SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                                    FORM 10-Q


                                   (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, 1999

                                       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. 33-55254-19

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

<TABLE>
<CAPTION>

<S>                                                                        <C>       
                        Nevada                                             87-0434285
             (State or other jurisdiction of                              (IRS Employer
             incorporation or organization)                            Identification No.)
</TABLE>


                           83 Mercer Street, New York
                               New York 10012-4437
               (Address of principal executive offices, zip code)

                                 (212) 219-7680
              (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 6,139,272  shares of the  registrant's  Common Stock,  par value
$.001 per share, outstanding on May 14, 1999.
<PAGE>
                            VIANET TECHNOLOGIES, INC.

                                      INDEX
<TABLE>
<CAPTION>



                                                                                                                   Page
<S>                                                                                                                <C> 
Part 1            Financial Information

Item 1            Financial Statements

                  Balance Sheets of the Company (unaudited) at March 31, 1999 and December 31, 1998
                                                                                                                   3
                  Statement of Operations of the Company
                  (unaudited) for the three months ended March 31, 1999 and 1998                                   4

                  Statements of Cash Flows of the Company (unaudited) for the three months ended 
                  March 31, 1999 and 1998
                                                                                                                   5
Item 2            Management's Discussion and Analysis of Financial
                  Condition and Results of Operations                                                             11


Item 3            Quantitative and Qualitative Disclosures About Market Risk                                      13


Item 6            Exhibits and Reports

                  Exhibit 11 - Calculation of Loss per Share                                                       15
                  Exhibit 27 - Financial Data Schedule                                                             16

Part 2            Legal and Capital Transactions                                                                  14      
                  Signatures                                                                                      14




</TABLE>


<PAGE>
                            VIANET TECHNOLOGIES, INC.
                                  BALANCE SHEET
<TABLE>
<CAPTION>

                       ( U.S. Dollars, except share data)
                                                                        (Unaudited)


                                                                         March 31        December 31
                                                                           1999             1998

ASSETS
Current Assets:
<S>                                                                    <C>            <C>        
     Cash and cash equivalents .....................................   $   115,725    $    13,856
     Marketable securities .........................................       669,268        669,268
                                                                           784,993        683,124

Loans due from Develcon Electronics Ltd ............................     2,511,435      1,506,800
Accrued interest receivable ........................................        96,490         65,375
Technology license, at cost less accumulated amortization of $28,125
                                                                           405,000        427,500
                                                                       $ 3,797,918    $ 2,682,799

LIABILITIES AND SHAREHOLDERS' EQUITY

Current Liabilities:
     Accounts payable ..............................................   $   353,853    $   251,384
     Convertible Demand Notes and loans payable.....................       410,000      2,909,272
     Payable to Director of the Company ............................         1,000          1,000
                                                                           764,853      3,161,656


Shareholders' Equity:
      Common shares, $0.01 par value,
      100,000,000 shares authorized ................................
      6,139,272 issued and outstanding at
      March 31,1999(1998-350,000) ..................................         6,139          3,500
      Series A Convertible preferred shares
      (1998: authorized and issued - 250,000)........................          --       1,000,000
   Subsription receivable ..........................................          (500)      (990,500)
   Share premium ...................................................     3,736,663           --
   Retained deficit ................................................      (709,207)      (491,857)
                                                                         3,131,817       (478,857)
                                                                       $ 3,797,918    $ 2,682,799




</TABLE>

<PAGE>
                            VIANET TECHNOLOGIES, INC.
                             STATEMENT OF OPERATIONS

<TABLE>
<CAPTION>

                        (U.S. Dollars, except share data)
                                   (Unaudited)



                                        Three Months Ended March 31
          
                                           1999        1998
STATEMENT OF OPERATIONS

Sales and other revenues:
<S>                                     <C>          <C>  
     Net sales ......................   $      --    $  --
     Interest and other income ......      34,900       --
                                           34,900       --
Costs and expenses:
     Cost of goods sold .............        --         --
     General and administrative .....     229,750       --
     Amortization ...................      22,500       --

Net loss from operations for period .   $(217,350)   $  --


LOSS PER SHARE ......................   $   (0.49)   $  0.00

Weighted average number of shares and
common stock equivalents outstanding      440,890    350,000


</TABLE>



<PAGE>
                            VIANET TECHNOLOGIES,INC.
                             STATEMENT OF CASH FLOWS


<TABLE>
<CAPTION>


                           (Thousands of U.S. Dollars)
                                   (Unaudited)



