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 quarterly period ended December 31, 2001

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



For the transition period from              to
                               -------------   ---------------

Commission file number:  000-26421
                        ------------


                           Milinx Business Group, Inc.
                           ---------------------------
        (Exact name of small business issuer as specified in its charter)



             Delaware                                      91-1954074
        -------------------                              --------------
   (State or other jurisdiction of                      (I.R.S. Employer
           organization)                               Identification No.)


     P.O. Box 2156
     Danville, California                                      94526
 --------------------------------------                ----------------------
(Address of principal executive offices)                     (Zip Code)

                              (925) 736-3413
                          ------------------------
                        (Issuer's telephone number)


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 issuer was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days. Yes [X] No [ ]

                      APPLICABLE ONLY TO CORPORATE ISSUERS

Indicate the number of shares outstanding of each of the Issuer's classes of
common stock, as of the latest practicable date: As of March 14, 2002, the
Issuer had 27,766,613 shares of common stock, par value $0.001, issued and
outstanding.


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                                  TABLE OF CONTENTS
<S>                                                                             <C>
PART I - FINANCIAL INFORMATION

         ITEM 1.  FINANCIAL STATEMENTS
                  Balance Sheets.................................................. 3
                  Statements of Operations........................................ 4
                  Statements of Cash Flows........................................ 5
                  Notes to Financial Statements................................... 6

         ITEM 2.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
                  AND RESULTS OF OPERATIONS....................................... 9

         ITEM 3.  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK......13


PART II - OTHER INFORMATION

         ITEM 1.  LEGAL PROCEEDINGS...............................................13

         ITEM 2(C).  CHANGES IN SECURITIES AND USE OF PROCEEDS....................13

         ITEM 3.  DEFAULTS UPON SENIOR SECURITIES.................................13

         ITEM 4.  SUBMISSION OF MATTERS TO A VOTE OF SECURITIES HOLDERS...........13

         ITEM 5.  OTHER INFORMATION...............................................13

         ITEM 6.  EXHIBITS AND REPORTS ON FORM 8-K................................14

SIGNATURES .......................................................................15


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                                                                               2
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                         PART I - FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

                  MILINX BUSINESS GROUP, INC. and SUBSIDIARIES
                           Consolidated Balance Sheets



                                               December 31, 2001  June 30, 2001
         ASSETS                                    (Unaudited)

CURRENT ASSETS
Cash                                              $     46,810     $     33,680
Receivables and services tax                            33,629           35,039
Security deposits                                         --                 75
Prepaid rent and other                                  68,108            5,355
                                                  ------------     ------------
         Total current assets                          148,547           74,149

PROPERTY AND EQUIPMENT, net                            688,816        1,100,226

OTHER ASSETS
         Capital lease deposits                         10,146           10,571
                                                  ------------     ------------
                                                  $    847,509     $  1,184,946
                                                  ============     ============

         LIABILITIES AND STOCKHOLDERS' DEFICIT

CURRENT LIABILITIES
Accounts payable                                  $  1,097,179     $  1,582,188
Accrued liabilities                                  1,544,072        1,456,368
Due to Milinx Management Corporation                     3,586            3,586
Deferred Revenue                                       146,730            --
Capital lease obligations                            1,427,021        1,588,678
Notes payable, net of unamortized discount             616,784          444,444
                                                  ------------     ------------
         Total current liabilities                   4,835,372        5,075,264

COMMITMENTS AND CONTINGENCIES                            --                --

REDEEMABLE COMMON SHARES                               480,551             --

STOCKHOLDERS' DEFICIT

Series A preferred stock                                 3,675            3,675
Series C preferred stock                                   117            1,016
Common stock                                            23,977           23,078
Shares subscribed                                      386,630           10,000
Additional paid in capital                          21,941,334       21,803,465
Unearned compensation                                  (61,066)           --
Accumulated deficit                                (26,707,461)     (25,492,701)
Accumulated other comprehensive deficit                (55,620)        (238,851)
                                                  ------------     ------------
                                                    (4,468,414)      (3,890,318)
                                                  ------------     ------------
                                                  $    847,509     $  1,184,946
                                                  ============     ============




The accompanying notes are an integral part of these statements.


                                                                               3
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                                  MILINX BUSINESS GROUP, INC. and SUBSIDIARIES

                                      Consolidated Statements of Operations
                                                   (unaudited)



                                                       Six months ended                 Three months ended
                                                          December 31                       December 31
                                                  ----------------------------    -----------------------------
                                                      2001             2000           2001            2000

<S>                                              <C>             <C>             <C>             <C>
Net Sales                                         $       --      $     11,483    $       --      $     23,794

Cost of Sales                                             --           277,500            --           129,263
                                                  ------------    ------------    ------------    ------------
Gross Profit (loss)                                       --          (166,017)           --          (105,469)

Selling, General and Administrative expense          1,372,691       6,656,910         861,146       3,283,382

Other expenses (income)
         Interest                                      217,005         121,038         150,457          70,865
         Miscellaneous                                    --           106,067            --           105,728
         Gain on sale of property and equipment        (49,954)            339            --              --
         Gain on settlement of liabilities            (324,982)           --          (324,982)           --
                                                  ------------    ------------    ------------    ------------
                                                      (157,931)        227,105        (174,525)        176,593

Net Loss                                          $  1,214,760    $  7,050,032    $    686,621    $  3,565,444
                                                  ============    ============    ============    ============
Net Loss per Common Share-Basic & Diluted         $       0.04    $       0.48    $       0.02    $       0.21
                                                  ============    ============    ============    ============
Weighted average common shares outstanding          27,292,153      14,676,936      29,202,221      16,642,652
                                                  ============    ============    ============    ============



The accompanying notes are an integral part of these statements.





