# SECURITIES
AND EXCHANGE COMMISSION

# WASHINGTON,
D.C. 20549

---

# FORM 10-Q

# QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934

# For the quarterly period ended September 30, 2001

| | 0-27042 | 
| | ------- | 

| | Commission File Number | 
| | ---------------------- | 

| | AlphaNet
Solutions, Inc. | 
| | ------------------------ | 

| | (Exact Name of Registrant as Specified in Charter) | 
| | -------------------------------------------------- | 

|New Jersey |  | 22-2554535
|---------- |  | ----------

|(State or Other Jurisdiction of Incorporation) |  | (I.R.S. Employer Identification Number)
|---------------------------------------------- |  | ---------------------------------------

|7 Ridgedale Avenue, Cedar Knolls, New Jersey | 07927 | 
|-------------------------------------------- | ----- | 

|(Address of Principal Executive Offices) | (Zip Code) | 
|---------------------------------------- | ---------- | 

|Registrant's Telphone Number, Including Area Code | (973) 267-0088 | 
|------------------------------------------------- | -------------- | 

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 ____ | 
|---------------------------- | 

Indicate the number of shares outstanding
of each of the Registran's classes of common stock, as of October 31, 2001:

|Class |  | Number of Shares Outstanding
|----- |  | ----------------------------

|Common Stock, $0.01 par value |  | 6,583,413
|----------------------------- |  | ---------

# ALPHANET SOLUTIONS, INC.

# TABLE OF CONTENTS

|PART I. | FINANCIAL INFORMATION
|------- | ---------------------

| | Item 1. | Financial Statements | 1
| | ------- | -------------------- | -

| |  | Consolidated Balance Sheets
          
as of September 30, 2001 (unaudited)
          
and December 31, 2000 | 1
| |  | ------------------------------------------------------------------------------------------------------------ | -

| |  | Consolidated Statements of Operations
          
for the Three and Nine Months Ended
          
September 30, 2001 (unaudited) and September 30, 2000 (unaudited) | 2
| |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------- | -

| |  | Consolidated Statements of Cash Flows 
          
for the Nine Months Ended
          
September 30, 2001 (unaudited) and September 30, 2000 (unaudited) | 3
| |  | -------------------------------------------------------------------------------------------------------------------------------------------------------- | -

| |  | Notes to Consolidated Financial Statements (unaudited) | 4
| |  | ------------------------------------------------------ | -

| | Item 2. | Management's Discussion and Analysis of
        Financial Condition and Results of Operations | 11
| | ------- | --------------------------------------------------------------------------------------------- | --

| | Item 3. | Quantitative and
 Qualitative Disclousres About Market Risk | 20
| | ------- | ----------------------------------------------------------- | --

|PART II. | OTHER INFORMATION |  | 11
|-------- | ----------------- |  | --

| | Item 1. | Legal Proceedings | 21
| | ------- | ----------------- | --

| | Item 6. | Exhibits and Reports on Form 8-K | 22
| | ------- | -------------------------------- | --

|SIGNATURES |  |  | 23
|---------- |  |  | --

## PART I.

# FINANCIAL
INFORMATION

## Item 1.     
Financial Statements

`ALPHANET SOLUTIONS, INC.
                                                      CONSOLIDATED BALANCE SHEETS
                                                   (in thousands, except share data)
                                                              (unaudited)

                                                                         September 30,       December 31,
                                                                              2001               2000
                                                                              -----              ----
ASSETS
Current assets:
        Cash and cash  equivalents . . . . . . . . . . . . . .            $ 22,871                $ 17,164
        Accounts receivable, less allowance for doubtful
        accounts of $766 September 30, 2001 and $3,923 at
        December 31, 2000 . . . . . . . . . . . . . . . . . .                9,865                  16,340
        Inventories . . . . . . . . . . . . . . . . . . . . .                  422                     858
        Income taxes. . . . . . . . . . . . . . . . . . . . .                    -                   1,576
        Prepaid expenses and other current assets . . . . . .                  329                     426
                                                                          --------                --------
                 Total current assets . . . . . . . . . . . .               33,487                  36,364

Property and equipment, net . . . . . . . . . . . . . . . . .                2,335                   3,235

Goodwill. . . . . . . . . . . . . . . . . . . . . . . . . . .                2,450                   2,134

Other assets . . . . . . . . . . . . . . . . . . . . . . . . .                  78                      92
                                                                          --------                --------
                 Total assets. . . . . . . . . . . . . . . .              $ 38,350                $ 41,825
                                                                          ========                ========
LIABILITIES AND SHAREHOLDERS' EQUITY

Current liabilities:
        Current portion of capital lease obligations . . . .              $     14                $     23
        Accounts payable . . . . . . . . . . . . . . . . . .                 1,569                   4,405
        Accrued expenses . . . . . . . . . . . . . . . . . .                 3,444                   3,540
        Accrued MTA contract liability. . .  . . . . . . . .                 2,373                   2,093
                                                                          --------                --------
                 Total current liabilities . . . . . . . . .                 7,400                  10,061

Long term liabilities:

        Capital lease obligations . . . . . . . . . . . . . .                    -                       8
                                                                          --------                --------
         Total liabilities . . . . . . . . . . . . . . . . .                 7,400                  10,069
                                                                          --------                --------
Shareholders' equity:
        Preferred stock -- $0.01 par value; authorized
        3,000,000 shares, none issued . . . . . . . . . . . .                    -                       -
        Common stock -- $0.01 par value; authorized
        15,000,000 shares, 6,583,413 and 6,536,209 shares
        issued and outstanding at September 30, 2001 and
        December 31, 2000, respectively . . . . . . . . . . .                   66                      65
        Additional paid-in capital. . . . . . . . . . . . . .               35,091                  35,013
        Accumulated Deficit. . . . . . . . . . . . . . . . .                (3,487)                 (2,602)
        Treasury stock - at cost; 150,600 shares at September 30,
        2001 and December 31, 2000, respectively. . . . . . .                 (720)                   (720)
                                                                          --------                --------
                 Total shareholders' equity . . . . . . . . .               30,950                  31,756
                                                                          --------                --------
                 Total liabilities and shareholders' equity .             $ 38,350                $ 41,825
                                                                          ========                ========

                                      See accompanying notes to consolidated financial statements`

# 1

`ALPHANET SOLUTIONS, INC.
                                                 CONSOLIDATED STATEMENTS OF OPERATIONS
                                                (in thousands, except per share amounts)
                                                              (unaudited)

                                                        For the Three Months ended               For the Nine Months ended
                                                            September 30,                              September 30,
                                                        --------------------------               -------------------------

                                                             2001            2000                       2001               2000
                                                             ----            ----                       ----               ----
Net sales:
      Product sales. . . . . . . . . . . . . .            $ 2,517        $ 10,194                   $ 13,772          $  35,943
      Services and support . . . . . . . . . .              8,208          11,650                     29,141             34,808
                                                          -------        --------                   --------          ---------
                                                           10,725          21,844                     42,913             70,751
Cost of sales:
      Product sales . . . . . . . . . . . . . .             2,202           9,093                     12,031             33,004
      Services and support. . . . . . . . . . .             5,550           8,102                     19,926             25,012
      MTA contract loss recognition and
      Other charges. . . . . . . . . . . . . .                  -               -                          -              4,851
                                                          -------        --------                   --------          ---------
                                                            7,752          17,195                     31,957             62,867
Gross Profit:
         Product . . . . . . . . . . . . . . .                315           1,101                      1,741              2,939
         Service and support . . . . . . . . .              2,658           3,548                      9,215              9,796
      MTA contract loss recognition and
      Other charges. . . . . . . . . . . . . .                  -               -                          -             (4,851)
                                                          -------        --------                   --------          ---------
                                                            2,973           4,649                     10,956              7,884
Operating expenses:
      Selling, general & administrative. .              3,901           5,737                     12,875             19,085
                                                          -------        --------                   --------          ---------

