<PAGE>

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

                                   (Mark One)
     |X| QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
                              EXCHANGE ACT OF 1934

               For the quarterly period ended SEPTEMBER 30, 2001

                                       OR

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

   For the transition period from ___________________ to ___________________

                         Commission File No. 000-29177

                           VIANET TECHNOLOGIES, INC.
             (Exact name of registrant as specified in its charter)

               Delaware                                   87-0434285
   (State or other jurisdiction of                      (IRS Employer
    incorporation or organization)                    Identification No.)

                        6509 Windcrest Drive, Suite 160
                               Plano, Texas 75024
               (Address of principal executive offices, zip code)

                                 (972) 543-2700
              (Registrant's telephone number, including area code)

    Indicate by check mark whether the registrant (1) has filed all reports
    required to be filed by Section 13 or 15(d) of the Securities Exchange Act
    of 1934 during the preceding 12 months (or for such shorter period that the
    registrant was required to file such reports), and (2) has been subject to
    such filing requirements for the past 90 days. Yes |X| No |_|

    There were 60,521,381 shares of the registrant's Common Stock, par value
$.001 per share, issued as of November 1, 2001.




<PAGE>



                   VIANET TECHNOLOGIES, INC. AND SUBSIDIARIES

                                      INDEX

<TABLE>
<CAPTION>

                                                                                            Page
                                                                                            ----
<S>          <C>                                                                         <C>
Part 1       Financial Information

Item 1       Financial Statements

             Consolidated Balance Sheet at September 30, 2001 (unaudited)                       3

             Consolidated Statements of Operations for the three and nine-months
             ended September 30, 2001 and 2000 (unaudited)                                      4

             Condensed Consolidated Statements of Cash Flows for the nine-months
             ended September 30, 2001 and 2000 (unaudited)                                    5-6

             Notes to Consolidated Financial Statements (unaudited)                          7-13

Item 2       Management's Discussion and Analysis                                           14-23

Part II      Other Information

Item 1       Legal Proceedings                                                                 24

Item 2       Changes in Securities                                                             25

Item 3       Defaults Upon Senior Securities                                                   25

Item 4       Submission of Matters to a Vote of Security Holders                               25

Item 5       Other Information                                                                 25

Item 6       Exhibits and Reports on Form 8-K

             (a) Exhibits                                                                      25

             (b) Reports on Form 8-K                                                           25

             Signatures                                                                        26

</TABLE>





                                      -2-
<PAGE>


                   VIANET TECHNOLOGIES, INC. AND SUBSIDIARIES
                           CONSOLIDATED BALANCE SHEET
                               SEPTEMBER 30, 2001
                                  (unaudited)


ASSETS

Current Assets:
   Cash ...................................................   $      7,045
   Accounts receivable, net of allowance of $76,996 .......         35,000
   Due from Escrow Agent ..................................         18,845
   Receivable from related party ..........................         48,017
   Prepaids and other current assets ......................         51,881
                                                              ------------

       Total Current Assets ...............................        160,788
                                                              ------------

Property and Equipment, less accumulated depreciation
   of $842,575 ............................................        378,877
                                                              ------------

Security Deposits .........................................        233,622
                                                              ------------

                                                              $    773,287
                                                              ============

LIABILITIES AND DEFICIENCY IN SHAREHOLDERS' EQUITY

Current Liabilities:
   Accounts payable and accruals ..........................   $  4,610,784
   Demand notes payable ...................................        365,000
   Convertible notes payable, net of discount of $1,666,827      9,231,790
   Net liabilities of discontinued operations .............        435,319
   Deferred revenue .......................................         11,000

                                                              ------------

       Total Current Liabilities ..........................     14,653,893
                                                              ------------

Deficiency in Shareholders' Equity
   Common shares, $0.001 par value; 100,000,000
     shares authorized; 53,008,621 shares issued
     and 52,918,684 shares outstanding ....................         53,009
   Treasury stock .........................................       (200,000)
   Subscription receivable ................................           (500)
   Additional paid-in capital .............................     32,614,644
   Warrants issued ........................................     15,301,768
   Deferred offering costs ................................     (1,571,226)
   Accumulated deficit ....................................    (60,078,301)

                                                              ------------

       Total Deficiency in Shareholders' Equity ...........    (13,880,606)
                                                              ------------

                                                              $    773,287
                                                              ============

       The accompanying notes are an integral part of these consolidated
                             financial statements.





                                      -3-
<PAGE>



                   VIANET TECHNOLOGIES, INC. AND SUBSIDIARIES
                      CONSOLIDATED STATEMENTS OF OPERATIONS
                                   (UNAUDITED)


<TABLE>
<CAPTION>

                                                        Three Months Ended                  Nine Months Ended
                                                  ------------------------------      ------------------------------
                                                  September 30,     September 30,     September 30,    September 30,
                                                      2001              2000             2001             2000
                                                  ------------      ------------      ------------      ------------

<S>                                               <C>               <C>               <C>               <C>
Revenue and Other Income:
    Sales - other                                 $    631,102      $     14,166      $    702,706      $     88,500
    Sales - Opicom joint venture                            --                --                --           390,000
    Interest and other income                               --            30,494             7,463           145,308
                                                  ------------      ------------      ------------      ------------
                                                       631,102            44,660           710,169           623,808
                                                  ------------      ------------      ------------      ------------
Costs and Expenses:
    Cost of goods and services sold                     22,887            13,557            33,948            13,872
    Selling, general and administrative              1,317,722         2,038,959         4,817,300         6,709,410
    Research and development                           200,104         1,285,328         1,013,216         2,647,771
    Provision for loss on Develcon receivable               --                --                --         1,386,386
    Depreciation and amortization                       65,883           583,729           275,205         1,588,970
    Interest and other financing costs               1,539,483            45,757         6,029,006           404,154
                                                  ------------      ------------      ------------      ------------

                                                     3,146,079         3,967,330        12,168,675        12,750,563
                                                  ------------      ------------      ------------      ------------

Loss From Continuing Operations                     (2,514,977)       (3,922,670)      (11,458,506)      (12,126,755)
                                                  ------------      ------------      ------------      ------------

Discontinued Operations

    Operating loss                                          --        (1,170,858)               --        (2,665,205)
    Loss on disposal                                        --                --                --        (1,000,000)
                                                  ------------      ------------      ------------      ------------
Loss From Discontinued Operations, net
    of income tax of $0                                     --        (1,170,858)               --        (3,665,205)
                                                  ------------      ------------      ------------      ------------

Loss Before Extraordinary Item                      (2,514,977)       (5,093,528)      (11,458,506)      (15,791,960)

Net Gain on Extinguishment of Debt                          --                --           658,204                --
                                                  ------------      ------------      ------------      ------------

Net Loss                                          $ (2,514,977)     $ (5,093,528)     $(10,800,302)     $(15,791,960)
                                                  ============      ============      ============      ============

Gain (Loss) per share - basic and diluted
    Continuing operations                         $      (0.05)     $      (0.17)     $      (0.30)     $      (0.59)
    Discontinued operations                                 --             (0.05)               --             (0.18)
    Net gain on extinguishment of debt                      --                --              0.02                --
                                                  ------------      ------------      ------------      ------------

    Loss per share - basic and diluted            $      (0.05)     $      (0.22)     $      (0.28)     $      (0.77)
                                                  ============      ============      ============      ============

Weighted average number of shares outstanding       51,440,591        23,296,778        38,650,433        20,572,832
                                                  ============      ============      ============      ============

</TABLE>




       The accompanying notes are an integral part of these consolidated
                             financial statements.



                                      -4-
<PAGE>




                   VIANET TECHNOLOGIES, INC. AND SUBSIDIARIES

                CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
                                  (UNAUDITED)



                                                          Nine Months Ended
                                                 ------------------------------
                                                 September 30,    September 30,
                                                     2001              2000
                                                 ------------      ------------


   Net Cash Used In Operating Activities         $ (3,880,796)     $(10,586,875)
                                                 ------------      ------------

Investing Activities:
   Security deposits                                    2,250                --
   Loans to related parties                           (16,349)          (94,652)
   Capital expenditures                                (1,020)         (963,021)
   Proceeds from note receivable -Develcon
    Electronics Ltd                                    30,000            25,000
                                                 ------------      ------------

   Net Cash Provided By (Used In)
    Investing Activities                               14,881        (1,032,673)
                                                 ------------      ------------

Financing Activities:
   Issuance of common stock and warrants               32,009        13,190,458
   Proceeds from secured convertible notes,
    net of amounts due from escrow agent            3,668,405                --
   Repayment of note payable                          (60,000)               --
   Proceeds from notes payable                        225,000                --
   Principal payments of long term debt                    --           (20,304)
   Loans from related parties                              --            48,783
                                                 ------------      ------------

   Net Cash Provided By Financing Activities        3,865,414        13,218,937
                                                 ------------      ------------

   Net (Decrease) Increase In Cash                       (501)        1,599,389

Cash at beginning                                       7,546           115,101
                                                 ------------      ------------

   Cash at end                                   $      7,045      $  1,714,490
                                                 ============      ============



       The accompanying notes are an integral part of these consolidated
                             financial statements.