                                                                                                               4
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                                  MILINX BUSINESS GROUP, INC. and SUBSIDIARIES
                                      Consolidated Statements of Cash Flows
                                                   (unaudited)

                                                                                        Six months ended
                                                                                           December 31
                                                                                   ---------------------------
                                                                                     2001              2000
<S>                                                                              <C>               <C>
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS
CASH FLOWS FROM OPERATING ACTIVITIES

  Net Loss                                                                       $ (1,214,760)     $(7,050,032)
  Adjustments to reconcile net loss to net cash used
    in operating activities
         Depreciation and amortization                                                311,042          826,771
         Amortization of convertible debt discount                                     71,970           16,944
         Shares issued in lieu of cancellation fees                                      --             80,000
         Loss on property and equipment disposal                                       49,954             --
         Stock option issued for employee and consulting services                      76,803             --
         Shares issued for services                                                    31,377             --
         Employee stock option compensation                                              --            304,528
         Changes in assets and liabilities
                  Receivables                                                           1,410         (282,565)
                  Security deposits and prepaid expenses                              (21,630)        (153,148)
                  Accounts payable, accrued liabilities and customer deposits         113,731          587,960
                                                                                  ------------     ------------
                  Net cash used in operating activities                              (580,103)      (5,669,542)


CASH FLOWS FROM INVESTING ACTIVITIES
  Acquisition of Property and Equipment                                                  --         (1,101,721)
  Disposal (purchase) of property and equipment, net                                    5,002            --
  Acquisition of licenses and trademarks                                                 --           (218,507)
                                                                                  ------------     ------------
                  Net cash provided by (used in) investing activities                   5,002       (1,320,228)


CASH FLOWS FROM FINANCING ACTIVITIES
  Proceeds from issuance of common stock                                                 --            513,691
  Proceeds from issuance of stock subscriptions                                       183,000            --
  Proceeds from conversion of D warrants                                                 --          3,629,748
  Proceeds from issuance of notes payable                                             222,000         (143,222)
  Proceeds from conversion of Class D units                                                            325,970
  Proceeds from issuance of common to employees                                          --              7,923
  Proceeds from conversion of Millinium units                                            --            401,387
  Proceeds from exercise of stock options                                                --              --
  Payments on capital lease obligations                                                  --            400,000
                                                                                  ------------     ------------
                  Net cash provided by financing activities                           405,000        5,135,497

Effect of the exchange rate changes on cash                                           183,231          (81,406)

Net increase (decrease) in cash and cash equivalents                                   13,130       (1,935,679)

Cash and cash equivalents at beginning of the period                                   33,680        2,162,430
                                                                                  ------------     ------------
Cash and cash equivalents at end of the period                                    $    46,810      $   226,751
                                                                                  ============     ============






The accompanying notes are an integral part of these statements.



                                                                                                               5
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                  MILINX BUSINESS GROUP, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                   (Unaudited)

NOTE 1. FINANCIAL STATEMENTS

The unaudited, consolidated financial statements of Milinx Business Group,
Inc.(the Company or Milinx), and its subsidiaries, have been prepared by the
Company pursuant to the rules and regulations of the Securities and Exchange
Commission. Certain information and footnote disclosures normally included in
financial statements prepared in accordance with generally accepted accounting
principles (GAAP) have been condensed or omitted pursuant to such rules and
regulations. The unaudited consolidated financial statements of the Company
reflect all adjustments which are, in the opinion of management, necessary to a
fair statement of the results for the interim periods presented. The results of
operations for interim periods are not necessarily indicative of the results to
be expected for the entire fiscal year ending June 30, 2002. The Company was
incorporated on December 10, 1998 and commenced its operations on February 10,
1999. This Form 10-Q should be read in conjunction with the Form 10-K, as
amended, that includes consolidated financial statements for the year ended June
30, 2001, 2000 and the six months ended June 30, 1999.

NOTE 2. LOSS PER SHARE

Basic and diluted loss per share is based on the weighted average number of
common shares outstanding during the period. The weighted average number of
common shares outstanding during the three and six months ended December 31,
2001 and 2000, was $29,202,221, $27,292,153, $16,642,652 and $14,676,936
respectively. Diluted loss per share includes the effect of all potentially
issue-able common stock. Diluted loss per share for the three and six months
ended December 31, 2001 and 2000, equaled basic loss per share due to the
anti-dilutive effect of the potentially issueable common stock.

NOTE 3. COMPREHENSIVE INCOME

The Company has adopted SFAS 130, Reporting Comprehensive Income. The statement
requires inclusion of foreign currency adjustments, reported separately in
stockholder's equity as other comprehensive income. The Company's total
comprehensive loss for the three and six months ended December 31, 2001 and 2000
was $701,502, $1,031,529, $3,380,102, and $7,131,438 respectively.

NOTE 4. MANAGEMENT PLANS

The Company's negative cash flow from operations is expected to continue through
at least the third quarter of the 2002 calendar year. Until subscription and
product revenues exceed cash operating expenditures, substantial additional
equity capital will have to be raised to fund capital expenditures and
operations. Management intends to raise $3,000,000-$5,000,000 starting in
mid-March 2002. There is no assurance the Company will successfully raise any
funds.

For the quarter ended December 31, 2001, the Company sold, in two private debt
offerings, a total of $122,000 in debt which included the promise to issue
707,500 shares of the Company's common stock. One offering provided 5000 shares
of restricted common stock for every $1,000 loaned under the terms of the note.
The terms of the note are: i) the note bears interest for the first 120 days at
the rate of 12% per annum, the Company has the option to retire this note during
this period and the note holder has the option of converting the note during
this 120 day period into an additional 5000 shares per $1,000 loaned, ii) should
the Company not retire the note nor the shareholders convert the note during the
first 120 day period, the note automatically extends to a term of 300 days and
accrues interest at the rate of 15% for the entirety of the period. The second
note was an extension to an earlier debt instrument and offered 250,000 shares
for $12,500 added to the previous debt amount.

