# UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 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 June 30, 2001
Commission file number 0-27042

# ALPHANET
SOLUTIONS, INC.

---

(Exact name of registrant as specified in
its charter)

New Jersey
                    
                      
              0-27042
                      
                    
        
           22-2554535

---

(State or other jurisdiction of       
      
                      
 (Commission File Number)
                       
       (IRS Employer Identification Number)
          incorporation)

# 7 Ridgedale Avenue, Cedar Knolls, New Jersey 07927

---

(Address of principal executive offices)   
  (Zip code)

Registrant's telephone 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 Registrant's classes of common stock, as of July 31, 2001:

Class            
                         
            
                       
                      
           Number of Shares Outstanding

Common Stock, $.01 par value
                  
                    
                      
                       
6,425,970

# ALPHANET
SOLUTIONS, INC.

# TABLE OF CONTENTS

PART I.        
 FINANCIAL INFORMATION

Item 1.     
 Financial Statements..................................................................................................................................................................... 1

Consolidated Balance Sheets
           
           
as of June 30, 2001 (unaudited)
           
            and
 December 31, 2000................................................................................................................................................................ 1

Consolidated Statements of Operations
      
                
for the Three and Six Months Ended
      
                
June 30, 2001,  (unaudited) and June 30, 2000 (unaudited)......................................................................................................... 2

Consolidated Statements of Cash Flows
      
                
for the Six Months Ended
      
                
June 30, 2001(unaudited) and June 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.......................................................................................................................... 10

Item 3.     
  Quantitative and Qualitative Disclosures About Market Risk.................................................................................................. 19

PART II.        
OTHER INFORMATION....................................................................................................................................................... 20

Item 1.     
  Legal Proceedings...................................................................................................................................................................... 20

Item 4.     
  Submission of Matters to a vote by Securities Holders........................................................................................................... 20

Item 6.     
  Exhibits and Reports on Form 8-K.......................................................................................................................................... 21

SIGNATURES..................................................................................................................
 .............................................................................. 22

## PART I.

# FINANCIAL
INFORMATION

## Item 1.     
Financial Statements

`ALPHANET SOLUTIONS, INC.
                                                      CONSOLIDATED BALANCE SHEETS
                                                   (in thousands, except share data)
                                                              (unaudited)
                                                                             June 30,        December 31,
                                                                              2001               2000
                                                                              -----              ----

ASSETS
Current assets:
        Cash and cash  equivalents . . . . . . . . . . . . . .            $ 20,746                $ 17,164
        Accounts receivable, less allowance for doubtful
        accounts of $1,215 at June 30, 2001 and $3,923 at
        December 31, 2000 . . . . . . . . . . . . . . . . . .               10,807                  16,340
        Inventories . . . . . . . . . . . . . . . . . . . . .                  433                     858
        Income taxes. . . . . . . . . . . . . . . . . . . . .                1,576                   1,576
        Prepaid expenses and other current assets . . . . . .                  343                     426
                                                                          --------                --------
                 Total current assets . . . . . . . . . . . .               33,905                  36,364

Property and equipment, net . . . . . . . . . . . . . . . . .                2,684                   3,235

Goodwill. . . . . . . . . . . . . . . . . . . . . . . . . . .                2,004                   2,134

Other assets . . . . . . . . . . . . . . . . . . . . . . . . .                  83                      92
                                                                          --------                --------
                 Total assets. . . . . . . . . . . . . . . .              $ 38,676                $ 41,825
                                                                          ========                ========
LIABILITIES AND SHAREHOLDERS' EQUITY

Current liabilities:
        Current portion of capital lease obligations . . . .              $     20                $     23
        Accounts payable . . . . . . . . . . . . . . . . . .                 1,806                   4,405
        Accrued expenses . . . . . . . . . . . . . . . . . .                 3,290                   3,540
        Accrued MTA contract liability. . .  . . . . . . . .                 2,314                   2,093
                                                                          --------                --------
                 Total current liabilities . . . . . . . . .                 7,430                  10,061

Long term liabilities:

