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, 2002

                                       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 |_|

As of November  12,  2002,  there were  614,646,240  shares of the  registrant's
Common  Stock  issued,  par  value  $.001  per  share,  and  614,558,303  shares
outstanding.

Transitional Small Business Disclosure Format (check one). Yes |_| No |X|

<PAGE>

                   VIANET TECHNOLOGIES, INC. AND SUBSIDIARIES

                                      INDEX



Part 1  Financial Information

Item 1  Financial Statements

        Consolidated Balance Sheets at September 30, 2002 (unaudited) and
        December 31, 2001

        Consolidated Statements of Operations for the three months
        ended September 30, 2002 and 2001, the nine months ended September 30,
        2002 and the period from February 16, 2001, Inception, through
        September 30, 2001(unaudited)

        Consolidated Statements of Cash Flows for the nine months
        ended September 30, 2002 and the period from February 16, 2001,
        Inception, through September 30, 2001 (unaudited)

        Notes to Consolidated Financial Statements (unaudited)

Item 2  Management's Discussion and Analysis

Item 3  Controls and Procedures

Part II Other Information

Item 1  Legal Proceedings

Item 2  Changes in Securities

Item 3  Defaults Upon Senior Securities

Item 4  Submission of Matters to a Vote of Security Holders

Item 5  Other Information

Item 6  Exhibits and Reports on Form 8-K

        (a) Exhibits



Signatures

<PAGE>
<TABLE>
<CAPTION>

VIANET TECHNOLOGIES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS



                                                   September 30, 2002     December 31, 2001
                                                        unaudited              audited
                                                   ------------------    ------------------
 <S>                                                <C>                   <C>
CURRENT ASSETS
   Cash and cash equivalents                       $           57,025    $        1,462,653
   Accounts receivable, net                                 1,485,086             2,729,289
   Prepaids and other current assets                          709,343               730,833
                                                   ------------------    ------------------
                                                            2,251,454             4,922,775
                                                   ------------------    ------------------

PROPERTY AND EQUIPMENT, net                                 4,994,076             7,130,078

OTHER ASSETS
   Patents, net                                               556,087             7,167,000
   Trademarks, net                                            259,335             3,096,000
   Goodwill                                                      --               1,435,757
   Security deposits                                           50,073               200,000
                                                   ------------------    ------------------

TOTAL ASSETS                                       $        8,111,025    $       23,951,610
                                                   ==================    ==================

CURRENT LIABILITIES
   Accounts payable                                $       16,233,709    $       14,820,663
   Accrued liabilities                                      3,375,173             3,338,411
   Current portion of note payable                          4,950,000               250,000
   Current portion of capital lease obligations             8,402,030             2,200,630
   Convertible notes payable                                1,207,088             1,207,088
   Demand notes payable                                       494,154               855,450
                                                   ------------------    ------------------
                                                           34,662,154            22,672,242
                                                   ------------------    ------------------

LONG-TERM LIABILITIES
   Note payable, excluding current portion                       --               4,700,000
   Long-term portion of capital lease obligation              233,838             4,905,024

SHAREHOLDERS' DEFICIT
   Common shares                                              603,216               571,106
   Common Stock Subscribed                                      9,467                  --
   Additional paid in capital                               6,933,585             5,271,894
   Accumulated deficit                                    (34,331,235)          (14,168,656)
                                                   ------------------    ------------------
                                                          (26,784,967)           (8,325,656)
                                                   ------------------    ------------------

TOTAL LIABILITIES AND SHAREHOLDERS' DEFICIT        $        8,111,025    $       23,951,610
                                                   ==================    ==================
</TABLE>


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

<PAGE>
<TABLE>
<CAPTION>

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


                                                                                                 Period
                                            Three Months     Three Months     Nine Months      February 16,
                                               Ended            Ended            Ended            2001,
                                                                                                Inception,
                                                                                                 Through
                                           September 30,    September 30,    September 30,    September 30,
                                                2002             2001             2002             2001
                                           ------------------------------    ------------------------------
<S>                                        <C>              <C>              <C>              <C>
Revenue:
     Telecommunications revenue            $   8,143,145    $   6,363,532    $  28,243,440    $   7,529,726
     Software sales                               50,804             --          1,564,721             --
                                           ------------------------------    ------------------------------

Total revenue                                  8,193,949        6,363,532       29,808,161        7,529,726

Costs of revenue:
     Telecommunication costs                   7,680,327        6,424,564       27,064,881        7,523,920
     Software costs                               10,848             --             42,684             --
                                           ------------------------------    ------------------------------

                                               7,691,176        6,424,564       27,107,565        7,523,920

Gross margin                                     502,774          (61,032)       2,700,596            5,806


Operating expenses:
     Personnel                                 1,267,535          579,391        4,431,051          586,036
     Selling, general and administrative       2,985,800          510,256        5,485,283          672,250
     Depreciation and amortization             1,102,680          577,055        3,710,669          577,340
     Impairment of intangible assets           1,329,953                0        8,520,316             --
                                           ------------------------------    ------------------------------

Total operating expenses                       6,685,968        1,666,702       22,142,318        1,835,626

Loss from operations                          (6,183,194)      (1,727,734)     (19,446,722)      (1,829,820)

Other Income expenses:
     Interest expense                            309,393          103,638          705,286          103,638
     Other                                          --             (5,580)          10,571           (5,580)
                                           ------------------------------    ------------------------------

Net loss                                   $  (6,492,588)   $  (1,825,792)   $ (20,162,579)   $  (1,927,878)
                                           ==============================    ==============================


Loss per share - basic and diluted         $        (.01)             N/A    $        (.03)             N/A
                                           ==============================    ==============================

Weighted average shares outstanding          602,943,613              N/A      583,267,910              N/A
                                           ==============================    ==============================
</TABLE>




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

<PAGE>
<TABLE>
<CAPTION>

VIANET TECHNOLOGIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
                                                                                             Period
                                                                                           February 16,
                                                                          Nine Months         2001,
                                                                             Ended         Inception,
                                                                         September 30,       through
                                                                              2002        September 30,
                                                                                              2001
                                                                         ------------------------------
<S>                                                                      <C>              <C>
OPERATING ACTIVITIES:
Net loss                                                                 $ (20,162,579)   $  (1,927,878)

Adjustments to reconcile net loss to net cash used in operating
   activities:

Provision for bad debts                                                      2,491,250          253,802
Equity compensation for expenses                                               118,802             --
Depreciation and amortization                                                3,710,669          577,340
Impairment of intangibles                                                    8,520,316             --

Increase (decrease) in cash attributable to changes in
   operating assets and liabilities:

Accounts receivable                                                         (1,247,047)      (1,245,674)
Prepaids and other current assets                                               21,490           20,540
Accounts payable and accruals, and other                                     5,256,440        3,099,313
                                                                         ------------------------------

Net Cash Provided (Used) In Operating Activities                            (1,290,659)         777,443

INVESTING ACTIVITIES:

Cash acquired in Inter-Tel.NET, Inc. purchase                                     --             24,817
Security deposits                                                              (30,073)         (12,393)
Capital expenditures                                                          (325,583)            --

                                                                         ------------------------------
Net Cash Provided (Used) In Investing Activities                              (355,656)          12,424


FINANCING ACTIVITIES:

Issuance of common stock and warrants                                             --            201,000
Increase in demand notes                                                       370,000             --
Payment of demand notes                                                        (50,000)            --
Payments under capital leases                                                  (79,313)
                                                                         ------------------------------
Net Cash Provided In Financing Activities                                      240,687          201,000

Net (Decrease) Increase In Cash                                             (1,405,628)         990,867

Cash at beginning of period                                                  1,462,653             --
                                                                          ------------------------------

Cash at end of period                                                    $      57,025    $     990,867
                                                                         ==============================

Supplemental disclosure of cash flow information:

Cash paid during the period for interest                                        23,172             --

Supplemental disclosure of noncash investing and financing activities:


Transfer of capital lease obligations from accounts payable                  1,102,804             --
Acquisition of equipment through capital lease obligations                     450,863             --
Conversion of demand notes to common stock                                     681,296             --
Conversion of accounts payable and accrued liabilities to common stock         903,170
Reclass of security deposit to goodwill                                        180,000             --
Reclass of accrued liabilities to goodwill                                   1,965,012             --

Note payable issued for acquisition of Inter-Tel.NET, Inc.                        --          4,950,000
</TABLE>



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

<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
(consisting only of normal  recurring  adjustments)  considered  necessary for a
fair presentation have been included.