Operating income (loss). . . . . . . . . . . .               (928)         (1,088)                    (1,919)           (11,201)

Other income (expense):
      Interest  income . . . . . . . . . . . .                187             261                        614                822
      Nex-i.com loss . . . . . . . . . . . . .                  -            (642)                         -             (2,249)
      Other Income . . . . . . . . . . . . . .                417             372                        420                364
                                                          -------        --------                   --------          ---------
                                                              604              (9)                     1,034             (1,063)

Income (loss) before income taxes. . . . . . .               (324)         (1,097)                      (885)           (12,264)

Provision (benefit) for income taxes . . . . .                  -               -                          -                474
                                                          -------        --------                   --------          ---------
Net income (loss). . . . . . . . . . . . . . .           $   (324)       $ (1,097)                  $   (885)         $ (12,738)
                                                         ========        ========                   ========          =========
Basic and Diluted net income (loss) per share.           $  (0.05)       $  (0.17)                  $  (0.14)         $   (2.01)
                                                         ========        ========                   ========          =========
Weighted average number of common shares
outstanding . . . . . . . . . . . . . . . . . .             6,430           6,372                      6,415              6,339

Weighted average number of common and common
equivalent shares outstanding. . . . . . .                  6,430           6,372                      6,415              6,339

                                     See accompanying notes to consolidated financial statements.`

# 2

`ALPHANET SOLUTIONS, INC.
                                                 CONSOLIDATED STATEMENTS OF CASH FLOWS
                                                             (in thousands)

                                                              (unaudited)
                                                                                            Nine Months ended
                                                                                               September 30,
                                                                                            -----------------
                                                                                             2001          2000
                                                                                             ----          ----
Cash flows from operating activities:
    Net income (loss) . . . . . . . . . . . . . . . . . . . . . . . . . . . . .           $ (885)      $ (12,738)

    Adjustments to reconcile net income to net cash
    (used in) provided by operating activities:
          Depreciation and amortization . . . . . . . . . . . . . . . . . . . .            1,375           1,903
          Provision for accounts receivable. . . . . . . . . . . . . . . . . . .             142             923
          Nex-i.com loss recognition. . . . . . . . . . . . . . . . . . . . . .                -           2,249
          MTA contract loss . . . .  . . . . . . . . . . . . . . . . . . . . . .               -           4,400
          Income taxes . . . . . . . . . . . .. . . . . . . . . . . . . . . . .                -             313
          Increase (decrease) from changes in:
               Accounts receivable. . . . . . . . . . . . . . . . . . . . . . .            6,714           8,251
               Inventories . . . . . . . . . . . . . . . . . . . . . . . . . . .             436             902
               Income taxes. . . . . . . . . . . . . . . . . . . . . . . . . . .           1,576               -
               Prepaid expenses and other current assets . . . . . . . . . . . .              97             740
               Other assets . . . . . . . . . . . . . . . . . . . . . . . . . .               13            (225)
               Accounts payable . . . . . . . . . . . . . . . . . . . . . . . .           (2,836)         (2,584)
               Accrued expenses . . . . . . . . . . . . . . . . . . . . . . . .              (95)            898
               Accrued MTA contract liability. . . . . . . . . . . . . . . . . .             280          (2,264)
                                                                                          ------        --------
          Net cash (used in) provided by operating activities . . . . . . . . .            6,817           2,768

Cash flows from investing activities:
    Loan to Eureka Broadband. . . . . . . . . . . . . . . . . . . . . . . . . .             (382)              -
    Property and equipment expenditures . . . . . . . . . . . . . . . . . . . .             (279)         (1,021)
    Purchase of ICM . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .             (511)              -
    Investment in nex-i.com . . . . . . . . . . . . . . . . . . . . . . . . . .                -          (1,833)
                                                                                          ------        --------
          Net cash used in investing activities . . . . . . . . . . . . . . . .           (1,172)         (2,854)

Cash flows from financing activities
    Employee stock purchases and exercises of stock options . . . . . . . . . .               79             440
    Repayment of capital lease obligations. . . . . . . . . . . . . . . . . . .              (17)            (17)
    Repayment of shareholder advance. . . . . . . . . . . . . . . . . . . . . .                -            (675)
    Repurchase of common stock. . . . . . . . . . . . . . . . . . . . . . . . .                -               3
                                                                                          ------        --------
         Net cash provided by financing activities. . . . . . . . . . . . . . .               62            (249)
                                                                                          ------        --------
Net (decrease) increase in cash and cash equivalents. . . . . . . . . . . . . .            5,707            (335)

Cash and cash equivalents, beginning of period . . . . . . . . . . . . . . . . .          17,164          16,485
                                                                                          ------        --------
Cash and cash equivalents, end of period. . . . . . . . . . . . . . . . . . . .          $22,871         $16,150
                                                                                         =======        ========

                                     See accompanying notes to consolidated financial statements.`

# 3

# ALPHANET SOLUTIONS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

##### (Unaudited)

Note 1 - Description of the Business and Basis of Presentation:

AlphaNet
  Solutions,  Inc. (the  Company) is a leading IT
professional    services   firm   providing    business    consulting,
infrastructure   design,   managed   services,   business   continuity
planning,  and security.  The Company also offers enterprise solutions
including remote network  management and call center support,  as well
as professional development.

The   accompanying    unaudited    consolidated   financial
statements  have been prepared in accordance  with generally  accepted
accounting  principles for interim  periods.  The foregoing  financial
information  reflects  all  adjustments  which are,  in the opinion of
management,  necessary  for  a  fair  presentation  of  the  Company's
financial  position,  results of  operations  and cash flows as of the
dates  and  for  the  periods  presented.   Certain   information  and
footnote   disclosure   normally  included  in  financial   statements
prepared in accordance with generally accepted  accounting  principles
have  been  condensed  or  omitted.   These   consolidated   financial
statements  should be read in conjunction  with the Company's  audited
financial  statements for the year ended December 31, 2000, which were
included  as part of the  Company's  Annual  Report on Form  10-K,  as
filed with the  Securities  and  Exchange  Commission.  Certain  prior
year  amounts  have been  reclassified  to conform  with  current year
presentation.

Results  for  the  interim   periods  are  not  necessarily
indicative of results that may be expected for the entire year.

# 4

`Note 2 - Net Income Per Share:

                        COMPUTATION OF EARNINGS PER SHARE
                    (in thousands, except per share amounts)
                                   (unaudited)

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

Net income (loss) . . . . . . . . . . . . . . . . . . . .           $  (324)      $   (1,097)    $ (885)  $ (12,738)
                                                                    ========       =========     =======  ==========
Basic:

  Weighted average number of shares outstanding. . . . .              6,430            6,372      6,415       6,339
                                                                    ========       =========     =======  ==========
  Net income (loss) per share.  . . . . . . . . . . . . .           $ (0.05)       $   (0.17)    $(0.14)  $   (2.01)
                                                                    ========       =========     =======  ==========
Diluted:
   Weighted average number of shares outstanding . . . .              6,430            6,372      6,415       6,339
   Dilutive effects of stock options . . . . . . . . . .                  -                -          -           -
                                                                    --------       ---------     -------  ----------
   Weighted average number of common and common
   Equivalent shares outstanding . . . . . . . . . . . .              6,430            6,372      6,415       6,339
                                                                    ========       =========     =======  ==========
   Net income (loss) per share . . . . . . . . . . . . .            $ (0.05)       $   (0.17)    $(0.14)  $   (2.01)
                                                                    ========       =========     =======  ==========`

# 5

Note 3 - Investment in nex-i.com:

In January  2000,  the Company  invested  $1.8 million in
exchange  for  3,101,000  shares  of  Series  A  Convertible  Participating
Preferred   Stock  (the  "Series  A  Financing")  in  a  private   internet
start-up--nex-i.com Inc. ("nex-i.com"),  which was subsequently acquired by
a  wholly-owned  subsidiary  of Eureka  Broadband  Corporation,  a Delaware
corporation  ("EurekaGGN").  The investment  represented  approximately 30%
of nex-i.com  equity on an "as converted"  basis.  The Company recorded its
share of losses to the extent of its  investment  based upon its  preferred
stock funding interest.  On July 27, 2000,  nex-i.com received  $12,100,000
in a Series B Convertible  Participating  Preferred  Stock  financing  (the
"Series  B  Financing"),   in  which  the  Company  did  not   participate.
Following  the Series B Financing,  the  Company's  investment in nex-i.com
represented  approximately  15% of  nex-i.com  equity on an "as  converted"
basis. In connection with the Series B Financing,  and in  consideration of
the Company's release of nex-i.com from certain  commercial  commitments to
the  Company  made at the  time of the  Series  A  Financing,  the  Company
received  100,000  warrants  to  purchase  shares  of  nex-i.com  Series  B
Convertible  Participating  Preferred  Stock at an exercise  price  ranging
from  $1.50  to  $1.85  per  share  (the  "warrants").  In  February  2001,
EurekaGGN  merged with and into nex-i.com,  in connection with which merger
the Company  received  preferred  stock of various  classes in EurekaGGN in
exchange for the  Company's  Series A Convertible  Participating  Preferred
Stock in nex-i.com  and the  warrants.  Coincident to and as a condition of
the merger,  the Company was  required  to lend  $382,098 to  EurekaGGN  in
exchange for a convertible  promissory note, which has since been converted
into common stock of  EurekaGGN.  The Company  also  committed to invest an
additional $382,098 in EurekaGGN under certain  conditions,  which were not
met  and  as  such,  the  Company  has  made  no  further  investment.   In
consideration   of  the  Company's   investment  in  EurekaGGN,   EurekaGGN
committed  to  purchase  a minimum of  $145,621  of the  Company's  network
monitoring,  cabling, field engineering and other services during the first
twelve  months  following  the  closing  of the  merger  and a  minimum  of
$182,100 of such services  during the second  twelve  months  following the
closing.  EurekaGGN  also committed to use good faith efforts to ultimately
purchase  a minimum  of  $500,000  of the  Company's  services  during  the
twenty-four  month  period  following  the closing.  EurekaGGN  has not yet
fulfilled its obligations  under the  aforementioned  commitments.  In July
2001,  EurekaGGN  announced  that  it had  consummated  an  additional  $20
million  financing,  in  which  the  Company  did  not  participate.   This
additional  financing  resulted  in the  Company  having  a 1.5%  ownership
interest in common stock in  EurekaGGN,  which is now being  accounted  for
under the cost basis method of accounting.

The   Company's   interests  in  EurekaGGN   are  subject  to  two
agreements   among   EurekaGGN  and  its   shareholders.   The  rights  and
restrictions  set forth in the two agreements are not deemed by the Company
to be material.  The  restrictions  include a limitation on transfer of the
Company's  equity  interest in EurekaGGN in certain  circumstances  and the
requirement  to sell the equity  interest  when a transfer is approved by a
vote  of  the  interest  holders.  In  addition,   the  Company,  upon  the
agreement of a substantial amount of other interest holders,  has the right
to demand  that the  Company's  equity  interest  be  registered  under the
Securities Act of 1933, and the right,  without other interest holders,  to
have the Company's equity interest included in certain other  registrations
under such Act.

# 6

Note 4 - 
Recently Issued Accounting Standards:

In December 1999, the Securities and Exchange  Commission issued Staff
Accounting  Bulletin  ("SAB") No. 101  "Revenue  Recognition  in  Financial
Statements."  This  SAB  summarizes  certain  of the SEC  staff's  views in
applying generally accepted  accounting  principles to revenue  recognition
in  financial  statements.  Adoption of SAB No. 101 did not have a material
effect on the Company's results of operations.

In July 2001,
the Financial  Accounting  Standard Board (FASB) issued
Statement  of  Financial  Accounting  Standard  (SFAS) No.  141,  "Business
Combinations," which supersedes  Accounting  Principles Board (APB) Opinion
No. 16. SFAS No. 141  requires all business  combinations  initiated  after
June 30, 2001 to be accounted for under the purchase  method.  In addition,
SFAS No. 141 establishes  criteria for the recognition of intangible assets
separately  from  goodwill.  The  Company  does not expect the  adoption of
SFAS No.  141 will have a  material  effect  on the  Company's  results  of
operations, financial position or cash flow.

In July  2001,  the FASB  issued  SFAS No.  142,  "Goodwill  and Other
Intangible  Assets,"  which  supersedes  APB Opinion No. 17. Under SFAS No.
142,  goodwill and  indefinite  lived  intangible  assets will no longer be
amortized,  but rather will be tested for  impairment at least annually and
the  amortization  period of  intangible  assets with finite  lives will no
longer be limited to 40 years.  SFAS No. 142, which is effective for fiscal
years  beginning after December 15, 2001, will be adopted by the Company on
January 1, 2002.  The Company is currently  assessing  the impact,  if any,
of SFAS No.  142 on the  carrying  value of its  goodwill,  its  results of
operations and financial condition.

On August 15,  2001,  the FASB issued FASB No.  143,  "Accounting  for
Asset  Retirement   Obligations."   This  statement   addresses   financial
accounting and reporting for obligations  associated with the retirement of
tangible  long-lived  assets and the associated asset retirement  costs. It
applies to legal  obligations  associated with the retirement of long-lived
assets that result from the acquisition,  construction,  development and/or
the normal operation of a long-lived asset,  except for certain obligations
of  lessees.  The Company  does not expect the  adoption of FASB No. 143 to
have a material effect on the Company's results of operations.

On October 3, 2001, the
FASB issued FASB No. 144,  "Accounting for the
Impairment  or Disposal of Long-Lived  Assets." The  objectives of FASB No.
144 are to address  significant  issues relating to the  implementation  of
FASB  Statement  No. 121,  "Accounting  for the  Impairment  of  Long-Lived
Assets  and for  Long-Lived  Assets to be  Disposed  Of," and to  develop a
single  accounting  model,  based on the framework  established  in FAS No.
121, for long-lived  assets to be disposed of by sale,  whether  previously
held and used or newly  acquired.  The Company does not expect the adoption
of FAS No.  144 will have a  material  effect on the  Company's  results of
operations.

# 7

Note 5 - MTA Contract:

In  December  1997,  the  Company  entered  into a  four-year,  $20.4
million  contract  (the  "MTA  Contract")  with New York City  Transit,  an
agency of the  Metropolitan  Transportation  Authority  of the State of New
York (the  "MTA") to  furnish  and  install  local and  wide-area  computer
network   components.   The   aggregate   amount  of  this   contract   was
subsequently  increased  to $20.6  million.  In the event of default by the
Company,  in addition to all other  remedies at law,  the MTA  reserves the
right to  terminate  the  services  of the  Company  and  complete  the MTA
Contract  itself at the Company's  cost. In the event of unexcused delay by
the Company,  the Company may be obligated to pay, as  liquidated  damages,
the sum of $100 to $200 per day,  per  site.  The MTA  Contract  is a fixed
unit price contract, and the quantities are approximate,  for which the MTA
has  expressly  reserved the right,  for each item, to direct the amount of
equipment  and related  installation  be increased,  decreased,  or omitted
entirely  on 30 days  notice.  The MTA has the right to suspend the work on
10 days  notice for up to 90 days and/or  terminate  the  contract,  at any
time,  on  notice,  paying  only  for the  work  performed  to the  date of
termination.  Historically,  the project has been subject to the prevailing
wage rate and classification for telecommunications  workers, as determined
by the New York City  Comptroller's  office,  over which the Company has no
control,  and which is  generally  adjusted in June of each year and may be
so adjusted in the future.