                                                         Three Months Ended March 31

                                                               1999     1998
Cash Flows From Operating Activities:
<S>                                                       <C>            <C>
Net loss for period ...................................   $  (217,350)   $-
Adjustments to reconcile net loss to
net cash provided by operating activities:
     Amortization of technology license ...............        22,500     --
Changes in operating assets and liabilities: ..........          --
     Interest receivable ..............................       (31,115)    --
         Accounts payable and accrued liabilities .....       102,469     --
         Net cash (used in) operating activities ......      (123,496)    --

         Cash Flows From Investing Activities:
              Loans to Develcon Electronics Limited ...    (1,004,635)    --
         Net cash used in investing activities ........    (1,004,635)    --

         Cash Flows From Financing Activities:
              Repayment of convertible notes payable ..      (200,000)    --
              Proceeds from loans payable .............       410,000     --
              Proceeds from convertible notes payable .        30,000     --
              Proceeds from subscription receivable ...       990,000     --
         Net cash provided by financing activities ....     1,230,000     --

         Net decrease in cash and cash equivalents ....       101,869     --

         Cash and cash equivalents, beginning of period        13,856     --

         Cash and cash equivalents, end of period .....   $   115,725    $-




Supplemental cash flow information:
   Cash paid for taxes ................................   $     4,963    $-
   Cash paid for interest .............................            $-    $-




</TABLE>


<PAGE>
NOTES TO FINANCIAL STATEMENTS

1. Summary of Significant Accounting Policies

         a.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-Q
and Article 10 of Regulation S-X. In the opinion of management,  all adjustments
(consisting only of normal recurring accruals)  considered  necessary for a fair
presentation have been included.

     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-KB as at December
31, 1998.

         b. Foreign Currency Transactions

     Gains and  losses  from  foreign  currency  transactions  are  included  in
selling, general and administrative expenses in the period in which they occur.

         Fair Value of Financial Instruments

     Statement of Financial  Accounting  Standards ("SFAS") No.107,  Disclosures
About Fair Value of Financial Instruments, requires disclosure of the fair value
of certain  financial  instruments  for which it is practicable to estimate fair
value.  For  purposes  of the  disclosure  requirements,  the  fair  value  of a
financial instrument is the amount at which the instrument could be exchanged in
a current  transaction  between willing parties,  other than in a forced sale or
liquidation.  The carrying  values of cash,  marketable  securities and accounts
payable  are  reasonable  estimates  of their fair  value due to the  short-term
maturity  of  underlying  financial  instruments.  The  carrying  value  of  the
convertible  demand notes payable are  reasonable  estimates of their fair value
since  they  were  convertible  into  the  Company's  common  stock  at a  price
equivalent  to the  conversion  rights  of the  Company's  Series A  convertible
preferred shares.

         Income Taxes

     The Company  accounts for income taxes under the asset and liability method
as required by SFAS No. 109,  Accounting  for Income  Taxes.  Under this method,
deferred tax assets and  liabilities  are  determined  based on the  differences
between the financial  reporting and income tax bases of assets and  liabilities
and are  measured  using the  enacted  tax rates and laws  expected  to apply to
taxable income in the years in which those temporary differences are expected to
be recovered or settled.  The effect on deferred tax assets and liabilities of a
change in tax rates is  recognized  in income in the period  that  includes  the
enactment date.

         Cash and Cash Equivalents

     Cash and cash  equivalents  include  cash held in banks  and time  deposits
having original maturities of three months or less.

         Technology License

     The technology license consists of purchased  technology,  amortized by the
straight-line  method  over a period  of five  years,  the  initial  term of the
license agreement.


<PAGE>
         Investment in Marketable Equity Securities

     The Company  accounts for its  investments in equity  securities  that have
readily  determinable  fair  values  under  the  provisions  of  SFAS  No.  115,
Accounting  for Certain  Investments in Debt and Equity  Securities.  Marketable
equity  securities  consist  of shares of common  stock and are stated at market
value.  Management has identified the Company's  marketable equity securities as
trading  securities  and,  accordingly,  unrealized  gains  and  losses  on such
securities are recorded in the statement of operations.

     Subsequent  to March 31, 1999,  on various  dates,  the Company sold 65,000
shares  of the  approximately  83,000  shares  it held at March  31,  1998 at an
average price in excess of its carrying value per share.

