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     September 30, 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.)


        1037 Yorkshire Pl.
        Danville, California                                      94506
    --------------------------------------                ----------------------
   (Address of principal executive offices)                     (Zip Code)

                                 (925) 736-7111
                             ------------------------
                           (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 December 20, 2001, the
Issuer had  26,318,067  shares of common  stock,  par value  $0.001,  issued and
outstanding.




<PAGE>
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                                  TABLE OF CONTENTS

<S>                                                                              <C>
PART I - FINANCIAL INFORMATION

         ITEM 1.  FINANCIAL STATEMENTS............................................ 1
                  Balance Sheets.................................................. 1
                  Statements of Operations........................................ 2
                  Statements of Cash Flows........................................ 3
                  Notes to Financial Statements................................... 4

         ITEM 2.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
                  AND RESULTS OF OPERATIONS....................................... 7

         ITEM 3.  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK......11


PART II - OTHER INFORMATION

         ITEM 1.  LEGAL PROCEEDINGS...............................................11

         ITEM 2(C).  CHANGES IN SECURITIES AND USE OF PROCEEDS....................12

         ITEM 3.  DEFAULTS UPON SENIOR SECURITIES.................................12

         ITEM 5.  OTHER INFORMATION...............................................12

         ITEM 6.  EXHIBITS AND REPORTS ON FORM 8-K................................12

SIGNATURES .......................................................................14

</TABLE>


                                       ii
<PAGE>


                         PART I - FINANCIAL INFORMATION

ITEM 1.  FINANCIAL STATEMENTS


                  MILINX BUSINESS GROUP, INC. and SUBSIDIARIES
                          Consolidated Balance Sheets


                                               September 30, 2001  June 30, 2001
         ASSETS                                    (Unaudited)

CURRENT ASSETS
Cash                                              $     38,523     $     33,680
Receivables-Goods and services tax                      33,629           35,039
Security deposits                                         --                 75
Prepaid rent and other                                  50,725            5,355
                                                  ------------     ------------
         Total current assets                          122,877           74,149

PROPERTY AND EQUIPMENT, net                            883,575        1,100,226

OTHER ASSETS
         Capital lease deposits                         10,146           10,571
                                                  ------------     ------------
                                                  $  1,016,598     $  1,184,946
                                                  ============     ============
         LIABILITIES AND STOCKHOLDERS' EQUITY

CURRENT LIABILITIES
Accounts payable                                  $  1,061,860     $  1,582,188
Accrued liabilities                                  1,537,334        1,456,368
Due to Milinx Management Corporation                     3,586            3,586
Capital lease obligations -- current portion         1,588,678        1,588,678
Notes payable, net of unamortized discount             488,621          444,444
                                                  ------------     ------------
         Total current liabilities                   4,680,079        5,075,264

COMMITMENTS AND CONTINGENCIES

REDEEMABLE COMMON SHARES                               480,551             --

STOCKHOLDERS' EQUITY

Series A preferred stock                                 3,675            3,675
Series C preferred stock                                   117            1,016
Common stock                                            23,977           23,078
Shares subscribed                                      161,304           10,000
Additional paid in capital                          21,926,229       21,803,465
Accumulated deficit                                (26,020,840)     (25,492,701)
Accumulated other comprehensive deficit               (147,953)        (238,851)
                                                  ------------     ------------
                                                    (4,144,032)      (3,890,318)
                                                  ------------     ------------
                                                  $  1,016,598     $  1,184,946
                                                  ============     ============


The accompanying notes are an integral part of these statements.