                                      -5-
<PAGE>


                   VIANET TECHNOLOGIES, INC. AND SUBSIDIARIES

          CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)

                                  (UNAUDITED)


<TABLE>
<CAPTION>

                                                                              Nine Months Ended
                                                                       --------------------------------
                                                                       September 30,       September 30,
                                                                           2001                2000
                                                                       ------------          ----------

<S>                                                                    <C>                   <C>
Supplemental Disclosures of Cash Flow Information
    Cash paid for interest                                             $         --          $   95,887
                                                                       ============          ==========



Noncash Transactions:

    Conversion of notes payable into common stock                      $     37,971          $2,199,485
                                                                       ============          ==========

    Issuance of common stock and warrants                              $         --          $1,488,125
                                                                       ============          ==========

    Issuance of common stock for exercise of warrants                  $    407,356          $       --
                                                                       ============          ==========

    Issuance of warrants to placement agents                           $         --          $5,569,408
                                                                       ============          ==========

    Issuance of common stock and warrants in return for
      loan receivable from Develcon Electronics Ltd.                   $         --          $  750,000
                                                                       ============          ==========

    Contribution of shares for repayment of convertible notes          $    216,000          $       --
                                                                       ============          ==========

    Issuance of common stock and warrants for debt                     $  1,958,405          $       --
                                                                       ============          ==========

    Convertible notes and warrants issued for common stock             $  2,534,105          $       --
                                                                       ============          ==========

    Common stock issued for deferred offering costs                    $    475,560          $       --
                                                                       ============          ==========

    Warrants issued for deferred offering costs                        $  1,096,666          $       --
                                                                       ============          ==========
</TABLE>


       The accompanying notes are an integral part of these consolidated
                             financial statements.







                                      -6-
<PAGE>




NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

1.    Basis of Presentation:

The accompanying consolidated financial statements have been prepared by the
Company without audit in accordance with generally accepted accounting
principles for interim financial statements and with instructions to Form 10-QSB
and Article 10 of Regulation S-X. In the opinion of management, all adjustments
considered necessary for a fair presentation have been included.

The accompanying consolidated financial statements have been prepared assuming
that the Company will continue as a going concern. The Company has suffered
recurring losses from operations and their current and total liabilities exceed
their current and total assets, respectively. This raises substantial doubt
about the Company's ability to continue as a going concern. The consolidated
financial statements do not include any adjustments that might result from the
outcome of this uncertainty.

The accompanying consolidated financial statements do not include certain
footnotes and financial presentations normally required under generally accepted
accounting principles and, therefore, should be read in conjunction with the
audited financial statements included in the Company's Form 10-KSB as of
December 31, 2000.

The consolidated financial statements include the accounts of Vianet
Technologies, Inc. (Vianet) and its wholly-owned subsidiaries, Vianet Labs, Inc.
(Labs) and Vianet Access, Inc. (Access) (collectively, the "Company"). All
significant intercompany accounts and transactions have been eliminated. On
January 12, 2001, Vianet disposed of the intellectual property relating to
Access. For accounting purposes the effective date of this disposal is December
31, 2000. Accordingly, the consolidated financial statements have been restated
to reflect Access as a discontinued operation. The Results of Operations for the
three and nine-months ended September 30, 2001 are not necessarily indicative of
the results to be expected for the full year.

2.   Revenue

Revenue is measured at the fair value of consideration received or receivable.
Revenue is recognized when there is persuasive evidence that an arrangement
exists, delivery has occurred, the Company's fee is fixed or determinable, and
collectibility is probable. Arrangements may include services not essential to
the functionality of any other element of the transaction such that the total
price of the arrangement would be expected to vary as the result of the
inclusion or exclusion of the services. If an arrangement includes services,
previously described revenue is allocated among the service and software
elements of the arrangement. Revenue allocated to the service element is
recognized as the services are performed or, if no pattern of performance is
discernible, on a straight-line basis over the period during which the services
are performed.

In July 2001, the Company signed a $3,300,000 two-year contract with Holy
Universal Limited, a purchasing agency acting on behalf of Beijing Telecom.
Under the terms of the contract, Vianet is licensing its software products,
Video Messenger Pro and Video Interactive to Beijing Telecom for its broadband
services and Video Services Provider applications. The Company shipped its
licensed software under the first phase of the agreement in August 2001. In
September 2001, the Company received approximately $600,000 in connection with
this contract. The agreement contains a service element. Revenue allocated to
the service element is recognized as the services are performed. Accordingly,
the Company has included in Deferred Revenue amounts related to services to be
performed. The Company has adopted SOP 97-2 "Software Revenue Recognition", as
amended. In connection with this transaction, $11,000 is included in Deferred
Revenue in the Consolidated Balance Sheet as of September 30, 2001 and $589,000
is included in Revenue in the Consolidated Statements of Operations for the
three and nine-months ended September 30, 2001.

3.    Related Party Transactions

Purchase Agreement:

In January 2001, Vianet entered into a Purchase Agreement (the "Agreement") with
Vida Technologies, Inc. under the terms of which Vianet agreed to convey (i) all
of it's ownership and exclusive rights to all intellectual property related to
Access, and (ii) the fiber optic product lines of Vianet and Access, to Vida
Technologies, a corporation controlled by shareholders of Vianet and former
employees of Access. Also, under the terms of the Agreement, Access assigned its
executive employment agreements to Vida Technologies. No additional losses were
recognized in the nine-month period ended September 30, 2001 related to the
disposition of Access. The operating loss from discontinued operations of
$1,170,858 and $2,665,205 for the three and nine-month periods ended September
30, 2000, respectively, resulted from the operations of Access.


                                      -7-
<PAGE>

Employment / Consulting Agreements:

The Company incurred consulting and management fees of approximately $212,500
during the nine-month period ended September 30, 2001 to CFM Capital Limited
(CFM) and Xelix Capital Limited (Xelix), entities controlled by the Company's
former CFO and Chairman, respectively.

Fees and Expenses:

In January 2001, the Company paid WorldCorp Management Group, a shareholder,
$122,500 in cash in connection with investor relations services performed. The
fees were determined based upon financing transactions consummated and
agreements in place at that time.

Related Party - Financings:

In March 2001, the Company issued warrants to purchase 2,437,553 (subsequently
adjusted in September 2001 to 4,240,690) shares of common stock to CFM, at an
exercise price of $0.16. CFM is controlled by Peter Leighton, the former Chief
Financial Officer of Vianet. In addition, the Company issued warrants to
purchase 1,218,777 (subsequently adjusted in September 2001 to 2,120,345) shares
of common stock to Xelix, at an exercise price of $0.16. Xelix is controlled by
Jeremy Posner, Vianet's Chairman. The exercise price of both the CFM and Xelix
warrants are subject to adjustment in the event that Vianet issues any other
securities at a price lower than $0.16 to a third party during the term of the
warrants. In June 2001, the Company issued additional warrants to an unrelated
party exercisable at $0.01, accordingly the warrants to CFM and Xelix have been
adjusted to match the $0.01 exercise price. The number of warrants issued to CFM
and Xelix was equal to 8% and 4% respectively, of the then outstanding number of
shares of the company. During the ten-year term of the warrants, the number of
warrants will be increased to equal 8% and 4% of the outstanding shares of the
Company. The Company determined the fair value of the warrants to be
approximately $700,000 by using commonly accepted valuation methodologies
including the Black Scholes Model, which utilizes risk free interest rates,
volatility and available market information. This consideration is included in
selling, general and administrative expenses in the Consolidated Statement of
Operations for the nine-months ended September 30, 2001.

In February 2001, the Company issued warrants to purchase 1,000,000 shares of
the Company's common stock in connection with a distribution agreement. The
warrants expire in two years and are exercisable at $0.25 per share. The Company
determined the fair value of the warrants to be approximately $122,000 by using
commonly accepted valuation methodologies including the Black Scholes Model,
which utilizes risk free interest rates, volatility and available market
information. This amount was recorded as a distribution fee and is included in
Selling, general and administrative expenses in the Consolidated Statement of
Operations for the nine-months ended September 30, 2001. The warrants were
issued to Espre Inc., an entity controlled by the Company's Chief Executive
Officer. In addition, the Company may issue additional warrants to purchase up
to 2,000,000 shares of common stock at exercise prices of $0.25 to $0.50 per
share expiring in two years from the date of issuance. The additional warrants
will be issued on a pro rata basis based upon revenue resulting from the
distribution agreement.

