANCIAL INFORMATION                                             Page
                                                                           ----

Item 1  Financial Statements

Consolidated Balance Sheets.................................................  3

Consolidated Statements of Operations.......................................  4

Consolidated Statements of Stockholders' Deficit............................  5

Consolidated Statements of Cash Flows.......................................  6

Condensed Notes to Consolidated Financial Statements........................  7

Item 2 - Management's Discussion and Analysis of Financial  Condition
and Results of Operations...................................................  8


PART II - OTHER INFORMATION

Item 2.   Changes in Securities and Use of Proceeds......................... 11

Item 6.   Exhibit and Reports on Form 8-K................................... 12

SIGNATURE................................................................... 12



<PAGE>

                           MCGLEN INTERNET GROUP, INC.
                           CONSOLIDATED BALANCE SHEETS
                                 (in thousands)


                          ASSETS                        MARCH 31,   DECEMBER 31,
                                                          2001         2000
                                                        --------     --------
                                                      (unaudited)

Current Assets:
Cash and cash equivalents                               $    80      $     2
Accounts receivable, net of allowance for doubtful
  accounts and estimated  returns of $20 at March 31,
  2001 and $30 at December 31, 2000                         323          341
Inventories                                                 303          192
Prepaid expenses and other current assets                   191          210
Deposits                                                    203          203
                                                        --------     --------
              Total current assets                        1,100          948
                                                        --------     --------
Equipment, net                                              221          297
Intangible assets                                           241          252
Other assets                                                 19           31
                                                        --------     --------
                                                        $ 1,581      $ 1,528
                                                        ========     ========

                     LIABILITIES AND STOCKHOLDERS' DEFICIT

Current Liabilities:
Accounts payable                                        $ 1,074      $ 1,701
Accrued expenses                                            199          211
Line of credit                                               90
Advances from Lan Plus                                      475
Capital lease obligations - current portion                  91           92
Convertible notes payable                                 1,092        1,092
Net current liabilities of discontinued operations          159          573
                                                        --------     --------
              Total current liabilities                   3,180        3,669
                                                        --------     --------
Capital lease obligations                                   104          141
Convertible notes payable                                   700          817
                                                        --------     --------

              Total liabilities                           3,984        4,627
                                                        --------     --------

Stockholders' deficit:
Preferred stock, $0.01 par value; 5,000 shares
  authorized, none issued or outstanding                      -            -
Common stock, $0.03 par value; authorized 50,000
  shares, 35,851 in 2001 and 31,896 in 2000 shares
  issued and outstanding                                  1,075          957
Additional paid in capital                                6,162        5,119
Accumulated deficit                                      (9,640)      (9,175)
                                                        --------     --------

              Total stockholders' deficit                (2,403)      (3,099)
                                                        --------     --------
                                                        $ 1,581      $ 1,528
                                                        ========     ========

    See accompanying condensed notes to the consolidated financial statements

                                       3


<PAGE>

<TABLE>
                                         MCGLEN INTERNET GROUP, INC.
                                    CONSOLIDATED STATEMENTS OF OPERATIONS
                                                 (unaudited)
                                    (in thousands, except per share data)
<CAPTION>

                                                                             MARCH 31, 2001    MARCH 31, 2000
                                                                             --------------    --------------
<S>                                                                             <C>               <C>
Net sales                                                                       $  5,804          $ 10,909
Cost of sales                                                                      5,107             9,658
                                                                                ---------         ---------
Gross profit                                                                         697             1,251
Selling, general and administrative expenses (including $159
and $157 of non cash compensation in 2001 and 2000, respectively)                  1,440              1860
                                                                                ---------         ---------
Loss from operations                                                                (743)             (609)
Interest expense                                                                      67                 5
                                                                                ---------         ---------
Loss before income taxes and extraordinary item                                     (810)             (614)
Provision for income taxes                                                            (-)               (-)
                                                                                ---------         ---------
Loss before extraordinary item                                                      (810)             (614)
Extraordinary item, gain from retirement of debt, net of tax of $0 (Note 2)          345                 -
                                                                                ---------         ---------
Net loss                                                                        $   (465)         $   (614)
                                                                                =========         =========
Basic and diluted net loss per share before extraordinary item                  $  (0.01)         $  (0.02)
                                                                                =========         =========
Basic and diluted net loss per share                                            $  (0.01)         $  (0.02)
                                                                                =========         =========
Weighted average shares of common stock outstanding:
         Basic and diluted                                                        33,873            32,000
                                                                                =========         =========