                                       1
<PAGE>


                  MILINX BUSINESS GROUP, INC. and SUBSIDIARIES

                     Consolidated Statements of Operations
                                  (unaudited)


                                                         Three months ended
                                                            September 30

                                                        2001            2000
                                                    (Unaudited)     (Unaudited)

Net Sales                                           $       --     $     87,689

Cost of Sales                                               --          148,237
                                                    ------------   -------------
Gross Profit (loss)                                         --          (60,548)

Selling, General and Administrative expenses             511,545      3,373,528

Other expenses (income)
         Interest                                         66,548         50,173
         Gain on sale of property and equipment          (49,954)           339
                                                    ------------   -------------
                                                          16,594         50,512

Net Loss                                            $    528,139   $  3,484,588
                                                    ============   =============
Net Loss per Common Share - Basis and Diluted       $       0.02   $       0.27
                                                    ============   =============
Weighted average common shares outstanding            25,370,902     12,801,315
                                                    ============   =============



The accompanying notes are an integral part of these statements.



                                       2
<PAGE>

<TABLE>
<CAPTION>


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

                                                                                      Three months ended
                                                                                           September 30

                                                                                     2001              2000
                                                                                  (Unaudited)       (Unaudited)
<S>                                                                               <C>              <C>
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS
CASH FLOWS FROM OPERATING ACTIVITIES

  Net Loss                                                                        $  (528,139)     $(3,484,588)
  Adjustments to reconcile net loss to net cash used
    in operating activities
         Depreciation and amortization                                                162,755          388,660
         Loss on property and equipment disposal                                       48,894             --
         Amortization of beneficial conversion feature                                  5,481             --
         Stock option issued for employee and consulting services                      32,223             --
         Shares issued for services                                                    31,377             --
         Employee stock option compensation                                              --            263,136
         Changes in assets and liabilities
                  Receivables                                                           1,410         (150,545)
                  Security deposits and prepaid expenses                               (4,247)         (84,026)
                  Accounts payable, accrued liabilities and customer deposits          41,189            1,850
                                                                                  ------------     ------------
                  Net cash used in operating activities                              (209,057)      (3,065,513)


CASH FLOWS FROM INVESTING ACTIVITIES
  Disposal (purchase) of property and equipment, net                                    5,002         (788,961)
  Acquisition of licenses and trademarks                                                 --           (217,752)
                                                                                  ------------     ------------
                  Net cash provided (used) in investing activities                      5,002       (1,006,713)


CASH FLOWS FROM FINANCING ACTIVITIES
  Proceeds from issuance of common stock                                                 --            181,788
  Proceeds from conversion of D warrants                                                 --          3,499,748
  Proceeds from issuance of notes payable                                             118,000             --
  Proceeds from conversion of Class D Units                                              --            325,970
  Proceeds from exercise of stock options                                                --              2,798
  Payments on capital lease obligations                                                  --           (219,394)
                                                                                  ------------     ------------
                  Net cash provided by financing activities                           118,000        3,790,910

Effect of the exchange rate changes on cash                                            90,898          (66,748)

Net increase (decrease) in cash and cash equivalents                                    4,843         (348,064)

Cash and cash equivalents at beginning of the period                                   33,680        2,162,430
                                                                                  ------------     ------------
Cash and cash equivalents at end of the period                                    $    38,523      $ 1,814,366
                                                                                  ============     ============
SCHEDULE OF NONCASH FINANCING AND INVESTING ACTIVITIES

  Reduction of liabilities in exchange for redeemable
    common shares                                                                     480,551             --
  Property acquired under capital leases                                                 --            334,863
                                                                                  ------------     ------------
                                                                                  $   480,551      $   334,863
                                                                                  ============     ============

The accompanying notes are an integral part of these statements.

</TABLE>






                                                        3

<PAGE>



                  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 months ended September 30, 2001 and
2000,  was  25,370,902  and  12,801,315,  respectively.  Diluted  loss per share
includes  the  effect of all  potentially  dilutive  common  stock  equivalents.
Diluted loss per share for the three months ended  September  30, 2001 and 2000,
equaled basic loss per share due to the anti-dilutive effect of the common stock
equivalents.

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 months ended  September  30, 2001 and 2000 was
$528,139 and $3,484,588, 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.