        Capital lease obligations . . . . . . . . . . . . . .                    -                       8
                                                                          --------                --------
         Total liabilities . . . . . . . . . . . . . . . . .                 7,430                  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, 6,571,824 and 6,536,209 shares
        issued and outstanding at June 30, 2001 and December
        31, 2000, respectively . . . . . . . . . . . . . .                      65                      65
        Additional paid-in capital. . . . . . . . . . . . . .               35,064                  35,013
        Accumulated Deficit. . . . . . . . . . . . . . . . .                (3,163)                 (2,602)
        Treasury stock - at cost; 150,600 shares at June 30,
        2001 and December 31, 2000, respectively. . . . . . .                 (720)                   (720)
                                                                          --------                --------
                 Total shareholders' equity . . . . . . . . .               31,246                  31,756
                                                                          --------                --------
                 Total liabilities and shareholders' equity .             $ 38,676                $ 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 Six Months ended
                                                                 June 30,                                   June 30,
                                                                 --------                                   --------

                                                             2001            2000                       2001               2000
                                                             ----            ----                       ----               ----
Net sales:
      Product sales. . . . . . . . . . . . . .            $ 3,556        $ 13,540                   $ 11,255          $  25,749
      Services and support . . . . . . . . . .              9,955          12,138                     20,933             23,158
                                                          -------        --------                   --------          ---------
                                                           13,511          25,678                     32,188             48,907
Cost of sales:
      Product sales . . . . . . . . . . . . . .             3,020          12,573                      9,829             23,911
      Services and support                                  6,819           8,669                     14,376             16,910
      MTA contract loss recognition and
      Other charges                                             -           4,851                          -              4,851
                                                          -------        --------                   --------          ---------
                                                            9,839          26,093                     24,205             45,672
Gross Profit:
         Product . . . . . . . . . . . . . . .                536             967                      1,426              1,838
         Service and support . . . . . . . . .              3,136           3,469                      6,557              6,248
      MTA contract loss recognition and                         -          (4,851)                         -             (4,851)
                                                          -------        --------                   --------          ---------
         Other charges
                                                            3,672            (415)                     7,983              3,235
Operating expenses:
      Selling, general & administrative . . .           4,288           7,456                      8,974             13,348
                                                          -------        --------                   --------          ---------

Operating income (loss) . . . . . . . . . . . .              (616)         (7,871)                      (991)           (10,113)

Other income (expense):
      Interest  income . . . . . . . . . .  . .               202             302                        427                561
      Nex-i.com loss . . . . . . . . . . . . .                             (1,272)                                       (1,607)
      Other Income . . . . . . . . . . . . . .                 (3)            (14)                         3                 (8)
                                                          -------        --------                   --------          ---------
                                                              199            (984)                       430             (1,054)
Income (loss) before income taxes. . . . . . .               (417)         (8,855)                      (561)           (11,167)

Provision (benefit) for income taxes . . . . .                  -           1,433                          -                474
                                                          -------        --------                   --------          ---------
Net income (loss) . . . . . . . . . . . . . . .          $   (417)       $(10,288)                  $   (561)         $ (11,641)
                                                         ========        ========                   ========          =========
Basic and Diluted net income (loss) per share.           $  (0.07)       $  (1.62)                  $  (0.09)         $   (1.84)
                                                         ========        ========                   ========          =========
Weighted average number of common shares
outstanding . . . . . . . . . . . . . . . . . .             6,417           6,350                      6,409              6,323

Weighted average number of common and common
equivalent shares outstanding. . . . . . .                  6,417           6,350                      6,409              6,323