The Company has performed  services and supplied  products to the MTA
since the  inception  of the MTA  Contract.  The work  performed to date at
MTA sites has required  greater  than the  originally  estimated  labor and
other  costs to  complete.  In May 1999,  the  Company  submitted  a formal
request to the MTA for equitable  adjustment in the amount of approximately
$1.5 million and for a time extension.  This request was supplemented  with
a further  submission  in  October  1999.  In  January  2000,  the  Project
Manager  for  the  MTA  Contract  denied  the  Company's  request,  thereby
triggering  the  Company's  right under the  contract to appeal the Project
Manager's denial to the MTA's Dispute  Resolution  Office (the "DRO").  The
Company  filed a Notice  of  Appeal  with  the DRO in  February  2000,  and
pursuant  to the DRO's  request,  filed  further  written  submissions  and
participated  in an arbitral  session with the DRO subsequent  thereto.  In
November  2000,  the DRO  rendered a written  decision  denying in full the
Company's  Request for Equitable  Adjustment and Time  Extension.  In March
2001,  the Company  appealed the DRO's denial of the  Company's  Request to
the New York  Supreme  Court.  The Court  held a hearing  on the  Company's
appeal on May 23,  2001.  As of the date of filing of this  report  for the
period ended  September  30, 2001,  the Court has not yet rendered a ruling
in this matter.  There can be no assurance the Company will be  successful,
either in whole or in part, in its efforts to obtain the  adjustment or the
requested extension.

On July 19, 2000,  the MTA advised the Company of a  determination  by
the Bureau of Labor Law (the  "Bureau") of the New York City  Comptroller's
Office,  communicated  to the MTA by letter from the Bureau  dated June 22,
2000,  that,  as of July 1,  2000,  the  labor  classification  for all low
voltage cabling carrying voice,  data,  video, or any combination  thereof,
is  electrician.  The Bureau's  determination  is based on a New York State
Supreme Court Appellate  Division  decision dated May 18, 2000. The workers
currently  and  historically  used by the Company to perform  cabling  work
have been classified as  telecommunications  workers.  The Company believes
it is probable that the Bureau's  determination will apply to the Company's
cabling  activities  under  the  contract,  thereby  likely  requiring  the
reclassification   of  its   telecommunications   workers  as  electricians
retroactive  to July 1, 2000.  Since the prevailing  wage for  electricians
is  substantially  higher  than that for  telecommunications  workers,  the
Company  expects to incur  materially  increased labor costs as a result of
the Bureau's  determination.  On October 16, 2000, the MTA Project  Manager
denied the Company's  request for a change order to compensate  the Company
for the  increased  costs  it  expects  to  incur  in  connection  with the
reclassification   of   certain  of  its   telecommunications   workers  as
electricians.  On January  19,  2001,  the  Company  initiated  a "dispute"
within the meaning of the applicable federal regulations  governing the MTA
Contract by filing a complaint  with the United States  Department of Labor
(the  "Department of Labor").  In its complaint,  the Company requests that
the  Department  of  Labor  adjudicate  this  dispute  and  either  issue a
determination    affirming    that   the    prevailing    wage   rate   for
telecommunications  workers,  as  originally  specified  by the MTA, is the
applicable  rate for this project,  or directing the MTA to compensate  the
Company for the change in wage  classification  made during the performance
of the  contract  in  violation  of federal  regulations.  By letter  dated
March 12, 2001, the  Department of Labor advised the Company that,  without
knowing  which,  if any,  federal  wage  decision  was  included in the MTA
Contract,  it is  unable  to make a  determination  that any  violation  of
federal  labor law has  occurred.  Since  March 12,  2001,  the Company has
continued  to  correspond  with the  Department  of Labor in an  effort  to
advance the Department of Labor's  consideration of this matter.  There can
be no  assurance  the  Company  will be  successful,  either in whole or in
part, in its efforts with respect to the prevailing wage rate.

# 8

Due to the  determination  by the Bureau  communicated to the Company
on July 19,  2000,  as well as lower  than  anticipated  gross  margins  on
networking  activities and higher than expected  costs of  completion,  the
Company  revised its estimated costs for the project during the 2000 second
quarter.  As a result,  in the second  quarter of 2000,  the Company took a
charge of $4.4  million  for  costs  projected  in  excess of the  contract
value. This charge represented the Company's  estimated net loss on the MTA
project.  As of September 30, 2001,  approximately  75% of the value of the
contract was completed.

Note 6 - Income Taxes:

Set forth below is a
 summary of the Company's tax provision (benefit) for
the three months ended September 30, 2001 and for the nine months ended
September 30, 2001.

`Three months ended            Nine months ended
                                                         September 30, 2001           September 30, 2001
                                                         ------------------           -----------------

Federal income tax benefit at statutory rate (34%)          $ (110,000)                   $   (301,000)

State income tax benefit net of Federal effect                 (23,000)                        (63,000)
                                                            ----------                    -------------
Income tax benefit                                            (133,000)                       (364,000)
Valuation allowance                                            133,000                         364,000
                                                            ----------                    -------------
                                                            $        -                    $          -
                                                            ==========                    =============`

For the three months ended
September 30, 2001, the Company has recognized a tax benefit of $133,000, offset
by a tax valuation allowance equal to the benefit. For the nine months ended
September 30, 2001, the Company has recognized a tax benefit of $364,000, offset
by a tax valuation allowance equal to the tax benefit.

Note 7 - Other Income:

In August 2001, the Company  transferred
  certain of its employees to EDS,  L.L.C.  in connection with the selection
of EDS,  L.L.C.  as a provider of Help Desk  services  previously  provided by the  Company to one of its  customers.  The
Company received a one-time  payment net of expenses of $417,000 from EDS, L.L.C.  which has been recorded as other income
in the accompanying consolidated financial statements.

Note 8 - ICM Acquisition:

On  September  4, 2001,  the  Company  announced
  that it had  acquired  certain of the assets of the ICM  Education
Division of Computer Horizons Corp., a premier provider of  vendor-authorized  technical and private training services for
corporations,  financial institutions,  governmental agencies and professional services firms in the tri-state region, for
$510,950.  The  acquisition  of ICM is not  deemed  by the  Company  to be  material  and,  as such,  pro-forma  financial
information  is not  presented.  The  acquisition  has been  accounted  for as a  purchase  and  included  in  results  of
operations as of the date of closing.

# 9

## Item 2.     
Management's Discussion and Analysis of Financial Condition and
Results of Operations

## General

AlphaNet Solutions,  Inc. (the "Company") is a leading IT professional  services firm providing business consulting,
infrastructure  design,  managed services,  business continuity planning, and security. The Company also offers enterprise
solutions  including  remote  network  management  and call  center  support,  as well as  professional  development.  The
Company's   customers  are  primarily  Fortune  1000  and  other  large  and  mid-sized   companies  located  in  the  New
York-to-Philadelphia corridor. The Company was formed in 1984.

The
Companys results for the third quarter of 2001 include certain items that
affect comparability to prior periods. The Company quantifies the impact of
these items in order to explain its results on a comparable basis. Such items
are collectively referred to as special charges and gains. Special
charges recorded in the 2001 third quarter consisted of a $69,000 pre-tax charge
for compensation and related employee costs, a pre-tax gain of $417,000 relating
to fees received from EDS, L.L.C. and $133,000 of income tax valuation
allowances.

## Results of
Operations

Three Months Ended September 30, 2001
Compared To Three Months Ended September 30, 2000

During the third quarter of 2001, excluding special charges,  the Company reported a net loss of $396,000,  or $0.06
per share,  as compared to a net loss of  approximately  $255,000,  or $0.04 per share,  in the third quarter of 2000. The
Company's  combined gross profit margin  excluding  special charges was 28.0% in the third quarter of 2001, as compared to
21.3% in the third quarter of 2000. Selling,  general and administrative  expenses,  excluding special charges,  were $3.9
million in the third  quarter of 2001,  as compared to $5.3  million in the third  quarter of 2000,  a reduction of 26.4%.
These  improvements in the Company's  operating  performance are attributable to cost reductions,  improvements in service
delivery and a shift to higher-end consulting services commanding higher billing rates and profit
margins.