For the quarter  ended  September  30, 2001,  the Company  raised,  in a private
offering,  a total of  $118,000  in debt  which  included  the  promise to issue
791,000  shares of the  Company's  common  stock.  This  offering  provided  for
repayment terms in 120 days and had interest of twelve percent.  In addition the
Company must issue another  27,000  shares of the Company's  common stock due to
non repayment of one of the borrowings by December 15, 2001.

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  will ultimately need to
receive the support of its secured  creditors and its unsecured  creditors,  who
will meet to  approve  the plan.  The plan must also be  approved  by the court.
Milinx  bases its  turnaround  initiative  on  obtaining  approval  of a plan of
reorganization,  because its  business  model  contemplates  using two  material
assets of 580880BC Ltd.


                                       4
<PAGE>

The  Company  plans to conduct a private  equity  offering  to raise $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. 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 Services:  in excess of
$50,000 in damages and  immediate  possession  of equipment  and Breach of Lease
Guaranty by 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.  These suits
have been settled  pending payment of certain sums by the defendants with mutual
releases executed by all parties. The basic terms for settlement of the included
forgiveness of $200,000 in outstanding liabilities, cash payments to the Company
of  $242,000,  return  of  certain  equipment,  a  restructuring  of the  leases
resulting in monthly  payments of $50,000 starting March 2002, and cash payments
of $50,000 payable over six months starting February 2002.

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 proposed plan of
reorganization will address these remaining claims.

There are  numerous  unsecured  creditors of Milinx  Business  Services who have
filed suit or threatened actions against Milinx Business Services. These matters
will be resolved in the reorganization plan to be approved by the court.

On August 15, 2001, the  Government of Canada,  through the divisions of Revenue
Canada and Employment  Standards filed  superpriority  liens against the Company
and certain directors and officers for unpaid employee wages,  accrued vacation,
payroll taxes and severance pay. The Company has 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
will be addressed in the pending reorganization,  and it is the intention of the
Company to meet its  obligations as confirmed by the plan. If the Company cannot
confirm the plan, the superpriority  claim would allow the Government to execute
on its lien against the assets of the Company.

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 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.


                                       5
<PAGE>

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 September 30, 2001. As of the date of this filing, the past due amount
reflects  from  nine  to  twelve  months  of  past  due  payments.  Due  to  the
aforementioned  events of default,  the  Company  classified  all capital  lease
liabilities as current for financial statement presentation purposes.

On August 27, 2001, the Company issued  3,203,670 common shares to various trade
creditors of the Company as tentative  payment of the liabilities due to them as
of the date of this issuance. The Company has a right to redeem these shares and
pay off the underlying  liabilities.  In addition,  if proceeds from the sale of
the stock is less than the  indebtedness of the Company or if such stock remains
unsold and the Company has funds to pay such indebtedness,  it may complete such
payments  and cancel the  remaining  shares.  If any shares are sold at or below
$.15, then reduction of indebtedness shall be calculated at $.15 per share sold.
If shares are sold at greater than $.15 per share,  the actual  proceeds will be
applied toward the original liability amount. The Company recorded shares issued
on connection with this transaction outside of its permanent stockholders equity
at the amount  equal to the  original  liabilities  to be  satisfied  with these
shares.  In addition,  on August 19, 2001, the Company granted 2,500,000 options
to an employee and two consultants. In connection with these grants, the Company
recognized  $32,223 in compensation  expense on options vested through September
30,  2001.  The options  vest over a one year period with 40% vesting  after the
first two months  and the  remaining  options  vesting  ratably  over a one year
period  starting with the date of grant.  All options were granted with a strike
price below fair value of the underlying stock on the date of grant.

On July 2, 2001, and September 26, 2001,  the Company  entered into contracts to
grant a total of 500,000 shares to two consultants as compensation  for services
to be performed over a two month period commencing on the date of each grant. In
connection with these transactions, the Company recognized $31,377 in consulting
fees earned  through  September 30, 2001.  These  issuances are subject to Board
approval.

NOTE 7.  SUBSEQUENT EVENTS

Subsequent  to  September  30,  2001 and through  the date of this  filing,  the
Company  received  an  additional  $115,000  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.