The  accompanying  financial  statements  have been  prepared on a going concern
basis,  which  contemplates  the  realization of assets and the  satisfaction of
liabilities  in the  normal  course  of  business.  As  shown  in the  financial
statements for the period ended September 30, 2002, the Company  incurred losses
of $20.2 million for the first nine months of 2002.

The Company is also in arrears on its capital lease obligations in the amount of
$2,744,035  as of September 30, 2002 and has negative  working  capital of $32.4
million.  The lessor has presented  the Company with a demand letter  requesting
payment of all outstanding  amounts under the capital leases and is currently in
discussions with the Company regarding payment and resolution of various service
issues relating to the equipment.

The Company  was  recently  notified  by  Inter-Tel,  Inc.  (Inter-Tel)  that it
believes  the  Company is in  default on a  principal  payment of  $250,000  due
September 22, 2002 under a note in the amount of $4,950,000 issued in connection
with the  purchase  of  Vianet  Communications,  Inc.  (formerly  Inter-tel.NET,
Inc.)(VComm), and further believes the Company is in default under the note such
that  Inter-Tel  considers  the note  subject to  acceleration.  The Company and
Inter-Tel are  negotiating  the priority of application for various amounts owed
by a  subsidiary  of  Inter-Tel  to  the  telecommunications  subsidiary  of the
Company, a cure of any default and/or modification of the terms of payment under
the note.

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.  These
factors among others may indicate that the Company will be unable to continue as
a going concern for a reasonable period of time. The financial statements do not
include any adjustment relating to the recovery and classification of assets and
liabilities  that might be necessary should the Company be unable to continue as
a going concern.

The  accompanying  consolidated  financial  statements  do not  include  certain
footnotes  and  financial   presentations  normally  required  under  accounting
principles  generally  accepted in the United States of America and,  therefore,
should be read in conjunction with the audited financial  statements included in
the Company's Form 10-KSB as of December 31, 2001.

The   consolidated   financial   statements   include  the  accounts  of  Vianet
Technologies,  Inc.  (Vianet) and its wholly-owned  subsidiaries,  Comm Services
Corporation, Vianet Communications,  Inc. (formerly Inter-Tel.NET, Inc.) (VComm)
Vianet Labs, Inc. (Labs) and Vianet Access,  Inc.  (Access)  (collectively,  the
"Company").  All significant  intercompany  accounts and transactions  have been
eliminated.

Per share amounts are not  reflected  for the nine months  ending  September 30,
2001 due to the  recapitalization  of the  Company  as a result  of the  reverse
acquisition on December 31, 2001.

<PAGE>

2.       Demand Notes Payable

In January  2002,  the Company paid $50,000 to a  shareholder  in  settlement of
demand notes.

During the quarter ended June 30, 2002 the Company entered into a demand note in
the amount of $70,000.

During the quarter ended June 30, 2002 the Company issued  19,948,754  shares of
common stock in settlement of demand notes in the amount of $681,296.

In  September  2002 the  Company  entered  into a note  payable in the amount of
$300,000.

3.       Patents and Trademarks

In connection with the acquisition of Vianet,  the Company  recorded patents and
trademarks at estimated fair value based upon independent valuations on December
31,  2001.  The  Company   amortizes  the  patents  and  trademarks   using  the
straight-line  method  over 7 years  and 10  years,  respectively.  Amortization
expense for patents and  trademarks  was  $800,764 and $134,036 for the nine and
three month periods  ended  September  30, 2002,  respectively,  and nil for the
comparable 2001 periods. Amortization expense for each of the next five years is
estimated to be $105,375 per year after  reduction  for the  impairment  charges
described below.

In October 2001, the Financial Accounting Standards Board ("FASB") approved SFAS
144,  Accounting for the Impairment or Disposal of Long-Lived  Assets.  SFAS 144
replaces SFAS 121,  Accounting for the  Impairment of Long-Lived  Assets and for
Long-Lived  Assets to Be Disposed Of. The new  accounting  model for  long-lived
assets to be disposed of by sale  applies to all  long-lived  assets,  including
discontinued  operations,  and  replaces the  provisions  of APB Opinion No. 30,
Reporting Results of  Operations-Reporting  the Effects of Disposal of a Segment
of a  Business,  for the  disposal of  segments  of a  business.  Statement  144
requires  that those  long-lived  assets be  measured  at the lower of  carrying
amount  or fair  value  less  cost  to  sell,  whether  reported  in  continuing
operations or in discontinued operations.

The Company's  policy is to periodically  review the net realizable value of its
long-lived  assets  through an  assessment  of the  estimated  future cash flows
related to such assets  pursuant to SFAS 144. In the event that assets are found
to be carried at amounts in excess of estimated  undiscounted future cash flows,
then the assets will be adjusted for impairment to a level  commensurate  with a
discounted  future cash flow analysis of the underlying  assets.  Based upon its
most recent analysis,  the Company recognized an impairment loss on the carrying
value of patents and trademarks of $1,329,953 during the quarter ended September
30,  2002.  This  impairment  loss was caused by the revised  forecast for video
product sales,  which has diminished the expected  future cash flows  supporting
the  valuation  of patents  and  trademarks.  As a result,  the assets have been
impaired to the present value of the estimated future cash flows.

4.       Goodwill and Impairment

In June 2001, the FASB issued Statements of Financial  Accounting  Standards No.
141,  Business  Combinations  ("FAS  141"),  and No.  142,  Goodwill  and  Other
Intangible  Assets  ("FAS 142").  FAS 141  requires  all  business  combinations
initiated after June 30, 2001 to be accounted for under the purchase method. For
all business  combinations  for which the date of  acquisition is after June 30,
2001,  FAS  141  also  establishes  specific  criteria  for the  recognition  of
intangible  assets  separately from goodwill and requires  unallocated  negative
goodwill to be written off  immediately as an  extraordinary  gain,  rather than

<PAGE>

deferred and  amortized.  FAS 142 changes the  accounting for goodwill and other
intangible assets after an acquisition. The most significant changes made by FAS
142 are: 1) goodwill and intangible  assets with indefinite lives will no longer
be amortized;  2) goodwill and intangible  assets with indefinite  lives must be
tested for  impairment at least  annually;  and 3) the  amortization  period for
intangible  assets with finite  lives will no longer be limited to forty  years.
The Company  does not believe  that the adoption of FAS 141 will have a material
effect on its financial position, results of operations, or cash flows.

The Company  adopted FAS 142 on January 1, 2002.  The Company had not  amortized
the goodwill  related to the  acquisition  of Vianet at December  31, 2001.  All
goodwill is  attributable  to the video products  segment.  In the quarter ended
June 30, 2002, the Company recognized a goodwill  impairment loss of $1,727,136,
based upon a reduction in the expected present value of future cash flows of the
reporting unit. For the quarter ended September 30, 2002, the Company  completed
its reallocation of the net asset values in the acquisition.  As a result of the
reallocation,  goodwill  was  credited  in the  amount  of  $1,853,633  for  the
reduction of assumed  liabilities.  The resulting  negative goodwill balance was
reallocated to the other intangible assets on a pro-rata basis.

5.       Proforma Results of Operations

On a proforma,  unaudited basis, as if the acquisition of Vianet had occurred on
February 16, 2001,  total  revenues and operating loss for the nine months ended
September 30, 2001 would have been approximately  $30,518,000 and $(13,727,000),
respectively.  Included  in the  proforma  net  loss  is  $999,000  of  proforma
intangible asset amortization.  Without the proforma amortization,  the net loss
would have been  $(12,728,000).  Proforma basic and diluted loss per share would
have approximated  ($0.03) per share. These unaudited proforma results have been
prepared for comparative purposes only and are not necessarily indicative of the
results of operations that would actually have occurred had the acquisition been
in effect on the date indicated.