Net Sales.  Net sales decreased by $11.1 million,  to $10.7 million for the third quarter of 2001 from $21.8 million
for the third  quarter of 2000.  The decline of $11.1  million was  primarily  due to a reduction in product sales of $7.7
million  and a reduction  in service  revenues  of $3.4  million.  The  Company is  continuing  to pursue its  strategy of
securing  higher-margin  consulting engagements and related revenues and has become more selective in accepting technology
product orders resulting in the significant decrease in product sales.

Gross Profit.  Excluding  special  compensation  charges,  the Company's  combined gross profit improved to 28.0% in
the third  quarter of 2001 from 21.3% in the third  quarter of 2000.  The  Company  recorded  $33,000 of special  charges,
reflecting  severance  compensation  costs during the third  quarter of 2001.  The increase in gross profit  resulted from
improvement in both service and product  margins.  The Company  currently offers  technology  products as a convenience to
its clients and is therefore  selective in accepting  technology  product  orders.  Consequently,  the amount of sales and
related  aggregate  gross profit  associated  with  technology  product  sales have  declined;  however,  the gross profit
percentage  on the  technology  product  sales  improved  to 12.5% in the third  quarter  of 2001 from  10.8% in the third
quarter of 2000.  Competitive  pricing pressures  continue to impact technology  product margins and, as such,  technology
product  margins may vary from  quarter to quarter.  Service  gross  profits  have  continued  to improve  and,  excluding
special  compensation  costs,  increased  to 32.8% in the third  quarter of 2001 from 30.5% in the third  quarter of 2000.
The Company  intends to continue to focus its efforts on increasing the efficiency of its service  delivery force, as well
as expanding its higher-end consulting offerings.

# 11

Selling,  General and Administrative Expenses.  Selling, general and administrative expenses before special charges
in each period  were $3.9  million in the third  quarter of 2001,  as  compared  to $5.3  million in the third  quarter of
2000.  Special charges of $36,000 reflecting  severance  compensation costs were recorded in the third quarter of 2001. In
the third quarter of 2000, special charges of $394,000 in severance and special compensation payments were recorded.

Interest  income,  net.  
 Due to declining  interest  rates,  interest  income,  net,  totaled  $187,000 for the third
quarter of 2001, down from $261,000 in the third quarter of 2000.

Income taxes.  
In the third quarter of 2001,  the Company  recorded a $133,000  income tax benefit  before an income
tax valuation  allowance  provision.  In determining  the Company's tax expense for the quarter,  an effective tax rate of
41.0% was utilized.  In the third quarter of 2000, the Company  recorded a $454,000 benefit before an income tax valuation
allowance provision.

Nine Months Ended September 30,
2001 Compared To Nine Months Ended September 30, 2000

During the first nine months of 2001,  excluding  special charges,  the Company reported a net loss of $485,000,  or
$0.08 per share,  as compared to a net loss of  approximately  $2,086,000,  or $0.33 per share,  for the nine months ended
September 30, 2000. The Company's  combined  gross profit margin  excluding  special  charges was 25.9% for the first nine
months of 2001, as compared to 18.0% for the nine months ended  September 30, 2000.  Selling,  general and  administrative
expenses,  excluding  special charges,  were $12.5 million for the first nine months of 2001, as compared to $17.1 million
in the third  quarter of 2000, a reduction  of 26.9%.  These  improvements  in the  Company's  operating  performance  are
attributable  to cost  reductions,  improvements  in  service  delivery  and a shift  to  higher-end  consulting  services
commanding higher billing rates and profit margins.

Net Sales.  
Net sales  decreased  by $27.9  million,  to $42.9  million for the first nine months of 2001 from $70.8
million for the nine months  ended  September  30,  2000.  The decline of $27.9  million was mainly due to a reduction  in
product  sales of $22.2 million and a reduction of service  revenues of $5.7 million.  The Company is continuing to pursue
its  strategy of securing  high-margin  consulting  engagements  and related  revenues  and has become more  selective  in
accepting technology product orders resulting in the significant decrease in product sales.

Gross Profit.  
Excluding special  compensation  charges,  the Company's  combined gross profit improved to 25.9% for
the nine months ended  September 30, 2001 from 18.0% in the first nine months of 2000.  The Company  recorded  $147,000 of
special charges  reflecting  severance  compensation  costs during the first nine months of 2001. In the first nine months
of 2000, the Company  recorded  special charges of $4.4 million  associated  with the Company's  contract with the MTA and
$0.5 million  associated  with  unrecoverable  vendor charges.  The increase in gross profit resulted from  improvement in
both service and product margins.  The Company  currently offers  technology  products as a convenience to its clients and
is therefore  selective in accepting  technology product orders.  Consequently,  the amount of sales and related aggregate
gross profit  associated  with  technology  product  sales have  declined;  however,  the gross profit  percentage  on the
remaining  technology  product sales excluding special charges,  improved to 12.6% for the nine months ended September 30,
2001 from 8.2%  during  the first  nine  months of 2000.  Competitive  pricing  pressures  continue  to impact  technology
product  margins and, as such,  technology  product  margins may vary from quarter to quarter.  Service gross profits have
continued to improve and, excluding special  compensation costs of $147,000,  increased to 32.1% for the nine months ended
September  30,  2001 from 28.1% a year ago.  The  Company  intends to  continue  to focus its  efforts on  increasing  the
efficiency of its service delivery force, as well as expanding its higher-end consulting offerings.

# 12

Selling,  General and Administrative
Expenses.  Selling, general and administrative expenses before special charges
were $12.5  million for the first nine months of 2001,  as compared to $17.1  million for the nine months ended  September
30, 2000. Special charges of $330,000,  reflecting  severance  compensation  costs, were recorded in the first nine months
of 2001.  For the nine months ended  September  30, 2000,  special  charges of $2.0 million were recorded  including  $0.7
million of uncollectable receivables and $1.3 million in severance and special compensation payments.

Interest  income,  net.  
Interest  income,  net totaled  $614,000 for the nine months ended September 30, 2001, down
$208,000 from $822,000 for the nine months ended September 30, 2000 due to lower interest rates.

Income  Taxes.  
For the first nine months of 2001,  the  Company  recorded a $364,000  income tax benefit  before an
income tax valuation  allowance  provision.  In determining the Company's tax expense for the three months ended September
30, 2001,  an effective  tax rate of 41.0% was utilized.  The Company,  for the first nine months of 2000,  recorded a tax
valuation  allowance  totaling  $5.6  million,  reducing  its deferred tax asset  balance to $1.6  million,  for which the
Company had federal  income tax carryback  availability.  The 2000 tax return was filed in the second quarter of 2001, and
the  Company  received  a tax refund of $1.6  million  in the third  quarter of 2001  resulting  in full  recovery  of the
Company's tax receivable balance.

## Risks and
Uncertainties

The Company offers business consulting,  infrastructure design,  managed services,  business continuity planning,
and security.  The Company also offers enterprise  solutions  including remote network management and call center support,
as well as  professional  development.  Services  revenue  is  recognized  as such  services  are  performed.  Most of the
Company's  services are billed on a  time-and-materials  basis.  The Company's  professional  development and services are
fee-based on a per-course basis.  Generally,  the Company's  service  arrangements with its customers may be terminated by
such customers with limited advance notice and without  significant  penalty.  The most  significant  cost relating to the
services  component of the  Company's  business is personnel  costs which consist of salaries,  benefits,  payroll-related
expenses and training and recruiting  costs.  Thus, the financial  performance of the Company's  service business is based
primarily  upon billing  margins  (billable  hourly  rates less the costs to the Company of such  service  personnel on an
hourly basis) and utilization rates (billable hours divided by paid hours).  The future success of the services  component
of the  Company's  business will depend in large part upon its ability to maintain  high  utilization  rates at profitable
billing margins, as well as on the Company's ability to obtain new projects at new
and existing clients.