The Company  currently  engaging in a private  equity  offering in the amount of
$400,000 to provide  funding for  operations.  This  offering  will offer common
stock at $.08 per share for  investments  of  $50,000  or more and  include  50%
warrant coverage at an exercise price of $.08 per share. Subsequent to September
30, 2001, the Company received $135,000 under the terms of 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. has until  December 24, 2001, to file a plan
of   reorganization   with  the  court.   If  the  court  accepts  the  plan  of
reorganization, the OSOB and 580880BC Ltd.'s unsecured creditors are notified of
a meeting to consider the plan of reorganization. The meeting is to occur within
21 days of the  filing  of the  plan of  reorganization.  If the  plan  receives
approval by the unsecured  creditors (which occurs if the plan receives 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 will be submitted to the
court for its  approval,  which is to occur within 15 days.  If 580880BC  Ltd.'s
general  unsecured  creditors  and the  court  approve  the plan,  it  becomes a
contract  between  580880BC Ltd. and its general  unsecured  creditors,  and the
balance of general  unsecured debt is  extinguished  if 580880 BC Ltd.  performs
according to the plan.

580880BC  Ltd.'s plan of  reorganization  will have to ultimately  address 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 amount to  approximately  $1,600,000.  These
claims  have been  negotiated  outside the formal plan filed with the court (see

                                       6
<PAGE>

Note 5), as secured creditors are not bound by a plan of reorganization approved
by the general unsecured creditors and the court.

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  $156,000,  which is broken down into approximately $114,000 of
unpaid wage claims and $42,000 of rental arrears claims. Within six months after
court  approval of the plan,  580880BC Ltd.  must pay an additional  $140,000 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.  In crafting the plan of  reorganization  it will file with the court on
December 24, 2001,  580880BC  Ltd. must fashion a proposal that will attract the
votes of a majority  in number  and more than 66% in  dollars  of valid  general
unsecured  claims.  The  proposal  must  treat all  claimants  equally.  In some
instances  equal  treatment  could  consist  of an equal per claim  payment.  In
others, it could consist of a pro-rata payment based on the amount of a claim. A
proposal could combine these approaches.  The proposal may also include payments
over time.  The critical  consideration,  however,  is that the proposal must be
attractive  enough to the  claimants  that it secures  the  necessary  votes for
approval.  The final  amount of the claims that  580880BC  Ltd.  will pay to its
unsecured  creditors will ultimately be determined if the creditors  approve the
plan of reorganization. Milinx's efforts are currently focused on developing the
plan of reorganization.  The opposing  constraints on the plan are the resources
available  for  payment  of  claims  versus  what  enough  claimants  will  find
acceptable to approve the plan. Because of the uncertainty  associated with both
of these  variables,  Milinx  cannot  predict at this time the level of payments
that the plan of reorganization will ultimately propose.

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. If the plan of
reorganization  is approved by the creditors  and accepted by the court,  Milinx
will need to fund the  balance  of the debt  under  the plan of  reorganization.
There can be no assurance that Milinx's plan of reorganization  will be approved
by the  creditors  or by the court or that Milinx will be able to fund the debt.
To obtain  approval,  Milinx will need to  demonstrate  to the creditors and the
court that its plan is viable.  If the plan is not approved or if it is approved
and 580880BC Ltd. does not perform  according to its terms,  580880 Ltd. will be
forced into a deemed bankrutpcy.

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.


                                       7
<PAGE>

Overview

Milinx  Business  Group,  Inc. was  incorporated  under the laws of the State of
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  is   effectively   a  company   trying  to  emerge  from  a   bankruptcy
reorganization.  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  a
court-supervised   reorganization   proceeding  in  British  Columbia,   Canada.
Management's  discussion  will focus on the capital  resources  needed to obtain
approval of 580880BC Ltd.'s plan of reorganization.