                                     See accompanying notes to consolidated financial statements.`

# 2

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

                                                              (unaudited)
                                                                                             Six Months ended
                                                                                                 June 30,
                                                                                                 --------
                                                                                             2001             2000
                                                                                             ----             ----
Cash flows from operating activities:
    Net income (loss) . . . . . . . . . . . . . . . . . . . . . . . . . . . . .           $ (561)         $ (11,641)
    Adjustments to reconcile net income to net cash
    (used in) provided by operating activities:
          Depreciation and amortization . . . . . . . . . . . . . . . . . . . .              947              1,278
          Provision for accounts receivable. . . . . . . . . . . . . . . . . . .             113                750
          Nex-i.com loss recognition. . . . . . . . . . . . . . . . . . . . . .                -              1,607
          MTA contract loss . . . .  . . . . . . . . . . . . . . . . . . . . . .               -              4,400
          Deferred income taxes. . . . . . . .. . . . . . . . . . . . . . . . .                -                313
          Increase (decrease) from changes in:
               Accounts receivable. . . . . . . . . . . . . . . . . . . . . . .            5,802              6,403
               Inventories . . . . . . . . . . . . . . . . . . . . . . . . . . .             425              1,120
               Prepaid expenses and other current assets . . . . . . . . . . . .              83                221
               Other assets . . . . . . . . . . . . . . . . . . . . . . . . . .                9               (234)
               Accounts payable . . . . . . . . . . . . . . . . . . . . . . . .           (2,599)             1,329
               Accrued expenses . . . . . . . . . . . . . . . . . . . . . . . .             (250)               213
               Accrued MTA contract liability. . . . . . . . . . . . . . . . . .             221             (1,544)
                                                                                          ------           --------
          Net cash (used in) provided by operating activities . . . . . . . . .            4,190              4,215

Cash flows from investing activities:
    Loan to Eureka Broadband. . . . . . . . . . . . . . . . . . . . . . . . . .             (382)                 -
    Property and equipment expenditures . . . . . . . . . . . . . . . . . . . .             (266)              (933)
    Investment in nex-i.com . . . . . . . . . . . . . . . . . . . . . . . . . .                -             (1,833)
                                                                                          ------           --------
    Net cash used in investing activities . . . . . . . . . . . . . . . . . . .             (648)            (2,766)

Cash flows from financing activities
    Employee stock purchases and exercises of stock options . . . . . . . . . .               51                416
    Repayment of capital lease obligations. . . . . . . . . . . . . . . . . . .              (11)               (10)
                                                                                          ------           --------
         Net cash provided by financing activities. . . . . . . . . . . . . . .               40                406
                                                                                          ------           --------
Net (decrease) increase in cash and cash equivalents. . . . . . . . . . . . . .            3,582              1,855

Cash and cash equivalents, beginning of period . . . . . . . . . . . . . . . . .          17,164             16,485
                                                                                          ------           --------
Cash and cash equivalents, end of period. . . . . . . . . . . . . . . . . . . .          $20,746            $18,340
                                                                                         =======           ========

                                     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         Six Months ended
                                                                          June 30,                   June 30,
                                                                          --------                   --------
                                                                      2001         2000          2001         2000
                                                                      ----         ----          ----         ----

Net income (loss) . . . . . . . . . . . . . . . . . . . .           $   (417)      $ (10,288)    $ (561)  $ (11,641)
                                                                    ========       =========     =======  ==========
Basic:

  Weighted average number of shares outstanding. . . . .              6,417            6,350      6,409       6,323
                                                                    ========       =========     =======  ==========
  Net income (loss) per share.  . . . . . . . . . . . . .           $ (0.07)       $   (1.62)    $(0.09)  $   (1.84)
                                                                    ========       =========     =======  ==========
Diluted:
   Weighted average number of shares outstanding . . . .              6,417            6,350      6,409       6,323
   Dilutive effects of stock options . . . . . . . . . .                  -                -          -           -
                                                                    --------       ---------     -------  ----------
   Weighted average number of common and common
   Equivalent shares outstanding . . . . . . . . . . . .              6,417            6,350      6,409       6,323
                                                                    ========       =========     =======  ==========
   Net income (loss) per share . . . . . . . . . . . . .            $ (0.07)       $   (1.62)    $(0.09)  $   (1.84)
                                                                    ========       =========     =======  ==========`

# 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").   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, a wholly-owned  subsidiary of Eureka Broadband  Corporation,
a Delaware  corporation  ("Eureka"),  merged  with and into  nex-i.com,  in
connection  with  which  merger the  Company  received  preferred  stock of
various  classes  in  Eureka  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 Eureka in exchange for a convertible  promissory  note,
which has since been  converted  into common  stock of Eureka.  The Company
also  committed to invest an  additional  $382,098 in Eureka under  certain
conditions,   which  were  not  met.  In  consideration  of  the  Company's
investment  in Eureka,  Eureka  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.  Eureka 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.  In
July 2001,  Eureka  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 Eureka,  which is now being  accounted for under the cost basis
method of accounting.