Portions of the  Company's  service  revenue is derived from  fixed-fee  projects,  under which the Company  assumes
greater  financial  risk if it fails to accurately  estimate the costs of projects.  The Company  assumes  greater risk on
fixed-fee  projects than on  time-and-material  projects.  If a  miscalculation  for resources or time occurs on fixed-fee
projects,  the costs of completing these projects may exceed the price,  which could result in a loss on the project and a
decrease in net income.  The Company  recognizes  revenue from fixed-fee  projects based on its estimate of the percentage
of each project completed in a reporting period.

# 13

The Company  anticipates  that an increasing  percentage of its gross profits in the future will be derived from the
services  component of its business.  During the three-month  period ended September 30, 2001,  services  revenue,  before
special  charges,  produced  approximately  89.5% of the  Company's  total gross profit  compared to 76.3% during the same
period in 2000.  However,  the Company  believes  that product  sales will continue to generate a portion of the Company's
gross profit for the foreseeable future.

The Company  offers its  clients  the ability to source  technology  products.  The  Company is  authorized  by many
leading  manufacturers  of IT  products,  such as  3Com,  Cisco  Systems,  Compaq,  Hewlett-Packard,  IBM,  Intel,  Lucent
Technologies,  Microsoft,  NEC, Nortel Networks,  Novell and Sun Microsystems to resell their products and provide related
services.  The Company  maintains  alliances with  distributors of computer  technology  products  including Ingram Micro,
Inc. and Tech Data Corporation.

The
Companys net sales, gross profit, operating income and losses and net
income and losses have varied substantially from quarter to quarter and are
expected to continue to do so in the future. Many factors, some of which are not
within the Companys control, have contributed and may in the future
contribute to fluctuations in operating results. These factors include: the
transition from product reseller to IT professional services provider and
expected and unexpected costs and events related to such transition; intense
competition from other IT service providers; the Companys dependence upon
a limited number of key clients for a significant portion of its business; the
short-term nature of the Companys customers commitments; patterns of
capital spending by customers; the timing, size, and mix of product and service
orders and deliveries; the timing and size of new projects; pricing changes in
response to various competitive factors; market factors affecting the
availability of qualified technical personnel; timing and customer acceptance of
new product and service offerings; changes in trends affecting outsourcing of IT
services; disruption in sources of supply; changes in product, personnel, and
other operating costs; deficiencies in the design and operation of the
Companys internal control structure as identified by the Company and its
independent accountants; and industry and general economic conditions. Operating
results have been and may in the future also be affected by the cost, timing and
other effects of acquisitions, including the mix of revenues of acquired
companies. Past operating results and period-to-period comparisons are not
necessarily an indication of future operating performance.

The
Companys operating results have been and will continue to be impacted by
changes in technical personnel billing and utilization rates. Many of the
Companys costs, particularly costs associated with services revenue, such
as administrative support personnel and facilities costs, are fixed costs. The
Companys expense levels are based in part on expectations of future
revenues. As the Companys business shifts from product-related sales to
services, expense levels may exceed total gross profits as the Company invests
in the expansion of its service offerings. If the Company successfully expands
its service offerings, periods of variability in utilization may continue to
occur. The Company may incur greater technical training costs during such
periods.

# 14

## EDS, L.L.C.

In August 2001,  the Company  agreed that certain of its employees  could join EDS,  L.L.C.  in connection  with the
selection  of EDS,  L.L.C.  as a  provider  of  Help  Desk  services  previously  provided  by the  Company  to one of its
customers.  The Company  received a one-time  payment net of expenses of $417,000,  and has been  recorded as other income
in the accompanying consolidated financial statements.    As a  result  of this  transaction,  the  Company  has  incurred
monthly  reductions of revenue and operating  income from this customer of $400,000 and $60,000,  respectively.  There can
be no assurance the Company will be successful  in replacing  this revenue or operating  income with business from this or
other customers in the foreseeable future.

## ICM EDUCATION DIVISION OF COMPUTER HORIZONS CORP

On  September  4, 2001,  the  Company  announced  that it had  acquired  certain of the assets of the ICM  Education
Division of Computer  Horizons Corp, a premier provider of  vendor-authorized  technical and private training services for
corporations,  financial  institutions,  governmental agencies and professional services firms in the tri-state region for
$510,950.  The  acquisition  of ICM is not  deemed  by the  Company  to be  material  and,  as such,  pro-forma  financial
information is not presented.

## MTA

In
December 1997, the Company entered into a four-year, $20.4 million contract (the
MTA Contract) with New York City Transit, an agency of the
Metropolitan Transportation Authority of the State of New York (the
MTA) to furnish and install local and wide-area computer network
components including network and telecommunications hardware, software and
cabling throughout the MTAs over 200 locations. The aggregate amount of
this contract was subsequently increased to $20.6 million. The Company is the
prime contractor on this project and is responsible for project management,
systems procurement, and installation. The work is grouped in contiguous
locations and payment is predicated upon achieving specific milestone events. In
the event of default, in addition to all other remedies at law, the MTA reserves
the right to terminate the services of the Company and complete the MTA Contract
itself at the Companys cost. In the event of unexcused delay by the
Company, the Company may be obligated to pay, as liquidated damages, the sum of
$100 to $200 per day, per site. While the Company believes it is currently
performing in accordance with the contract terms, there can be no assurance that
any such events of default or unexcused delays will not occur. In addition, the
MTA Contract is a fixed unit price contract, and the quantities are approximate,
for which the MTA has expressly reserved the right, for each item, to direct the
amount of equipment and related installation be increased, decreased, or omitted
entirely on 30 days notice. The MTA has the right to suspend the work on 10 days
notice for up to 90 days and/or terminate the contract, at any time, on notice,
paying only for the work performed to the date of termination. Historically, the
project has been subject to the prevailing wage rate and classification for
telecommunications workers, as determined by the New York City
Comptrollers Office, over which the Company has no control, and which is
generally adjusted in June of each year and may be so adjusted in the future.

# 15

On
July 19, 2000, the MTA advised the Company of a determination by the Bureau of
Labor Law (the Bureau) of the New York City Comptrollers
Office, communicated to the MTA by letter from the Bureau dated June 22, 2000,
that, as of July 1, 2000, the labor classification for all low voltage cabling
carrying voice, data, video or any combination thereof is electrician. The
Bureaus determination is based on a New York State Supreme Court Appellate
Division decision dated May 18, 2000. The workers currently and historically
used by the Company to perform cabling work have been classified as
telecommunications workers. The Company believes it is probable the
Bureaus determination will apply to the Companys cabling activities
under the contract, thereby likely requiring the reclassification of its
telecommunications workers as electricians retroactive to July 1, 2000. Since
the prevailing wage for electricians is substantially higher than that for
telecommunications workers, the Company expects to incur materially increased
labor costs as a result of the Bureaus determination. On October 16, 2000,
the MTA Project Manager denied the Companys request for a change order to
compensate the Company for the increased costs it expects to incur in connection
with the reclassification of certain of its telecommunications workers as
electricians. On January 19, 2001, the Company initiated a dispute
within the meaning of the applicable federal regulations governing the MTA
Contract by filing a complaint with the United States Department of Labor (the
Department of Labor). In its complaint, the Company requests that
the Department of Labor adjudicate this dispute, and either issue a
determination affirming that the prevailing wage rate for telecommunications
workers, as originally specified by the MTA, is the applicable rate for this
project, or directing the MTA to compensate the Company for the change in wage
classification made during the performance of the contract in violation of
federal regulations. By letter dated March 12, 2001, the Department of Labor
advised the Company that, without knowing which, if any, federal wage decision
was included in the MTA Contract, it is unable to make a determination that any
violation of federal labor law has occurred. Since March 12, 2001, the Company
has been corresponding with the Department of Labor in an effort to advance the
Department of Labors consideration of this matter. There can be no
assurance the Company will be successful, either in whole or in part, in its
efforts with respect to the prevailing wage rate.