                       See accompanying notes to the consolidated financial statements

                                                      4
</TABLE>


<PAGE>

<TABLE>
                                         MCGLEN INTERNET GROUP, INC.
                              CONSOLIDATED STATEMENTS OF STOCKHOLDERS' DEFICIT
                                                 (unaudited)
                                               (in thousands)
<CAPTION>

                                                                                                   TOTAL
                                                    COMMON STOCK     ADDITIONAL   ACCUMULATED  STOCKHOLDERS'
                                                                      PAID-IN      EARNINGS       EQUITY
                                               SHARES      AMOUNT     CAPITAL      (DEFICIT)     (DEFICIT)
                                              ---------   ---------   ---------    ---------     ---------
<S>                                             <C>       <C>         <C>          <C>           <C>
Balance at January 1, 2001                      31,895    $    957    $  5,119     $ (9,175)     $ (3,099)
Conversion of notes payable                      3,723         111         811                        922
Cashless stock options exercised                   233           7          (7)                         -
Non-cash compensation and financing charges                                135                        135
Conversion of accounts payable                                             104                        104
Net loss                                                                               (465)         (465)
                                              ---------   ---------   ---------    ---------     ---------
Balance at March 31, 2001                       35,851    $  1,075    $  6,162     $ (9,640)     $ (2,403)
                                              =========   =========   =========    =========     =========

                       See accompanying notes to the consolidated financial statements

                                                     5
</TABLE>


<PAGE>

                           MCGLEN INTERNET GROUP, INC.
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                                   (unaudited)
                                 (in thousands)


                                                                  MARCH 31,
                                                               2001       2000
                                                             --------   --------
Increase (decrease) in cash and cash equivalents
Cash flows from operating activities:
   Net loss                                                  $  (465)   $  (614)
   Adjustments to reconcile net loss to net cash used
     in operating activities:
   Depreciation and amortization                                  87         92
   Non cash charges relating to stock options, warrants
     and stock compensation                                      160        157
   Gain on debt settlements                                     (345)         -
   Decrease in allowance for doubtful accounts                   (10)         -
   Amortization of beneficial debt conversion feature             28          -
   Changes in operating assets and liabilities:
   Accounts receivable                                             8        (64)
   Inventories                                                  (111)      (150)
   Prepaid expenses and other current assets                       9         37
   Deposits                                                        -        (92)
   Other assets                                                   12         (6)
   Accounts payable                                             (158)      (159)
   Accrued expenses                                              (22)        95
   Net current liabilities of discontinued operations           (143)      (349)
                                                             --------   --------
   Total adjustments                                            (483)      (439)
                                                             --------   --------
Net cash used in operating activities                           (948)    (1,053)
                                                             --------   --------

Cash flows from investing activities:
         Purchases of equipment                                    -        (39)
                                                             --------   --------
Net cash used in investing activities                              -        (39)
                                                             --------   --------

Cash flows from financing activities:
   Advances from Lan Plus Corporation                            475          -
   Borrowings under convertible notes payable                    500        109
   Borrowings under line of credit, net                           90         72
   Payments on capital lease obligations                         (38)       (18)
                                                             --------   --------
Net cash provided by financing activities                      1,027        163
                                                             --------   --------

   Net increase (decrease) in cash and cash equivalents           78       (929)

   Cash and cash equivalents beginning of period                   2        962
                                                             --------   --------

   Cash and cash equivalents end of period                   $    80    $    32
                                                             ========   ========

         The Company paid $6 and $10 for interest and $1 and $2 for taxes,
during the three months ended March 31, 2001 and 2000, respectively

                                                                  MARCH 31,
                                                               2001       2000
                                                             --------   --------
Non-cash investing and financing activities:
   Conversion of net current liabilities of discontinued
     operations to equity                                    $   271          -
   Conversion of convertible notes payable to equity         $    20          -
         Non cash exercise of stock options                  $     7          -
   Conversion of accounts payable to equity                  $   104          -

         See accompanying notes to the consolidated financial statements

                                       6


<PAGE>

MCGLEN INTERNET GROUP, INC.
CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


1. BASIS OF PRESENTATION

The consolidated interim financial statements include the accounts of Mcglen
Internet Group, Inc. (a Delaware corporation) and its wholly owned subsidiaries
(the "Company") and have been prepared, without audit, pursuant to the rules and
regulations of the Securities and Exchange Commission (SEC). Certain information
and footnote disclosures normally included in financial statements prepared in
accordance with generally accepted accounting principles have been condensed or
omitted pursuant to such regulations. These financial statements should be read
in conjunction with the audited financial statements and the notes thereto
included in the Company's Annual Report on Form 10-KSB for the year ended
December 31, 2000.