During this period the Company engaged in a Private Equity Offering in the
amount of $400,000 to provide funding for operations. In exchange for a minimum
investment of $50,000 the company granted common restricted shares at the price
of $0.08 per share plus warrants to purchase up to 50% of the number of shares
at an exercise price of $0.08 per share. The warrants have a term of 2 years.
The Company raised $183,000 under this offering reflecting 2,287,500 shares.

In September 2001, Milinx's current management team took over as part of a
turnaround initiative. This management team assessed the business and financial
position of the Company and determined that the only viable alternative was to
attempt to reorganize through a voluntary reorganization filing in British
Columbia, Canada by its subsidiary, 580880BC Ltd., dba Milinx Business Services,
Inc. 580880BC Ltd.'s proposed plan of reorganization ultimately needed to
receive the support of its secured creditors and its unsecured creditors. On
February 22, 2002 the Court in Vancouver, British Columbia, Canada approved the
plan that had been previously approved on January 14, 2002 by the necessary
number of unsecured creditors. Pursuant to the reorganization plan the Board of
Directors approved a resolution to offer proven creditors 1 share of restricted
common stock for each Canadian dollar of the amount of proven debt remaining
after payment.

                                                                               6
<PAGE>

On October 12, 2001, Milinx's subsidiary, 580880BC Ltd., had filed with the
Office of the Superintendent of Bankruptcy (OSOB) in British Columbia, Canada, a
Notice of Intention.

On December 24, 2001 580880BC Ltd. filed a plan of reorganization with the
court. The plan required to treat all claimants equally. In some instances equal
treatment consists of an equal per claim payment. In others, it consists of a
pro-rata payment based on the amount of a claim. The plan combines these
approaches. The plan also includes payments over time. The critical
consideration, however, was that the plan must be attractive enough to the
claimants that it secured the necessary votes for approval.

The court accepted the plan of reorganization, the OSOB and 580880BC Ltd.'s
notified unsecured creditors of a meeting to consider the plan of
reorganization.

580880BC Ltd.'s plan of reorganization ultimately addresses three discrete
groups of creditors: secured creditors, preferred creditors and general
unsecured creditors.

580880BC Ltd.'s two major secured creditors are Cisco Systems and Sun
Microsystems. These secured claims amounted to approximately $1,600,000. These
claims have been negotiated outside the formal plan filed with the court, as
secured creditors are not bound by a plan of reorganization approved by the
general unsecured creditors and the court. The basic terms for settlement of the
secured claims include forgiveness of $200,000 in outstanding liabilities, cash
payments to the Company of $42,000, return of certain equipment, a restructuring
of the leases resulting in monthly payments of approximately $50,000 starting
March 2002, and cash payments of $50,000 payable over six months starting
February 2002. Milinx has not yet performed on the terms of this structure and
intends to renegotiate the payment terms with the parties.

580880BC Ltd.'s preferred creditors include its landlord for the data center and
several former employees with wage claims. The amount of the preferred
creditors' claims that must be paid immediately upon court approval of the plan
is approximately $111,297 which is broken down into approximately $71,683 of
unpaid wage claims and $39,614 of rental arrears claims. Within six months after
court approval of the plan, 580880BC Ltd. must pay an additional $134,563 in
back withholding taxes. The amount of the preferred claims is not negotiable.

580880BC Ltd.'s general unsecured creditors have claims of approximately $1.8
million. This amount excludes any indebtedness of 580880BC Ltd. to its parent,
Milinx. The remaining amounts have been extinguished pursuant to the terms of
the approved plan.

The Company plans to conduct a private equity offering to raise $3 to 5 million.
Based on management's estimates this amount of funding could allow the Company
to conduct its operations until achieving positive cash flow from operations by
the fourth quarter of calendar 2002 or the first quarter of calendar 2003. There
is no assurance, however, that these funds will be available or will be
available on terms acceptable to the Company.

NOTE 5. CONTINGENCIES

On April 6, 2001 Milinx Business Group and Milinx Business Services filed a Writ
of Summons in the Supreme Court of British Columbia against Sun Microsystems,
Inc., Netscape Communications Canada, Inc., Netergy Networks, Inc. Intraware
Canada, Inc. and Burntsand Inc. claiming for damages in excess of 10,000,000
Canadian dollars for misrepresentations and breach of contract. Sunrise
International Leasing Corporation (with all correspondence under the SUN
Microsystems letterhead) filed a Summons and Complaint in the State of
Minnesota, County of Hennepin against Milinx Business Group and Milinx Business
Services, for two Counts, Breach of Equipment Lease by Milinx Business Services:
in excess of $50,000 in damages and immediate possession of equipment and Breach
of Lease Guaranty by Milinx Business Group: in excess of $50,000 damages and
seizure of equipment. Milinx takes the position that this is in reaction to the
Writ of Summons issued in the Supreme Court of British Columbia and therefore
the jurisdiction and claim should be part of and in the same jurisdiction of
British Columbia. All of these suits have now been settled with mutual releases
executed by all parties. In the matter of the Netergy Networks settlement the
company received the sum of $200,000 in cash. In the matter of Sun Microsystems,
Inc., Netscape Communications Canada, Inc., Intraware Canada, Inc. and
Burntsand, Inc. the company received a credit of $197,101 as a reduction in
liability due to renegotiated terms, a cash payment of approximately $27,000 and
a credit of $146,730 from Intraware applied to the provision of two years of Sun
Gold level service and maintenance.