         Use of Estimates

     The  preparation  of financial  statements  in  conformity  with  generally
accepted  accounting  principles  requires  management  to  make  estimates  and
assumptions  that  affect the  reported  amounts of assets and  liabilities  and
disclosure of  contingent  assets and  liabilities  at the date of the financial
statements,  and the  reported  amounts  of  revenues  and  expenses  during the
reporting period. Actual results could differ from those estimates.

         Stock Option Plan

     The Company  accounted for stock options  issued to employees in accordance
with SFAS No.  123,  Accounting  for  Stock-Based  Compensation,  which  permits
entities to continue to apply the  provisions  of  Accounting  Principles  Board
("APB") Opinion No. 25 and provide pro forma net income disclosures for employee
stock option  grants as if the fair value based  method,  as defined in SFAS No.
123, had been  applied.  The Company has elected to apply the  provisions of APB
Opinion No. 25 and provide the pro forma disclosure required by SFAS No. 123.

         Comprehensive Income

     The Company reports and presents comprehensive income and its components in
accordance  with SFAS No. 130,  Reporting  Comprehensive  Income.  SFAS No. 130.
requires only additional  disclosures in the financial (SFAS) 128, "Earnings Per
Share" which requires  presentation  of both basic and  statements;  it does not
affect the Company's financial position or results of operations. For the period
from  December  31,  1998 to  March  31,  1999,  there  were no  items  of other
comprehensive income.

         k. Net Loss Per Share

     We follow the  provisions  of Statement of Financial  Accounting  Standards
diluted  earnings per share (EPS) on the face of the  statement  of  operations.
Basic  EPS is  computed  using the  weighted  average  number  of common  shares
outstanding  during the period.  The diluted EPS  calculation  assumes  that all
stock  options or contracts  to issue  common stock were  exercised or converted
into common  stock at the  beginning  of the period.  We have  excluded  certain
common stock  equivalents  from our diluted EPS calculation  during the quarters
ended March 31, 1999 and 1998 because the effect would have reduced our net loss
per share.

2. Acquisition of Develcon Electronics, Ltd.

     On February 12, 1999 the Company entered into an Arrangement Agreement (the
"Arrangement")  to  acquire  all  the  outstanding   shares  of  Develcon.   The
Arrangement has received the approval of the Supreme Court of British  Columbia,
the Securityholders and Debentureholders of Develcon.

<PAGE>
     The  following   information  is  summarized  from   Develcon's   financial
statements as of and for the years ended August 31, 1998 and 1997:
<TABLE>
<CAPTION>

                                                               1997
                         (thousands of Canadian Dollars)

<S>                                                            <C>                   <C>    
     Total Assets                                              $13,147               $15,545
     Total Liabilities                                          13,348                11,055
     Working Capital (Deficiency)                               (4,349)                5,042
     Shareholders' Equity (Deficiency)                            (201)                4,490
     Sales                                                      19,158                18,907
     Net Loss                                                   (4,773)              (12,460)

</TABLE>

     The Arrangement provides for Develcon  shareholders to receive one share of
common stock of the Company for every 30.75 shares of Develcon.  The Arrangement
also provides that the Develcon convertible notes payable will be converted into
5.9963 Develcon shares for each $1.00 principal amount of notes payable and that
interest  which has been accrued on the  convertible  notes payable but not paid
shall be forgiven.  These  shares will also  convert  into Vianet  shares in the
ratio  of one  share  of  the  Company  for  every  30.75  shares  of  Develcon.
Additionally,  effective upon closing,  certain other creditors of Develcon have
agreed to  either  accept  common  stock of Vianet as  payment  for  amounts  or
portions of amounts owed to them and have  restructured the repayment  schedule.
In exchange for restructuring  the repayment  schedule of its debt, if such debt
has not been  repaid by June 30,  1999,  a lender of Develcon  has been  granted
warrants to purchase  150,000 shares of Vianet stock at the greater of $6.00 per
share or 90% of the price per share of an offering of no less than $2.5  million
completed  between  May  15,  1999  and  June  30,  1999.  The  warrants  become
exercisable  over an  approximate  24-month  period and expire on June 30, 2002.
Upon completion of the Arrangement, defaults under long-term debt agreements are
expected to be cured.

     On  May  11,  1999,  Develcon  held  its  Annual  and  Special  Meeting  of
Shareholders,  at which time the Securityholders and  Debentureholders  approved
the  Arrangement.  The  Arrangement  is expected to become  effective on May 18,
1999.