4.    Equity Transactions

Settlements:

During 2000, the Company recognized a contingent Bank Debt of $1,000,000 as a
result of its guarantee of the debt of a former subsidiary, Develcon Electronics
Ltd (Develcon). This debt was reflected as a note payable-bank at December 31,
2000. In January 2001, the Company settled the contingent Bank Debt by issuing
500,000 restricted common shares to Royal Bank Capital Corp. (the "Bank") in
January 2001 and is obligated to issue as many as 500,000 additional shares of
common stock in December 2001 in the event that the Company's shares trade below
$3 in the period prior to December 2001. The market value of the shares issued
was $140,600, which is recorded as an increase to additional paid-in capital on
the Consolidated Balance Sheet as of September 30, 2001, and the fair value of
the potential additional shares to be $140,600, which is recorded in accounts
payable and accruals on the Consolidated Balance Sheet as of September 30, 2001.
In connection with the foregoing transactions, the Company recorded an
extraordinary net gain on extinguishment of debt of approximately $718,800 in
the Consolidated Statement of Operations for the nine-months ended September 30,
2001. In return, the Bank assigned its entire interest in Develcon's
indebtedness to the Company. In August 2001, the Company assigned its entire
interest in Develcon's indebtedness to Socordia Limited, a Canadian shareholder
for $30,000.



                                      -8-
<PAGE>

In April 2001, the Company issued 1,254,618 shares of common stock in exchange
for services previously performed and accrued in 2000 of approximately $183,700.
In addition, 736,938 shares of common stock were issued to employees in
settlement of compensation of approximately $103,000 arising in 2001. Such
amount is included in Selling, general and administrative expenses in the
Consolidated Statement of Operations for the nine-months ended September 30,
2001.

In September 2001, the Company recorded a charge of $62,000 for the issuance of
751,807 shares of common stock in satisfaction of liabilities incurred in the
third quarter 2001 relating to salaries, legal fees and investor relations
services. Such amount is included in Selling, general and administrative
expenses in the Consolidated Statement of Operations for the nine-months ended
September 30, 2001.

Demand Notes Payable:

In March 2001, the Company issued demand notes payable aggregating $75,000 to
two investors, in exchange for cash. The notes are in default and bear an
interest rate of 8% per annum. In addition, the notes contain provisions for
payment of interest and financing costs with common stock of the Company.

In August 2001, the Company issued demand notes payable aggregating $50,000 to
Seneca Capital Limited, in exchange for cash. The notes are in default and bear
an interest rate of 8% per annum. In September 2001, the Company paid Seneca
Capital Limited $10,000 as a partial principal payment on these notes.

Convertible Class A Notes Payable:

In July and August 2001, the Company issued approximately $146,400 Class A Notes
to employees for $133,215 unpaid salaries. The notes are convertible into common
stock at a conversion price of $0.06 per share and 5-year warrants with an
exercise price of $0.10 per share issuable upon conversion. In July and August
2001, Noteholders elected to convert $73,720 of Class A Notes and the Company
recorded a liability for the issuance of 1,199,999 shares of common stock and
1,199,999 warrants in accounts payable and accrued liabilities on the
Consolidated Balance Sheet as of September 30, 2001. The Notes are considered to
contain a beneficial conversion feature as they were issued at a conversion
price, which was less than the fair value of the common stock at the date of
issuance. The Company determined the fair value of the beneficial conversion
feature of the Notes to be approximately $139,000. This amount was immediately
expensed and included in Interest and other financing costs in the Consolidated
Statement of Operations for the three and nine-months ended September 30, 2001,
as the conversion feature was immediately available to the investors.

Financings:

The Company has commitments under various agreements to issue shares beyond its
authorized capital as required by the financing transactions described below and
these can only be met if shareholders approve a proposed increase in authorized
shares. Unless shareholders approve these transactions and approve an amendment
to the Company's certificate of incorporation to increase the number of
authorized shares of common stock from 100,000,000 to 750,000,000, the Company
will be unable to perform its obligations under the agreements and will be in
default pursuant to the terms of the agreements.

In January 2001, the Company issued an aggregate of $2,100,000 principal amount
of 8% Secured Convertible Notes (the "Notes") due January 9, 2002 in a private
placement to eight investors. In addition, 9,999,999 five-year warrants to
purchase common stock were issued at an exercise price not to exceed $0.28875,
in connection with the issuance of the Notes. The exercise price of the warrants
approximated 110% of the fair market value of our common stock at the time of
issuance. Simultaneously with such transaction, shareholders of 1,566,666 shares
of previously issued common stock agreed to return such shares for cancellation
in consideration for the issuance of $4,700,000 convertible notes which is an
amount equal to the original purchase price for such shares. The notes are due
on January 9, 2002 and bear interest at a rate of 8% per annum. In connection
with such transactions, the Placement Agent, Sunrise Securities Corp., received
cash fees of $103,750, warrants to purchase an aggregate of approximately
1,036,962 common shares, and $56,250 principal amount of the Notes. The Notes
are considered to contain a beneficial conversion feature as they were issued at
a conversion price, which was less than the fair value of the common stock at
the date of issuance. The Company determined the fair value of the beneficial
conversion feature of the Notes to be approximately $2,015,000. This amount was
immediately expensed and included in Interest and other financing costs, as the
conversion feature was immediately available to the investors. The Company also
determined the fair value of the warrants issued to be approximately $3,168,000
by using commonly accepted valuation methodologies including the Black Scholes
Model, which utilizes risk free interest rates, volatility and available market
information. This amount is being amortized using the interest method over the
term of the Notes. The amount included in Interest and other financing costs in
the Consolidated Statement of Operations for the nine-months ended September 30,
2001 was approximately $2,182,000. The Notes are collateralized by all of the
Company's assets and approximately 3,800,000 shares (the "Secured Shares") owned
by the Company's Chairman and its former CFO. In the second quarter 2001, the
collateral was sold by the note-holders. The proceeds received by the
note-holders approximated $216,000. In September 2001, the Company issued
310,000 shares of common stock and accrued for the issuance of 14,539 shares of
common stock in connection with a noteholder's election to convert $37,971 of
convertible notes.


                                      -9-
<PAGE>

In January 2001, we entered into a $10 million equity line of credit agreement.
It should be noted that this agreement has since been terminated. In order to
secure the equity line of credit agreement, we agreed to issue 1,000,000 shares
of common stock and warrants to purchase 4,392,004 shares to the private
investment group.

In January 2001, the Company issued 1,294,999 shares of common stock in exchange
for services previously performed (and accrued in 2000) approximating $473,000.
In addition, the Company issued 238,095 shares of common stock and warrants to
purchase 238,095 shares of common stock at an exercise price not to exceed
$0.28875 per share as full payment for a $50,000 outstanding debt. In connection
with the issuance of these shares and warrants, the Company incurred a loss on
the extinguishment of debt of approximately $60,600 by using commonly accepted
valuation methodologies including the Black Scholes Model, which utilizes risk
free interest rates, volatility and available market information. The $60,600
loss has been included in net gain on extinguishment of debt in the Consolidated
Statement of Operations for the nine-months ended September 30, 2001.

In January 2001, the Company issued 4,144,104 shares of common stock to
shareholders that participated in prior private placements. The shares were
issued as consideration for adjustments required due to a decrease in the market
value of the Company's stock six months after the effective date of the
registration statement relating to the securities purchased in these private
placements. The Company received no proceeds from this stock issuance. The
Company recorded the par value of the shares issued as a reduction of additional
paid-in capital on the Consolidated Balance Sheet as of September 30, 2001.

In February 2001, the Company issued 281,876 shares of common stock to Aegis
Capital Corp, for placement agent services rendered in connection with a pending
tender offer. The Company determined the market value of the shares at the date
of issuance to be $68,360. Such amount is included in Deferred offering costs in
the Consolidated Balance Sheet as of September 30, 2001.



                                      -10-
<PAGE>

In February 2001, in connection with a strategic marketing alliance with Ogilvy
Group Inc. the Company issued warrants to purchase 1,000,000 shares of common
stock at an exercise price of $0.25 per share expiring two years from the date
of issuance. The Company determined the fair value of the warrants to be
approximately $122,000 by using commonly accepted valuation methodologies
including the Black Scholes Model, which utilizes risk free interest rates,
volatility and available market information. This amount was recorded as a
distribution fee and is included in Selling, general and administrative expenses
in the Consolidated Statement of Operations for the nine-months ended September
30, 2001. In addition, the Company may issue additional warrants to purchase up
to 2,000,000 shares of common stock at an exercise price of $0.25 per share
expiring two years from the date of issuance. The warrants will be issued on a
pro rata basis based upon revenue resulting from the alliance.