In the opinion of management, the accompanying financial statements contain all
adjustments necessary to present fairly the financial position of the Company at
March 31, 2001 and 2000, and the results of operations and cash flows for the
three months ended March 31, 2001 and 2000. The results of operations for the
interim periods are not necessarily indicative of the results of operations for
the full year.


2. OVERVIEW AND RECENT DEVELOPMENTS

Mcglen Internet Group, Inc. is an Internet operating company focused on creating
multiple on-line business divisions targeting specific business-to-business and
business-to-consumer markets. The Company offers over 120,000 computer hardware,
software, and peripheral products servicing individuals, small offices/home
offices, and the corporate market through its three web sites; Mcglen.com,
AccessMicro.com, and Techsumer.com.

On October 11, 2000, the Company entered into an agreement and plan of merger
with Lan Plus Corporation (Lan Plus). Lan Plus is a manufacturer of both
private-label and branded turnkey computer solutions and services, with over
nine years of operating history. On March 21, 2001, the Company entered into an
amended and restated merger agreement that, among other things, eliminated
certain conditions to closing contained in the original merger agreement. The
amended merger agreement also extended the deadline for completing the merger to
June 30, 2001. At the closing of the merger, Lan Plus shareholders will receive
a number of shares such that the Lan Plus shareholders will own (a) a majority
of shares of the post merger combined entity plus (b) 1.9 million additional
shares and certain other shares based upon the liabilities and assets at the
closing date and certain other adjustments.

The merger is subject to customary closing conditions, including shareholder and
regulatory approval. Management anticipates the merger closing in June or July
2001.

Andy Teng, founder, Chairman and Chief Executive Officer of Lan Plus, will
become the Chief Executive Officer and Chairman of the Board of the combined
company. Richard Shyu, currently President and Chief Operating Officer of Lan
Plus, will become President of the combined company. Both were added to the
Board of Directors in March 2001. Grant Trexler, currently Mcglen's Chief
Financial Officer, will become Chief Financial Officer of the combined company.
Two of Mcglen's founders, Mike Chen and Alex Chen, will assume management
positions within the new company.

In December 2000, the Company signed an interim operating agreement with Lan
Plus Corporation whereby the two companies would share certain facilities, staff
and other resources, co-market certain products, and combine other operations
where beneficial to both entities. The Company subsequently moved its
operations, except for its call center, to Lan Plus' facility. Mcglen purchased
approximately $300,000 of merchandise from Lan Plus during the three months
ended March 31, 2001 and had an accounts payable balance to Lan Plus of
approximately $90,000 at March 31, 2001. In addition, Lan Plus has advanced
Mcglen approximately $475,000 as of March 31, 2001 which will be converted to
stock at the close of merger.

                                       7


<PAGE>

During the three months ended March 31, 2001, the Company settled various
accounts payable and notes. The Company recorded a gain of approximately
$345,000 in connection with these settlements. In addition, the Company also
recorded a $271,000 increase to additional paid in capital as a result of one of
these settlements.

In January and February 2001, debt holders converted $617,000 of debt and
$60,000 of accrued interest into 111,666 shares of common stock.

Finally, in January and February 2001, the Company received $500,000 from
convertible notes, less fees of approximately $55,000. These notes, as well as
$200,000 received from these investors in December 2000, were converted into
2,800,000 shares of the Company's common stock. However, since the holders of
these notes have the right to rescind their investment under Sections 15 and 29
of the Securities Act of 1934, the accompanying financial statements do not
reflect the conversion of these notes to equity.

In connection with this funding the Company also paid a placement fee of 140,000
shares of the Company's stock.


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

The following discussion should be read in conjunction with our consolidated
financial statements and the related notes that appear elsewhere in this
document. The following discussion contains forward-looking statements that
reflect our plans, estimates and beliefs. Our actual results could differ
materially from those discussed in the forward-looking statements.