On October 4, 2000, three former employees of Milinx Business Services advanced
separate actions in the British Columbia Supreme Court against Milinx Business
Services alleging breach of their employment severance agreements and claiming
unspecified damages. One of the claimants has since discontinued the action
against Milinx Business Services and Employment Standards has dismissed a
vacation wage claim of one of the two remaining employees. The plan of
reorganization addressed these claims and is now a binding settlement on all
employees.

There are numerous unsecured creditors of Milinx Business Services who have
filed suit or threatened actions against Milinx Business Services. These matters
were resolved in the reorganization plan approved by the court February 22, 2002
but certain sums remain to be paid pursuant to the plan.

                                                                               7
<PAGE>

On August 15, 2001, the Government of Canada, through the divisions of Revenue
Canada and Employment Standards filed super-priority liens against the Company
and certain directors and officers for unpaid employee wages, accrued vacation,
payroll taxes and severance pay. The Company had recorded these claims, totaling
$740,000, in accrued liabilities. The amount in question is in dispute, and the
Company has filed an appeal to determine the correct amount owing. The claims
were addressed in the pending reorganization, and the Company has deposited with
the Bankruptcy Trustee the necessary amounts to meet the first of these
obligations as confirmed by the plan. The necessary funds to meet certain other
obligations including the Revenue Canada obligations, due 6 months from the date
of approval of the plan, in the amount of $134,563 have not yet been placed with
the Trustee and failure to do so can result in the forced liquidation of the
subsidiary company in Canada.

To the knowledge of the officers and directors of Milinx, there are no other
pending legal proceedings or litigation and none of its property is the subject
of a pending legal proceeding. Further, except as discussed above, Milinx's
officers and directors know of no legal proceedings against Milinx or its
property contemplated by any governmental authority.

From December 2000 to June 2001, the Company conducted an offering of its
Millenium offering (see 2001 Form 10-K). Some of the sales of securities may
have been made in violation of the Act, creating liability under the Act. The
Company believed that the sales were exempt from registration under the Act, but
facts recently coming to its attention created uncertainty whether the exemption
was fully complied with. If a court were to determine that the exemption had not
been fully complied with, the Company's maximum possible liability would be
$306,000, plus statutory interest. The Company would vigorously defend any
assertion by investors that it had not complied with the exemption and would
seek contribution from third parties the Company believes to be responsible for
the potential violations.

NOTE 6. OTHER

As of the date of this filing, Milinx Business Services, Inc. is not current on
its capital lease payments. The leases were between seven and ten months past
due as of December 31, 2001. As of the date of this filing, due to restructuring
of certain leases and the return of certain unnecessary equipment the past due
amount reflected from nine to twelve months of past due payments in the prior
filing have been waived or deferred. Due to the aforementioned events of
default, the Company classified all capital lease liabilities as current for
financial statement presentation purposes. Adjustments will be made in the
financials for the period ending March 31, 2002 to reflect the lease
renegotiations. Certain capital lease payments that were to be paid beginning
Jan 1, 2002 have not been made and the Company intends to renegotiate the
starting payment dates but there can be no assurance the company will be
successful and the equipment secured by the leases could be forfeited. In such
an event the Company would need to secure other equipment to replace the
forfeited equipment and there is no assurance the Company would be able to do
so.

In December 2001, the Company engaged in a Private Equity Offering in the amount
of $400,000 to provide funding for operations. In exchange for a minimum
investment of $50,000 the company granted common restricted shares at the price
of $0.08 per share plus warrants to purchase up to 50% of the number of shares
at an exercise price of $0.08 per share. The warrants have a term of 2 years and
are exercisable immediately. The Company raised $183,000 under this offering.

NOTE 7. SUBSEQUENT EVENTS

Subsequent to December 31, 2001 and through the date of this filing, the Company
received an additional $5,988 in proceeds from the issuance of Convertible Notes
which included the issuance of five shares of common stock for each dollar
loaned and the ability to convert the debt for an additional five shares per
dollar converted. These Notes have an interest rate of twelve per cent for the
first 120 days which will increase, retroactively, to fifteen per cent for an
additional 300 days. These notes are also convertible at the note-holders option
to shares of common stock at a price of $.10 per share.

The Company has closed both of the previous offerings.

On February 8, 2002 the Company extended an Exempt Private Offering, to
accredited investors only, in the amount of $500,000 to provide funding for
operations. This offering has two parts:
       Part 1.) In exchange for a minimum investment of $5,000 but investments
       less than $100,000 the company granted common restricted shares at the
       price of $0.06 per share plus warrants to purchase up to 50% of the
       number of shares at an exercise price of $0.08 per share. The warrants
       have a term of 2 years. Part 2.) In exchange for a minimum investment of
       $100,000 the company granted common restricted shares at the price of
       $0.04 per share plus warrants to purchase up to 25% of the number of
       shares at an exercise price of $0.08 per share. The warrants have a term
       of 2 years.
The Company has raised $223,000 under this offering.

On October 12, 2001, Milinx's subsidiary, 580880BC Ltd., filed with the Office
of the Superintendent of Bankruptcy (OSOB) in British Columbia, Canada, a Notice
of Intention. 580880BC Ltd. and on December 24, 2001, filed a plan of
reorganization with the court.

                                                                               8
<PAGE>

At a meeting of the Creditors held in Vancouver BC on January 14, 2002, the
Company's plan was approved by a sufficient number and dollar amount of the
creditors to proceed. The court approved the plan of reorganization as proffered
by the Company on February 22, 2002.