In February 2001, the Company agreed to issue 1,427,623 shares of common stock
to an existing shareholder in exchange for a $100,000 non-interest bearing
demand loan. 867,623 and 560,000 of these shares were issued in March and April
2001, respectively. The Company determined the market value of the shares at the
date of agreement to be approximately $379,000 and such amount is included in
interest and other financing costs in the Consolidated Statement of Operations
for the nine-months ended September 30, 2001. In June and September 2001, the
Company paid a total of $50,000 of the $100,000 obligation. The Company is in
default on the unpaid balance of the loan.

In March 2001, the Company issued 175,000 shares of common stock to entities
providing investor relations and consulting services. The Company determined the
market value of the shares at the date of issuance to be $30,083 and such amount
is included in Selling, general and administrative expenses in the Consolidated
Statement of Operations for the nine-months ended September 30, 2001.

In April 2001 through May 2001, the Company issued $477,500 one-year 8% Secured
Convertible Notes and 7,045,238 five-year warrants to purchase shares of common
stock at a price not to exceed $0.28875. Simultaneously with and as a condition
to these transactions, the shareholders of 334,000 shares of common stock and
501,000 related warrants issued pursuant to previous private placement offerings
agreed to return such shares and warrants for cancellation in consideration for
the issuance of $1,002,000 one-year 8% Secured Convertible Notes, which is the
amount equal to their original purchase price for such securities. In connection
with such transactions, Donald & Co. Securities, Inc., the Placement Agent,
received cash fees of approximately $48,000, such amount is included in interest
and other financing costs in the Consolidated Statement of Operations for the
nine-months ended September 30, 2001. Donald & Co. Securities, Inc. also
received warrants to purchase an aggregate of 227,381 common shares at a price
not to exceed $0.28875. The Company determined the fair value of the warrants
issued to be approximately $893,000 by using commonly accepted valuation
methodologies including the Black Scholes Model, which utilizes risk free
interest rates, volatility and available market information. This amount is
being amortized using the interest method over the term of the Notes. The amount
included in Interest and other financing costs in the Consolidated Statement of
Operations for the nine-months ended September 30, 2001 was approximately
$212,000.

In May 2001, the Company issued warrants to purchase 225,000 shares of common
stock at an exercise price of $0.01 per share expiring two years from the date
of issuance for investor related services performed in June 2001. Accordingly,
approximately $19,000 (the fair market value of the warrants) is included in
Selling, general and administrative expenses in the Consolidated Statement of
Operations for the nine-months ended September 30, 2001.

In June 2001, the Company issued $881,250 one-year 8% convertible notes. In
connection with such transactions, Donald & Co. Securities, Inc. and Aegis
Capital Corp., the Placement Agents, received cash fees of approximately $5,000
and $50,000, respectively, which is included in interest and other financing
costs in the Consolidated Statement of Operations for the nine-months ended
September 30, 2001. Aegis Capital Corp. also received warrants to purchase an
aggregate of approximately 1,968,392 common shares at an aggregate purchase
price of $100 and warrants to purchase an aggregate of 788,188 common shares
$0.08. The Company determined the fair value of the warrants to be approximately
$146,450 by using commonly accepted valuation methodologies including the Black
Scholes Model, which utilizes risk free interest rates, volatility and available
market information. This consideration is included in interest expense and other
financing costs in the Consolidated Statement of Operations for the nine-months
ended September 30, 2001. In addition, the Company issued 14,160,109 shares of
common stock to shareholders that participated in financings prior to March 2000
and participated in the June 2001 financing. The Company received no proceeds
from the 14,160,109 stock issuance. The Company recorded the par value of the
shares issued as a reduction of additional paid-in capital on the Consolidated
Balance Sheet as of September 30, 2001. In September 2001, the Company issued
1,000,000 shares of common stock to existing shareholders in connection with and
as a condition of the June 2001 financing. The Company recorded the par value of
the shares issued as a reduction of additional paid-in capital.



                                      -11-
<PAGE>

In June 2001, the Company issued 949,733 shares of common stock to existing
shareholders pursuant to clauses in the financing agreements completed prior to
March 2000. The Company received no proceeds from this stock issuance. The
Company recorded the par value of the shares issued as a reduction of additional
paid-in capital.

In June 2001, the Company issued 201,333 shares of common stock for the exercise
of warrants with an exercise price of $0.01. Also, the Company issued 830,000
shares of common stock in exchange for the cancellation of 1,706,667 warrants at
exercise prices ranging from $1.375 to $12.00.

In June 2001, the Company issued 1,406,250 shares of common stock to two
investors in lieu of interest payments on notes payable. Approximately $298,000
(the fair market value of the issued shares) is included in interest and other
financing costs in the Consolidated Statement of Operations for the nine-months
ended September 30, 2001.

In August 2001, the Company issued 507,350 shares of common stock for the
exercise of warrants with an exercise price of $0.05625. The Company received
approximately $28,600 in connection with this transaction.

5.    Reclassification:

Certain reclassifications, in addition to the restatement for discontinued
operations of Access, have been made to the 2000 consolidated financial
statements to conform to the 2001 presentation. The Consolidated Statements of
Operations for the three and nine-months ended September 30, 2000 have been
restated to reflect the accrual of a previously contingent guarantee of
$1,000,000 as a loss on disposal of the discontinued operations. Previously,
such provision was included as "Provision for loss - Develcon" as a component of
operations in the Consolidated Statements of Operations for the nine-months
ended September 30, 2000. As a result, previously stated loss per share from
continuing operations included in the Consolidated Statements of Operations of
$0.22 and $0.77 for the three and nine-months ended September 30, 2000 has been
restated to $0.17 and $0.59, respectively. Previously reported loss per share
from discontinued operations was nil and has subsequently been restated to $0.05
and $0.18 for the three and nine-months ended September 30, 2000, respectively.
The result of this restatement had no effect on total loss per share in the
Consolidated Statements of Operations for the three and nine-months ended
September 30, 2000.

6.   Employee Stock Incentive Plan:

In September 2001, the Company's Board of Directors elected to reduce the
exercise price of 2,965,000 options previously issued under the plan to $0.10.
In connection with this transaction the Company recorded a charge of $59,300,
which is included in selling, general and administrative expenses in the
Consolidated Statements of Operations for the three and nine-months ended
September 30, 2001.


7.    Subsequent Events:

On October 2, 2001 Vianet announced that the Company had signed a letter of
intent to merge with Comm-Services Corporation (CSC), a privately held
corporation with corporate offices in Plano, Texas. The merger is to include the
CSC subsidiary Inter-Tel.NET, Inc., which was purchased by CSC from Inter-Tel,
Inc. (as a result of this earlier transaction, Inter-Tel, Inc. holds a 17%
equity position in Inter-Tel.NET,Inc. with the right to convert this into an
equity position in CSC).

Following the completion of the merger, it is expected that existing CSC
shareholders will hold a 60% ownership position in the combined companies,
subject to adjustment on certain closing conditions. The merger of the two
companies is subject to various conditions including due diligence, conversion
of Vianet's secured notes into equity, deficit working capital financing and the
signing of a customary definitive agreement.



                                      -12-
<PAGE>

In October 2001, three noteholders elected to convert approximately $327,300
convertible notes into 5,619,204 shares of common stock.

In October 2001, the Company's CFO resigned and its consulting and management
agreement with CFM was terminated.

In November 2001,CFM elected to exercise warrants for 4,775,173 shares of common
stock at an exercise price of $0.01 per share.

In November 2001,Xelix elected to exercise warrants for 2,387,587 shares of
common stock an exercise price of $0.01 per share.

In November 2001, the Company agreed to issue 4,833,977 shares of common stock
to existing shareholders pursuant to clauses in the financing agreements
completed prior to March 2000. No proceeds were received by the Company from
this stock issuance.



                                      -13-
<PAGE>



ITEM 2.

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS FOR THE THREE AND NINE MONTH PERIODS ENDED SEPTEMBER 30, 2001

This quarterly report on Form 10-QSB contains forward-looking statements that
are subject to risks and uncertainties, which could cause actual results to
differ materially from those expressed or implied in the statements. This
document contains certain forward-looking statements including, among others,
anticipated trends in our financial condition and results of operations and our
business strategy. These forward-looking statements are based largely on our
current expectations and are subject to a number of risks and uncertainties.
Actual results could differ materially from these forward-looking statements.
Important factors to consider in evaluating such forward-looking statements
include (i) changes in external competitive market factors or in our internal
budgeting process which might impact trends in our results of operations; (ii)
unanticipated working capital or other cash requirements; (iii) changes in our
business strategy or an inability to execute its strategy due to unanticipated
changes in the industries in which we operate; and (iv) various competitive
factors that may prevent us from competing successfully in the marketplace.