OVERVIEW

Net sales of the Company are primarily derived from the sale of personal
computer hardware, software, peripherals and accessories to system integrators,
distributors, individual consumers, small office- home offices (SOHO), small and
large corporations, and the government through the Internet. Gross profit
consists of net sales less product and shipping costs.

Mcglen has a marketing and promotion program in place that includes web
advertising, hyperlink allegiances, portal alliances, and direct one-to-one
marketing. For website development, Mcglen plans to enhance its virtual
superstore to provide a community-like experience while shopping online. The
objectives behind the website enhancement will be to increase customer
interaction and to offer a more comprehensive array of value-added services.

The Company purchases a substantial percentage of its products from a single
provider, Ingram Micro. Mcglen has no long-term contracts or arrangements with
its vendors that guarantee the availability of merchandise.

RESULTS OF OPERATIONS

The following table sets forth for the periods indicated the percentage of net
sales represented by certain items reflected in the Company's consolidated
statements of operations. There can be no assurance that the trends in sales
growth or operating results will continue in the future.

                                       8


<PAGE>

                                                         PERCENTAGE OF NET SALES
                                                         PERIOD ENDED MARCH 31,
                                                           2001           2000
                                                         --------       --------

     Net sales                                           100.00%        100.00%
     Cost of sales                                        88.00          88.53
                                                         --------       --------
     Gross profit                                         12.00          11.47
     Operating expenses                                   22.04          15.66
     Non cash compensation and financing expenses          2.74           1.44
                                                         --------       --------
     Loss from operations                                (12.78)         (5.63)
     Interest expense                                      1.15              -
                                                         --------       --------
     Loss before income taxes and extraordinary item     (13.93)         (5.63)
     Provision for income taxes                               -              -
                                                              -              -
     Loss before extraordinary item                      (13.93)         (5.63)
     Extraordinary item - gain on debt settlements         5.94              -
                                                         --------       --------
     Net loss                                             (7.99%)        (5.63%)
                                                         ========       ========

Net sales decreased by $5.1 million, or 47%, to $5.8 million for the period
ended March 31, 2001, compared to $10.9 million for the period ended March 31,
2000. The decrease in net sales was primarily a result of the Company's decision
in July 2000 to focus its efforts on the business to business sector (B2B), a
return to a focus on products where the Company has a niche in the marketplace
and where the Company believes it has a strategic advantage in product
procurement and distribution, and a shift away from the business to consumer
market (B2C) market.

Gross profit decreased by $554,000 or 44% to $697,000 for the period ended March
31, 2001, compared to $1.25 million for the period ended March 31, 2000. The
decrease in gross profit was directly related to the decrease in net sales as
the Company focused its operations on the business to business sector (B2B), a
return to a focus on products where the Company has a niche in the marketplace
and where the Company believes it has a strategic advantage in product
procurement and distribution, and a shift away from the B2C market in July 2000.
Gross profit as a percentage of sales actually increased to 12.0% for the period
ended March 31, 2001, compared to 11.5% for the period ended March 31, 2000. The
increase in gross profit was directly related to the change in the Company's
operations in July 2000, away from lower margin B2C customers.

Operating expenses decreased by $420,000 or 23%, to $1.44 million for the period
ended March 31, 2001, from $1.86 million for the same period in the prior year.
The decrease in operating expenses was attributable to a decrease in personnel
costs associated with the decreased sales volume, a decrease in advertising
costs, and a decrease in almost every component of the Company's operating
expenses as the Company reduced its expenses as it decreased sales. Advertising
decreased by approximately $84,000, or 28% as Mcglen decreased spending during
the first three months of 2001. Mcglen's advertising expenditures for the fourth
quarter 2000 and the first quarter of 2001 averaged approximately $68,000 per
month. Mcglen conducted almost all of its advertising on the Internet, primarily
through price comparison web sites. Depreciation and amortization increased by
approximately $29,000, or 42% due to the infrastructure expenditures in 2000.
Payroll and related costs decreased by approximately $308,000, or 46.5% for the
quarter ended March 31, 2001 as compared to $663,000 during the same period in
2000 as Mcglen reduced its work force as it decreased sales. Non cash
compensation charges of approximately $135,000, or 2.3% of sales, was recorded
in 2000, an increase of $30,000 or 29%, compared to $105,000 in the quarter
ended March 31, 2000, resulting from options granted and stock provided to
employees, key management and consultants. As a result of the Company's decrease
in sales, credit card processing and phone charges decreased by approximately
$57,000 and $67,000, or 23.3% and 63.8%, respectively, for the quarter ended
March 31, 2001 as compared to $245,000 and $105,000 during the same period in
2000.