The plan as approved calls for funding certain cash payments in the required
statutory amounts to satisfy the agreed amounts is satisfaction of all claims as
submitted. The plan's payment schedule falls in four parts; i) Payment
immediately upon approval of the sum of $111,297 in satisfaction of employee
wage claims and prior rent claims, ii) payment 30 days from approval of an
amount equal to $500.00CDN per creditor in satisfaction of all outstanding
claims, payment will be due on March 22nd 2002 of approximately $50,000USD iii)
issuance 60 days from the date of plan approval of one share per dollar of debt
remaining to acclaimed creditors after payments of all funds under the plan, iv)
payment six months from the date of approval of the plan of $134,563 to Revenue
Canada.

The first payments of the claims of the employees and prior rent have been made.

580880BC Ltd.'s general unsecured creditors have claims of approximately $1.8
million. This amount has been settled by the plan by way of paying $500 per
creditor and shares of common stock at the value of 1 share for each $1 Canadian
of approved claim.

During the course of the reorganization, Milinx has been and will continue to
pay expenses of approximately $15,000 per month for the lease of the data
center, in addition to other general and administrative costs. The landlord has
consented to a partial sublease of the space at 1045 Howe St which reduces the
cost of the space by approximately 30%. Milinx will need to fund the balance of
the debt under the plan of reorganization. There can be no assurance that Milinx
will be able to fund the debt and failure to do so will force the subsidiary
into a deemed bankruptcy.

On January 12, 2002, the Company held a noticed annual shareholders meeting in
Burlingame, California. The purpose of this meeting was to elect a new Board of
Directors. The Board has been expanded with the addition of a new board member
chartered as the "Designated Shareholder Representative." A new Board of
Directors was elected consisting of Thomas Loker who was elected Chairman,
Maynard Dokken, Stanley Mazor, John Erickson (elected as the Designated
Shareholder Representative) and Jackson Brown. Mr. Erickson and Mr. Mazor are
not involved with the management of the Company. The Board passed a resolution
constituting a compensation committee chartered to be composed of three members.
Two members of the board sit on the committee one of those must be the
Designated Shareholder Representative, a third committee member must be a
non-board member selected from the shareholders. Shawn Wootton, as selected by
the Board to serve as the outside shareholder, and joined John Erickson and
Jackson Brown as the charter members of this committee.

On January 25, 2002 Mr. Maynard Dokken resigned from the Board and all
subsidiary companies and resigned all executive positions to pursue other
interests. The Company does not believe this will have a material adverse affect
on the Company and Mr. Dokken continues to make himself available to the Company
on an as needed basis. No new replacement director has yet been appointed.

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

Except for the historical information presented in this document, the matters
discussed in this Form 10-Q, and specifically in Management's Discussion and
Analysis of Financial Condition and Results of Operations, or otherwise
incorporated by reference into this document contain forward-looking statements
(as such term is defined in the Private Securities Litigation Reform Act of
1995). These statements can be identified by the use of forward-looking
terminology such as believes, expects, may, will, should, or anticipates or the
negative thereof or other variations thereon or comparable terminology, or by
discussions of strategy that involve risks and uncertainties. The safe harbor
provisions of Section 21E of the Securities Exchange Act of 1934, as amended,
and Section 27A of the Securities Act of 1933, as amended, apply to
forward-looking statements made by the Company. You should not place undue
reliance on forward-looking statements. Forward-looking statements involve risks
and uncertainties, including those identified within the section entitled
Outlook: Issues and Uncertainties contained in our Form 10-K, as amended, for
the year ended June 30, 2001. The actual results that the Company achieves may
differ materially from any forward-looking statements due to such risks and
uncertainties. These forward-looking statements are based on current
expectations, and the Company assumes no obligation to update this information.
Readers are urged to carefully review and consider the various disclosures made
by the Company in this Quarterly Report on Form 10-Q and in the Company's other
reports filed with the Securities and Exchange Commission that advise interested
parties of the risks and factors that may affect the Company's business.

The following discussion and analysis should be read in conjunction with the
financial information contained in Item 1 and the Company's audited financial
statements contained in its Form 10-K, as amended, for the year ended June 30,
2001.


Overview

Milinx Business Group, Inc. was incorporated under the laws of the State of

                                                                               9
<PAGE>

Delaware on December 10, 1998. On December 9, 1999, Milinx entered into a stock
exchange agreement with Forestay Corporation, a public company incorporated in
Delaware. Under the agreement, Forestay became a wholly owned subsidiary of
Milinx, and Milinx elected successor status under the Securities and Exchange
Act of 1934 Rule 12g-3.

Milinx started its life to ride the wave of Application Service Providers and
firmly become a participant in the Dot Com bonanza. Milinx is no longer a Dot
Com and no longer focused to develop itself as an ASP business. Milinx is now
focused on the internet only so far as it becomes a vehicle to enhance the sale
and distribution of the services and products Milinx will be bringing to market
through its acquisition, partnership and joint venture strategies.

Milinx is effectively a company trying to be reborn from the ashes of failure.
The major assets that form the basis for the Company's turnaround initiative are
owned by its subsidiary, 580880BC Ltd., a British Columbia corporation dba
Milinx Business Services, Inc., which is in the process of completing a
court-supervised reorganization proceeding in British Columbia, Canada. The
approved plan is conditioned upon satisfaction of the remaining payments
scheduled under the plan. The Company must raise additional capital to meet the
required schedule of payments under the plan.