The  Company's  interests in Eureka are subject to two  agreements
among Eureka 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 Eureka 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 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.

Also 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  its  results  of
operations.

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,  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.  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.

# 7

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  hereof,  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.  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.  The
Company is  corresponding  with the  Department in an effort to advance the
Department'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.

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  June  30,  2001,  approximately  70% of the  value  of the
contract was completed.

# 8

Note 6 - Income Taxes:

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

`Three months ended               Six months ended
                                                          June 30, 2001                   June 30, 2001
                                                          -------------                   -------------

Federal income tax benefit at statutory rate (34%)          $ (142,000)                   $   (191,000)

State income tax benefit net of Federal effect                 (30,000)                        (40,000)
                                                            ----------                    -------------
Income tax benefit                                            (172,000)                       (231,000)
Valuation allowance                                            172,000                         231,000
                                                            ----------                    -------------
                                                            $        -                    $          -`

For the three months ended
June 30, 2001, the Company has recognized a tax benefit of $172,000, offset by a
tax valuation allowance equal to the benefit. For the six months ended June 30,
2001, the Company has recognized a tax benefit of $231,000, offset by a tax
valuation allowance equal to the tax benefit.

Note 7 - EDS L.L.C Disclosure:

The Company announced that
on July 3, 2001, the Company entered into an Agreement with EDS Information
Services L.L.C. (EDS) relating to the potential transfer of certain
employees of the Company to EDS and payments therefore by EDS to the Company in
connection with a customers selection of EDS as its new provider of Help
Desk services currently being furnished to the customer by the Company. Other
services currently being provided by the Company to the customer, including
deskside and network support services, are not being transferred to EDS and
currently remain unaffected. The Agreement became effective July 12, 2001, the
date the Company received notice from its customer. Under the Agreement, the
Company will be entitled to receive from EDS in 2001 a minimum one-time payment
of $405,000, but the actual payment may exceed this amount. The Company
currently anticipates that the customers transfer of its Help Desk
business to EDS will result in monthly reductions, commencing as early as August
2001, of up to approximately $400,000 and $60,000 in the Companys revenue
and operating income, respectively.

# 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 second  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."  Special  charges  recorded in the 2001 second  quarter  consisted of a $234,000  pre-tax charge for
compensation and related employee costs and $172,000 of income tax valuation allowances.

## Results of
Operations

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

The  Company's  results of  operations  for the three  months ended June 30, 2001 showed  improvement  compared to its results of
operations  for the three  months  ended June 30, 2000.  During the second  quarter of 2001,  excluding  special  charges,  the Company
reported a net loss of $107,000,  or $0.02 per share as compared to a net loss of  approximately  $835,000,  or $0.13 per share, in the
second  quarter of 2000.  The  Company's  gross profit margin  excluding  special  charges was 27.7% in the second  quarter of 2001, as
compared to 17.3% in the second quarter of 2000. Selling,  general and administrative  expenses,  excluding special charges,  were $4.1
million in the second  quarter of 2001,  as  compared  to $6.2  million in the second  quarter of 2000,  a  reduction  of 33.9%.  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 $12.2  million,  to $13.5  million for the second  quarter of 2001 from $25.7 million for the
second  quarter of 2000.  The decline of $12.2  million was  primarily  due to a continued  planned  reduction in product sales and the
resultant loss of lower-margin  service  revenues  associated  with product sales.  The Company is continuing to pursue its strategy of
securing higher margin  consulting  engagements and related  revenues and has recently hired a number of new  solutions-oriented  sales
executives and expanded the number of consultants in its advisory consulting practices.