     As a result of the closing of the Arrangement,  the former shareholders and
creditors of Develcon,  excluding the Company,  hold  approximately  2.3 million
shares  of  the   approximate  8.4  shares  of  common  stock  the  Company  has
outstanding.

3. Loans to Develcon

Loans to Develcon (the "Loans") at March 31, 1999 are comprised of:
<TABLE>
<CAPTION>
<S>             <C>                                                                                       <C>          
Convertible notes payable, due on demand,
with interest at Royal Bank of Canada
prime rate plus 2%                                                                                        $     530,000
Notes payable, due on February 2004,
with interest at Royal Bank of Canada
prime rate plus 2%                                                                                              990,718
Convertible notes payable of C$3,000,000,
Originally due on April 30, 1999, with interest at
10% per annum                                                                                                   990,717
                                                                                                             ----------
                                                                                                           $  2,511,435
                                                                                                              ---------
</TABLE>

<PAGE>
     The loans were converted  into common shares of Develcon  contemporaneously
with Develcon becoming a wholly owned subsidiary of the Company.  For the period
from December 31, 1998 to March 31, 1999 the Company  recorded  accrued interest
income of $31,125 in relation to these loans.  The accrued interest was forgiven
and,  together with the  outstanding  loan balances  constitute a portion of the
purchase price of Develcon.

     The acquisition will be accounted for as a purchase.  The purchase price of
Develcon  will be  determined  by the number of shares  issued by the Company to
effect the acquisition and the amount of loans provided to Develcon.


4. SPS Technology License

     The  Company  purchased  a  license  for the  SPS  technology  from  NewCom
Technologies,  Inc.  (the  "Licensor")  for $450,000.  The license  entitles the
Company  to use  certain  intellectual  property  rights.  This  "right  to use"
includes any patents  associated with the SPS technology  along with the current
preferred  embodiment  of the  patent.  Royalty  payments  of 2.5%  of Net  Cash
Received,  as defined in the license  agreement,  on products  manufactured  and
sold, licensed or services rendered by Vianet during the term of the license are
due to the licensor.  The Company may, at its option, pay a one-time royalty fee
of $2.1  million at any time during the term.  If such one time payment is made,
the license shall become  perpetual and no further  royalties  will be due under
the license.

     The license provides the Company with all the source code and documentation
required to allow the Company to integrate the technology into its products. The
license provides for quarterly updates from NewCom of the  hardware/firmware for
the initial five year term of the agreement.


5. Related Party Transactions

Fees and Expenses

     The Company accrued consulting fees aggregating  approximately $11,000 to a
company  owned by two  shareholders  who are also  officers  of the  Company for
engineering and other services.

Convertible Demand Notes Payable

     At December 31, 1998, the Company had  convertible  demand notes payable of
$2,909,272 to entities  controlled by two officers and directors of the Company.
These  borrowings  were  interest  free.  The  convertible   demand  notes  were
convertible  into shares of common stock at a ratio of one share for every $1 of
principle  amount.  Of these notes  $669,268  were  contributed  in exchange for
marketable  securities  and  $1,355,000  was  contributed  in the  form of loans
receivable  from  Develcon.  In the period  ended March 31,  1998,  $200,000 was
repaid to one of the lenders and additional  convertible demand notes of $30,000
were issued to two of the lenders.

     On March 23, 1999,  the notes payable were  converted  into common stock of
the Merged Company.  Based upon the original  exchange ratio of one common share
of Company common stock for every $1 of principal amount.

Other

     During the period ended March 31, 1999 the Company borrowed $110,000 from a
company controlled by two officers of the Company. The loan is unsecured,  bears
interest at 8% and is repayable on demand.



<PAGE>
6.   Series A Convertible Preferred Stock

     The authorized Series A convertible preferred stock of the Company consists
of 1,000,000  shares,  of which 250,000  shares were issued and  outstanding  at
December  31, 1998.  The Series A preferred  stock was  convertible  into common
stock at a rate of four for one. Such shares were issued at $4.00 per share.  Of
the issued and outstanding  shares,  2,500 were fully paid at December 31, 1998.
The remaining subscription receivable outstanding,  $990,000 was paid subsequent
to December 31, 1998.

     On March 23, 1999 the Series A preferred  stock was  converted  into common
stock.  As a result,  the Series A  preferred  shareholders  received  1,000,000
shares of common stock of the merged company.