The following information has not been audited. You should read this information
in conjunction with the condensed financial statements and related notes to
financial statements included in this report. In addition, please see our
Management Discussion and Analysis of Financial Condition and Results of
Operations and audited financial statements and related notes included in our
Annual Report on Form 10-KSB for the year ended December 31, 2000.

Our Business

We design and market advanced visual communication technologies and services
that allow our customers to deliver visual media applications as a market
differentiator. In the future, we will put a greater emphasis on our interactive
video conferencing applications, with a major focus of offering bundled
communication applications and services.

Our visual communication products are designed to utilize patent pending wavelet
compression techniques that allow for the delivery of high quality video,
multimedia content and data over the Internet and Intranet with less expense,
delay and bandwidth usage. We believe that this technology allows us to provide
our customers with a competitive advantage by providing high quality video
applications at lower data transfer rates to the desktop and, via "set top
boxes", to the television, than generally available in the marketplace. We
intend to utilize this technology as the foundation for our value added
services, and we expect this technology to serve as our main focus for future
expansion.

We have developed this technology from a family of CODECs using Wavelet
technology and have several patents pending. Our Lightning Strike product suite
includes Video Streaming (Live broadcast & on demand video streaming), Video
Messenger (encapsulated store and forward, capture, compression and play), Video
Interactive (IP based point-point and multipoint video conferencing) and Power
Zoom (image enhancement & delivery system). Recently, we introduced our
Licensing Server. The Vianet Automatic Licensing E-commerce Server distinguishes
between license creation and license renewal. License creation is used to
convert the client application from a demo mode to a retail mode. The demo to
retail conversion process will put the product in one of three modes: single
use, time period, or permanent.

Our objective is to become a leading provider of enabling technology, services
and applications that allow our customers and marketing partners to capitalize
on the Internet's rapid growth as a commercial forum and private network
operators to utilize improved visual communication experiences.

We believe that our combined product portfolio will allow us to excel in the
Internet, private network, and value added services market segments. We intend
to continue our development as a serious competitor in these and other market
segments for bundled communication services.

Compression Technology Products and Value Added Services

We develop and sell data compression technologies and services utilizing a
patent pending wavelet compression technique. Wavelet based technologies deliver
data, video and multimedia content faster than conventional compression
techniques. Furthermore, wavelet compression typically uses less bandwidth,
costs less and yields higher quality video and still imagery than conventional
techniques. In addition, this technology is flexible enough to be used in a
variety of compression products for many types of data. Our key products include
the Lightning Strike suite of products that include the following:

                                      -14-
<PAGE>

         o        LS Video Messenger Pro - a product that enables users to send
                  V-Mail, which consist of the E-mailing of a video file;

         o        LS Video Interactive - a suite of Video Conferencing products;

         o        LS Power Zoom - a product that allows a user to zoom and pan
                  on still images;

         o        LS Video Stream - a streaming video product that allows users
                  to view video on demand; and

         o        LS Licensing Server - a server based application that manages
                  deployment and version control for the other LS products

We have determined that the revenue model originally anticipated of direct
product sales contains considerable uncertainties due in part to competition,
market conditions and our customers' perception of value that our products
provide. Accordingly, we have changed our marketing focus to the provision of
visual communications as a bundled suite of service offerings, with an emphasis
on broadband service providers and large systems integrators that specialize on
turnkey network based, visual communications applications.

We intend to serve these market segments by providing video compression
technology, as well as value added services to provide our customers with a
competitive edge. We believe our products will enable communications across
broadband networks that efficiently combine voice, data, graphics and video
across geographic locations with high throughput, protocol flexibility, and
system expandability.

Research and Development Activities

On acquisition, the Vianet Labs products were in the form of CODECS (COmpressor
- DECompressors) representing mathematical algorithms that had been utilized in
a "proof of concept" suite of products known as LS Interactive, LS Messenger, LS
Video Streaming, LS Power Zoom, LS Still Image, and LS Facial recognition. These
products were in "pre alpha" form, worked only on one limited platform and were
extremely "buggy" causing computer lock-ups and worse. Since the acquisition,
Vianet's engineering effort has consisted of the design of professional Graphic
User Interfaces (GUI's), a suite of end user applications, debugging and the
integration across multiple platforms, as well the further enhancement and
development of the basic CODECS.

LS Messenger Pro has moved from a proof of concept to a product phase. LS
Messenger Pro has been tested on Windows 98, Windows NT, and Windows 2000. We
have started to market these products with a positive response. Vianet signed a
$3,300,000 contract with Holy Universal Limited, a purchasing agency acting on
behalf of Beijing Telecom. This two-year contract is a license for 500,000
copies of both Messenger Pro and the Video Interactive product. The first phase,
which includes 100,000 units of each application, plus two Licensing Servers,
have been installed, accepted, billed and paid for by Beijing Telecom.

Power Zoom gives Web Developers the capability to serve up high-resolution
images over the Internet. By using a Power Zoom server, hosting sites give users
the capability to zoom in on the details of a high-resolution image not seen
with traditional serving techniques. Power Zoom is certified on IBM's Netfinity
product line, and is available for general release.

We completed the final release versions of Power Zoom, Video Interactive, Video
Streaming, Video Messenger Pro and have recorded sales for all but the Power
Zoom product at this time. We are in the final stage of Development based on
input received from alpha and beta customers of LS Video Interactive Multipoint
and have shipped nine multipoint conference room systems to Marshall
Communications, one of our business partners for installation at FBI regional
offices and an additional unit to Verizon that is installed in one of their
customer demo centers. The next release with additional features including an
enhanced GUI will be available by the end of November 2001. We will continue to
add additional features that our customers ask for in future point releases.

We launched the development of the Licensing Server early in 2001 and completed
the first release in the third quarter 2001 in time for installation in Beijing
Telecom's public network. The Licensing Server allows service providers the
flexibility to offer Video Messenger Pro and Video Interactive as a service
offering. In addition, it allows service providers to decide what set of
features to implement within each application and offer different feature sets
at different fees. The Licensing Server and its ability to easily role out
enhanced services, is one of the key reasons Beijing Telecom and Verizon chose
to sign a contract with Vianet. The Licensing Server application is server
based, can allow billing by the transaction, monthly, yearly or any increment
the provider chooses, allows providers to offer free trials for any period they
choose, tracks valid users and insures piracy protection.



                                      -15-
<PAGE>

No assurance can be given that a market will exist for the products once the
development is completed.

Marketing Developments

During the last quarter, we made progress in a number of key areas. We completed
the installation and received payment from Beijing Telecom for 100,000 copies of
Messenger Pro and Video Interactive, along with two Licensing Servers. We signed
a non-disclosure agreement (NDA) with Lockheed Martin and Kodak, which could
lead to a joint development agreement for a new wireless application. We
received official approval from Verizon's labs for both the internal use and
reselling of our Video Interactive product. In addition, Verizon purchased
multiple copies of both Video Messenger Pro and Video Interactive software for
internal users. We have been accepted for certification testing by SBC's Tri
Labs, which is a critical requirement before sales and distribution efforts can
get underway. We worked with Eagle Wireless and their Set Top Boxes, which
allowed us to provide a turnkey conference room system that met the needs of the
FBI. This relationship should result in a cross licensing and distribution
contract. We signed an agreement with Marshall Communications (Marshall), a
government integrator specializing in satellite services. They are the
integrator for the FBI systems and work with numerous government agencies.
Marshall will be adding Vianet's product suite to the government's general
services agreement (GSA) schedule. We signed a contract with SumaNetworks that
includes a 50/50 revenue sharing arrangement, including the use of our Licensing
Server, which allow three different bundled application offerings: One for dial
up customers; another for DSL, cable modem or ISDN customers; and finally, one
for enterprise LAN customers. SumaNetworks recently purchased the largest Cyber
Cafe company with Cyber centers in over 70 high-end U.S. malls. SumaNetworks
plans on offering Vianet's full suite of Lightning Strike products as a bundled
service, which will be available for sale through these centers. We signed a NDA
with Hughes Networks (Hughes). Hughes is deploying a new broadband satellite
network to be launched at a future date and are evaluating our multipoint
product as a potential service offering.

No assurance can be given that these market developments will be lead to any
additional business or that a market will exist for any products or services
jointly developed.

Subsequent Event:

On October 2, 2001 Vianet announced that the Company had signed a letter of
intent to merge with Comm-Services Corporation (CSC), a privately held
corporation with corporate offices in Plano, Texas. The merger is to include the
CSC subsidiary Inter-Tel.NET, Inc., which was purchased by CSC from Inter-Tel,
Inc. (as a result of this earlier transaction, Inter-Tel, Inc. holds a 17%
equity position in Inter-Tel.NET,Inc. with the right to convert this into an
equity position in CSC).