The
Company has performed services and supplied products to the MTA since the
inception of the MTA Contract. The work performed to date at MTA sites has
required greater than originally estimated labor and other costs to complete. In
May 1999, the Company submitted a formal request to the MTA for equitable
adjustment in the amount of approximately $1.5 million and for a time extension.
This request was supplemented with a further submission in October 1999. In
January 2000, the Project Manager for the MTA Contract denied the Companys
request, thereby triggering the Companys right under the contract to
appeal the Project Managers denial to the MTAs Dispute Resolution
Office (the DRO). The Company filed its Notice of Appeal with the
DRO in February 2000, and pursuant to the DROs request, filed further
written submissions and participated in an arbitral session with the DRO
subsequent thereto. In November 2000, the DRO rendered a written decision
denying in full the Companys Request for Equitable Adjustment and Time
Extension. In March 2001, the Company appealed the DROs denial of the
Companys Request to the New York Supreme Court. The Court held a hearing
on the Companys appeal on May 23, 2001. As of the date of filing for the
period ended September 30, 2001, the Court has not yet rendered a ruling in this
matter. There can be no assurance the Company will be successful, either in
whole or in part, in its efforts to obtain the adjustment of the requested
extension.

# 16

Historically,
the Company had estimated that project costs would approximate project revenues
and, accordingly, had recognized no gross profit on the contract. Due to the
determination by the Bureau communicated to the Company on July 19, 2000, as
well as lower than anticipated gross margins on networking activities and higher
than expected costs of completion, the Company revised its estimated costs for
the project during the 2000 second quarter. As a result, in the second quarter
of 2000, the Company took a charge of $4.4 million for costs projected in excess
of the contract value. This charge represents the Companys current
estimated loss on the MTA project. As of September 30, 2001, approximately 75%
of the value of the contract was completed.

## EurekaGGN

In
January 2000, the Company invested $1.8 million in exchange for 3,101,000 shares
of Series A Convertible Participating Preferred Stock (the Series A
Financing) in a private internet start-up  nex-i.com Inc.
(nex-i.com), which was subsequently acquired by a wholly-owned
subsidiary of Eureka Broadband Corporation, a Delaware corporation
(EurekaGGN). The investment represented approximately 30% of
nex-i.com equity on an as converted basis. The Company recorded it
share of losses to the extent of its investment based upon its preferred stock
funding interest. On July 27, 2000, nex-i.com received $12,100,000 in a Series B
Convertible Participating Preferred Stock financing (the Series B
Financing), in which the Company did not participate. Following the Series
B Financing, the Companys investment in nex-i.com represented
approximately 15% of nex-i.com equity on an as converted basis. In
connection with the Series B Financing, and in consideration of the
Companys release of nex-i.com from certain commercial commitments to the
Company made at the time of the Series A Financing, the Company received 100,000
warrants to purchase shares of nex-i.com Series B Convertible Participating
Preferred Stock at an exercise price ranging from $1.50 to $1.85 per share (the
warrants). In February 2001, EurekaGGN merged with and into
nex-i.com, in connection with which merger the Company received preferred stock
of various classes in EurekaGGN in exchange for the Companys Series A
Convertible Participating Preferred Stock in nex-i.com and the warrants.
Coincident to and as a condition of the merger, the Company was required to lend
$382,098 to EurekaGGN in exchange for a convertible promissory note, which has
since been converted into common stock of EurekaGGN. The Company also committed
to invest an additional $382,098 in EurekaGGN under certain conditions, which
were not met and as such, the Company has made no further investment. In
consideration of the Companys investment in EurekaGGN, EurekaGGN committed
to purchase a minimum of $145,621 of the Companys network monitoring,
cabling, field engineering and other services during the first twelve months
following the closing of the merger and a minimum of $182,100 of such services
during the second twelve months following the closing. EurekaGGN also committed
to use good faith efforts to ultimately purchase a minimum of $500,00 of the
Companys services during the twenty-four month period following the
closing. EurekaGGN has not yet fulfilled its obligations under the
aforementioned commitments. In July 2001, EurekaGGN announced that it had
consummated an additional $20 million financing, in which the Company did not
participate. This additional financing resulted in the Company having a 1.5%
ownership interest in common stock in EurekaGGN, which is now being accounted
for under the cost basis method of accounting.

The
Company's  interests in EurekaGGN  are subject to two  agreements  among  EurekaGGN  and its  shareholders.  The
rights and  restrictions  set forth in the two agreements are not deemed by the Company to be material.  The  restrictions
include a  limitation  on  transfer of the  Company's  equity  interest  in  EurekaGGN  in certain  circumstances  and the
requirements  to sell the equity  interest  when a transfer is approved by a vote of the  interest  holders.  In addition,
the Company,  upon the  agreement of a  substantial  amount of other  interest  holders,  has the right to demand that the
Company's equity interest be registered under the Securities Act of 1933, and the right,  without other interest  holders,
to have the Company's equity interest included in certain other registrations under
 such Act.

# 17

## Forward-Looking
Statements

Certain  statements  are  included  in this  Quarterly  Report  on  Form  10-Q  which  are  not  historical  and are
"forward-looking,"  within the meaning of The Private  Securities  Litigation  Reform Act of 1995 and may be identified by
such terms as "expect,"  "believe,"  "may," "will," and "intend" or similar terms.  These  forward-looking  statements may
include,  without limitation,  statements  regarding the growth in the IT markets, the continuation of the trends favoring
outsourcing of management  information systems ("MIS") functions by large and mid-sized companies,  possible future higher
margins in the services  component of the Company's  business,  the timing of the  development and  implementation  of the
Company's new service  offerings and the  utilization  of such services by the Company's  customers,  and trends in future
operating performance.  Such forward-looking  statements include risks and uncertainties,  including,  but not limited to:
(i) the  repositioning  of the Company as an IT  professional  services  firm and all  expected and  unexpected  costs and
events  related to such  repositioning,  including,  among other things (a) the  substantial  variability of the Company's
quarterly  operating results caused by a variety of factors,  some of which are not within the Company's control,  (b) the
loss of  significant  revenue and  operating  income from certain  large legacy  accounts and the absence of any assurance
that the Company will be successful in replacing this revenue or operating income in the foreseeable  future,  (c) intense
competition  from other IT service  providers,  (d) the short-term  nature of the Company's  customers'  commitments,  (e)
patterns of capital spending by the Company's  customers,  (f) the timing,  size and mix of product and service orders and
deliveries,  (g) the timing and size of new projects,  (h) pricing changes in response to various competitive factors, (i)
market factors  affecting the availability of qualified  technical  personnel,  (j) the timing and customer  acceptance of
new product and service offerings,  (k) changes in trends affecting outsourcing of IT services,  (l) disruption in sources
of  supply,  (m)  changes in  product,  personnel  and other  operating  costs,  and (n)  industry  and  general  economic
conditions;  (ii) changes in technical  personnel  billing and  utilization  rates;  (iii) the intense  competition in the
markets for the  Company's  products  and  services;  (iv) the ability to develop,  market,  provide,  and achieve  market
acceptance of new service  offerings to new and existing  customers;  (v) the Company's  ability to attract,  hire, train,
and retain  qualified  technical  personnel;  (vi) the  Company's  substantial  reliance on a  concentrated  number of key
customers;  (vii) uncertainties  relating to potential  acquisitions,  if any, made by the Company,  such as the Company's
ability to integrate acquired  operations and to retain key customers and personnel of the acquired  business;  (viii) the
Company's  reliance on the continued  services of key executive  officers and  salespersons;  and (ix) material  risks and
uncertainties  associated  with the MTA  Contract.  These risks and  uncertainties  could cause  actual  results to differ
materially  from  results  expressed  or  implied  by  forward-looking   statements  contained  in  the  document.   These
forward-looking statements speak only as of the date of this document.