Gross Profit.  Excluding special  compensation  charges,  the Company's gross profit improved from 17.3% in the second quarter of
2000 to 27.7% in the second  quarter of 2001.  The Company  recorded  $68,000 of special  charges,  reflecting  severance  compensation
costs  during the second  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 remaining  technology product sales improved from 7.1% in the second
quarter of 2000 to 15.1% in the second quarter of 2001.  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 from 28.6% in the second quarter of 2000 to 32.2% in the second quarter of 2001. 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.

# 10

Selling, General and Administrative Expenses.  Selling, general and administrative expenses before special charges in each period
were $4.1  million in the second  quarter of 2001,  as  compared  to $6.2  million in the second  quarter of 2000.  Special  charges of
$166,000  reflecting  severance  compensation costs were recorded in the second quarter of 2001. In the second quarter of 2000, special
charges of $1.3 million related to $0.7 million in  uncollectible  receivables  and $0.6 million in severance and special  compensation
payments were recorded.

Interest  income,  net.  Interest  income,  net totaled $202,000 for the second quarter of 2001, down from $302,000 in the second
quarter of 2000.

nex-i.com.  On January 14, 2000,  the Company  invested $1.8 million in nex-i.com in exchange for  3,101,000  shares of nex-i.com
Series A Convertible  Participating  Preferred  Stock.  The Company  recorded its share of losses to the extent of its investment based
upon its  preferred  stock  funding  interest.  The  Company  recorded  a first  quarter  2000  charge  of  $335,000  relating  to this
investment.  The entire cost of the Company's investment was recognized as a loss in 2000.

Income taxes.  In the second quarter of 2001, the Company  recorded a $172,000  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
second  quarter of 2000,  the Company  recorded a $3.7 million  benefit  before an income tax  valuation  allowance  provision.  In the
second quarter of 2000, the Company  recorded a tax valuation  allowance  totaling $5.1 million reducing its deferred tax asset balance
to $1.6 million, for which the Company has federal income tax carryback availability.

Six Months Ended June 30, 2001 Compared To Six Months Ended June 30, 2000

The  Company's  results of  operations  for the six months  ended June 30,  2001  showed  improvement  compared to its results of
operations  for the six months  ended June 30,  2000.  During the first six months of 2001,  excluding  special  charges,  the  Company
reported a net loss of $89,000,  or $0.01 per share, as compared to a net loss of  approximately  $1,831,000,  or $0.29 per share,  for
the six months ended June 30, 2000.  The Company's  gross profit margin  excluding  special  charges was 25.2% for the first six months
of 2001,  as  compared  to 16.5% for the six months  ended June 30,  2000.  Selling,  general and  administrative  expenses,  excluding
special  charges,  were $8.7 million for the first six months of 2001,  as compared to $11.8  million in the second  quarter of 2000, a
reduction of 26.3%.  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 $16.7  million,  to $32.2 million for the first six months of 2001 from $48.9 million for the
six months ended June 30,  2000.  The decline of $16.7  million was mainly due to a continued  planned  reduction in product  sales and
the resultant loss of lower-margin  service  revenues  associated with product sales.  The Company is continuing to pursue its strategy
of securing high-margin consulting  engagements and related revenues,  and has recently hired a number of new solutions-oriented  sales
executives, as well as expanded the number of consultants in our advisory consulting practices.

# 11

Gross Profit.  Excluding special compensation  charges, the Company's gross profit improved from 16.5% in the first six months of
2000 to 25.2% for the six  months  ended  June 30,  2001.  The  Company  recorded  $114,000  of special  charges  reflecting  severance
compensation  costs during the first six months 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 remaining  technology  product sales improved from 7.1% for
the first six  months of 2000 to 12.7% for the six  months  ended June 30,  2001.  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  from 27.0% a year ago to 31.9% in the second quarter of
2001.  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.