During fiscal year 2000 and the first half of fiscal year 2001, Milinx was
engaged in developing and hosting proprietary business application software that
could be delivered over a network, such as the Internet. As a part of this
strategy, during fiscal year 2001 the Company placed in service a data center in
Vancouver, British Columbia. Due to economic conditions, funding constraints and
other factors, the Company was not able to effectively launch its application
software service during the second half of fiscal year 2001. By the end of
fiscal year 2001, the Company had lost all of its employees but two, and it
required substantial capital infusions merely to sustain the lease and other
financial commitments it had undertaken in anticipation of its product launch.

In September 2001, Milinx's current management team took over as part of a
turnaround initiative. This management team assessed the business and financial
position of the Company and determined that the only viable alternative was to
attempt to fundamentally reorganize through a voluntary reorganization filing in
British Columbia, Canada by 580880BC Ltd., and obtaining approval of a plan of
reorganization, because its business model contemplates using two material
assets of 580880BC Ltd. Additionally, the new management team determined that
the previous business model for the Company was no longer viable and required a
redirection of the Company from that of a developer of software and technologies
to that of a developer of markets and revenue streams.

Now that the plan for reorganization has been approved Milinx is in the process
of reestablishing its operations, assuming it can continue to obtain adequate
capital. Milinx will begin to develop revenue streams and markets from some of
the prior art of the company. The Company intends to take some of the previous
components and quickly begin to generate revenue from them. Milinx intends to
focus its offerings to the market in the general area of Collaborative Business
Services. The Company has developed a strategy to offer a Collaborative
Management Suite of products or CMS. CMS will provide the core of applications
that will allow customers to gain the same advantage of integrated services
typically only available through large scale integrated systems available in
Fortune 500-1000 companies. Milinx will ultimately offer a single, unified
collaborative system supporting the business enterprise.

Due to current market conditions and the relative availability of significantly
valuable technologies at significant discount relative to development cost, the
Company expects to focus much of it's efforts at acquiring needed technologies
for integration into the CMS core rather than a much more costly, and time
consuming, proprietary development process.

CMS will provide the core integrated suite of functionality. Customers will be
able to share applications and information seamlessly across the enterprise,
each individual working within the applications they are skilled and trained in
while having access to information and data within their applications that is
actually resident to other users and other applications. This system will allow
for scalable, secure, seamless integration of information where ever and when
ever it resides.

Milinx intends to derive this application suite from both the completion of some
exiting Milinx technologies and through acquisition and/or licensing of market
available technologies. The Company is in various stages of negotiation with a
number of other companies and technologies to provide the required systems for
both the CMS core suite as well as enhancements to the offerings.

One principal enhancement to the CMS core is the Advanced Collaborative
Enterprise System or ACES. This technology is available to Milinx via an
acquisition. The Company has negotiated favorable terms and is awaiting
completion of sufficient funding to implement the transaction.

The Company has entered into an agreement whereby the Company can offer for
resale a collaborative discussion server technology both individually and as
part of our CMS suite. The Company expects to begin to generate revenue from the
sale of this product in the next quarter. The foregoing statement should be
noted as a forward looking statement and should be treated as such under the
definition as described herein. Additionally, the Company has identified and is
in various stages of evaluation and negotiation for other valuable technologies
including a document exchange system, enterprise modeling and simulation tools,
streaming media and compression technologies, unified messaging and soft-switch
technologies and others.

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<PAGE>

Some of the planned benefits of CMS include:

o    Single Message Interface (Unified Messaging)
o    Seamlessly Exchange Documents Between Applications
o    Establish Rules Based Project Management
o    Completely Tailorable to Business Needs
o    Powerful Web Based Data Management System for Full Accessibility
o    Able to Support Any Business Enterprise
o    Captures Company's Expertise within the System
o    Transparently Integrates any Kind of Company Information into Dynamic Web
     Based Pages called CMS Documents
o    Scalable Based on Needs and Budgets

Liquidity and Capital Resources

During the six months ended December 31, 2001, the Company used approximately
$580,000 in its operating activities. The Company funded its operations
primarily through the sale of approximately $222,000 in notes payable, and
issuance of stock subscriptions of approximately $183,000. The Company's net
working capital shortfall of $5,001,115 at June 30, 2001, decreased to a deficit
of $4,686,825 at December 31, 2001, due primarily to issuances of common stock
in lieu of certain creditor liabilities and settlement of some lease
obligations.

During October 2001 the Company commenced a new private placement of convertible
debentures. The securities offered have not been and will not be registered
under the Act and may not be offered or sold in the United States absent
registration or an applicable exemption from registration requirements. The
offering is based on $1000 increments, with each increment entitling the
purchaser to a note for the full value of the increment, with 12% interest,
callable by the Company in 120 days, and 5,000 restricted common shares. If the
Company does not call the notes, they are due in 300 days but they bear 15%
interest from the date of issue. The offering has been extended until February
8, 2002, and it sought to raise up to $400,000. As of the filing of this report,
the Company had raised approximately $385,000 in this offering, with $183,000
being converted to a subsequent offering. The proceeds have been used to pay
operating expenses and complete the Company's audit and Form 10-K filing. This
disclosure is not an offer of securities or a solicitation of an offer to buy
securities. Sales will be made only to investors with preexisting contacts with
the Company and its authorized representatives. This offering was effectively
closed on February 8, 2002.

In December 2001 the Company commenced an additional private equity placement.
The securities offered have not been and will not be registered under the Act
and may not be offered or sold in the United States absent registration or an
applicable exemption from registration requirements. The offering is based on
minimum investments of $50,000. The offering consists of common stock at $.08
per share plus 50% warrant coverage with an exercise price of $.08 per share.
The offering was open until February 8th 2002. As of the filing of this report,
the Company had raised approximately $183,000 in this offering. Of this amount,
$98,000 was converted from the October 2001 offering. The proceeds will be used
to pay operating expenses and complete the Company's first quarter 10-Q filing.
This disclosure is not an offer of securities or a solicitation of an offer to
buy securities. Sales will be made only to investors with preexisting contacts
with the Company and its authorized representatives. This offering was
effectively closed on February 8th 2002.