## Recently
Issued Accounting Standards

In December 1999, the Securities and Exchange  Commission issued Staff Accounting  Bulletin ("SAB") No. 101 "Revenue
Recognition  in  Financial  Statements."  This SAB  summarizes  certain of the SEC  staff's  views in  applying  generally
accepted  accounting  principles to revenue  recognition in financial  statements.  Adoption of SAB No. 101 did not have a
material effect on the Company's results of operations.

# 18

In July 2001,  the Financial  Accounting  Standard  Board (FASB) issued  Statement of Financial  Accounting  Standard
(SFAS) No. 141,  "Business  Combinations,"  which  supersedes  Accounting  Principles Board (APB) Opinion No. 16. SFAS No.
141 requires all business  combinations  initiated  after June 30, 2001 be  accounted  for under the purchase  method.  In
addition,  SFAS No. 141  establishes  criteria for the  recognition of intangible  assets  separately  from goodwill.  The
Company does not expect the adoption of SFAS No. 141 will have a material  effect on the Company's  results of operations,
financial position or cash flow.

In
July 2001, the FASB issued SFAS No. 142, Goodwill and Other Intangible
Assets, which supersedes APB Opinion No. 17. Under SFAS No. 142 goodwill
and indefinite lived intangible assets will no longer be amortized, but rather
will be tested for impairment at least annually. In addition, the amortization
period of intangible assets with finite lives will no longer be limited to 40
years. SFAS No. 142 is effective for fiscal years beginning after December 15,
2001, which for the Company means the standard will be adopted on January 1,
2002. The Company is currently assessing the impact of SFAS No. 142 on the
carrying value of its goodwill, its results of operations and financial
condition.

On
August 15, 2001, the FASB issued FASB No. 143, Accounting for Asset
Retirement Obligations. This statement addresses financial accounting and
reporting for obligations associated with the retirement of tangible long-lived
assets and the associated asset retirement costs. It applies to legal
obligations associated with the retirement of long-lived assets that result from
the acquisition, construction, development and/or the normal operation of a
long-lived asset, except for certain obligations of lessees. The Company does
not expect the adoption of FASB No. 143 to have a material effect on the
Companys results of operations.

On
October 3, 2001, the FASB issued FASB No. 144, Accounting for the
Impairment or Disposal of Long-Lived Assets. The objectives of FASB No.
144 are to address significant issues relating to the implementation of FASB
Statement No. 121, Accounting for the Impairment of Long-Lived Assets and
for Long-Lived Assets to be Disposed Of, and to develop a single
accounting model, based on the framework established in FAS No. 121, for
long-lived assets to be disposed of by sale, whether previously held and used or
newly acquired. The Company does not expect the adoption of FAS No. 144 will
have a material effect on the Companys results of operations.

## Liquidity and
Capital Resources

Cash and cash  equivalents  at  September  30, 2001 were $22.9  million,  compared to $17.2  million at December 31,
2000,  an increase of $5.7 million.  Working  capital at September 30, 2001 was $26.1 million as compared to $26.3 million
at December 31, 2000, representing a decrease of $0.2 million.

Since its inception,  the Company has funded its operations primarily from cash generated by operations,  as well as
with funds from  borrowings  under a credit  facility  and the net  proceeds  from the  Company's  public  offerings.  The
Company's credit agreement with the First Union National Bank expired on December 31, 2000 and was not renewed.

The increase during the third quarter in cash from operating  activities  reflected  primarily a decrease in Company
accounts  receivable  of  approximately  $6.7  million.  The  Company's  days sales  outstanding  in  accounts  receivable
increased  from 65 days at December  31, 2000 to 80 days at September  30, 2001.  Excluding  MTA  receivables,  days sales
outstanding  in accounts  receivable at September  30, 2001 was 62 days.  Cash used in investing  activities  included the
Company's  capital  expenditures  for the first nine months of 2001 of  $279,000  primarily  for the  purchase of computer
equipment and software used by the Company,  the Company's  previous loan to Eureka of $382,000 and the ICM acquisition of
approximately $511,000.

# 19

Cash provided and utilized by financing  activities  included  $79,000 for employee  stock  purchases,  reduced by a
$17,000 repayment of capital lease obligations.

The Company's  Employee Stock  Purchase Plan was approved by the Company's  shareholders  in May 1998.  During 1998,
80,888 shares of common stock were purchased by employees under the plan for approximately  $509,000,  an average price of
$6.29 per  share.  During  1999,  employees  purchased  an  additional  49,691  shares  under  the plan for  approximately
$177,000,  an average price of $3.54 per share.  During 2000,  33,548  shares of common stock were  purchased by employees
under the plan for  approximately  $117,  000,  an  average  price of $3.51 per share.  During the third  quarter of 2001,
employees  purchased  11,589  shares of stock for  approximately  $22,000,  at an average  price of $1.87 per  share.  The
Company has issued an aggregate of 211,331  shares since the inception of the Employee  Stock  Purchase Plan at an average
price of $4.14 per share,  receiving  total  proceeds of  approximately  $875,000.  As of September  1, 2001,  the Company
suspended the Employee Stock Purchase Plan as a cost conservation measure.

The  Company  purchases   certain  inventory  and  equipment  through  a  financing   arrangement  with  IBM  Credit
Corporation.  At September 30, 2001, there was an outstanding balance of approximately
$0.6  million  to IBM Credit  Corporation  under this  arrangement.  Obligations  under  this  financing  arrangement  are
collateralized  by the current  inventory  balance purchased from IBM through September 30, 2001. The current credit limit
with IBM Credit Corporation is $1.5 million.

The Company believes that its available funds,  together with existing and anticipated  credit  facilities,  will be
adequate to satisfy its current and planned operations for at least the next 12 months.

Not applicable.

# 20

## Item 1.  Legal Proceedings

In connection with the Company's  ongoing  disputes with the MTA concerning a contract  entered into with the MTA in
December  1997,  the  Company  commenced  certain  legal  proceedings  as  discussed  in  Part I,  Item 2 of  this  Report
(Management's Discussion and Analysis of Financial Condition and Results of Operations) at pp.15-17.

# 21

## Item 6.  
Exhibits and Reports on Form 8-K.

|(a) | Exhibits.
|--- | ---------

| | 10.41 | Asset Purchase Agreement dated
 August 31, 2001 by and between AlphaNet Solutions, Inc. and Computer Horizons Corp.
| | ----- | -------------------------------------------------------------------------------------------------------------------

|(b) | Reports on Form 8-K.
|--- | --------------------

| | On
July 16, 2001, the Company filed with the Commission a current report on Form
8-K reporting an event under Item 5-Other Events, and on September 27, 2001, the
Company filed with the Commission a current report on Form 8-K reporting an
event under Item 5-Other Events.
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

# 22

# 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.

| |  | ALPHANET SOLUTIONS, INC.
| |  | ------------------------

|DATE:  November 9, 2001 |  | STAN GANG
|----------------------- |  | ---------

| |  | By:_________________________________
| |  | ------------------------------------

| |  | Name:  Stan Gang
       Title:    Chairman and Chief Executive Officer
            
       (Principal Executive Officer)
| |  | ------------------------------------------------------------------------------------------------------------------------

| |  | 
| |  | 

|DATE:  November 9, 2001 |  | WILLIAM S. MEDVE
|----------------------- |  | ----------------

| |  | By:_________________________________
| |  | ------------------------------------

| |  | Name:  William S. Medve
        Title:    Executive Vice President,
                
    Chief Financial Officer and Treasurer
                
    (Principal Financial and Accounting Officer)
| |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

# 23