6.       Segment Information

SFAS  No.  131,   DISCLOSURES  ABOUT  SEGMENTS  OF  AN  ENTERPRISE  AND  RELATED
INFORMATION,   establishes  standards  for  public  companies  relating  to  the
reporting  of  financial  and  descriptive  information  about  their  operating
segments in  financial  statements.  Operating  segments  are  components  of an
enterprise  about which  separate  financial  information  is available  that is
evaluated  regularly  by chief  operating  decision  makers in  deciding  how to
allocate resources and in assessing performance.

The  Company  identifies  its  segments  based upon  components  of revenue  and
considers its  operating  segments to be  Telecommunications  Services and Video
Products.

The Company's  reportable  operating segments have been determined as separately
identifiable  business units.  The Company measures segment earnings as Earnings
Before Interest,  Taxes,  Depreciation and Amortization  (EBITDA). The following
amounts are  disclosed  for the nine  months  ended  September  30, 2002 and the
period beginning  February 16, 2001,  Inception,  through September 30, 2001 and
the three month periods ending September 30, 2002 and 2001:

<PAGE>
<TABLE>
<CAPTION>

                                       Nine month period ended           Period from February 16, 2001
                                         September 30, 2002            (Inception) to September 30, 2001
                                  ---------------------------------    ---------------------------------
                                      Telecom             Video            Telecom             Video
                                  --------------     --------------    --------------     --------------
<S>                               <C>                <C>               <C>                <C>
Revenue from external customers   $   28,243,440     $    1,564,721    $    7,529,726     $         --

Inter-segment revenues                      --                 --                --                 --

Gross profit                           1,178,559          1,522,036             5,806               --

Depreciation, amortization and
impairment                             2,800,409          9,430,576           577,340               --

Interest expense                         527,835            177,451           103,638               --

Net loss                              (8,278,384)       (11,884,195)       (1,927,878)              --

EBITDA                                (4,950,140)        (2,276,168)       (1,246,900)              --

As of                                    September 30, 2002                   September 30, 2001
                                  ---------------------------------    ---------------------------------

Segment assets                         6,297,527          1,813,498        19,799,757               --

Intangible assets                           --              815,422         7,059,398               --


                                      Three month period ended             Three month period ended
                                         September 30, 2002                   September 30, 2001
                                  ---------------------------------    ---------------------------------
                                      Telecom             Video            Telecom             Video
                                  --------------     --------------    --------------     --------------

Revenue from external customers   $    8,143,145     $       50,805    $    6,363,532     $         --

Inter-segment revenues                      --                 --                --                 --

Gross profit                             462,818             39,956           (61,032)              --

Depreciation, amortization and
impairment                               939,363          1,493,270           577,055               --

Interest expense                         163,688            145,705           103,638               --

Net loss                              (3,945,723)        (2,546,865)       (1,825,792)              --

EBITDA                                (2,842,672)          (907,890)       (1,145,099)              --
</TABLE>

7.       Commitments and Contingencies

Capital leases:

The  Company  is in  arrears  on  capital  lease  obligations  in the  amount of
$2,744,035  as of September  30, 2002 for amounts due to one lessor.  The lessor
has  presented  the  Company  with a demand  letter  requesting  payment  of all
outstanding  amounts  under the capital  leases and is currently in  discussions
with the Company  regarding  payment and  resolution of various  service  issues
relating to the equipment.

Notes Payable:

The Company was recently  notified by Inter-Tel  that it believes the Company is
in default on a principal  payment of $250,000  due  September  22, 2002 under a
note in the amount of  $4,950,000  issued in  connection  with the  purchase  of
VComm,  and further  believes the Company is in default under the note such that

<PAGE>

Inter-Tel considers the note subject to acceleration.  The Company and Inter-Tel
are  negotiating  the  priority of  application  for various  amounts  owed by a
subsidiary of Inter-Tel to the  telecommunications  subsidiary of the Company, a
cure of any default and/or modification of the terms of payment under the note.

Payroll Taxes:

The Company has recorded  payroll tax liabilities in the amount of approximately
$501,995, including approximately $177,373 for penalties and interest.



ITEM 2.

MANAGEMENT'S  DISCUSSION  AND  ANALYSIS OF  FINANCIAL  CONDITION  AND RESULTS OF
OPERATIONS FOR THE NINE MONTH PERIOD ENDED SEPTEMBER 30, 2002

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.
Forward-looking statements (including oral representations) are statements about
future  performance  or  results,  and include  any  statements  using the words
"believe,"   "expect,"   "anticipate"  or  similar  words.  All  forward-looking
statements are only  predictions  or statements of current  plans,  which we are
constantly  reviewing.  All  forward-looking  statements  may differ from actual
future  results  due to, but not  limited  to,  changes in the local and overall
economy,  the  nature  and  pace  of  technological   changes,  the  number  and
effectiveness  of  competitors  in the  Company's  markets,  success  in overall
strategy,  the Company's  ability to identify  future  markets and  successfully
expand  existing  ones  and the mix of  products  and  services  offered  in the
Company's  target  markets.  You  should  consider  these  important  factors in
evaluating  any  statement  contained in this report and/or made by us or on our
behalf. We have no obligation to update or revise forward-looking statements.

The following information has not been audited. You should read this information
+n  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,  2001.  Vianet
Technologies, Inc. is referred to as "we," "us" or "our" in this report.

DESCRIPTION OF BUSINESS.

OVERVIEW

We were  originally  incorporated in the State of Delaware on March 20, 1998. In
March  1999,  we  consummated  a merger  with Radar  Resources,  Inc.,  a Nevada
Corporation,  under the terms of which we merged with and into Radar  through an
exchange of shares.  Upon  completion  of the merger,  Radar changed its name to
Vianet Technologies,  Inc. In June 2000, we reincorporated under the laws of the
State of Delaware.

In December  2001,  we acquired  100% of the  outstanding  capital stock of Comm
Services Corporation ("CSC") in a merger transaction. CSC operates as a division
of  Vianet  and  is a  wholesaler  of  telecommunications  services  that  sells
international  long  distance  voice and data  service to global  carriers  that

<PAGE>

include regional Bell operating companies,  competitive local exchange carriers,
long distance companies and private network providers. CSC provides its services
through a  combination  of its own  international  network  facilities,  various
international  termination  relationships  and  resale  arrangements  with other
international long distance service providers.  CSC was originally  incorporated
on February 16, 2001.

Although  Vianet was the surviving  legal entity in the merger,  the transaction
has been  accounted for as an issuance of equity by CSC, and a  recapitalization
of CSC under the capital  structure  of Vianet in exchange for the net assets of
Vianet.  This  type  of  transaction  is  commonly  referred  to  as  a  reverse
acquisition.  Under the purchase method of accounting, the historical results of
CSC have been carried forward and Vianet's  operations have been included in the
financial  statements  commencing  on the merger date.  Accordingly,  all of the
historical  2001 results  included here are those of CSC only.  Further,  on the
date of the merger,  the assets and liabilities of Vianet were recorded at their
estimated  fair  values,  with the excess  purchase  consideration  allocated to
goodwill and  consolidated  with the balance sheet of CSC. Results of operations
after the merger include the results of both companies on a consolidated basis.

PRINCIPAL PRODUCTS AND SERVICES

The Company, through CSC, offers  telecommunications  services both domestically
and  internationally,  providing  high  quality  Voice Over  Internet  Protocol,
commonly  referred to as VoIP, long distance  services.  These  services,  which
include  transport and  termination  services,  a switched  direct dialing VoIP,
commonly  referred to as 1+dialing,  voice,  fax and modem service,  and Network
Monitoring  Operations  Center  Services,   are  provided  to  telecommunication
carriers,   business  enterprises  and  other  service  providers.  CSC  enables
telephony communications service providers to offer their consumers high quality
voice,  data, and video  communications.  CSC delivers its services  through its
IP-based  packet  switching  network that is designed to be more  efficient than
traditional  circuit-switching  networks. CSC is able to charge customers highly
competitive rates because its transmission  costs are generally lower than those
incurred by traditional  circuit-switching  competitors. The CSC network reduces
transmission  costs by  providing  routing  which  bypasses  many local  access,
long-distance tariff and settlement charges.