                                       9


<PAGE>

Interest expense increased by approximately $62,000 to $67,000 in 2001 from
$5,000 in the three months ended March 31, 2000. The increase in interest
expense was a result of increased borrowings in March 2000 that were used to
fund the Company's operating losses.

During the quarter ended March 31, 2001, the Company recorded an extraordinary
gain from the retirement of debt of approximately $345,000; no such gain was
recorded in 2000.

INCOME TAXES

For the periods ended March 31, 2001 and 2000, the difference between the amount
of income tax recorded and the amount of income tax benefit calculated using the
federal statutory rate of 34% is due to net operating losses resulting in a
deferred tax asset having a full valuation allowance, due to uncertainties
regarding our realization of these benefits in future years. Accordingly, no tax
benefit has been provided for the periods ended March 31, 2001 or 2000.

As of December 31, 2000, the Company had federal and state net operating loss
carryforwards of approximately $14.5 million and $9.5 million, respectively. The
net operating loss carryforwards will expire at various dates beginning in 2012
through 2020 for federal purposes and 2002 through 2005 for state purposes, if
not utilized. Utilization of the net operating loss carryforwards may be subject
to a substantial annual limitation due to the ownership change limitations
provided by the Internal Revenue Code of 1986, as amended, and similar state
provisions. The annual limitation may result in the expiration of net operating
loss carryforwards prior to utilization.

LIQUIDITY AND CAPITAL RESOURCES

The Company incurred a net loss from operations for the years ended December 31,
2000 and 1999, has negative working capital and negative stockholders' equity,
and needs to raise additional funds to accomplish its objectives. The Company's
independent certified public accountants have included a modification to their
opinion, which indicates there is substantial doubt about the Company's ability
to continue as a going concern. The Company is attempting to raise additional
capital to meet future working capital requirements, but may not be able to do
so. Should the Company not be able to raise additional capital, it may have to
severely curtail operations.

The Company's primary capital need has been the funding of operations and
working capital requirements. Historically, the Company's primary sources of
financing have been private placements of stock and borrowings from its
stockholders, private investors, and financial institutions. The Company also
has a $90,000 line of credit with its primary bank. The Company drew down all
available funds on this line during the three months ended March 31, 2001. This
line is secured by personal guarantees from the Company's largest shareholders.

During the period ended March 31, 2001, the Company had no capital expenditures,
as compared to $39,000 in the same period in the prior year, primarily for
computer software and hardware, and distribution equipment.

On December 22, 2000, we entered into a financing agreement with Dillow &
Dillow, Inc. Under the agreement, Dillow & Dillow introduced us to lenders that
loaned us $700,000; of which $500,000 was loaned during the quarter ended March
31, 2001. The promissory notes for the loans were secured by a first priority
security interest on all of our assets, and converted into 2,800,000 shares of
our common stock, at a conversion price of $0.25 per share, on March 21, 2001.
However, since the holders of these notes have the right to rescind their
investment under Sections 15 and 29 of the Securities Act of 1934, the
accompanying financial statements do not reflect the conversion of these notes
to equity. We have also agreed to sell to certain purchasers identified by
Dillow & Dillow up to an aggregate of 3,200,000 shares of our common stock at a
price of $0.25 per share.

                                       10


<PAGE>

During the first quarter of 2001, the Company settled approximately $645,000 of
accounts payable and a note for $396,000 (included in net current liabilities of
discontinued operations) for approximately $306,000 in cash. The Company also
issued 231,000 shares of common stock and warrants to purchase 150,000 shares of
common stock in connection with these settlements. Finally, the Company received
notice from several individuals of their conversion of $109,000 of notes,
accrued interest, late fees and penalties into common stock pursuant to their
note agreements. As a result, the Company issued 267,000 shares of common stock
and warrants to purchase 133,000 shares of common stock at an exercise price of
$1.00 per share. These warrants expire in February, 2004.

