--------------------------------------------------------------------------------
                                  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 MARCH 31, 2001

                                       OR

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

      For the transition period from ___________________ to ___________________

      Commission File No. 000-29177


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

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

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

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

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

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

      There were 34,960,159 shares of the registrant's Common Stock, par value
$.001 per share, issued as of May 15, 2001.

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


                                      - 1 -
<PAGE>

                   VIANET TECHNOLOGIES, INC. AND SUBSIDIARIES

                                      INDEX


                                                                            Page
                                                                            ----
Part 1    Financial Information

Item 1    Financial Statements

          Consolidated Balance Sheets at March 31, 2001 (unaudited) and
          December 31, 2000                                                    3

          Consolidated Statements of Operations for the three months
          ended March 31, 2001 and 2000 (unaudited)                            4

          Consolidated Statements of Cash Flows for the three
          months ended March 31, 2001 and 2000 (unaudited)                   5-6

          Notes to Consolidated Financial Statements (unaudited)            7-10


Item 2    Management's Discussion and Analysis                             11-17


Part II   Other Information                                                   18

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


          (b) Reports on Form 8-K



          Signatures                                                          19


                                      - 2 -
<PAGE>

                   VIANET TECHNOLOGIES, INC. AND SUBSIDIARIES

                           CONSOLIDATED BALANCE SHEETS

<TABLE>
<CAPTION>
                                                                                  March 31, 2001    December 31, 2000
                       ASSETS                                                      (unaudited)          (audited)
                                                                                  --------------    -----------------
<S>                                                                               <C>               <C>
Current Assets:
  Cash                                                                            $        2,139    $           7,546
  Accounts receivable, net of allowance of $69,648 in 2001 and $74,648 in 2000             3,799                4,092
  Receivable from related party                                                           51,468               31,668
  Prepaids and other current assets                                                       47,465               52,021
                                                                                  --------------    -----------------
      Total Current Assets                                                               104,871               95,327
                                                                                  --------------    -----------------
Property and Equipment, less accumulated depreciation
  of $700,198 in 2001 and $574,791 in 2000                                               652,159              777,566
                                                                                  --------------    -----------------
Notes receivable from Develcon Electronics Ltd., less allowance of
    $3,422,946 in 2001 and $2,422,946 in 2000                                                 --                   --
Security Deposits                                                                        233,622              235,872
                                                                                  --------------    -----------------

                                                                                  $      990,652    $       1,108,765
                                                                                  ==============    =================

LIABILITIES AND DEFICIENCY IN SHAREHOLDERS' EQUITY

Current Liabilities:
  Accounts payable and accruals                                                        4,569,220            4,901,014
  Loans payable - related parties                                                          4,782                4,782
  Demand notes payable                                                                   375,000              200,000
  Convertible notes payable, net of discount of $2,551,400 in 2001                     4,804,850              500,000
  Note payable - bank                                                                         --            1,000,000
  Net liabilities of discontinued operations held for sale                               434,457              667,287
                                                                                  --------------    -----------------
      Total Current Liabilities                                                       10,188,309            7,273,083
                                                                                  --------------    -----------------
Convertible Notes Payable (noncurrent)                                                 1,125,000            1,125,000
                                                                                  --------------    -----------------

Deficiency in Shareholders' Equity
  Common shares, $0.001 par value; 100,000,000 shares authorized; 31,426,290
    and 24,476,143 shares issued and 31,336,353 and
    24,386,206 shares outstanding, respectively                                           31,426               24,476
  Treasury stock                                                                        (200,000)            (200,000)
  Subscription receivable                                                                   (500)                (500)
  Additional paid-in capital                                                          30,117,601           31,447,655
  Warrants issued                                                                     15,793,810           10,717,050
  Deferred offering costs                                                             (1,571,226)                  --
  Accumulated deficit                                                                (54,493,768)         (49,277,999)
                                                                                  --------------    -----------------
      Total Deficiency in Shareholders' Equity                                       (10,322,657)          (7,289,318)
                                                                                  --------------    -----------------
                                                                                  $      990,652    $       1,108,765
                                                                                  ==============    =================
</TABLE>

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


                                      - 3 -
<PAGE>

                   VIANET TECHNOLOGIES, INC. AND SUBSIDIARIES

                      CONSOLIDATED STATEMENTS OF OPERATIONS

                                   (UNAUDITED)