The Company's network is designed to allow it to accommodate rapid deployment of
new services like video conferencing,  enterprise Virtual Private Networks (VPN)
and enhanced data  services.  Vianet is continuing its business of designing and
marketing advanced data visual  communication  technologies and services,  which
utilize a 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.  Key
products include the Lightning Strike suite of products,  which include LS Video
Messenger, LS Video Interactive, LS Power Zoom and LS Video Stream. All of these
products  utilize our  wavelet  technology,  and offer  customers  high  quality
desktop video applications.  Our key video products include the Lightning Strike
suite of products such as:

         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 point to point  video  conferencing
                  product .

<PAGE>

         o        Video  Interactive  Multipoint  -  allows  up  to  an 8  party
                  software  based  video/audio  conference  over IP,  without  a
                  conference bridge (MCU).


         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.

The  combination  of CSC's global IP network and Vianet's  suite of visual media
applications results in the Company being able to 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  difficult  to achieve  over public
networks,  such as the Internet,  and making it ideal for applications like VoIP
and Video  conferencing.  In addition,  a  state-of-the-art  network  operations
center is in place to  monitor,  analyze  and test all  aspects  of the  network
performance  24  hours a day,  7 days a week,  to  assure  high  quality  and to
minimize interruption of service to customers.

The Company is now able to provide  enterprise  customers  with a global Virtual
Private  Network,  with  bandwidth  management  and Quality of Service,  or QoS,
features,  for business quality video conferencing and data  collaboration,  any
time,  anywhere.  Further, the Company can now provide managed broadband network
access,  combining the use of traditional  broadband copper access and broadband
wireless access where traditional wire access isn't practical.  This combination
allows the  Company  to offer both the  traditional  service  providers  and the
enterprise customers a business reason to justify VPN services.

We also offer video  compression  technology,  as well as value added  services,
which  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.


MARKETS

Our  principal  target  markets for video  products are ISPs  (Internet  Service
Providers) and ASPs (Application Service Providers),  corporate  enterprises and
government   agencies  seeking  to  provide  a  visual   experience  to  improve
communications,  brand  awareness and access to digitized  documents and images.
Our  market  for  telecommunications  services  is  primarily  to  international
long-distance telecommunication service providers on a wholesale basis.

We believe that our video  markets are tied to the progress and  development  of
the Internet,  the deployment of broadband access, the growth of the SOHO (Small
Office Home Office), distance learning and to private network infrastructure.

The Company believes that growth in these sectors is currently high, and that it
appears to be  continuing.  We believe  that this growth will  require a similar
growth in the demand for  software  and  hardware to support the systems used by
Internet service  providers,  private networks and individual end users, as well
as a similar growth in the demand for products that more efficiently communicate
over these systems.  Video communications  technology allows two or more parties
in different locations to use video and audio to communicate simultaneously in a

<PAGE>

real-time environment.  Since video provides an effective means of communication
with "face to face"  benefits when  participants  are unable to meet in a common
location,  we expect this  market to expand  substantially.  The  overall  video
communications  market is a rapidly growing large market.  According to industry
sources, the total video communications  market in the United States is expected
to grow to $5.8 billion by 2005.

The  telecommunications  market was  dramatically  affected by  deregulation  of
certain  aspects of the  telecommunications  industry  and  especially  with the
divestiture by AT&T (American Telephone & Telegraph,  Inc.) of the regional bell
operating companies. A number of competitive  telecommunications  companies were
formed to avail themselves of the business  opportunities  thus offered.  Today,
there  are over 500 U.S.  long  distance  companies.  Foreign  deregulation  and
privatization  have also allowed new long distance  providers to emerge in other
foreign   markets,   although  the  timing  and  effects  are  still  uncertain.
Deregulation has encouraged competition,  which in turn has prompted carriers to
offer a wider  selection  of products  and  services at lower  prices.  Industry
estimates  provide that the lower prices for  telecommunications  services  that
have resulted from increased competition have been more than offset by decreases
in the costs of  providing  such  services and  increases in  telecommunications
usage.  These  estimates  rely upon FCC data for the period 1989  through  1995,
during  which  per-minute  settlement  payments  by  U.S.-based  carriers to the
companies outside the United States that are primarily responsible for providing
telecommunication  services in  particular  countries  (commonly  referred to as
"Post,  Telephone and Telegraphs," or "PTTs") fell 31.4%,  from $0.70 per minute
to $0.48 per minute while  per-minute  international  billed  revenues fell only
13.7%,  from $1.02 in 1989 to $0.88 in 1995.  It is expected  that as settlement
rates and capacity costs continue to decline,  international  long distance will
continue to provide opportunities in the telecommunications market.

Telecommunications  VoIP services consist of both traditional and enhanced voice
and data services between ordinary phones and the addition of interactive  voice
capability to computers,  web sites and email.  These services  satisfy both the
extensive  market of existing  phone users and the expanding  market of computer
users.  Our data  networks as compared to  traditional  telephone  networks  are
better  suited to deliver  future  enhanced  services  to both  phone  users and
computer  users due to the ability to address user  specific  needs and flexible
utilization.  Moreover, the Internet is the most cost-effective data network for
transmitting  any type of data  worldwide,  including  voice.  According  to the
International Telecommunications Union the year 2000 was the first time Internet
capacity  exceeded  international  telephone  circuit  capacity.   According  to
industry sources,  the  international  long distance market by 2003 may approach
$190 billion in revenues.

As the Internet  continues to develop as a communications  and business tool, we
believe that both business and home Internet users will adopt enhanced  services
that require  additional  bandwidth  and web  functionality.  We intend to serve
these market  segments by providing  video  compression  technology,  as well as
value added  services to provide our customers  with the  competitive  edge they
need.  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.  We feel our products currently offer the service and quality the
video market is seeking.

<PAGE>

Sales, Marketing & Distribution

We  market  and  sell our  video,  data  and  voice  products  and  services  to
corporations,  advertising  agencies,  ISPs/ASPs,  distributors  and VARs (Value
Added  Resellers) in commercial,  government,  medical and  educational  markets
through   direct  sales,   resellers  and  agents.   We  primarily   market  our
international  telecommunications  services through our direct wholesale carrier
services  sales staff.  We regularly  attend and are  exhibitors at Internet and
telecom trade shows where we meet potential customers and offer new products and
services to existing customers.

Our existing and prospective customers are provided with sales,  advertising and
promotional  materials by our account service personnel.  Product  demonstration
facilities are  maintained in our offices.  We also provide our sales force with
ongoing  training to ensure that it has the necessary  expertise to  effectively
market and promote our products.

We also  maintain an Internet web site,  which  provides  extensive  information
about our Company, our products and services and contact information.

The five largest telecommunications customers represented 75.3% and 70.4% of the
Company's  revenue for the period February 16, 2001 to December 31, 2001 and the
nine-month  period  ended  September  30,  2002,  respectively.  The ten largest
customers  represented  96.0% and 84.6% of the Company's  revenue for the period
February 16, 2001 to December 31, 2001 and the nine-month period ended September
30, 2002, respectively.

Competition

We  operate  in  markets  that  are  extremely  competitive  and are  influenced
significantly by the marketing and pricing  decisions of other industry members.
The barriers to entry are not  insurmountable  in any of the markets in which we
compete.  We expect  competition in these markets to intensify in the future. We
compete with both  telecommunication  service  providers  and  manufacturers  or
resellers  of video  communications  products,  some of which are  larger,  have
longer operating histories have substantially  greater financial,  technical and
marketing resources, larger customer bases, longer operating histories,  greater
name  recognition  and more  established  relationships  in the industry than we
have.  Consequently,  these  competitors  can devote  greater  resources  to the
development,  promotion,  sale and  support  of  their  products.  In  addition,
competitors  with a  large  installed  customer  base  may  have  a  significant
competitive  advantage over us.  Accordingly,  these potential customers may not
consider or evaluate  our  products.  We expect to face  increased  competition,
particularly price competition,  from other technology providers.  These vendors
may develop products with  functionality  similar to our products or may provide
alternative  solutions.  Our  distributors  and OEMs may also compete with us by
selling their own current products or products that they may develop, as well as
selling products that they purchase from us. In addition,  current and potential
competitors may establish  cooperative  relationships  among  themselves or with
third parties to develop and offer competing products.