7.   Merger with Vianet Technologies, Inc.

     On March 16, 1999 the Company  entered into a Merger  Agreement with Vianet
Technologies,  Inc.("Old Vianet"),  a Delaware  corporation,  under the terms of
which the  Company  and Old Vianet  merged  through an  exchange  of shares (the
"Merger").  Subject to the terms and  conditions  of this Merger  Agreement,  on
March 23,  1999,  the Company  issued to the  shareholders  of Old Vianet,  four
shares of fully paid and  nonassessable  shares of the  Company's  common stock,
$.001 par value  ("Common  Stock") per share in  exchange  for each share of Old
Vianet's  outstanding  common stock.  The existing  common  shareholders  of Old
Vianet  received  1,400,000  shares of common  stock of the  Merged  Company  in
exchange  for the 350,000  shares then  outstanding.  All shares of Old Vianet's
Series A Convertible Preferred Stock issued and outstanding immediately prior to
the Merger  were  deemed to have been  converted  into an  aggregate  of 250,000
shares of Old  Vianet's  common  stock and the  Series A  Convertible  Preferred
shareholders received 1 million shares of Common Stock of the Company.  Further,
Old Vianet convertible demand notes payable holders received 2,709,272 shares of
Common  Stock.For  accounting  purposes,  Old  Vianet was  considered  to be the
acquiror in a reverse acquisition accounted for as a purchase.

<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS FOR THE THREE MONTH PERIOD ENDED MARCH 31, 1999

     This quarterly report on Form 10-Q 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, changes in legal and regulatory policy, relations with ILECs and their
ability  to  provide  delivery  of  services  including   interoffice  trunking,
implementation of back office service delivery systems, 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,  audited  financial  statements  and related  notes  included in our
Annual  Report  on Form  10-K for the  year  ended  December  31,  1998.  Vianet
Technologies, Inc. is referred to as "we", "us" or "our" in this report.


Results of Operations

     The Company is transitioning  through a period of completing  transactions.
The costs and other  effects of these  programs  and  activities  are  adversely
impacting current results for intended benefits of improving revenues, operating
performance and financial results in future reporting periods.No  comparison for
the period for the three  months  ended March 31, 1998 is made since the Company
had not commenced operations at that time.

Net sales and other revenues

     The Company  had no net sales for the three  months  ended March 31,  1999.
Other  revenues  consisted of interest on cash deposits  ($3,785)and  $31,105 of
accrued interest on the Company's loans to Develcon Electronics Ltd.

Gross profit

     The Companys' cost of sales was nil since there were no sales.

General and administrative

     General and administrative expenses amounted to $229,750 comprised primarly
of legal  and  professional  fees  ($146,763)  relating  to the  acquisition  of
Develcon and investor relations expenses ($31,720).  These expenses are expected
to reduce  significantly in the second quarter after the Develcon acquisition is
completed.


Amortization

     Amortization  amounted to $22,500 and  represents the  amortization  of the
Company's SPS Technology License ($450,000) over five years.



<PAGE>
Significant Transactions

Merger with Vianet Technologies, Inc.

     On March 16, 1999 the Company  entered into a Merger  Agreement with Vianet
Technologies,  Inc.("Old Vianet"),  a Delaware  corporation,  under the terms of
which the  Company  and Old Vianet  merged  through an  exchange  of shares (the
"Merger").  Subject to the terms and  conditions  of this Merger  Agreement,  on
March 23,  1999,  the Company  issued to the  shareholders  of Old Vianet,  four
shares of fully paid and  nonassessable  shares of the  Company's  common stock,
$.001 par value  ("Common  Stock") per share in  exchange  for each share of Old
Vianet's  outstanding  common stock.  The existing  common  shareholders  of Old
Vianet  received  1,400,000  shares of common  stock of the  Merged  Company  in
exchange  for the 350,000  shares then  outstanding.  All shares of Old Vianet's
Series A Convertible Preferred Stock issued and outstanding immediately prior to
the Merger  were  deemed to have been  converted  into an  aggregate  of 250,000
shares of Old  Vianet's  common  stock and the  Series A  Convertible  Preferred
shareholders received 1 million shares of Common Stock of the Company.  Further,
Old Vianet convertible demand notes payable holders received 2,709,272 shares of
Common  Stock.For  accounting  purposes,  Old  Vianet was  considered  to be the
acquiror in a reverse acquisition accounted for as a purchase.