<TABLE>
<CAPTION>
                                                         Three Months Ended
                                                   ------------------------------
                                                   March 31, 2001  March 31, 2000
                                                   --------------  --------------
<S>                                                <C>             <C>
Revenue and Other Income:
  Sales and services                               $       28,415  $       74,334
  Interest and other income                                    33          44,137
                                                   --------------  --------------
                                                           28,448         118,471
                                                   --------------  --------------
Costs and Expenses:
  Cost of goods and services sold                             916           2,483
  Selling, general and administrative                   2,059,378       1,910,278
  Research and development                                535,018         876,128
  Depreciation and amortization                           125,407         495,782
  Interest and other financing costs                    3,181,702         325,138
                                                   --------------  --------------
                                                        5,902,421       3,609,809
                                                   --------------  --------------
Loss From Continuing Operations                        (5,873,973)     (3,491,338)
                                                   --------------  --------------

Discontinued Operations

  Operating loss                                               --        (515,960)
  Loss on disposal                                             --        (450,000)
                                                   --------------  --------------
Loss From Discontinued Operations                              --        (965,960)
                                                   --------------  --------------
Loss Before Extraordinary Item                         (5,873,973)     (4,457,298)
Net Gain on Extinguishment of Debt                        658,204              --
                                                   --------------  --------------
Net Loss                                           $   (5,215,769) $   (4,457,298)
                                                   ==============  ==============

Earnings (Loss) per share - basic and diluted
  Continuing operations                            $        (0.21) $        (0.21)
  Discontinued operations                                      --           (0.06)
  Net gain on extinguishment of debt                         0.02              --
                                                   --------------  --------------
  Earning (Loss) per share - basic and diluted     $        (0.19) $        (0.27)
                                                   ==============  ==============
Weighted average number of shares outstanding          27,534,886      16,452,109
                                                   ==============  ==============
</TABLE>

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


                                      - 4 -
<PAGE>

                   VIANET TECHNOLOGIES, INC. AND SUBSIDIARIES

                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                                   (UNAUDITED)

<TABLE>
<CAPTION>
                                                                      Three Months Ended
                                                               --------------------------------
                                                               March 31, 2001    March 31, 2000
                                                               --------------    --------------
<S>                                                            <C>               <C>
Operating Activities:
  Net loss                                                     $   (5,215,769)   $   (4,457,299)
  Adjustments to reconcile net loss to net cash used
    in operating activities:
      Provision for (recovery of) bad debts                            (5,000)            6,000
      Unearned fees                                                        --           186,457
      Net gain on extinguishment of debt                             (658,204)               --
      Loss from discontinued operations                                    --           965,960
      Imputed interest                                                     --           (36,559)
      Depreciation and amortization                                   125,407           495,781
      Issuance of equity instruments for services, interest
      and other financing costs                                     3,519,527           136,931
      Increase (decrease) in cash attributable to changes in
        operating assets and liabilities:
          Accounts receivable                                           5,293           (88,965)
          Prepaids and other current assets                             4,556            60,912
          Net Assets and Liabilities of discontinued
            operations available for sale                            (232,830)         (710,000)
          Accounts payable and accruals, and other                    190,718          (150,068)
                                                               --------------    --------------
  Net Cash Used In Operating Activities                            (2,266,302)       (3,590,850)
                                                               --------------    --------------

Investing Activities:
  Security deposits                                                     2,250                --
  Loans to related parties                                            (19,800)          (41,008)
  Capital expenditures                                                     --           (18,344)
                                                               --------------    --------------
  Net Cash Used In Investing Activities                               (17,550)          (59,352)
                                                               --------------    --------------
Financing Activities:
  Issuance of common stock and warrants                                 3,445         3,603,988
  Proceeds from secured convertible notes                           2,100,000                --
  Proceeds from notes payable                                         175,000                --
  Principal payments of long term debt                                     --            (5,316)
  Loans from related parties                                               --           252,837
                                                               --------------    --------------
  Net Cash Provided By Financing Activities                         2,278,445         3,851,509
                                                               --------------    --------------
  Net Increase (Decrease) In Cash                                      (5,407)          201,307
Cash at beginning                                                       7,546           115,101
                                                               --------------    --------------
  Cash at end                                                  $        2,139    $      316,408
                                                               ==============    ==============
Supplemental Disclosures of Cash Flow Information
  Cash paid for interest                                       $           --    $       27,432
                                                               ==============    ==============
</TABLE>

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


                                      - 5 -
<PAGE>

                   VIANET TECHNOLOGIES, INC. AND SUBSIDIARIES

                CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)

                                   (UNAUDITED)

<TABLE>
<CAPTION>
                                                                        Three Months Ended
                                                                 -------------------------------
                                                                 March 31, 2001   March 31, 2000
                                                                 --------------   --------------
<S>                                                              <C>              <C>
Noncash Transactions:

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

  Issuance of common stock and warrants for financing services   $           --   $    2,025,588
                                                                 ==============   ==============

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

  Issuance of common stock and warrants for debt                 $    1,522,443   $           --
                                                                 ==============   ==============

  Converible notes issued for common stock and warrants          $    1,532,105   $           --
                                                                 ==============   ==============

  Common stock issued for deferred offering costs                $      474,560   $           --
                                                                 ==============   ==============

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

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


                                      - 6 -
<PAGE>

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

1.    Basis of Presentation:

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

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

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

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

2.    Related Party Transactions

      Purchase Agreement:

In January 2001, Vianet entered into a Purchase Agreement (the "Agreement") with
Vida Technologies, Inc. ("Vida Technologies") under the terms of which Vianet
agreed to convey (i) all of it's ownership and exclusive rights to all
intellectual property related to Access, and (ii) the fiber optic product lines
of Vianet and Access, to Vida Technologies, a corporation controlled by
shareholders of Vianet and former employees of Access. Also, under the terms of
the Agreement, Access assigned its executive employment agreements to Vida
Technologies. No additional losses were recognized in the first quarter of 2001
related to the disposition of Access. The loss in 2000 was made up of $515,960
associated with the operations of Access and a $450,000 loss provision related
to Develcon, a former subsidiary.

      Employment / Consulting Agreements:

The Company incurred consulting and management fees of approximately $44,000
during the three-month period ended March 31, 2001 to CFM Cpital Limited and
Xelix Capital Limited, entities controlled by the Company's CFO and Chairman,
respectively.

      Fees and Expenses:

In January 2001, the Company paid WorldCorp Management Group, a shareholder,
$115,000 in cash in connection with investor relations services performed from
August 1999 to March 2001. The fees were agreed on and based upon financing
transactions consummated during that time period.

      Financings:

In March 2001, the Company issued 2,437,553 and 1,218,777 warrants to purchase
common stock to CFM and Xelix, respectively, at exercise prices of $0.16 per
share. The warrants expire in 10 years. The number of shares to be issued upon
exercise of such warrants is equal to 8% for CFM and 4% for Xelix of the
outstanding number of shares of Vianet as of the issue date. During the term of
the warrants, the holders are entitled to purchase from the Company, on the same
terms as provided for in the warrant, additional shares equal to 8% and 4%,
respectively, of the aggregate number of additional shares issued by the
Company. The Company determined the fair value of the warrants to be
approximately $525,000 by using available market information and commonly
accepted valuation methodologies. The management fee is included in Selling,
general and administrative expense in the Consolidated Statement of Operations
for the three-months ended March 31, 2001.

3.    Equity Transactions

      Settlement:

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


                                      - 7 -
<PAGE>

three-months ended March 31, 2001. In return, the Bank assigned its entire
interest in Develcon's indebtedness to the Company. The Company estimates that
its interest in the Develcon indebtedness has no value.

      Demand Notes Payable:

In March 2001, the Company issued demand notes payable aggregating $75,000 to
two investors. The notes are due on April 30, 2001 and bear an interest rate of
8%. In addition, the notes contain provisions for repayment with common stock of
the Company. The Company determined the market value of the unissued shares
accrued for in 2001 to be approximately $29,000 and such amount is included in
interest and other financing costs in the Consolidated Statement of Operations
for the three-months ended March 31, 2001.

      Financings:

In January 2001, the Company issued an aggregate of $2,100,000 principal amount
of 8% Secured Convertible Notes (the "Notes") due January 9, 2002 in a private
placement to eight investors. In addition, 9,999,999 five-year warrants to
purchase common stock were issued at an exercise price not to exceed $0.28875,
in connection with the issuance of the Notes. The exercise price of the warrants
approximated 110% of the fair market value of our common stock at the time of
issuance. Simultaneously with such transaction, shareholders of 1,566,666 shares
of previously issued common stock agreed to return such shares for cancellation
in consideration for the issuance of $4,700,000 convertible notes which is an
amount equal to the original purchase price for such shares. The notes are due
on January 9, 2002 and bear interest at a rate of 8% per annum. In connection
with such transactions, the Placement Agents received cash fees of $103,750,
warrants to purchase an aggregate of approximately 1,036,962 common shares, and
$56,250 principal amount of the Notes. The Notes are considered to contain a
beneficial conversion feature as they were issued at a conversion price, which
was less than the fair value of the common stock at the date of issuance. The
Company determined the fair value of the beneficial conversion feature of the
Notes to be approximately $2,015,000. This amount was immediately expensed and
included in Interest and other financing costs, as the conversion feature was
immediately available to the investors. The Company also determined the fair
value of the warrants issued to be approximately $3,168,000 by using available
market information and commonly accepted valuation methodologies. This amount is
being amortized using the interest method over the term of the Notes. The amount
included in Interest and other financing costs in the Consolidated Statement of
Operations for the three-months ended March 31, 2001 was approximately $616,000.
The Notes are collateralized by all of the Company's assets and approximately
3,800,000 shares (the "Secured Shares") owned by the Company's Chairman and its
CFO. The Company has agreed to issue up to 5% of the Secured Shares to the
Chairman and the CFO as replacement shares in the event of a default.