In February 2002 the Company commenced an additional private equity placement.
The securities offered have not been and will not be registered under the Act
and may not be offered or sold in the United States absent registration or an
applicable exemption from registration requirements.

This offering has two parts:
       Part 1.) In exchange for a minimum investment of $5,000 but investments
       less than $100,000 the company granted common restricted shares at the
       price of $0.06 per share plus warrants to purchase up to 50% of the
       number of shares at an exercise price of $0.08 per share. The warrants
       have a term of 2 years.

       Part 2.) In exchange for a minimum investment of $100,000 the company
       granted common restricted shares at the price of $0.04 per share plus
       warrants to purchase up to 25% of the number of shares at an exercise
       price of $0.08 per share. The warrants have a term of 2 years.
The Company has raised $223,000 under this offering. The proceeds will be used
to pay operating expenses.

On October 12, 2001, Milinx's subsidiary, 580880BC Ltd., filed with the Office
of the Superintendent of Bankruptcy (OSOB) in British Columbia, Canada, a Notice
of Intention.

On December 24, 2001 580880BC Ltd. filed a plan of reorganization with the
court. The plan required to treat all claimants equally. In some instances equal
treatment consists of an equal per claim payment. In others, it consists of a
pro-rata payment based on the amount of a claim. The plan combines these
approaches. The plan also includes payments over time. The critical
consideration, however, was that the plan must be attractive enough to the
claimants that it secured the necessary votes for approval.

                                                                              11
<PAGE>

The court accepted the plan of reorganization, the OSOB and 580880BC Ltd.'s
notified unsecured creditors of a meeting to consider the plan of
reorganization. The meeting occurred January 14, 2002. The plan received
approval by the unsecured creditors (which occurred due to the requirement of
the plan receiving the vote of a majority in number of the creditors filing a
proof of claim and the vote of 66% of the dollar value of the claims), then the
plan was submitted to the court for its approval, which is to occurred February
22nd 2002. Effective upon the court approval the plan, became a contract between
580880BC Ltd. and its general unsecured creditors, and the balance of general
unsecured debt is extinguished conditioned upon 580880 BC Ltd. performing
according to the plan.

580880BC Ltd.'s plan of reorganization ultimately addresses three discrete
groups of creditors: secured creditors, preferred creditors and general
unsecured creditors.

580880BC Ltd.'s two major secured creditors are Cisco Systems and Sun
Microsystems. These secured claims amounted to approximately $1,600,000. These
claims have been negotiated outside the formal plan filed with the court, as
secured creditors are not bound by a plan of reorganization approved by the
general unsecured creditors and the court. The basic terms for settlement of the
secured claims include forgiveness of $200,000 in outstanding liabilities, cash
payments to the Company of $42,000, return of certain equipment, a restructuring
of the leases resulting in monthly payments of approximately $50,000 starting
March 2002, and cash payments of $50,000 payable over six months starting
February 2002. Milinx has not yet performed on the terms of this structure and
intends to renegotiate the payment terms with the parties.

580880BC Ltd.'s preferred creditors include its landlord for the data center and
several former employees with wage claims. The amount of the preferred
creditors' claims that must be paid immediately upon court approval of the plan
is approximately $111,297 which is broken down into approximately $71,683 of
unpaid wage claims and $39,614 of rental arrears claims. Within six months after
court approval of the plan, 580880BC Ltd. must pay an additional $134,563 in
back withholding taxes. The amount of the preferred claims is not negotiable.

580880BC Ltd.'s general unsecured creditors have claims of approximately $1.8
million. This amount excludes any indebtedness of 580880BC Ltd. to its parent,
Milinx. The remaining amounts have been extinguished pursuant to the terms of
the approved plan.

Milinx has funded the first payment required under the plan and will need to
fund the balance of the debt under the plan of reorganization. There is no
assurance that Milinx's will be able to fund the debt remaining under the plan.

While the Company proceeds with the plan of reorganization for 580880BC Ltd. it
has monthly expenses of approximately $200,000 that it must meet. In addition,
it has professional expenses associated with the reorganization and its public
company status that must be met from time to time.

The notes issued in an August and September 2001 offering in the amount of
$110,500 have begun to complete the first 120 day window where by the option to
convert the note into shares of Milinx will expire. As of the filing of this
report, $98,000 had reached this window. The Company expects to offer and
extension for conversion to the Note-Holders during this quarter.

In addition to these reorganization-related cash requirements, management
believes that the Company will require a capital infusion of at least $1.7
million to launch the new Products and Services as planned. Additional working
capital will likely be necessary to sustain the unified messaging service until
break-even. The Company intends to raise additional equity in the range of
$3,000,000 to 5,000,000 beginning in March 2002 through an unregistered private
placement as allowable under the Securities and Exchange Act of 1944.

The Company is not committed to make any capital expenditures, although it may
need to acquire fixed assets from time to time.

There can be no assurance that adequate capital will be available on terms
acceptable to the Company, or at all. If the Company is unable to raise
additional capital, it may not be able to continue as a going concern, and it
might have to reorganize under bankruptcy laws, liquidate or enter into a
business combination. The Company has not presently identified any probable
business combination.

Results of Operations

Revenues decreased to zero for the three months ended December 31, 2001 from
approximately $23,794 for the same period in 2000 due to the Company halting all
operations of 580880 BC Ltd. in connection with the pending reorganization
proceeding. Assuming 580880BC Ltd. successfully reorganizes and the Company
subsequently succeeds in launching the unified messaging service, management
does not anticipate that the products and services that provided revenues in
fiscal years 2001 and 2000 will contribute to post-reorganization revenues.