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  reorganize  through a  voluntary  reorganization  filing in British
Columbia,   Canada  by  580880BC   Ltd.   580880BC   Ltd.'s   proposed  plan  of
reorganization  will  ultimately  need to receive  the  support  of its  secured
creditors and its unsecured  creditors,  who will meet to approve the plan.  The
court must also approve the plan.  Milinx  bases its  turnaround  initiative  on
obtaining  approval  of a plan of  reorganization,  because its  business  model
contemplates using two material assets of 580880BC Ltd.

If 580880BC  Ltd.'s plan of  reorganization  is  approved  and if 580880BC  Ltd.
performs according to the plan's terms, 580880BC Ltd.'s two major assets will be
free and clear,  which will allow  Milinx the  opportunity  to  reestablish  its
operations, assuming it can obtain adequate capital. These two assets consist of
unified messaging software and 580880BC Ltd.'s data center.

Results of Operations

Revenues  decreased to zero for the three months ended  September  30, 2001 from
approximately $88,000 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 $511,500
for the three months ended September 30, 2001 from approximately  $3,374,000 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 the unified  messaging  service,  management
expects that selling,  general and administrative  expenses will be significant,
but not nearly of the magnitude seen in prior periods.

Liquidity and Capital Resources

During the quarter  ended  September  30, 2001,  the Company used  approximately
$118,000 in its  operating  activities.  The  Company's use of cash in operating
activities of  approximately  $209,000  consisted of a use of $118,000 of actual
cash and approximately  $91,000 due to the effect of exchange rate changes.  The
Company  funded  its  operations  primarily  through  the sale of  approximately
$118,000 in notes  payable.  The  Company's  net working  capital  shortfall  of

                                       8
<PAGE>

$5,001,000 at June 30, 2001, decreased to a deficit of approximately  $4,557,000
at  September  30, 2001,  due  primarily to issuances of common stock in lieu of
certain creditor liabilities.

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 December
30, 2001, and it seeks to raise up to $400,000. As of the filing of this report,
the Company had raised  approximately  $193,000 in this  offering,  with $86,000
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.  Some of the sales 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
$107,000, plus statutory interest.

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 is open until  January 31,  2002.  As of the filing of this report,
the Company had raised approximately  $136,000 in this offering. Of this amount,
$86,000 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.

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. has until  December 24, 2001, to file a plan
of reorganization  with the court. The plan must treat all claimants equally. In
some instances equal  treatment could consist of an equal per claim payment.  In
others, it could consist of a pro-rata payment based on the amount of a claim. A
plan could combine  these  approaches.  The plan may also include  payments over
time. The critical  consideration,  however, is that the plan must be attractive
enough to the claimants that it secures the necessary votes for approval.

If the court accepts the plan of  reorganization,  the OSOB and 580880BC  Ltd.'s
unsecured  creditors  are  notified  of  a  meeting  to  consider  the  plan  of
reorganization. The meeting is to occur within 21 days of the filing of the plan
of  reorganization.  If the plan receives  approval by the  unsecured  creditors
(which  occurs  if the plan  receives  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 will be submitted to the court for its approval, which is
to occur within 15 days. If 580880BC Ltd.'s general unsecured  creditors and the
court  approve the plan,  it becomes a contract  between  580880BC  Ltd. and its
general  unsecured  creditors,  and the  balance  of general  unsecured  debt is
extinguished if 580880 BC Ltd. performs according to the plan.

580880BC  Ltd.'s plan of  reorganization  will have to ultimately  address 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 amount 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.


                                       9
<PAGE>

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  $156,000,  which is broken down into approximately $114,000 of
unpaid wage claims and $42,000 of rental arrears claims. Within six months after
court  approval of the plan,  580880BC Ltd.  must pay an additional  $140,000 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 final  amount of the  claims  that  580880BC  Ltd.  will pay to its
unsecured  creditors will ultimately be determined if the creditors  approve the
plan of reorganization. Milinx's efforts are currently focused on finalizing the
plan of reorganization.  The opposing  constraints on the plan are the resources
available  for  payment  of  claims  versus  what  enough  claimants  will  find
acceptable to approve the plan. Because of the uncertainty  associated with both
of these  variables,  Milinx  cannot  predict at this time the level of payments
that the plan of reorganization will ultimately entail.