In January 2001, the Company issued 1,000,000 shares of common stock and
warrants to purchase 4,392,004 common shares at an exercise price not to exceed
$0.28875 to a private investment group in consideration of their agreeing to
furnish a $10 million, 2-year equity line of credit. The Company determined the
market value of the shares at the date of issuance to be $406,200 and the fair
value of the warrants to be approximately $1,097,000 by using available market
information and commonly accepted valuation methodologies. These amounts are
included in Deferred offering costs in the Consolidated Balance Sheet as of
March 31, 2001. The terms of the agreement allows the Company to request funds
on a monthly basis. The funds available each month from this line shall be based
upon the average daily price of our shares on each separate trading day during
the twenty-two trading days following the delivery of our request for funds.
There is a funding limit of $1.0 million in any one month. The Company will
issue common shares to the investors in exchange for each month's credit line
draw down. These common shares will be issued at 85% of the average daily price
of our shares that are traded during the twenty-two trading days following the
date the Company requests the funds. The execution of the line of credit is
dependent upon an approval by the Securities and Exchange Commission of a
registration statement, which has been filed with the Securities and Exchange
Commission on May 9, 2001.

In January 2001, the Company issued 1,294,999 shares of common stock in exchange
for services previously performed (and accrued in 2000) approximating $473,000.
In addition, the Company issued 238,095 shares of common stock and warrants to
purchase 238,095 shares of common stock at an exercise price of $0.28875 per
share as full payment for a $50,000 outstanding debt. In connection with the
issuance of these shares and warrants, the Company incurred a loss on the
extinguishment of debt of approximately $60,600 by using available market
information and commonly accepted valuation methodologies. The $60,600 loss has
been included in net gain on extinguishment of debt in the Consolidated
Statement of Operations for the three-months ended March 31, 2001.

In January 2001, the Company issued 4,144,104 shares of common stock to
shareholders that participated in prior


                                      - 8 -
<PAGE>

private placements. The shares were issued as consideration for adjustments
required due to a decrease in the market value of the Company's stock six months
after the effective date of the registration statement relating to the
securities purchased in these private placements. The Company received no
proceeds from this stock issuance. The Company recorded the par value of the
shares issued as a reduction of additional paid-in capital on the Consolidated
Balance Sheet as at March 31, 2001.

In February 2001, the Company issued warrants to purchase 1,000,000 shares of
the Company's common stock in connection with a distribution agreement. The
warrants expire in two years and are exercisable at $0.25 per share. The Company
determined the fair value of the warrants to be approximately $122,000 by using
available market information and commonly accepted valuation methodologies. This
amount was recorded as a distribution fee and is included in Selling, general
and administrative expenses in the Consolidated Statement of Operations for the
three-months ended March 31, 2001. The warrants were issued to an entity
controlled by the Company's Chief Executive Officer. In addition, the Company
may issue additional warrants to purchase up to 2,000,000 shares of common
stock at exercise prices of $0.25 to $0.50 per share expiring in two years from
the date of issuance. The additional warrants will be issued on a pro rata basis
based upon revenue resulting from the distribution agreement.

In February 2001, the Company issued 281,876 shares of common stock to a
placement agent for services rendered in connection with a tender offer. The
Company determined the market value of the shares at the date of issuance to be
$68,360. Such amount is included in Deferred offering costs in the Consolidated
Balance Sheet as of March 31, 2001.

In February 2001, in connection with a strategic marketing alliance with Ogilvy
Group Inc. the Company issued warrants to purchase 1,000,000 shares of common
stock at an exercise price of $0.25 per share expiring two years from the date
of issuance. The Company determined the fair value of the warrants to be
approximately $122,000 by using available market information and commonly
accepted valuation methodologies. This amount was recorded as a distribution fee
and is included in Selling, general and administrative expenses in the
Consolidated Statement of Operations for the three-months ended March 31, 2001.
In addition, the Company may issue additional warrants to purchase up to
2,000,000 shares of common stock at an exercise price of $0.25 per share
expiring two years from the date of issuance. The warrants will be issued on a
pro rata basis based upon revenue resulting from the alliance.