We believe that we must invest significant resources in developing new products,
enhancing  current  products and  maintaining  customer  satisfaction  to remain
competitive.  If we fail to do so, our products may not compete  favorably  with
our  competitors'  products,  and our  business  could be  materially  adversely
affected.

It is  also  common  in the  networking  industry  for  competitors  to  acquire
companies to  introduce  new  products or emerging  technologies.  Consequently,
competitors with larger market  capitalizations or cash reserves than us will be
better  positioned to acquire new  technology or products  capable of displacing
our  product  lines.  If we fail  to  effectively  introduce  new  products  and
enhancements  on a  timely  basis,  our  business  may be  materially  adversely
affected.

<PAGE>

The long distance  telecommunication  market is highly competitive as we compete
for customers in the  telecommunications  markets  primarily  based on price and
quality of service  offered and  experience  intense  price  competition  in our
telecommunications   business.  There  are  several  large  and  numerous  small
competitors  and we expect to face  continuing  competition on price and service
offerings  from  existing  competitors  and new market  entrants  in the future.
Increased competition could force us to reduce our prices if our competitors are
able to procure rates or enter into service agreements that are comparable to or
better than those we obtain.  Similarly,  we have no control over the prices set
by our competitors in the long distance resale carrier-to-carrier market.

Intellectual Property

As of  September  30,  2002,  we have  filed  three  patent  and  two  trademark
applications,  which  applications  are in  various  stages in the  process  for
approval. The patent information is as follows:

----------------------------------------------    ------------------------------
                                                           APPLICATION
                    TITLE                                    NUMBER
----------------------------------------------    ------------------------------

System and Method for Image Compression and
     Decompression                                          09/038,562

System and Method for Image Compression and
   Decompression                          -
     Divisional                                             09/727,242

System and Method for Image Compression and
     Decompression - Divisional                             09/727,241

The trademark  matters are an application  for "Changing the Bandwidth  Equation
(CTM)"  which is being  examined  and an  approved  application  for  "Lightning
Strike."


Government Regulation of the Telecommunications Industry

As a U.S.  telecommunications  company,  the Company is subject to regulation by
federal agencies and states within which it operates. As a non-dominant carrier,
as classified by the Federal  Communications  Commission  ("FCC") and defined as
lacking  substantial power to influence market prices in the U.S., the Company's
provision  of  international  and  domestic  long  distance   telecommunications
services in the U.S. is  generally  subject to less  regulation  than a dominant
carrier.   The  FCC  and  relevant  state  authorities   regulate  ownership  of
transmission  facilities,  provision  of services  and the terms and  conditions
under which the  Company's  services are provided.  The  Company's  services are
subject to the provisions of the  Communications  Act of 1934, as amended by the
Telecommunications Act of 1996 (the "Act") and the related regulations.  Various
state laws and regulations as administered by the relevant state authorities are
also applicable.

In the United  States,  to the extent  that the  Company  offers  services  as a
carrier,  the Company is required to obtain  authority  under Section 214 of the
Act, in order to provide  telecommunications  service that originates within the
U.S.  and  terminates  outside the United  States.  The Company has obtained the

<PAGE>

required Section 214  authorization  from the FCC to provide U.S.  international
service. In addition, as a condition of the Company's Section 214 authorization,
the Company is subject to various reporting and filing requirements.  Failure to
comply with the FCC's rules could  result in fines,  penalties,  forfeitures  or
revocation of the Company's FCC authorization.

The use of the Internet to provide  telephone  service is a recent  development.
Although the FCC has determined that information  service  providers,  including
Internet  protocol  ("IP")  telephony  providers,   are  not  telecommunications
carriers,  the Company  cannot be certain that the FCC will continue to maintain
this position.  If the FCC determines that IP telephony is subject to regulation
as a telecommunications  service, it may subject providers of Internet telephony
services to  traditional  common  carrier  regulation  and require  them to make
universal  service  contributions  and pay  access  charges  to  terminate  long
distance  traffic.  In  addition  to the  FCC  and  Congress,  state  regulatory
authorities  and  legislators  may also assert  jurisdiction  and  regulate  the
provision of intrastate IP telephony services.

Although the Company provides international  long-distance termination services,
it is common in the industry for  domestic  vendors to impose  certain fees upon
services  unless  specifically  exempted.  The FCC  issued  an  order in 1997 to
implement the provisions of the Act relating to the preservation and advancement
of universal  telephone service (the "Universal  Service Order").  The Universal
Service Order  requires all  telecommunications  carriers  providing  interstate
telecommunications  services  to  pay  fees  based  on  certain  interstate  and
international  end  user  telecommunications  revenues.  Many  state  regulatory
agencies  have  also  begun   proceedings  to  revise  state  universal  support
mechanisms  to make  them  consistent  with the  requirements  of the Act.  As a
result,  the  Company  may be subject to state,  as well as  federal,  universal
service fund contribution requirements, which will vary from state to state. The
amounts  remitted to the  Universal  Service Fund may be billed to the Company's
customers.  If the Company  does not bill these  amounts to its  customers,  its
profit margins may be less than if it had elected to do so. However, if the

Company  elects to bill these  amounts to its  customers,  customers  may reduce
their use of the Company's  services,  or elect to use the services  provided by
the Company's competitors.  In May 2001, the FCC proposed several changes to its
Universal  Service Fund regulations  that, if adopted,  would alter the basis on
which the Company's  Universal Service Fund contributions are determined and the
ability  and  means  by  which  such  contributions  may be  recovered  from the
Company's customers.  The effect of the Universal Service Fund requirements (and
comparable state contribution  requirements) on the telecommunications  industry
generally and on certain of the Company's  business  activities are not known at
this time.

Research and Development Activities

We employ a technical  staff that is devoted to the  improvement and enhancement
of our existing Internet products and services as well as the development of new
technologies  and  products.  We  employ a staff  of 9  software  engineers  who
develop, test and evaluate proprietary  applications.  The costs associated with
these  efforts in the quarter  ended  September  30, 2002 totaled  approximately
$438,000.  To augment these resources,  we employ  independent  consultants.  We
expect that we will continue to commit  resources to research and development in
the future to further develop our products.

<PAGE>

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. A new
release of Messenger Pro has  eliminated  the need to send an  executable  file,
which frequently was being blocked by email systems and firewalls.  By sending a
link instead of an  executable  the product now lends itself to be utilized in a
number of new  application  areas.  We have sold and deployed  more then 300,000
licenses of Messenger Pro.  Additionally  we have a number of service  providers
deploying  Messenger  Pro as an  enhanced  monthly  service  offering.  In those
instances,  Vianet  and the  Service  Provider  shares  in the  monthly  revenue
generated.

Video  Interactive  Multipoint,  a new product,  is now available.  This product
includes a number of  features  and  capabilities  such as the ability to change
window sizes from small (176x144) to large  (352x288),  document  viewing camera
(640x480),  user selectable  bandwidth  usage, and  interoperability  with other
major H.323 video conferencing  systems.  Using Vianet's Licensing Server allows
Service  Providers  to offer  multiple  versions  (class  of  Service)  of Video
Interactive  Multipoint  including  audio-only,  2-way,  3-way,  5-way  or fully
functioning.  In  addition  to the more then  300,000  licenses  deployed of our
previous Video Interactive product, the Video Interactive Multipoint product has
been in trials with both enterprise and service providers since last quarter.

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 will continue to add additional features that our customers ask for in future
releases of all our products.

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 has the ability to easily  implement  enhanced  services.  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.