Selling, general and administrative expenses decreased to approximately $861,146
for the three months ended December 31, 2001 from approximately $3,283,382 for
the same period in 2000. This decrease is due to the layoff of the Company's
employees in June 2001 offset by the hiring of a new management team in August
2001. Assuming 580880BC Ltd. successfully reorganizes and the Company
subsequently succeeds in launching its new products and services, management
expects that selling, general and administrative expenses will become

                                                                              12
<PAGE>

significant, but not nearly of the magnitude seen in prior periods. Significant
reductions will continue to be derived due to the reduction in required
headcount and lower marketing costs achievable through the new strategy of
focusing away from software development and towards developing revenue markets
and distribution of acquired technologies and products.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

The Company believes its exposure to overall foreign currency risk is
immaterial. The Company does not manage or maintain market risk sensitive
instruments for trading or other purposes and is, therefore, not subject to
multiple foreign exchange rate exposures. The Company has no outstanding
long-term indebtedness for which the Company is subject to the risk of interest
rate fluctuations.

The Company reports its operations in US dollars and its currency exposure,
although considered by the Company as immaterial, is primarily between the US
and Canadian dollars. Exposure to the currencies of other countries is also
immaterial as international transactions are settled in US dollars. Any future
financing undertaken by the Company will be denominated in US dollars.


                           PART II - OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS


On August 15, 2001, the Government of Canada, through the divisions of Revenue
Canada and Employment Standards filed super-priority liens against the Company
and certain directors and officers for unpaid employee wages, accrued vacation,
payroll taxes and severance pay. The Company had recorded these claims, totaling
$740,000, in accrued liabilities. The amount in question is in dispute, and the
Company has filed an appeal to determine the correct amount owing. The claims
were addressed in the pending reorganization, and the Company has lodged with
the Bankruptcy Trustee the necessary amounts to meet these obligations as
confirmed by the plan. The necessary funds to meet certain other Revenue Canada
obligations, due 6 months from the date of approval of the plan, in the amount
of $134,563USD have not yet been placed with the Trustee and failure to do so
can result in the forced liquidation of the subsidiary company in Canada.

To the knowledge of the officers and directors of Milinx, there are no other
pending legal proceedings or litigation and none of its property is the subject
of a pending legal proceeding. Further, except as discussed above, Milinx's
officers and directors know of no legal proceedings against Milinx or its
property contemplated by any governmental authority.


ITEM 2 (C). CHANGES IN SECURITIES AND USE OF PROCEEDS

Set forth below is information regarding the issuance and sales of our
securities without registration during the quarter ending December 31, 2001. No
such sales involved the use of an underwriter, and no commissions were paid in
connection with the sale of any securities.

During six months ended December 31, 2001 the Company issued $222,000 in notes
and convertible debentures and 3,813,000 shares of its voting common stock
(excluding conversions) to accredited investors. The issuance of the notes and
convertible debentures and shares was exempt from registration under Rule 506 of
Regulation D under the Securities Act.

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

On November 9, 2000, the Company sold a $444,4444 convertible debenture to an
unrelated third party for net proceeds of $400,000. The debenture was to mature
on March 31, 2001, with 12% interest and was convertible upon demand into shares
of the Company's common stock at $3.00 per share. Based on the November 9, 2001
opening price of the Company's stock, there was no value to the beneficial
conversion feature associated with the debenture. The $44,000 premium paid on
the debenture was amortized as an additional interest expense.

On December 29, 2000 the holder of convertible debentures called the outstanding
principal balance by providing the Company with a thirty-day notice. The Company
is currently in a default on the debenture. As of June 30, 2001, the outstanding
principal balance was $444,444. In addition, accrued interest expenses include
$60,361 of unpaid interest. The Company intends to negotiate a conversion of the
debt into equity.

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

None

ITEM 5. OTHER INFORMATION

                                                                              13
<PAGE>

On January 25, 2002 Mr. Maynard Dokken resigned from the Board and all
subsidiary companies and resigned all executive positions to pursue other
interests. The Company does not believe this will have a material adverse affect
on the Company and Mr. Dokken continues to make himself available to the Company
on an as needed basis. No new replacement director has yet been appointed.

Effective February 2002 Mr. Steve Price resigned as acting Chief Financial
Officer to pursue other interests.

ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K

EXHIBITS



Exhibit Number             Description
--------------             ------------
3.1*                       Certificate of Incorporation

3.3*                       By-laws

4.1*                       Specimen Stock Certificate


*    Incorporated by reference from the Form 10-K of the Company filed with the
     Securities and Exchange Commission on October 13, 2000.

REPORTS ON FORM 8-K
On October 15, 2001, the Company filed a report on Form 8-K dated October 12,
2001, which included an Item 3 disclosing Other Events.

REPORTS ON FORM 10-K
On November 16, 2001, the Company filed a report on Form 10-K for fiscal year
ending June 30, 2001. On December 24, 2001, the Company filed a report on Form
10-K/A for fiscal year ending June 30, 2001.

REPORTS ON FORM 10-Q
On December 21, 2001, the Company filed a report on Form 10-Q for the quarter
ending September 30, 2001.



                                                                              14
<PAGE>



                                   SIGNATURES

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.



                              MILINX BUSINESS GROUP, INC.




Date:   March 21, 2001        By:      /s/ Thomas W. Loker
      ---------------------          ----------------------------------------
                                     Name: Thomas W. Loker
                                     Title: Chairman






                                  End of Filing









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