In February 2001, the Company agreed to issue 1,427,623 shares of common stock
to an existing shareholder in exchange for a $100,000 non-interest bearing
demand loan. 867,623 and 560,000 of these shares were issued in March and
April 2001, respectively. The Company determined the market value of the shares
at the date of agreement to be approximately $379,000 and such amount is
included in interest and other financing costs in the Consolidated Statement of
Operations for the three-months ended March 31, 2001.

In March 2001, the Company issued 175,000 shares of common stock to entities
providing investor relations and consulting services. The Company determined the
market value of the shares at the date of issuance to be $30,083 and such amount
is included in Selling, general and administrative expenses in the Consolidated
Statement of Operations for the three-months ended March 31, 2001.

4.    Reclassification:

Certain reclassifications, in addition to the restatement for discontinued
operations of Access and Develcon, have been made to the 2000 consolidated
financial statements to conform to the 2001 presentation.


                                      - 9 -
<PAGE>

5.    Subsequent Events

      Financing:

In April and May 2001, the Company issued $481,500 one-year notes and 7,045,238
five-year warrants to purchase shares of common stock at a price not to exceed
$0.28875. Simultaneously with and as a condition to these transactions, the
shareholders of 334,000 shares of the common stock and 501,000 related warrants
issued pursuant to previous private placement offerings agreed to return such
shares and warrants for cancellation in consideration for the issuance of
convertible notes and warrants in an amount equal to their original purchase
price for such securities. In connection with such transactions, the Placement
Agents received cash fees of approximately $39,100 and warrants to purchase an
aggregate of approximately 227,381 common shares at a price not to exceed
$0.28875.

In April 2001, the Company issued 1,254,618 shares of common stock in exchange
for services previously performed and accrued in 2000 approximating $183,700 and
issued 736,938 shares of common stock to employees in settlement of compensation
accrued in the quarter ended March 31, 2001.

In May 2001, the Company issued warrants to purchase 225,000 shares of common
stock at an exercise price of $0.01 per share expiring two years from the date
of issuance for investor related services performed and accrued in March 2001.

Should the above transactions have been consummated at March 31, 2001, the
effect on earnings per share would have been anti-dilutive.


                                     - 10 -
<PAGE>

ITEM 2.

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS FOR THE THREE MONTH PERIOD ENDED MARCH 31, 2001

This quarterly report on Form 10-QSB contains forward-looking statements that
are subject to risks and uncertainties, which could cause actual results to
differ materially from those expressed or implied in the statements.
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
in conjunction with the condensed financial statements and related notes to
financial statements included in this report. In addition, please see our
Management Discussion and Analysis of Financial Condition and Results of
Operations and audited financial statements and related notes included in our
Annual Report on Form 10-KSB for the year ended December 31, 2000. Vianet
Technologies, Inc. is referred to as "we," "us" or "our" in this report.

DESCRIPTION OF BUSINESS.

Our Business

We design and market advanced data visual communication technologies and
services that allow our customers to deliver rich media experiences as a market
differentiator.

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

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

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

Compression Technology Products, E-Commerce and Value Added Services

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

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


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            video file;
      o     LS Video Interactive - a suite of Video Conferencing products;
      o     LS Power Zoom - a product that allows a user to zoom and pan on
            still images; and
      o     LS Video Stream - a streaming video product that allows users to
            view video on demand.

During late 2000, we determined that the revenue model originally anticipated of
direct product sales contains considerable uncertainties due in part to
competition, market conditions and our customers' perception of value that our
products provide. Accordingly, we have changed our marketing focus to the
provision of visual communications as a suite of service offerings. While this
does not preclude the future sale of products and licensing arrangements, this
change in market strategy made it prudent to write down the goodwill and
software development costs recorded to reflect the value of the products
themselves.

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.

Research and Development Activities

On acquisition, the Vianet Labs products were in the form of CODECS
(COmpressor/DECompressors) representing mathematical algorithms that had been
utilized in a "proof of concept" suite of products known as LS Interactive, LS
Messenger, LS Video Streaming, LS Power Zoom, 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), debugging and the integration across multiple platforms
as well the further enhancement and development of the basic CODECS.

LS Messenger has moved from a proof of concept to a product phase. LS Messenger
and LS Messenger Pro have been tested on Windows 98, Windows NT, and Windows
2000. We have started to market these products with a positive response.

LS Video Interactive point to point has moved past the beta stage into a product
phase. We have started development of LS Video Interactive Multipoint and the
beta release of this product is targeted for June 2001.