No  assurance  can be given that a market will exist for the  products  once the
development is completed, nor can there be any assurance that we will be able to
successfully  develop new  technologies or effectively  respond to technological
changes or new industry standards or developments on a timely basis, if at all.

<PAGE>

Results of Operations for the  Three-Month  Period Ended  September 30, 2002 and
2001

Revenues

Revenues for the  three-month  period ended September 30, 2002 were $8.2 million
as compared to revenues of $6.4 million for the comparable  2001 period,  a $1.8
million  increase.  The increase is primarily due to a $1.8 million  increase in
telecommunications  revenue  that  is  attributable  to  the  telecommunications
revenue of the Company's subsidiary, VComm, which was acquired on July 24, 2001.
Thus, the comparable 2001 period excludes approximately three weeks in operating
results for VComm for the 2002 period.  Also, the increase  reflects  $50,805 in
revenue software sales of our video products and professional  services relating
to  the  installation  and  maintenance  of  our  software.  The  video  product
operations are not included in the prior 2001 quarter  results because they were
not consolidated into the Company's financial statements until December 31, 2001
due to the  accounting  required  for  the  reverse  merger  experienced  by the
Company.

Costs and Expenses

Costs of Revenue

Costs of revenue for the  three-month  period ended September 30, 2002 increased
by $1.3  million  to $7.7  million  from  $6.4  million  for the  quarter  ended
September  30, 2001.  This is due to the costs  associated  with the increase in
telecommunications  revenue  for the 2002 third  quarter as compared to the 2001
third quarter.  Costs of $10,848 related to video products were included for the
2002 third quarter while none are included in the prior 2001 quarter results due
to the accounting  required for the reverse merger experienced by the Company as
described above.

Personnel

Personnel  costs for the  three-month  period ended September 30, 2002 were $1.3
million,  as compared to costs of $579,391 for the quarter  ended  September 30,
2001.  The 2002 costs include  salaries and benefits for video  product  segment
personnel  costs of $722,000  which were not  included in the 2001 period due to
the  reverse  merger  accounting.   Telecommunications  segment  employees,  and
independent sales  representatives  represented personnel costs, for the quarter
ended September 30, 2001 with VComm employees beginning July 24, 2001.

Selling, General and Administrative

Selling,  general and  administrative  expenses for the three-month period ended
September 30, 2002  increased by  approximately  $2.5 million to $2.9 million as
compared to selling,  general and administrative expenses of $510,256 during the
quarter  ended  September  30,  2001.  The 2002  expenses  relate  to the  costs
associated with the operations of the Company over the three-month period, while
the 2001 expenses  relate to the operations of the Company prior to the December
31, 2001 merger and the  operations  of VComm  beginning  July 24,  2001.  Video
products  segment  expenses  of  $245,166  are  included  in  the  2002  period.
Additionally, bad debt expense was $2,023,300 higher in the 2002 period compared
to the 2001 period due to the write-off of accounts receivables of two customers
for which $2,137,159 was revenue reported in the 2002 quarter.

<PAGE>

Depreciation and Amortization

Depreciation and amortization expense for the three-month period ended September
30, 2002 was approximately $968,644 and $134,036,  respectively,  as compared to
depreciation and amortization expense of $577,054 and nil, respectively, for the
quarter ended  September 30, 2001. The increase in  depreciation  expense is the
result of including  depreciation  expense for VComm for the entire  quarter and
for  equipment  acquired   subsequent  to  the  2001  period.  The  increase  in
amortization expenses relates to patents and trademarks acquired in the December
31, 2001 merger.

Impairment of Intangible Assets

In connection with the acquisition of Vianet,  the Company  recorded patents and
trademarks at estimated fair value based upon independent valuations on December
31, 2001.  These  long-lived  assets are required to be measured at the lower of
carrying amount or fair value less cost to sell,  whether reported in continuing
operations  or  in  discontinued   operations.   The  Company's   policy  is  to
periodically review the net realizable value of its long-lived assets through an
assessment of the estimated future cash flows related to such assets. Based upon
its most recent  analysis,  the Company  recognized  an  impairment  loss on the
carrying value of patents and trademarks of $1,329,953  during the quarter ended
September 30, 2002.  The company did not  recognize an  impairment  loss for the
quarter ended September 30, 2001. This impairment loss was caused by the revised
forecast for video product sales,  which has diminished the expected future cash
flows  supporting  the  valuation of patents and  trademarks.  As a result,  the
assets  have been  impaired to the present  value of the  estimated  future cash
flows of the reporting unit.

All  business  combinations  initiated  after June 30,  2001 are  required to be
accounted for under the purchase method, in which goodwill and intangible assets
with  indefinite  lives must be tested for  impairment  at least  annually.  The
goodwill  balance was tested for impairment in the third quarter of 2002,  after
the sales forecast for video products  revenue was revised.  Video product sales
during the third  quarter of 2002 were  significantly  below  forecasts  and the
estimated fair value of the reporting unit has been  diminished.  In the quarter
ended June 30,  2002,  the  Company  recognized  a goodwill  impairment  loss of
$1,727,136  based upon a reduction in the expected  present value of future cash
flows of the  reporting  unit.  For the quarter ended  September  30, 2002,  the
Company  completed its  reallocation of the net asset values in the acquisition.
As a  result  of the  reallocation,  goodwill  was  credited  in the  amount  of
$1,853,633  for the reduction of assumed  liabilities.  The  resulting  negative
goodwill  balance was reallocated to the other  intangible  assets on a pro-rata
basis.

Net Loss

Net loss for the  three-month  period ended September 30, 2002 was $6.5 million,
as compared to $1.8 million for the quarter ended  September  30, 2001,  for the
reasons discussed above.


Results of Operations for the Nine-Month Period Ended September 30, 2002 and the
Period February 16, 2001, Inception, Through September 30, 2001

Revenues

Revenues for the nine-month  period ended  September 30, 2002 increased by $22.3
million to $29.8  million,  from  revenues  of $7.5  million for the period from
February 16, 2001 to September  30, 2001.  The 2002 period  revenue  increase is
primarily due to an $20.7 million increase in telecommunications revenue that is
attributable  to the  telecommunications  revenue of the  Company's  subsidiary,
Inter-Tel.NET,  Inc.,  which was  acquired  in July  2001.  Also,  the  increase
reflects $1.6 million in revenue from software  sales of our video  products and

<PAGE>

professional  services  relating  to the  installation  and  maintenance  of our
software.  The video  product  operations  are not  included  in the prior  2001
quarter results because they were not consolidated into the Company's  financial
statements  until  December  31,  2001 due to the  accounting  required  for the
reverse merger experienced by the Company.

Costs and Expenses

Costs of Revenue

Costs of revenue for the  nine-month  period ended  September 30, 2002 was $27.1
million  compared  to $7.5  million  for the period  from  February  16, 2001 to
September 30, 2001. The increase of $19.6 million is due to the costs associated
with the  increases  in our telecom  services for the 2002 period as compared to
the 2001 period.  Costs of $42,684  related to video  products were included for
the 2002 period while none were included in the prior 2001 period results due to
the  accounting  required for the reverse  merger  experienced by the Company as
described above.

Personnel

Personnel  costs  for the  nine-month  period  ended  September  30,  2002  were
approximately  $4.4 million,  as compared to Personnel  costs of $586,036 during
the period from February 16, 2001 to September 30, 2001,a $3.8 million increase.
The 2002 costs are associated  with salaries and benefits for both video product
and  telecommunications  segments  with the addition of VComm  employees in July
2001.  Video product  segment  personnel  cost of $2,439,118 was reported in the
2002 period while none were included in the prior 2001 period results due to the
accounting  required  for the  reverse  merger  experienced  by the  company  as
described above.

Selling, General and Administrative

Selling,  general and  administrative  expenses for the nine-month  period ended
September  30, 2002  increased  by $4.8  million to $5.5  million as compared to
selling,  general and administrative expenses of $672,250 during the period from
February 16, 2001 to September 30, 2001.  The 2002 expenses  relate to the costs
associated with the operations of the Company over the nine-month period,  while
the 2001 expenses  relate to the operations of the Company for five months prior
to the July  2001  VComm  acquisition  and the  December  31,  2001  merger.  In
addition,  the  nine-month  period ended  September  30, 2002  included bad debt
expense of $2.5  million,  primarily  related to third  quarter  revenue for two
customers, while the 2001 period expense was $77,000.