Selling,  General and Administrative  Expenses.  Selling,  general and  administrative  expenses before special charges were $8.7
million for the first six months of 2001,  as compared to $11.8  million for the six months  ended June 30,  2000.  Special  charges of
$294,000,  reflecting  severance  compensation  costs, were recorded in the first six months of 2001. For the six months ended June 30,
2000,  special charges of $1.6 million related to $0.7 million in  uncollectible  receivables and $0.9 million in severance and special
compensation payments were recorded.

Interest income,  net.  Interest income,  net totaled $427,000 for the six months ended June 30, 2001, down $561,000 from the six
months ended June 30, 2000 due to lower interest rates.

Nex-i.com.  On January 14, 2000,  the Company  invested $1.8 million in nex-i.com in exchange for  3,101,000  shares of nex-i.com
Series A Convertible  Participating  Preferred  Stock.  The Company  recorded its share of losses to the extent of its investment based
upon its  preferred  stock  funding  interest.  The  Company  recorded  a first  quarter  2000  charge  of  $335,000  relating  to this
investment.  The entire cost of the Company's investment was recognized as a loss in 2000.

Income  Taxes.  For the first six  months of 2001,  the  Company  recorded a $231,000  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 six months  ended  June 30,  2000,  the  Company  recorded  a $4.6  million  benefit  before an income tax  valuation
allowance  provision.  The  Company,  for the first six months of 2000,  recorded  a tax  valuation  allowance  totaling  $5.1  million
reducing its deferred tax asset balance to $1.6 million, for which the Company has federal income tax carryback availability.

## Risks and
Uncertainties

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.  Such products  include  workstations,  servers,  networking  and  communications  equipment,  enterprise  computing
products,  and  application  software.  Through its  established  vendor  alliances  with major  aggregators  of computer  hardware and
software,  Ingram Micro, Inc.  ("Ingram") and Tech Data Corporation  ("Tech Data"), the Company provides its customers with competitive
pricing and such value-added services as electronic product ordering,  product  configuration,  testing,  warehousing and delivery. The
Company  initiated  its  relationships  with  Ingram and Tech Data in 1994.  In  general,  the Company  orders IT  products,  including
workstations,  servers,  enterprise  computing products,  networking and communications  equipment,  and application software from such
aggregators  on an as-needed  basis,  thereby  reducing the Company's  need to carry large  inventories.  During the three months ended
June 30, 2001, the Company acquired approximately 49.7%, and 22.4% of its products for resale from Ingram and Tech Data,  respectively,
compared to 48.6% and 29.0%, respectively, during the three months ended June 30, 2000.

# 12

The Company may receive  manufacturer  rebates resulting from equipment sales. In addition,  the Company receives volume discounts
and other  incentives from certain of its suppliers.  Except for products in transit or products  awaiting  configuration  at a Company
facility,  the Company  generally does not maintain large  inventory  balances.  Both of the Company's  primary vendors have instituted
changes in their price protection and inventory  management  programs as a direct result of changes in such policies by  manufacturers.
Specifically,  the vendors have (i) limited price  protection to that provided by the  manufacturer,  generally  less than 30 days; and
(ii) restricted  product  returns,  other than defective  returns,  to a percentage (the percentage  varies depending on the vendor and
when the return is made) of product  purchased,  during a defined  period,  at the lower of the  invoiced  price or the current  price,
subject to the specific manufacturer's  requirements and restrictions.  There can be no assurances that any such rebates,  discounts or
incentives will continue at current levels,  if at all. Further adverse  modification,  restriction or reduction in such programs could
have a material adverse effect on the Company's financial position, results of operations, and cash flows.

Except for the MTA Contract  entered into in December 1997 (see below),  there are no ongoing written  commitments by customers
to purchase products from the Company,  and all product sales are made on a purchase-order  basis. The Company's increased  selectivity
in selling  product  resulted in an increase in gross profit  margin  attributable  to product  sales in the second  quarter of 2001 as
compared to the second quarter of 2000.

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.

The Company believes that its ability to provide a broad range of technical  services and its long-term  relationships with large
clients  positions the Company to grow the services  component of its business.  As such,  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 June 30, 2001,  services  revenue,  before special  charges,  produced  approximately  85.7% of the Company's  total gross
profit compared to 78.2% 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.