We launched major codec improvement initiatives in April 2000. The result of
this research initiative is a codec with improved video quality, as well as, the
prototype version of our Pure Wavelet codec. The Pure Wavelet codec has the
capability of streaming video at multiple bandwidths from the same file. As of
the date of this filing, the image quality of the Pure Wavelet codec is not as
good as our traditional codecs. Additionally, the Pure Wavelet codec requires
more processor resources than our current codec technology.

In March of 2000, we resumed development of Power Zoom. Power Zoom gives Web
Developers the capability to server 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.

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


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Results Of Operations for the three-month periods ended March 31, 2001 and March
31, 2000

Revenues and other income

      Revenues and other income for the three-month period ended March 31, 2001
decreased $90,023 to $28,448, as compared to revenues of $118,471 during the
three-month period ended March 31, 2000. The 2001 revenue was primarily
attributable to software sales of our video products and professional services
relating to the installation and maintenance of our software. The 2000 revenue
was made up of $74,334 of OEM sales and $44,137 attributable to interest and
other income.

Costs and Expenses

Costs of good and services sold

      Costs of good and services sold for the three-month period ended March 31,
2001 decreased $1,567 to $916, as compared to costs of good and services sold of
$2,483 during the three-month period ended March 31, 2000. The 2001 costs relate
to software sales of our video products, while the 2000 costs relate to OEM
sales.

Selling, general and administrative

      Selling, general and administrative expenses for the three-month period
ended March 31, 2001 increased $149,100 to $2,059,378, as compared to selling,
general and administrative expenses of $1,910,278 during the three-month period
ended March 31, 2000. Included in the 2001 expenses are $145,083 investor
relations' costs, $243,416 distribution fees, and approximately $525,000 of
management fees relating to debt acquisition. The remaining $1,145,879 primarily
consists of salaries and consulting costs, as well as costs associated with
maintaining our operations. The 2000 expenses relate to the costs associated
with the operations of the Company's newly acquired subsidiary, Labs and the
costs associated with salaries and benefits for over 30 employees.

Research and development

      Research and development for the three-month period ended March 31, 2001
decreased $341,110 to $535,018, as compared to research and development of
$876,128 during the three-month period ended March 31, 2000. In the first
quarter of 2000 we utilized two outsource engineering development service
companies to assist in the development of features for our Video Messenger and
Video Interactive products. This development was completed in October of 2000
and the research and development expenditures for the first quarter of 2001 were
limited to research related to specific customization for potential buyers.

Depreciation and Amortization

      Depreciation and Amortization expenses for the three-month period ended
March 31, 2001 decreased $370,375 to $125,407, as compared to depreciation and
amortization expense of $495,782 during the three months period ended March 31,
2000. The decrease was primarily attributable to provisions for impairment of
long-lived assets taken in the fourth quarter of 2000, which resulted in reduced
fixed assets and intangibles and the related depreciation and amortization for
2001.

Interest Expense and Other Financing Charges

      Interest expense and other financing charges for the three-month period
ended March 31, 2001 was $3,181,702, as compared to $325,138 during the
three-month period ended March 31, 2000. The 2001 expense consists of $18,778 of
interest expense on notes held prior to 2001 and $3,162,924 of interest and
amortization of discounts on notes payable acquired in 2001. The 2000 expense
was primarily attributable to interest on convertible notes and the credit
facility (including amortization of debt discount).


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Loss from Discontinued Operations

      Loss from discontinued operations for the three-month period ended March
31, 2001 was nil, as compared to $965,960 during the three-month period ended
March 31, 2000. The 2000 loss was made up of $515,960 associated with the
operations of Access and a $450,000 loss provision related to Develcon, our
former subsidiary.

Net Loss

      Net loss during the three-month period ended March 31, 2001 was
$5,215,769, as compared to $4,457,298 during the three-month period ended March
31, 2000.

Cash Position

      For the three-month period ended March 31, 2001, the Company's cash
position decreased by $5,407 from $7,546 to $2,139. The principal source of cash
was $2,100,000 that was generated from the Company's private placement
offerings. Other sources of cash include $175,000 demand notes payable and
$3,445 from the issuance of common stock and warrants and $2,250 relating to
security deposits. $2,266,302 of these funds were used in operating activities,
as well as $19,800 used for loans to related parties.

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

      The working capital deficiency at March 31, 2001, was $10,083,438 compared
to a working capital deficiency of approximately $7,177,756 at December 31,
2000.