Depreciation and Amortization

Depreciation and amortization  expense for the nine-month period ended September
30, 2002 was approximately $2,909,905 and $800,764, respectively, as compared to
depreciation  expense of  $577,343  and nil,  respectively,  for the period from
February 16, 2001 to September 30, 2001. The increase in depreciation expense is
the result of depreciable assets acquired in the July 2001 VComm acquisition and
the December 31, 2001 merger while the Company did not own any significant fixed
assets  prior to the VComm  acquisition.  The increase in  amortization  expense
relates to amortization  of patents and trademarks  acquired in the December 31,
2001 merger.

Impairment of Intangible Assets

In connection with the acquisition of Vianet,  the Company  recorded patents and
trademarks at estimated fair value based upon independent valuations on December

<PAGE>

31, 2001.  These  long-lived  assets are required to be measured at the lower of
carrying amount or fair value less cost to sell,  whether reported in continuing
operations  or  in  discontinued   operations.   The  Company's   policy  is  to
periodically review the net realizable value of its long-lived assets through an
assessment of the estimated future cash flows related to such assets. Based upon
its most recent  analysis,  the Company  recognized  an  impairment  loss on the
carrying value of patents and trademarks of $1,329,953  during the quarter ended
September 30, 2002. This impairment loss was caused by the revised  forecast for
video  product  sales,  which has  diminished  the  expected  future  cash flows
supporting the valuation of patents and trademarks. As a result, the assets have
been impaired to the present value of the estimated future cash flows.

All  business  combinations  initiated  after June 30,  2001 are  required to be
accounted for under the purchase method, in which goodwill and intangible assets
with  indefinite  lives must be tested for  impairment  at least  annually.  The
goodwill  balance was tested for impairment in the third quarter of 2002,  after
the sales forecast for video products  revenue was revised.  Video product sales
during the third  quarter of 2002 were  significantly  below  forecasts  and the
estimated fair value of the reporting unit has been  diminished.  In the quarter
ended June 30,  2002,  the  Company  recognized  a goodwill  impairment  loss of
$1,727,136  based upon a reduction in the expected  present value of future cash
flows of the  reporting  unit.  For the quarter ended  September  30, 2002,  the
Company  completed its  reallocation of the net asset values in the acquisition.
As a  result  of the  reallocation,  goodwill  was  credited  in the  amount  of
$1,853,633  for the reduction of assumed  liabilities.  The  resulting  negative
goodwill  balance was reallocated to the other  intangible  assets on a pro-rata
basis.


Net Loss

Net loss for the nine-month  period ended  September 30, 2002 was $20.2 million,
as compared to $1.9  million for the period from  February 16, 2001 to September
30, 2001 for the reasons discussed above.

Cash Position

For the nine-month  period ended September 30, 2002, the Company's cash position
decreased  by  $1,405,628  from  $1,462,653  to  $57,025.  Investing  activities
consisted of $325,583 used for purchases of fixed assets, while $30,073 was used
for security deposits. Financing activities consisted of $50,000 used as payment
on past due demand notes and net cash provided from new demand notes of $370,000
and payments under capital leases of $79,313.  The remaining $1,290,659 was used
in operating activities of the Company.


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.

Liquidity and Capital Resources

Vianet and CSC have  operated at a deficit  since  inception and expect to incur
significant  additional operating losses until the Company generates significant
cash flow from operations.  The company reported a net loss of $20.2 million for
the nine-month  period ended  September 30, 2002 and a net loss of $14.2 million
for the year ended December 31, 2001 for the  operations of CSC and Vianet.  The
Company's  operations  were funded  principally by cash flow provided by working
capital deficits.

<PAGE>

Positive cash flow from operations was previously projected for the last quarter
of 2002 but the Company does not believe this to be attainable at this time. The
Company is reducing  personnel  and  facilities  costs in its efforts to achieve
positive cash flow as well as pursuing additional  distribution channels for its
video  products.  At this time the company is unable to forecast  when  positive
cash  flow  may  occur.  We face  considerable  risk in  completing  each of our
business plan steps, such as potential cost overruns;  a lack of interest in our
products in the market on the part of customers; potential further deterioration
of the telecommunications  market;  termination of services by vendors; and/or a
shortfall  of  funding  due to an  inability  to raise  capital  through  equity
transactions  or  financing.  If further  funding is required  and no funding is
received,  this would hinder our ability to meet our operating  goals until such
time as necessary  funds could be raised or we may be forced to curtail or cease
our  operations.  There can be no  assurance  that the  Company  will be able to
obtain additional financing on terms and conditions acceptable to the Company or
at all.

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 or close 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.  We also plan to satisfy
outstanding  liabilities in the form of equity subject to the acceptance of each
debt holder.  However,  no assurance  can be given that we will be successful in
completing any financing or liability  satisfaction.  If we are  unsuccessful in
completing any financing,  we will not be able to fund our current  expenses and
we may have to cease or curtail our operations.

We have used and intend to  continue  to use the  proceeds  from the  financings
described  to execute our sales plan.  Our ability to achieve  success  with our
business is dependent upon obtaining additional financing.

Going Concern Matters

The  accompanying  financial  statements  have been  prepared on a going concern
basis,  which  contemplates  the  realization of assets and the  satisfaction of
liabilities  in the  normal  course  of  business.  As  shown  in the  financial
statements for the period ended September 30, 2002, the Company  incurred losses
of $20.2 million for the first nine months of 2002.

The Company is also in arrears on its capital lease obligations in the amount of
$2,744,035  as of September 30, 2002 and has negative  working  capital of $32.4
million.  The lessor has presented  the Company with a demand letter  requesting
payment of all outstanding  amounts under the capital leases and is currently in
discussions with the Company regarding payment and resolution of various service
issues relating to the equipment.

The Company was recently  notified by Inter-Tel  that it believes the Company is
in default on a principal  payment of $250,000  due  September  22, 2002 under a
note in the amount of  $4,950,000  issued in  connection  with the  purchase  of
VComm,  and further  believes the Company is in default under the note such that
Inter-Tel considers the note subject to acceleration.  The Company and Inter-Tel
are  negotiating  the  priority of  application  for various  amounts  owed by a
subsidiary of Inter-Tel to the  telecommunications  subsidiary of the Company, a
cure of any default and/or modification of the terms of payment under the note.

<PAGE>

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.  These
factors among others raise  substantial  doubt as to whether the Company will be
able to  continue  as a going  concern  for a  reasonable  period  of time.  The
financial  statements do not include any adjustment relating to the recovery and
classification  of assets and  liabilities  that might be  necessary  should the
Company be unable to continue as a going concern.

The Company's  continuation  as a going concern is dependent upon its ability to
generate sufficient cash flow from operations,  to obtain financing arrangements
or equity  investment on a timely basis  sufficient to satisfy  current  working
capital needs and  ultimately to attain  profitability.  The Company is actively
pursuing  additional  financing and equity  financing  through  discussions with
lenders and investment bankers.