# 14

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 firm and all 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.

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.

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  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.  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.  The  Company  is  corresponding  with the  Department  in an  effort to  advance  the  Department'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.

# 15

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 hereof, 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.

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 June 30, 2001, approximately 70% of the value of the contract was completed.

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").  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, a wholly-owned subsidiary of Eureka Broadband Corporation,  a Delaware corporation  ("Eureka"),  merged
with and into  nex-i.com,  in  connection  with which  merger the  Company  received  preferred  stock of various  classes in Eureka 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 Eureka in exchange for a convertible  promissory note, which has
since been  converted  into common  stock of Eureka.  The Company  also  committed  to invest an  additional  $832,098 in Eureka  under
certain  conditions,  which were not met. In  consideration  of the  Company's  investment  in Eureka,  Eureka  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.  Eureka  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.  In July 2001,  Eureka 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 Eureka, which is now being accounted for under the cost basis method of accounting.

The Company's  interests in Eureka are subject to two agreements among Eureka 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 Eureka 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.

# 16

As  previously  disclosed  by the  Company in a Current  Report on Form 8-K filed by the  Company on July 16,  2001,  the Company
announced that on July 3, 2001, the Company entered into an Agreement with EDS  Information  Services  L.L.C.  ("EDS")  relating to the
potential  transfer of certain  employees  of the Company to EDS and  payments  therefor  by EDS to the  Company in  connection  with a
customer's  selection  of EDS as its new  provider of Help Desk  Services  currently  being  furnished  to the customer by the Company.
Other services  currently  being provided by the Company to the customer,  including  deskside and network  support  services,  are not
being  transferred  to EDS and  currently  remain  unaffected.  The  Agreement  became  effective  July 12, 2001,  the date the Company
received  notice from its customer.  Under the Agreement,  the Company will be entitled to receive from EDS in 2001 a minimum  one-time
payment of $405,000,  but the actual payment may exceed this amount.  The Company  currently  anticipates that the customer's  transfer
of its Help Desk  business  to EDS will result in a monthly  reduction,  commencing  as early as August  2001,  of up to  approximately
$400,000 and $60,000 in the Company's revenue and operating income, respectively.

## 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) intense  competition from
other IT service  providers,  (c) the short-term nature of the Company's  customers'  commitments,  (d) patterns of capital spending by
the Company's  customers,  (e) the timing,  size and mix of product and service orders and  deliveries,  (f) the timing and size of new
projects,  (g) pricing changes in response to various competitive  factors,  (h) market factors affecting the availability of qualified
technical  personnel,  (i) the timing and customer  acceptance of new product and service  offerings,  (j) changes in trends  affecting
outsourcing of IT services,  (k) disruption in sources of supply, (l) changes in product,  personnel and other operating costs, and (m)
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.

# 17

## 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 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.

Also 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 its results of operations.

## Liquidity and
Capital Resources

Cash and cash  equivalents  at June 30, 2001 were $20.7  million,  compared to $17.2 million at December 31, 2000, an increase of
$3.5 million.  Working  capital at June 30, 2001 was $26.5 million as compared to $26.3 million at December 31, 2000,  representing  an
increase 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 second  quarter in cash from operating  activities  reflected  primarily a decrease in Company  accounts
receivable of  approximately  $5.8 million.  The Company's  days sales  outstanding  in accounts  receivable  increased from 65 days at
December 31, 2000 to 69 days at June 30, 2001. Cash used in investing  activities  included the Company's capital  expenditures for the
first six months of 2001 of $266,000  primarily  for the  purchase  of  computer  equipment  and  software  used by the Company and the
Company's previous loan to Eureka of $382,000.