Our ability to complete any such future equity and/or debt financing will depend
upon our then financial condition, results of operations and future business
prospects as well as market conditions at the time such additional equity and/or
debt financing is consummated. Many of the factors that will influence our
ability to conduct any such future financing will be outside of our control. For
these reasons, we cannot make any assurances that we will successfully complete
the equity financing discussed above. Should we be unable to raise additional
capital, we may have to severely curtail operations.

On October 11, 2000, the Company entered into an agreement and plan of merger
with Lan Plus Corporation (Lan Plus). Lan Plus is a manufacturer of both
private-label and branded turnkey computer solutions and services, with over
nine years of operating history. On March 21, 2001, the Company entered into an
amended and restated merger agreement that, among other things, eliminated
certain conditions to closing contained in the original merger agreement. The
amended merger agreement also extended the deadline for completing the merger to
June 30, 2001. At the closing of the merger, Lan Plus shareholders will receive
a number of shares such that the Lan Plus shareholders will own (a) a majority
of shares of the post merger combined entity plus (b) 1.9 million additional
shares and certain other shares based upon the liabilities and assets at the
closing date and certain other adjustments.

The merger is subject to customary closing conditions, including shareholder and
regulatory approval. Management anticipates the merger closing in June or July
2001.

If we are successful in securing additional capital, we may expend up to $50,000
for improvements in software, hardware, and other infrastructure investments.

BUSINESS FACTORS

Except for historical information, all of the statements, expectations and
assumptions contained in the foregoing are forward-looking statements. The
realization of any or all of these expectations is subject to a number of risks
and uncertainties and it is possible that the assumptions made by management may
not materialize. In addition, there can be no assurances that current sales
levels will be sustained, and that the nine-month trends for sales will continue
in future periods. In addition to the factors set forth above, other important
factors that could cause actual results to differ materially from expectations
include lack of working capital to carry out our business plan; competition from
companies either currently in the market or entering the market; competition
from other Internet, catalog and retail store resellers and price pressures
related thereto; uncertainties surrounding the supply of and demand for computer
and computer related products; reliance on our vendors; and risks due to shifts
in market demand and/or price erosion of owned inventory. This list of risk
factors is not intended to be exhaustive. Reference should also be made to the
risk factors set forth elsewhere in this document and from time to time in our
other SEC reports and filings.


PART II - OTHER INFORMATION

Item 2.  CHANGES IN SECURITIES AND USE OF PROCEEDS

1.   In March 2001, the Company issued 231,000 shares of common stock from the
     Founders Pool to a supplier in exchange for the cancellation of certain
     indebtedness of the Company. The supplier also received warrants to
     purchase 50,000 shares of common stock at $0.50 per share in connection
     with this settlement.

                                       11


<PAGE>

     This common stock and the related warrants were issued without registration
     under the Securities Act of 1933, as amended (the "Securities Act"), in
     reliance upon the exemption from the registration requirements of the
     Securities Act set forth in Section 4 (2) of the Securities Act.

2.   In February 2001, the Company received notice from several individuals of
     their conversion of $109,000 of notes, accrued interest, late fees and
     penalties into common stock pursuant to their note agreements. As a result,
     the Company issued 267,000 shares of common stock and warrants to purchase
     133,000 shares of common stock at an exercise price of $1.00 per share.
     These warrants expire in February, 2004.

     This common stock and the related warrants were issued without registration
     under the Securities Act, in reliance upon the exemption from the
     registration requirements of the Securities Act set forth in Section 4 (2)
     of the Securities Act.

3.   In February 2001, the Company settled a $396,000 note payable through the
     payment of $125,000, entering into an agreement to change the purchase
     price of certain options, and the issuance of 100,000 warrants to purchase
     the Company's common stock at $0.50 per share in connection with this
     settlement.

     This common stock and the related warrants were issued without registration
     under the Securities Act, in reliance upon the exemption from the
     registration requirements of the Securities Act set forth in Section 4 (2)
     of the Securities Act.


Item 6.  EXHIBITS AND REPORTS ON FORM 8-K
         --------------------------------

         a.    Reports on Form 8-K - None.


                                    SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.



                                     Mcglen Internet Group, Inc.




Date: May 15, 2001                   By   /s/ Grant Trexler
                                        ---------------------------------------
                                          Grant Trexler
                                          Chief Financial Officer

                                     (Duly Authorized Officer of the Registrant
                                      and Principal Financial Officer)

                                       12