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.  Forward-looking  statements
are based on  management's  current views and  assumptions and involve known and
unknown risks that could cause actual  results,  performance or events to differ
materially  from those  expressed  or implied in those  statements.  These risks
include, but are not limited to, the following risks:

         o        we may  be  unable  to  obtain  adequate  sources  of  outside
                  financing in order to continue to satisfy our cash needs until
                  cash flow from operations is sufficient to fund our needs;
         o        our  telecommunications   services  are  highly  sensitive  to
                  declining prices;
         o        competition in our core businesses could substantially  reduce
                  our revenues and our profits;
         o        our revenues and profits will not increase if we are unable to
                  effectively   market  our  video   products   and  expand  our
                  telecommunications business;
         o        our  operations  will be  impaired  if we are unable to obtain
                  cost effective  services from the  telecommunications  vendors
                  that we rely upon;
         o        termination of our carrier agreements with foreign partners or
                  our  inability to enter into carrier  agreements in the future
                  could  materially and adversely  affect our ability to compete
                  in foreign countries;
         o        our revenues and our growth will suffer if our  retailers  and
                  sales   representatives   fail  to   effectively   market  and
                  distribute our products and services;
         o        our   profitability   will  be  impaired   if  we   experience
                  difficulties in collecting our receivables;

<PAGE>

         o        the infringement or duplication of our proprietary  technology
                  could increase our competition and we could incur  substantial
                  costs  in  defending  or  pursuing  any  claims   relating  to
                  proprietary rights;
         o        network  construction or upgrade delays and system disruptions
                  or failures  could  prevent us from  providing  our  services,
                  cause us to lose customers and adversely affect our business;
         o        we may infringe on third party  intellectual  property  rights
                  and could  become  involved  in costly  intellectual  property
                  litigation;
         o        creditors  who have  remained  unpaid may initiate  collection
                  proceedings which could hamper our operations due to the short
                  term cash needs  required  or the effect on assets  subject to
                  debt.




ITEM 3.

CONTROLS AND PROCEDURES

The Chief  Executive  Officer and Chief  Financial  Officer of the Company  have
established and are currently maintaining disclosure controls and procedures for
the Company. The disclosure controls and procedures have been designed to ensure
that material  information relating to the Company is made known to them as soon
as it is known by others  within the  Company.  There  have been no  significant
changes in these controls within the reporting period.

During the period immediately after the end of the quarter,  the Chief Executive
Officer  and the Chief  Financial  Officer  conduct  an update  and a review and
evaluation  of  the  effectiveness  of the  Company's  disclosure  controls  and
procedures.  It is  the  Chief  Executive  Officer's  and  the  Chief  Financial
Officer's opinion, based upon the evaluation they completed by October 31, 2002,
that the controls and  procedures  currently  being  utilized by the Company are
sufficiently  effective to ensure that any material  information relating to the
Company would become known to them within a reasonable time.


PART II - OTHER INFORMATION

Item 1. Legal Proceedings

Except as  described  below,  the Company is not a party to any  material  legal
proceedings or aware of any  governmental  proceeding  being  contemplated  by a
governmental  authority that has become reportable or had material  developments
during the quarter ended September 30, 2002..

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).  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 plaintiff  $36,500 in July 2001,  with the balance
payable  over the  following  eleven  months.  In  September  2001,  we paid the
plaintiff  $73,000 and agreed to pay $62,000 per month starting in January 2002.
We paid the  plaintiff  $124,100  in  January  2002.  There have been no further
payments.

<PAGE>

We are a defendant in an action pending before the Superior Court of Justice,
Ontario, Canada 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.
Agreement in principal has been reached between the parties on mutually
satisfactory terms for the resolution of this matter and withdrawal of the
claim. The Company is currently awaiting the receipt of the formal Settlement
Agreement.

A claim has been filed in the District  Court of Dallas  County,  Texas in which
the plaintiffs have asserted breach of contract,  civil conspiracy,  unspecified
general  damages and exemplary  damages in the amount of  $1,000,000.  The claim
relates  to  the  1999  acquisition  of  PSI  Communications,   Inc.  by  Vianet
Technologies,  Inc.  The Company  considers  this claim to be without  merit and
believes it will prevail in its defense against the suit.

A claim has been filed in U.S.  Bankruptcy Court for the Eastern  District,  New
Orleans Division, by a former vendor asserting breach of contract and payment of
$439,466.  The  Company  has  asserted  disputes  and  offsets in the amounts of
$80,830 and $132,492, respectively.

There are two actions that related to collection of existing accounts payable in
which judgments have been entered against the Company totaling $46,426.

There are 10 vendors  with  pending  litigation  matters  related to  collection
actions  for  existing  accounts  payable  in  the  aggregate  of  approximately
$356,000.

There is also one former employee with pending  litigation seeking $63,281 under
an  employment  agreement  for which  $6,500 has been paid and  $56,781 is still
subject to litigation. This has been settled in a mediation process.

There are two other former  employees  who have filed  claims  under  employment
agreements seeking $28,752 and $17,235, respectively. The Company believes these
claims to be without merit as both employees  previously agreed to accept Vianet
common stock in satisfaction of these amounts and such stock was issued.

A former  employee  has  filed a claim  under an  employment  agreement  seeking
$90,000 for compensation, bonuses and stock options.

We are not aware of any governmental proceeding against the company.

Item 2. Changes in Securities and Use of Proceeds

In  May  2002,  the  Company  issued  800,000  shares  of  common  stock  to two
consultants in consideration for past consulting services valued at $61,538. The
Company  relied on Section 4(2) of the  Securities  Act of 1993, as amended (the
"Act") as the basis of exemption from registration.

In June 2002, the Company issued  3,504,948  shares of common stock to 13 former
and current  employees  in  consideration  for accrued  salaries  owed valued at
$206,104.  The Company  relied on Section 4(2) of the Securities Act of 1993, as
amended (the "Act") as the basis of exemption from registration.

In June  2002,  the  Company  issued  19,948,754  shares  of  common  stock to 9
individuals or entities in consideration  for forgiveness of demand notes valued
at $681,296.  The Company  relied on Section 4(2) of the Securities Act of 1993,
as amended (the "Act") as the basis of exemption from registration.

In June  2002,  the  Company  issued  6,579,625  shares  of  common  stock to 12
individuals  or entities in  settlement  of accounts  payable and other  accrued
expenses  valued  at  $376,945.  The  Company  relied  on  Section  4(2)  of the
Securities  Act of 1993,  as amended (the "Act") as the basis of exemption  from
registration.

<PAGE>

In October 2002,  the Company issued 588,611 shares of common stock to a current
employee in  consideration  of accrued  salary and other  amounts owed valued at
$20,602.  The Company  relied on Section 4 (2) of the Securities Act of 1993, as
amended,  as the basis of exemption from  registration.  This equity transaction
was  accounted  for during the quarter  ended  September  30, 2002 as underlying
agreement was reached by that date.

In October  2002,  the Company  issued  3,333,334  shares of common stock to two
purchasers for total consideration of $100,000.  The Company relied on Section 4
(2) of the  Securities  Act of 1993, as amended,  as the basis of exemption from
registration. This equity transaction was accounted for during the quarter ended
September 30, 2002 as underlying agreement was reached by that date.


In October  2002,  the Company  issued  1,866,667  shares of common stock to two
companies or  individuals  in  settlement  of accounts  payable or other accrued
expenses or other amounts owed valued at $56,000.  The Company relied on Section
4 (2) of the Securities Act of 1993, as amended,  as the basis of exemption from
registration. This equity transaction was accounted for during the quarter ended
September 30, 2002 as underlying agreement was reached by that date.



Item 3.  Defaults Upon Senior Securities

The Company is in default on two 6%  Convertible  Debentures  due  September 30,
2002 in the principal  amounts of $700,000 and $250,000 with accrued interest of
$214,559 and $64,547, respectively.



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

         99.1     Certification  of  the  Chief  Executive   Officer  of  Vianet
                  Technologies,  Inc.  Pursuant to 18 U.S.C.  Section  1350,  As
                  Adopted Pursuant to Section 906 of the  Sarbanes-Oxley  Act of
                  2002.

         99.2     Certification  of  the  Chief  Financial   Officer  of  Vianet
                  Technologies,  Inc.  Pursuant to 18 U.S.C.  Section  1350,  As
                  Adopted Pursuant to Section 906 of the  Sarbanes-Oxley  Act of
                  2002.

         99.3     Certification  of  the  Chief  Executive   Officer  of  Vianet
                  Technologies,   Inc.,   regarding   Disclosure   Controls  and
                  Procedures.

         99.4     Certification  of  the  Chief  Financial   Officer  of  Vianet
                  Technologies,   Inc.,   regarding   Disclosure   Controls  and
                  Procedures

<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, 2002                            /s/ VICTOR E. GOETZ
                                                     ---------------------------
                                                     Victor E. Goetz
                                                     Chief Financial Officer