# 18

Cash provided and utilized by financing activities included $51,000 for employee stock purchases,  reduced by a $11,000 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 sold to 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 sold to employees  under the plan for  approximately  $117,  000, an average price of
$3.51 per share.  During the first three months of 2001,  employees  purchased 19,341 shares of stock for approximately  $30,000, at an
average  price of $1.52 per share.  The Company has issued an aggregate of 183,468  shares  since the  inception of the Employee  Stock
Purchase Plan at an average price of $4.54 per share,  receiving total proceeds of  approximately  $832,000.  During the second quarter
of 2001,  employees  purchased 16,274 shares of stock for  approximately  $21,000,  at an average price of $1.27 per share. The Company
has issued an aggregate of 199,742  shares since the  inception of the Employee  Stock  Purchase  Plan at an average price of $4.27 per
share, receiving total proceeds of approximately $853,000.

The Company purchases certain inventory and equipment through a financing  arrangement with IBM Credit  Corporation.  At June 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
substantially all of the assets of the Company.

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.

## Item 3.     Quantitative and Qualitative Disclosures About Market Risk.

Not applicable.

# 19

## PART II. OTHER INFORMATION

## Item 1.     Legal Proceedings

On June 29,  2001,  the Company  settled its lawsuit  against Polo Ralph Lauren  Corporation  ("Polo"),  filed by the Company
against Polo on February 16, 2000 in the Superior Court of New Jersey,  Law Division  (Morris  County),  and both parties  released all
claims against the other,  including a $4.7 million  counterclaim  filed by Polo against the Company on July 7, 2000, in  consideration
of a payment by Polo to the  Company of  $375,000,  which the  Company  received  on June 29,  2001.  The Company had filed its lawsuit
against Polo for collection of an overdue receivable in the amount of $893,330.

In connection with the Company's  ongoing disputes with the MTA concerning a contract entered into with the MTA in December 1997,
the Company filed 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.14-16.

## Item 4.     Submission of Matters to a Vote by Securities Holders.

The Annual Meeting of Shareholders of the Company (the "Meeting") was held on May 18, 2001.

There were present at the Meeting in person or by proxy shareholders  holding an aggregate of 6,294,431 shares of Common Stock of
a total number of 6,568,425  shares of Common Stock issued,  outstanding  and entitled to vote at the Meeting.  The results of the vote
taken at the Meeting with respect to each nominee for director were as follows:

`Nominees                        For                  Withheld
--------                        ---                  --------

Stan Gang                       6,245,259            49,172
Michael Gang                    6,243,259            51,172
Ira Cohen                       6,245,259            49,172
Thomas F. Dorazio               6,245,259            49,172
Doreen A. Wright                6,245,259            49,172`

A  vote  of  the   shareholders   was  taken  at  the  Meeting  on  the  proposal  to  approve  and  ratify  the  appointment  of
PricewaterhouseCoopers  LLP as independent  accountants of the Company for the year ending  December 31, 2001. Of the 6,294,431  shares
of Common Stock present at the Meeting in person or by proxy,  6,260,079  shares of Common Stock were voted in favor of such  proposal,
28,836 shares of Common Stock were voted against such proposal, 5,556 shares abstained from voting and there were no broker non-votes.

# 20

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

(a)     Exhibits.

None.

(b)     Reports on Form 8-K.

No reports on Form 8-K were filed during the quarter for which this report on Form 10-Q is filed.

# 21

# 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.

STAN GANG
Date:  August 3, 2001
          
          
          
          
          
          
          
          
          
         
By: ______________________________
          
          
          
          
          
          
          
          
          
          
          
          
          
          
Stan Gang
          
          
          
          
          
          
          
          
          
          
          
          
          
          
Chairman and Chief Executive Officer
          
          
          
          
          
          
          
          
          
          
          
          
          
          
          
          
          
(Principal Executive Officer)

WILLIAM S. MEDVE
Date:  August 3, 2001
          
          
          
          
          
          
          
          
          
          
By: ______________________________
          
          
          
          
          
          
          
          
          
          
          
          
          
          
William S. Medve
          
          
          
          
          
          
          
          
          
          
          
          
          
          
          
          
          
          
          
          
Executive Vice President, Chief Financial Officer
          
          
          
          
          
          
          
          
          
          
          
          
          
          
and Treasurer
          
          
          
          
          
          
          
          
          
          
          
          
          
          
(Principal Financial and Accounting Officer)

# 22