Following the completion of the merger, it is expected that existing CSC
shareholders will hold a 60% ownership position in the combined companies,
subject to adjustment on certain closing conditions. The merger of the two
companies is subject to various conditions including due diligence, conversion
of Vianet's secured notes into equity, deficit working capital financing and the
signing of a customary definitive agreement.

CSC, through its subsidiary Inter-Tel.net, has a network of Cisco based, Level 3
co-location points of presence both domestically and internationally, providing
high quality VoIP (voice over internet protocol) on and off net domestic and
international long distance services. These services, which include transport
and termination services, switched 1+VoIP, voice, fax and modem service, are
provided to telecommunication carriers, business enterprises and other service
providers. These providers in turn are able to offer their consumers high
quality voice, data, and video communications. CSC uses Level 3's (3)CrossRoads
service, which features destination-sensitive billing, the industry's first
pricing based on the destination of Internet traffic rather than traditional
flat rate pricing. Using (3)CrossRoads allows CSC to bypass congested Internet
exchange points, minimizing latency and maintaining the quality of their
IP-based enhanced services. This allows CSC to utilize an IP-based packet
switching network that is designed to be more cost-efficient than traditional
circuit-switching networks to offer services at very competitive rates. Cost
efficiency is achieved by providing routing that bypasses many local access,
long-distance tariff and settlement charges. The network architecture, which is
open, scalable and standards-based, can accommodate rapid deployment of new
services like video conferencing, enterprise Virtual Private Network (VPN) and
enhanced data services. The addition of new services is merely an application
overlay to the existing network and billing platform. This will allow new
services to be introduced with lower capital costs.



                                      -16-
<PAGE>

Upon a successful merger, the combination of CSC's global IP network and
Vianet's suite of visual media applications can offer consistent, high quality
voice, video and data services to customers on a privately managed IP-based
network, This network has Tier 1 bandwidth connections providing service at
levels of quality and reliability that are not achieved over public networks
such as the Internet. The network offers quality managed bandwidth required to
offer high-quality service for applications like VoIP and Video conferencing. In
addition, a state-of-the-art 24 X 7 network operations center is in place to
monitor, analyze, and test all aspects of the network performance to assure high
quality, minimize interruption of service to customers and manage dynamic
switching to other routes for continued high quality service termination. For
the enterprise customer we can offer a global VPN, with bandwidth management and
Quality of Service, enabling us to offer business quality video
conferencing and data collaboration any time, anywhere. We will provide managed
broadband network access that combines the use of traditional broadband copper
access and broadband wireless access where traditional wire access isn't
practical. This combination allows us to offer both the traditional service
providers and the enterprise customer a business reason to justify VPN services.

No assurance can be given that the parties will successfully complete the
merger. Nor can any assurance be given that there will be a market for these
combined services.

Results Of Operations

The following is a discussion of the financial condition and results of our
operations for the three and nine months ended September 30, 2001 and 2000,
respectively. This discussion should be read in conjunction with our
Consolidated Financial Statements, the notes related thereto, and the other
financial data included elsewhere in this filing.

Periods ended September 30, 2001 and 2000

Revenues and other income

Revenues and other income for the three and nine-month periods ended September
30, 2001 were $631,102 and $710,169, respectively, as compared to $44,660 and
$623,808 during the three and nine-month periods ended September 30, 2000,
respectively. In 2001, approximately $600,000 was generated from Phase I of a
two-year contract with Holy Universal Limited, a purchasing agency acting on
behalf of Beijing Telecom. Under the terms of the contract, Vianet is licensing
its software products, Video Messenger Pro and Video Interactive to Beijing
Telecom for its broadband services and Video Services Provider applications. In
the nine-months ended September 30, 2000, $74,334 was attributable to OEM sales,
while $390,000 was generated from one-time software licensing of our Lightning
Strike Suite of Products in the Korean market.



                                      -17-
<PAGE>

Costs and Expenses

Costs of goods and services sold

Costs of goods and services sold for the three and nine-month periods ended
September 30, 2001 were $22,887 and $33,948, respectively, as compared to
$13,557 and $13,872 during the three and nine-month periods ended September 30,
2000, respectively. The increase in the respective periods was due to the
increased sales in 2001 in connection with Phase I of a two-year contract with
Holy Universal Limited.

Selling, general and administrative

Selling, general and administrative expenses for the three and nine-month
periods ended September 30, 2001 were $1,317,722 and $4,817,300, respectively,
as compared to $2,038,959 and $6,709,410 during the three and nine-month periods
ended September 30, 2000, respectively. The decreases in the respective periods
result from the Company's operations being dramatically reduced in January 2001
due to a lack of available funding. All areas were affected including
administrative staffing, sales support and sales personnel. The current staffing
levels for selling, general and administrative have been reduced to eleven as
compared to thirty-five in 2000.

The company's expenditures in 2000 included (a) a consolidation of four separate
office locations in to one location; (b) increased marketing expenditures to
introduce its products to potential customers; (c) human resource acquisition
costs in the deployment of personnel to execute its strategy and (d) legal and
other administrative costs caused by the acquisitions.

Research and development

Research and development for the three and nine-month periods ended September
30, 2001 were $200,104 and $1,013,216, respectively, as compared to $1,285,328
and $2,647,771 during the three and nine-month periods ended September 30, 2000,
respectively. The Company's research and development efforts in 2001 have been
primarily focused on the development of a Licensing Server and the completion of
the Company's multi-point video conferencing product.

Provision for loss on Develcon receivable

Provision for loss on Develcon receivable was nil and $1,386,386 for the three
and nine month periods ended September 30, 2000, respectively and nil for both
the three and nine-month periods ended September 30, 2001.

Depreciation and Amortization Expenses

Depreciation and Amortization expenses for the three and nine-month periods
ended September 30, 2001 were $65,883 and $275,205, respectively, as compared to
$583,729 and $1,588,970 during the three and nine-month periods ended September
30, 2000, respectively. The decrease was primarily attributable to the fact that
the Company wrote off all intangible assets at December 31, 2000.



                                      -18-
<PAGE>

Interest Expense and Other Financing Charges

Interest expense and other financing charges for the three and nine-month
periods ended September 30, 2001 was $1,539,483 and 6,029,006, respectively, as
compared to $45,757 and $404,154 during the three and nine-month periods ended
September 30, 2000, respectively. The expense for the 2001 periods were
primarily attributable to interest on convertible notes, amortization of debt
discount and non cash charges relating to the issuance of warrants. The expense
for the 2000 periods primarily relate to interest on notes payable.

Loss from Discontinued Operations

Loss from discontinued operations for the three and nine-month periods ended
September 30, 2001 was nil, as compared to $1,170,858 and $3,665,205 during the
three and nine-month periods ended September 30, 2000, respectively. The
operating loss in the 2000 periods was made up of the operations of Access, our
former subsidiary, which was discontinued in January 2001. The loss on disposal
for the nine-month period ended September 30, 2000 relates to Develcon, our
former subsidiary, which was sold in January 2000.

Net Gain on Extinguishment of Debt

Net gain on extinguishment of debt includes an extraordinary net gain of
approximately $718,800 in connection with the settlement of Develcon debt to
Royal Bank Capital Corp. that Vianet guaranteed and a loss of approximately
$60,600 related to issuing stock and warrants for debt for the nine-months ended
September 30, 2001.

Net Loss

As a result of the above factors, net loss during the three and nine-month
periods ended September 30, 2001 was $2,514,977 and $10,800,302, respectively,
as compared to $5,093,528 and $15,791,960 during the three and nine-month
periods ended September 30, 2000, respectively.

Cash Position

For the nine-month period ended September 30, 2001, the Company's cash position
decreased by $501 from $7,546 to $7,045. The principal source of cash was
$3,668,405 that was generated from the Company's private placement offerings and
$225,000 from the issuance of demand notes. The funds received were used to fund
operating costs.

Inflation

Vianet has experienced minimal impact from inflation and changing prices on its
net sales and on its income from continuing operations for the periods it has
been engaged in business.



                                      -19-
<PAGE>

Liquidity and Capital Resources

The working capital deficiency at September 30, 2001, was $14,493,105 compared
to a working capital deficiency of approximately $7,177,756 at December 31,
2000. This increase in working capital deficiency was due to continued operating
losses and the conversion of capital into secured debt as part of the company's
funding arrangements in January through September 2001.

The Company has historically sustained its operations from the sale of debt and
equity securities, through institutional debt financing and through agreements
or arrangements for financing with certain creditors.