Acquisition of Develcon Electronics, Ltd.

     On May 11, 1999 the shareholders and convertible debenture ballots approved
the Plan of Arrangement  under which  Develcon was acquired by the Company.  The
acquisition  will be  accomplished  through a merger of  Develcon  with a wholly
owned subsidiary of Vianet, with a planned closing of the transaction on May 18,
1999 (the  "Closing").  The Company intends to file a Form 8 - K relating to the
acquisition of Develcon within fifteen days of the Closing.

Year 2000

     The Year 2000 (Y2K) issue is the result computer programs,  microprocessors
and date reliant  systems that may  recognize a date using "00" as the year 1900
rather  than  the  year  2000.   This  could  result  in  a  system  failure  or
miscalculation causing disruption in business operations.

     In an effort to assess our Y2K state of  readiness  we performed a complete
inventory  assessment  and  test of all of our  internal  systems  and  external
interfaces. All of our financial,  message processing and office support systems
are currently Year 2000 compliant.  The Company has communicated with all of its
major  customers  and  suppliers to determine  the extent to which the Company's
interface  systems are  vulnerable  to any  failure by third  parties to upgrade
their own  software.  The Company  believes that its customers and suppliers are
addressing   the  issues  and  will  timely  adjust  their   systems.   If  such
modifications are not made by customers or suppliers,  or are not completed in a
timely manner, the Company's operations will not be affected.

LIQUIDITY AND CAPITAL RESOURCES

     The  Company is  considering  several  financing  alternatives  to fund its
medium and longer-term  financing  requirements,  including anticipated accounts
receivable and inventory  requirements  and future R&D needs.  While the Company
has, in the past,  been able to maintain access to adequate  external  financing
sources on acceptable  terms,  no assurances  can be given that such access will
continue. If the Company is unable to obtain short-term and long-term funding on
acceptable terms from existing  financing sources or through secure new sources,
the Company's ongoing operations could be adversely impacted.


ADDITIONAL FACTORS THAT MAY EFFECT RESULTS

     Future operating results may be impacted by a number of factors,  including
worldwide  economic and political  conditions,  industry specific  factors,  the
Company's  ability to  maintain  access to  external  financing  sources and its
financial  liquidity,  the  Company's  ability  to timely  develop  and  produce
commercially viable products at competitive prices, the availability and cost of
components,  the  Company's  ability to manage  expense  levels,  the  continued
financial strength of the Company's dealers and distributors,  and the Company's
ability to accurately anticipate customer demand.
<PAGE>
     The  Company's  future  success  is highly  dependent  upon its  ability to
develop, produce and market products that incorporate new technology, are priced
competitively  and  achieve  significant  market  acceptance.  There  can  be no
assurance  that  the  Company's  products  will be  commercially  successful  or
technically advanced due to the rapid improvements in information technology and
resulting product obsolescence. There is also no assurance that the Company will
be able to deliver commercial quantities of new products in a timely manner. The
success  of new  product  introductions  is  dependent  on a number of  factors,
including market  acceptance,  the Company's  ability to manage risks associated
with product  transitions,  the effective management of inventory levels in line
with  anticipated  product  demand and the timely  manufacturing  of products in
appropriate  quantities to meet  anticipated  demand.  The Company competes with
established  equipment  manufacturers with greater financial  resources and more
developed channels of distribution.  No assurances can be given that the Company
will be successful in competing in this environment.

Item 3. Quantative and Qualitative Disclosures About Market Risk

     We are subject to foreign currency  exchange rate risk relating to receipts
from  customers,  payments  to  suppliers.  We do not  consider  the market risk
exposure relating to foreign exchange to be material.

     We do not have  financial  instruments  which are subject to interest  rate
risk and accordingly our exposure to interest rate risk is not material


Item 6.           Exhibits and Reports

         (a)      Exhibits.

                 11 - Calculation of Earnings Per Share

                 27 - Financial Data Schedule

         (b)      Reports on Form 8-K:

              On  March  23,  1999,  the  Company  filed a  report  on Form  8-K
reporting the merger with Vianet Technologies, Inc.

Part 2.   Legal and Capital Transactions.

     The  Company  is not party to any legal  proceedings  or changes in capital
structure.


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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 14, 1999                         /s/ PETER G. LEIGHTON
                                           Peter G. Leighton
                                           President and Chief Executive Officer