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

As of March 31, 2001, the Company had the following financing arrangements in
place:

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

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

      o In March 2000, we purchased a $1,000,000 (face amount) note receivable
        from Develcon Electronics, Ltd. (a former Subsidiary) from a creditor of
        Develcon Electronics, Ltd. in exchange for the issuance of 250,000
        shares of common stock issued at $3.00 per share and 375,000 Class D
        three year common stock purchase warrants, which are exercisable at
        $4.50 per share. The note has a carrying value of nil and $1,000,000 as
        of March 31, 2001 and December 31, 2000, respectively.

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


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      In addition, the terms of the Tender Offer provide that 50% of the shares
      of common stock to be issued upon the exercise of the reduced price class
      A and B common stock purchase warrants shall be freely tradable at such
      time as a registration covering the sale of the common stock underlying
      the class A and B warrants is declared effective by the Securities and
      Exchange Commission and the 50% balance of such shares of common stock
      shall be subject to a lock-up expiring on the earlier of (i) one hundred
      twenty (120) days after the date of issuance of such shares, or (ii) sixty
      (60) days after the effectiveness of any registration statement covering
      the resale of any shares sold in a private placement offering conducted by
      the Issuer.

      The completion of the Tender Offer, which shall occur upon the approval by
      the Securities and Exchange Commission of a registration statement shall
      result in the Company receiving an aggregate of approximately $64,650 from
      the exercise of our class A and B warrants.

      o In January 2001, we issued an aggregate of $2,100,000 principal amount
        of 8% Secured Convertible Notes (the "Notes") due January 9, 2002 in a
        private placement to eight investors. In addition, 9,999,999 five-year
        warrants were issued for shares of common stock at an exercise price not
        to exceed $0.28875, in connection with the issuance of the Notes. The
        exercise price of the warrants approximated 110% of the fair market
        value of our common stock at the time of issuance. Simultaneously with
        such transaction, shareholders of 1,566,666 shares of previously issued
        common stock agreed to return such shares for cancellation in
        consideration for the issuance of $4,700,000 convertible notes which is
        an amount equal to the original purchase price for such shares. The
        notes are due on January 9, 2002 and accrued interest at a rate of 8%
        per annum. In connection with such transactions, the Placement Agents
        received cash fees of $103,750, warrants to purchase an aggregate of
        approximately 1,036,962 common shares, and $56,250 principal amount of
        the Notes. The Notes are considered to contain a beneficial conversion
        feature as they were issued at a conversion price, which was less than
        the fair value of the common stock at the date of issuance. We
        determined the fair value of the beneficial conversion feature of the
        Notes to be approximately $2,015,000. This amount was immediately
        expensed and included in Interest and other financing costs, as the
        conversion feature was immediately available to the investors. We also
        determined the fair value of the warrants issued to be approximately
        $3,168,000 by using available market information and commonly accepted
        valuation methodologies. This amount is being amortized using the
        interest method over the term of the Notes. The amount included in
        Interest and other financing costs in the Consolidated Statement of
        Operations for the three-months ended March 31, 2001 was approximately
        $616,000. The Notes are collateralized by all of our assets and
        approximately 3,800,000 shares (the "Secured Shares") owned by the
        Company's Chairman and its CFO. We have agreed to issue up to 5% of the
        Secured Shares to the Chairman and the CFO as replacement shares in the
        event of a default.

      o In January 2001, we issued 1,000,000 shares of common stock and warrants
        to purchase 4,392,004 common shares at an exercise price not to exceed
        $0.28875 to a private investment group in consideration of their
        agreeing to furnish a $10 million, 2-year equity line of credit. We
        determined the market value of the shares at the date of issuance to be
        $406,200 and the fair value of the warrants to be approximately
        $1,097,000 by using available market information and commonly accepted
        valuation methodologies. These amounts are included in Deferred offering
        costs in the Consolidated Balance Sheet as of March 31, 2001. The terms
        of the agreement allow us to request funds on a monthly basis. The funds
        available each month from this line shall be based upon the average
        daily price of our shares on each separate trading day during the
        twenty-two trading days following the delivery of our request for funds.
        There is a funding limit of $1.0 million in any one month. We will issue
        common shares to the investors in exchange for each month's credit line
        draw down. These common shares will be issued at 85% of the average
        daily price of our shares that are traded during the twenty-two trading
        days following the date we request the funds. The execution of the line
        of credit is dependent upon an approval by the Securities and Exchange
        Commission of a registration statement, which has been filed with the
        Securities and Exchange Commission on May 9, 2001.