If the plan of  reorganization  is approved by the creditors and accepted by the
court,  Milinx  will  need to fund the  balance  of the debt  under  the plan of
reorganization.  There can be no assurance that Milinx's plan of  reorganization
will be approved by the creditors or by the court or that Milinx will be able to
fund the debt.  To obtain  approval,  Milinx  will  need to  demonstrate  to the
creditors and the court that its plan is viable.  If the plan is not approved or
if it is approved and  580880BC  Ltd.  does not perform  according to its terms,
580880 Ltd. will be forced into a deemed bankruptcy.

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
$118,000  have  begun to come due in  December  2001.  As of the  filing of this
report,  $54,000 had come due. Additional amounts up to the $118,000 raised will
come  due by  January  2002.  No  demand  for  payment  has  been  made yet by a
noteholder.

Assuming 580880BC Ltd.'s plan of  reorganization  is approved,  the Company will
immediately need to pay approximately  $163,000 in preferred claims.  Management
anticipates that these payments would occur sometime in late January 2002.

The Company  will also need to begin paying its secured  creditors  according to
whatever  negotiated  schedule it works out with them. The Company believes this
will  include  monthly  payments of  approximately  $50,000  plus an  additional
$50,000 paid over six months.  The Company  believes the  equipment  included in
these renegotiated leases will be sufficient to launch its products.

Any  deferred  payments  under  the  reorganization  plan  will  have to be paid
according to its terms, and  approximately  $131,000 of preferred claims will be
due no later than six months after plan approval (currently estimated to be July
2002).

Due to the negotiated nature of many of these payments,  management is unable to
determine with reasonable certainty at this time the amount of capital that will
be needed to successfully complete the reorganization.

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 unified messaging service. Additional working capital will
likely be necessary to sustain the unified messaging service until break-even.

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

The Company will need capital in addition to that being raised in the  offerings
that  commenced in October and  December in order to succeed in having  580880BC
Ltd.'s  reorganization  approved and the unified  messaging service launched and
supported to break-even. There can be no assurance that adequate capital will be


                                       10
<PAGE>

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.

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 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 Services:  in excess of
$50,000 in damages and  immediate  possession  of equipment  and Breach of Lease
Guaranty by 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.  These suits
have been settled  pending payment of certain sums by the defendants with mutual
releases  executed by all  parties.  The basic terms of the  settlement  include
forgiveness of $200,000 in outstanding liabilities, cash payments to the Company
of  $242,000,  return  of  certain  equipment,  a  restructuring  of the  leases
resulting in monthly  payments of $50,000 starting March 2002 and continuing for
36 months,  and cash  payments  of  $50,000  payable  over six  months  starting
February 2002.

On August 15, 2001, the  Government of Canada,  through the divisions of Revenue
Canada and  Employment  Standards  have filed  superpriority  liens  against the
Company and certain  directors and officers for unpaid employee  wages,  accrued
vacation,  payroll  taxes and  severance  pay.  The Company has  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 will be addressed in the pending reorganization, and it is the
intention of the Company to meet its  obligations  as confirmed by the plan.  If
the Company  cannot confirm the plan,  the  superpriority  claim would allow the
Government to execute on its lien against the assets of the Company.

The Company expects the reorganization plan to result in a significant reduction
in liabilities, however, it will require cash payments of approximately $163,000
in January  2002 and an  additional  $131,000  in July 2002.  In  addition,  the
Company will offer one share of stock for every dollar in debt. In return,  debt
would be reduced by approximately  $1,500,000.  There is no assurance,  however,
that the Company's proposal will be acceptable to its creditors.

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.

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<PAGE>

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 September 30, 2001. No
such sales involved the use of an underwriter,  and no commissions  were paid in
connection with the sale of any securities.