As of September 30, 2001, the Company had the following financing arrangements
in place:

         o        In September 1999, we borrowed $500,000 from a private
                  investor at an interest rate of 11%. This loan is currently in
                  default and can be converted at the option of the holder into
                  common shares at an exchange rate of $3.75 per share.

         o        We assumed convertible debentures (the "Debentures") as part
                  of the acquisition of Vianet Labs in the amount of $1,125,000.
                  The Debentures bear interest ranging from 6% to 8%, are
                  convertible into a maximum of 370,170 shares of common stock
                  through September 30, 2002. The Company is currently in
                  default of interest payments in connection with these
                  debentures.

         o        In the fourth quarter 2000, we made tender offer for our class
                  A, B and C warrants, pursuant to which we agreed to (i) reduce
                  the exercise price of 100% of the class A common stock
                  purchase warrants from $1.53 to $0.01, and (ii) reduce the
                  exercise price of 50% of the class B common stock purchase
                  warrants from $1.91 to $0.01, in consideration of the holders
                  of such securities agreeing to (i) exercise 100% of the
                  reduced price class A and B common stock purchase warrants,
                  and (ii) cancel the remaining class B and C common stock
                  purchase warrants which they currently hold or are entitled to
                  receive.

                  The original terms and conditions of the tender offer required
                  that funds and the certificates for the class A and B warrants
                  be held in escrow until such time as a registration covering
                  the sale of the common stock underlying the class A and B
                  warrants was declared effective by the Securities and Exchange
                  Commission. The tender offer has since been amended to remove
                  the registration requirement, and, as amended, will remain
                  open until December 27, 2001.

         o        In January 2001, the Company issued an aggregate of $2,100,000
                  principal amount of 8% Secured Convertible Notes (the "Notes")
                  due January 9, 2002 in a private placement to eight investors.
                  In addition, 9,999,999 five-year warrants to purchase common
                  stock were issued at an exercise price not to exceed $0.28875,
                  in connection with the issuance of the Notes. The exercise
                  price of the warrants approximated 110% of the fair market
                  value of our common stock at the time of issuance.
                  Simultaneously with such transaction, shareholders of
                  1,566,666 shares of previously issued common stock agreed to
                  return such shares for cancellation in consideration for the
                  issuance of $4,700,000 convertible notes which is an amount
                  equal to the original purchase price for such shares. The
                  notes are due on January 9, 2002 and bear interest at a rate
                  of 8% per annum. In connection with such transactions, the
                  Placement Agent, Sunrise Securities Corp., received cash fees
                  of $103,750, warrants to purchase an aggregate of
                  approximately 1,036,962 common shares, and $56,250 principal
                  amount of the Notes. The Notes are considered to contain a
                  beneficial conversion feature as they were issued at a
                  conversion price, which was less than the fair value of the
                  common stock at the date of issuance. The Company determined
                  the fair value of the beneficial conversion feature of the
                  Notes to be approximately $2,015,000. This amount was
                  immediately expensed and included in Interest and other
                  financing costs, as the conversion feature was immediately
                  available to the investors. The Company also determined the
                  fair value of the warrants issued to be approximately
                  $3,168,000 by using commonly accepted valuation methodologies
                  including the Black Scholes Model, which utilizes risk free
                  interest rates, volatility and available market information.
                  This amount is being amortized using the interest method over
                  the term of the Notes. The amount included in Interest and
                  other financing costs in the Consolidated Statement of
                  Operations for the nine-months ended September 30, 2001 was
                  approximately $2,182,000. The Notes are collateralized by all
                  of the Company's assets and approximately 3,800,000 shares
                  (the "Secured Shares") owned by the Company's Chairman and its
                  former CFO. In the second quarter 2001, the collateral was
                  sold by the note-holders. The proceeds received by the
                  note-holders approximated $216,000. In September 2001, the
                  Company issued 310,000 shares of common stock and accrued for
                  the issuance of 14,539 shares of common stock in connection
                  with a noteholder's election to convert $37,971 of convertible
                  notes. The Company recorded $1,701 in accounts payable and
                  accruals on the Consolidated Balance Sheet as of September 30,
                  2001.

                                      -20-
<PAGE>

         o        In January 2001, we entered into a $10 million equity line of
                  credit agreement. It should be noted that this agreement has
                  since been terminated. In order to secure the equity line of
                  credit agreement, we agreed to issue 1,000,000 shares of
                  common stock and warrants to purchase 4,392,004 shares to the
                  private investment group.

         o        In February 2001, the Company agreed to issue 1,427,623 shares
                  of common stock to an existing shareholder in exchange for a
                  $100,000 non-interest bearing demand loan. 867,623 and 560,000
                  of these shares were issued in March and April 2001,
                  respectively. The Company determined the market value of the
                  shares at the date of agreement to be approximately $379,000
                  and such amount is included in interest and other financing
                  costs in the Consolidated Statement of Operations for the
                  nine-months ended September 30, 2001. In June and September
                  2001, the Company paid a total of $50,000 of the $100,000
                  obligation. The Company is in default on the unpaid balance of
                  the loan.

         o        In April 2001 through May 2001, the Company issued $477,500
                  one-year 8% convertible notes and 7,045,238 five-year warrants
                  to purchase shares of common stock at a price not to exceed
                  $0.28875. Simultaneously with and as a condition to these
                  transactions, the shareholders of 334,000 shares of common
                  stock and 501,000 related warrants issued pursuant to previous
                  private placement offerings agreed to return such shares and
                  warrants for cancellation in consideration for the issuance of
                  $1,002,000 one-year 8% convertible notes, which is the amount
                  equal to their original purchase price for such securities. In
                  connection with such transactions, Donald & Co. Securities,
                  Inc., the Placement Agent, received cash fees of approximately
                  $48,000, such amount is included in interest and other
                  financing costs in the Consolidated Statement of Operations
                  for the nine-months ended September 30, 2001. Donald & Co.
                  Securities, Inc. also received warrants to purchase an
                  aggregate of 227,381 common shares at a price not to exceed
                  $0.28875. The Company determined the fair value of the
                  warrants issued to be approximately $893,000 by using commonly
                  accepted valuation methodologies including the Black Scholes
                  Model, which utilizes risk free interest rates, volatility and
                  available market information. This amount is being amortized
                  using the interest method over the term of the Notes. The
                  amount included in Interest and other financing costs in the
                  Consolidated Statement of Operations for the nine-months ended
                  September 30, 2001 was approximately $212,000.

                                      -21-
<PAGE>

         o        In April 2001, the Company issued 1,254,618 shares of common
                  stock in exchange for services previously performed and
                  accrued in 2000 of approximately $183,700 and issued 736,938
                  shares of common stock to employees in settlement of
                  compensation of approximately $103,000 arising in 2001, such
                  amount is included in Selling, general and administrative
                  expenses in the Consolidated Statement of Operations for the
                  nine-months ended September 30, 2001.

         o        In June 2001, the Company issued 949,733 shares of common
                  stock to existing shareholders pursuant to clauses in the
                  financing agreements completed prior to March 2000. The
                  Company received no proceeds from this stock issuance. The
                  Company recorded the par value of the shares issued as a
                  reduction of additional paid-in capital on the Consolidated
                  Balance Sheet as of September 30, 2001.

         o        In June 2001, the Company issued 1,406,250 shares of common
                  stock to two investors in lieu of interest payments on notes
                  payable. Approximately $298,000 is included in interest and
                  other financing costs in the Consolidated Statement of
                  Operations for the nine-months ended September 30, 2001.

         o        In July and August 2001, the Company issued 507,350 shares of
                  common stock for warrants with an exercise price of $0.05625
                  and cancelled 532,350 warrants at exercise prices ranging from
                  $2.00 to $7.00. The Company received approximately $28,600 in
                  connection with these transactions, which are recorded on the
                  Consolidated Balance Sheet as of September 30, 2001.

         o        In June 2001, the Company issued $881,250 one-year 8%
                  convertible notes. In connection with such transactions,
                  Donald & Co. Securities, Inc. and Aegis Capital Corp., the
                  Placement Agents, received cash fees of approximately $5,000
                  and $50,000, respectively, such amount is included in interest
                  and other financing costs in the Consolidated Statement of
                  Operations for the nine-months ended September 30, 2001. Aegis
                  Capital Corp. also received warrants to purchase an aggregate
                  of approximately 1,968,392 common shares at an aggregate
                  purchase price of $100 and warrants to purchase an aggregate
                  of 788,188 common shares $0.08. The Company determined the
                  fair value of the warrants to be approximately $146,450 by
                  using commonly accepted valuation methodologies including the
                  Black Scholes Model, which utilizes risk free interest rates,
                  volatility and available market information. This
                  consideration is included in interest expense and other
                  financing costs in the Consolidated Statement of Operations
                  for the nine-months ended September 30, 2001. In addition, the
                  Company issued 14,160,109 shares of common stock to
                  shareholders that participated in financings prior to March
                  2000 and participated in the June 2001 financing. The Company
                  received no proceeds from the 14,160,109 stock issuance. The
                  Company recorded the par value of the shares issued as a
                  reduction of additional paid-in capital on the Consolidated
                  Balance Sheet as of September 30, 2001. In September 2001, the
                  Company issued 1,000,000 shares of common stock to existing
                  shareholders in connection with and as a condition of the June
                  2001 financing. The Company recorded the par value of the
                  shares issued as a reduction of additional paid-in capital on
                  the Consolidated Balance Sheet as of September 30, 2001.

         o        In September 2001, the company recorded an accrual for the
                  issuance of 751,807 shares in satisfaction of approximately
                  $62,000 of expenses relating to salaries, legal fees an
                  investor relations liabilities incurred in the third quarter
                  2001, such amount is included in Selling, general and
                  administrative expenses in the Consolidated Statement of
                  Operations for the nine-months ended September 30, 2001 and in
                  accounts payable and accruals on the Consolidated Balance
                  Sheet as of September 30, 2001.