      Financing arrangements in place subsequent to March 31, 2001

      o In April and May 2001, we issued $481,500 one-year notes, and 7,045,238
        five-year warrants to purchase shares of common stock at a price not to
        exceed $0.28875. Simultaneously with and as a condition to these
        transactions, the shareholders of 334,000 shares of the common stock and
        501,000 related warrants issued pursuant to previous private placement
        offerings agreed to return such shares and warrants for cancellation in
        consideration for the issuance of convertible notes and warrants in an
        amount equal to their original purchase price for such securities. In
        connection with such transactions, the Placement Agents received cash
        fees of


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            approximately $39,100 and warrants to purchase an aggregate of
            approximately 227,381 common shares at a price not to exceed
            $0.28875.

Going Concern

      The accompanying financial statements have been prepared in conformity
with generally accepted accounting principles, which contemplate our
continuation as a going concern. However, we have experienced net losses of
$5,215,769 for the three-month period ended March 31, 2001 and losses of
$27,134,210 and $21,651,932 for the years ended December 31, 2000 and 1999,
respectively. We also had a net working capital deficit of $10,083,438 as of
March 31, 2001 and $7,177,756 and $5,884,666 as of December 31, 2000 and 1999,
respectively. We must raise additional capital to meet our continuing
operational needs. These factors raise doubt about our ability to continue as a
going concern. In view of the matters described above, recoverability of a major
portion of the recorded asset amounts shown in the accompanying balance sheet is
dependent upon our ability to generate sufficient sales volume to cover our
operating expenses and to raise sufficient capital to meet our payment
obligations. The financial statements do not include any adjustments relating to
the recoverability and classification of recorded asset amounts, or amounts and
classification of liabilities that might be necessary should we be unable to
continue in existence.

Potential Future Sources of Capital

      After completing the above financings, we have a total of 58,916,859
warrants and options outstanding as of the date of this filing at an average
issue price of $1.05. In the event that these warrants and options are all
exercised we would receive approximately $61,644,000 in cash proceeds. The
exercise of these warrants and options will depend on, among other things, the
liquidity and price for our common shares. We do not control the exercise of
these warrants and options and therefore no assurances can be given that any
warrants will be exercised.

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

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

Material Changes in Current Liabilities

      As of March 31, 2001 we had accounts payable and accrued liabilities
amounting to approximately $4,569,000. These liabilities have been partially
settled as of the date of this filing. In April and May 2001, we reduced our
obligation of approximately $127,500 in exchange for fixed assets of the Company
and paid employee costs (salaries, employee benefits, travel expenses) of
approximately $235,900. In April 2001, we issued 1,254,618 shares of common
stock as settlement for approximately $183,700 of liabilities accrued at March
31, 2001. As of the date of this filing, approximately $4,021,900 of these
liabilities remain. We intend to settle these obligations out of future revenues
and/or additional equity financings.

Future Sources of Revenue

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


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Summary

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


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PART II - OTHER INFORMATION

Item 1. Legal Proceedings

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

      We are a defendant in an action for a breach of contract claim for
      outstanding invoices for services rendered. In March 2001, a default
      judgment was entered against Vianet in this matter. We are currently
      engaged in discussions with the plaintiff regarding settlement of this
      matter, however no assurance can be given that an amicable settlement will
      be reached. In the event we are unable to consummate a settlement of this
      matter, we anticipate that the plaintiff will seek to enforce collection
      of the default judgment. The $702,739 of outstanding invoices is included
      in accounts payable and accruals on the balance sheet at March 31, 2001.

      In addition, we are a defendant in an action pending before the County
      Court at Law No. 2, County of Dallas, Texas, entitled Assured Industries,
      Inc. v. Vianet Technologies, Inc. (Cause No.: 01-03386-13). This action
      was commenced by Assured Industries on March 29, 2001, and seeks $78,521
      in damages for outstanding invoices for products sold or services
      rendered, plus lawyer's fees, interest and court costs. As of the date
      hereof, Vianet has filed a response to the claim though no discovery has
      yet commenced. Accordingly, it is difficult to estimate the likelihood of
      an unfavorable outcome and estimate the amount or range of a potential
      loss at this time. The $78,521 of outstanding invoices is included in
      accounts payable and accruals on the balance sheet at March 31, 2001.

Item 2. Changes in Securities and Use of Proceeds

      None.

Item 3. Defaults Upon Senior Securities

      None.

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

      (a)   None

      (b)   o On January 29, 2001, the registrant filed a report on Form 8-K
              regarding the Disposition of the intellectual property relating to
              Vianet Access, Inc. as of January 12, 2001.

            o On March 30, 2001, the registrant filed a report on Form 8-K/A
              regarding an amendment to Form 8-K filed on January 29, 2001.


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                                   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:       May 21, 2001
      ------------------                     -----------------------------------

                                             Peter Leighton
                                             Chief Financial Officer


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