During the three months ended  September 30, 2001, the Company issued  1,015,611
shares of its voting common stock pursuant to the conversion of 1,015,611 shares
of previously issued Series C preferred stock.

In August 2001, the Company issued  3,203,670  shares of its voting common stock
to trade  creditors and  consultants of the Company in settlement of outstanding
liabilities.  The  issuance  of the shares to the  consultants  was exempt  from
registration under Rule 506 of Regulation D under the Securities Act of 1933, as
amended (the "Securities Act") and under Regulation S under the Securities Act.

The Company  issued  $118,000 in notes and  convertible  debentures  and 791,000
shares of its voting common stock to three accredited investors during the three
months  ended  September  30, 2001.  The  issuance of the notes and  convertible
debentures and shares was exempt from registration  under Rule 506 of Regulation
D under the Securities Act.

In August and September  2001,  the Company  granted a total of 2,500,000  stock
options to its president and two executive officers. The issuance of the options
was exempt from registration under Rule 506 of Regulation D under the Securities
Act, and Section 4(2) under the Securities Act.

In July and September  2001, the Company entered into contracts to grant a total
of 500,000 shares of its voting common stock to two consultants as compensations
for services to be  performed,  however,  the Board has not yet  authorized  the
issuance of the shares.  The  issuance of the  shares,  when  authorized  by the
Board, will be exempt from registration under Rule 506 of Regulation D under the
Securities Act and under Regulation S under the Securities Act.

ITEM 3.  DEFAULTS UPON SENIOR SECURITIES

Some of the notes that the Company sold in August and September  2001 are due in
December 2001, and the rest are due in January 2002. If the Company does not pay
these notes upon demand  after they come due, it will be in default.  Out of the
$118,000 of notes,  $54,000 have matured as of the date of this report.  None of
the noteholders have made a demand for payment.  The Company will owe one of the
investors holding matured notes an additional 27,000 shares of additional common
stock, which represents 1,000 shares of common stock for each $1000 increment of
his notes.

ITEM 5.  OTHER INFORMATION

On November 16, 2001,  Maynard Dokken, the Company's Chief Executive Officer and
Chairman of the Board,  transferred  450,000 of his Series A Preferred  Stock to
Collaborative  Business  Management,  the company that employs the Company's new
team of management  that was brought on board in September 2001. The transfer of
the shares to Collaborative Business Management was made in consideration of its
management services conducted on behalf of the Company.

ITEM 6.  EXHIBITS AND REPORTS ON FORM 8-K

EXHIBITS

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

3.3*                       By-laws

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<PAGE>

4.1*                       Specimen Stock Certificate

10.1*                      Employment Agreement between Milinx Business Group
                           and Thomas Loker

*  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 July 12,  2001,  the Company  filed a report on Form 8-K dated July 12, 2001,
which  included an Item 5 disclosing  Other Events and an Item 6 disclosing  the
resignation of a director.

On August 24,  2001,  the  Company  filed a report on Form 8-K dated  August 23,
2001,  which included an Item 5 disclosing Other Events and an Item 6 disclosing
the resignation of a director.

On August 30,  2001,  the  Company  filed a report on Form 8-K dated  August 30,
2001, which included an Item 5 disclosing Other Events.

On September 5, 2001, the Company filed a report on Form 8-K dated  September 5,
2001, which included an Item 5 disclosing Other Events.

On September 18, 2001,  the Company  filed a report on Form 8-K dated  September
18, 2001, which included an Item 5 disclosing Other Events.

On September 20, 2001,  the Company  filed a report on Form 8-K dated  September
19,  2001,  which  included  an Item 5  disclosing  Other  Events  and an Item 6
disclosing the resignation of a director.


                                       13
<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:   December 21, 2001        By:      /s/ Steven Price
      ---------------------          ----------------------------------------
                                 Name:  Steven Price
                                 Title: Chief Financial Officer and Principal
                                        Accounting Officer







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