                                      -22-
<PAGE>

Going Concern

The accompanying financial statements have been prepared in conformity with
generally accepted accounting principles, which contemplate our continuation as
a going concern. However, we have experienced net losses of $10,800,302 for the
nine-month period ended September 30, 2001 and losses of $27,134,210 for the
year ended December 31, 2000. We also had a net working capital deficit of
$14,493,105 as of September 30, 2001 and $7,177,756 as of December 31, 2000. We
must raise additional capital to meet our continuing operational needs. These
factors raise doubt about our ability to continue as a going concern. In view of
the matters described above, recoverability of a major portion of the recorded
asset amounts shown in the accompanying balance sheet is dependent upon our
ability to generate sufficient sales volume to cover our operating expenses and
to raise sufficient capital to meet our payment obligations. The financial
statements do not include any adjustments relating to the recoverability and
classification of recorded asset amounts, or amounts and classification of
liabilities that might be necessary should we be unable to continue in
existence.

The majority of the Company's Accounts Payable are delinquent. The Company is
working with its vendors to procure revised payment terms, although there can be
no assurances that the Company will be successful in this endeavor.

The Company has commitments under various agreements to issue shares beyond its
authorized capital as required by the financing transactions described above and
these can only be met if our shareholders approve a proposed increase in
authorized shares. Unless our shareholders approve these transactions and
approve an amendment to our certificate of incorporation to increase the number
of authorized shares of common stock from 100,000,000 to 750,000,000, we will be
unable to perform our obligations under the agreements and will be in default
pursuant to the terms of the agreements. Management of the Company believes that
it is highly likely that such default will require the Company to substantially
curtail or cease its operations, and may result in a total loss of shareholder's
investment in the Company.

Potential Future Sources of Capital

We are currently seeking sources of additional financing, either in the form of
equity and/or debt financing, to provide the additional capital in order to fund
our current operations, expand our scope of operations and pursue our business
strategy. We intend to complete any equity financing by issuing securities at
prices equal to the current market value on the date of such financing. In
addition, we anticipate that we will be required to issue equity securities in
consideration of obtaining any such debt financing. However, no assurance can be
given that we will be successful in completing any financing. If we are
unsuccessful in completing any financing, we will not be able to fund our
current expenses.

We have used and intend to continue to use the proceeds from the financings
described to execute our sales plan. Our ability to become a serious competitor
may be dependent upon obtaining additional financing.

Future Sources of Revenue

As of the date of this filing, we have completed several distribution agreements
and trial sales that could generate future revenues. While we anticipate
significant revenues from these agreements and others that we will complete in
the future, there can be no guarantees these revenues will be realized. Should
the contracts be cancelled or if our customers do not generate revenues
utilizing our products, our future expected revenues could be adversely
affected.

Summary

Our management believes that upon full implementation of our business plan,
sufficient revenues will be generated to meet operating requirements. However,
no assurance can be given that such goal will be obtained or that our expected
revenues will be realized at sufficient levels and profitability to fund our
operations without additional capital. Such inability could have a materially
adverse effect on our business, operating results and financial condition.
Moreover, the estimated cost of the proposed expansion of our production and
marketing activities is subject to numerous uncertainties, including the
problems, expenses, difficulties, complications and delays, many of which are
beyond our control, frequently encountered in connection with the establishment
and development of new business activities, and may be affected by the
competitive environment in which we are operating. Accordingly, there can be no
assurance that we will complete the proposed expansion of our production and
marketing activities described herein.



                                      -23-
<PAGE>



PART II - OTHER INFORMATION

Item 1. Legal Proceedings

         We are not a party to any material legal proceedings, except as
described below.

         We were a defendant in an action for a breach of contract claim
         relating to outstanding invoices for services rendered in the amount of
         $702,739. (Superior Court of California, County of Alameda, Cause #
         H217819-8) In March 2001, a default judgment was entered against Vianet
         in this matter. We engaged in discussions with the plaintiff regarding
         settlement and reached agreement with regard to a payment schedule
         whereby we paid the defendant $36,500 in July, with the balance payable
         over the following eleven months. In September 2001, we paid the
         defendant $73,000 and agreed to pay $62,000 per month once the
         anticipated merger is complete. The $702,739 of outstanding invoices
         less the payments of $36,500 and $73,000 is included in accounts
         payable and accruals on the balance sheet at September 30, 2001.

         We were a defendant in an action pending before the Collin County Court
         at Law No. 5, Collin County, Texas, entitled Huntington, Martin & Wood.
         v. Vianet Technologies, Inc. (Cause No.: 005-1304-00). This action was
         commenced by Hunting, Martin & Wood, on January 5, 2001, and sought
         $19,500 in damages for outstanding invoices for products sold or
         services rendered, plus lawyer's fees, interest and court costs. As of
         the date hereof, Vianet has reached an agreement with the plaintiff to
         pay $19,500 in installments, of which $6,000 has now been paid. The
         $19,500 of outstanding invoices less the $6,000 payment is included in
         accounts payable and accruals on the balance sheet at September 30,
         2001. In October, the Company settled its entire obligation with the
         defendant.

         We are a defendant in an action pending before the County Court at Law
         No. 2, County of Dallas, Texas, entitled AMS Production Group, Inc, v.
         Vianet Technologies, Inc. (Cause No.: CC-01-04590-B). This action was
         commenced by AMS Production Group, Inc on May 1, 2001, and seeks
         $56,790 in damages for outstanding invoices for products sold or
         services rendered, plus lawyer's fees, interest and court costs. As of
         the date hereof, Vianet has filed a response to the claim though no
         discovery has yet commenced. Accordingly, it is difficult to estimate
         the likelihood of an unfavorable outcome and estimate the amount or
         range of a potential loss at this time. The $56,790 of outstanding
         invoices is included in accounts payable and accruals on the balance
         sheet at September 30, 2001.

         We are a defendant in an action pending before the County Court at Law
         No. 2, Collin County of, Texas, entitled BMI Leasing v. Vianet
         Technologies, Inc. (Cause No.: 2-694-01). This action was commenced by
         BMI Leasing on June 22, 2001, and seeks $44,819 in damages for
         outstanding invoices for products sold or services rendered, plus
         lawyer's fees, interest and court costs. As of the date hereof, Vianet
         has filed a response to the claim though no discovery has yet
         commenced. Accordingly, it is difficult to estimate the likelihood of
         an unfavorable outcome and estimate the amount or range of a potential
         loss at this time. The $44,819 of outstanding invoices is included in
         accounts payable and accruals on the balance sheet at September 30,
         2001.

         We are a defendant in an action pending before the Superior Court of
         Justice, Ontario, Canada (File # 99-CV-180354) in which the plaintiffs
         have asserted breach of contract and damages in the amount of $155,928
         and punitive damages in the amount of $50,000. The Company has been
         defending this claim vigorously. Pleadings have been entered and the
         process of discoveries has commenced. While there were earlier
         discussions with the plaintiff regarding settlement of this matter, no
         final settlement has been reached and no assurance can be given that an
         amicable settlement will be reached. In the event we are unable to
         consummate a settlement of this matter, we anticipate that the
         plaintiff will seek to pursue its claim.

                                      -24-
<PAGE>



Item 2. Changes in Securities and Use of Proceeds

         None.

Item 3. Defaults Upon Senior Securities

         The Company is in default of its Senior Secured Notes through its
         failure to pay interest, the existence of judgments against the company
         in excess of $50,000 and through the cross default provision.

Item 4. Submission of Matters to a Vote of Security Holders

         None.

Item 5. Other Information

         None.

Item 6. Exhibits and Reports on Form 8-K

         None.




                                      -25-
<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.


                                          VIANET TECHNOLOGIES, INC.
                                          --------------------------
                                          (Registrant)

Date: November 19, 2001                   /s/Jeremy Posner
                                          ---------------------
                                          Jeremy Posner
                                          Chief Financial Officer