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 September 30, 2000

                         Commission file number 0-27042


                            AlphaNet Solutions, Inc.
                           --------------------------
             (Exact Name of Registrant as Specified in Its Charter)

                New Jersey                           22-2554535
---------------------------------        ---------------------------------------
(State or Other Jurisdiction of          (I.R.S. Employer Identification No.)
 Incorporation or Organization)


7 Ridgedale Avenue, Cedar Knolls, New Jersey                     07927
------------------------------------------------------         -----------
(Address of Principal Executive Offices)                       (Zip Code)


                                 (973) 267-0088
                                 --------------
               (Registrant's Telephone Number Including Area Code)


       Indicate by check mark whether the Registrant:  (1) has filed all reports
required to be filed by Section 13 or 15(d) of the  Securities  Exchange  Act of
1934  during  the  preceding  12 months  (or for such  shorter  period  that the
Registrant was required to file such reports),  and (2) has been subject to such
filing requirements for the past 90 days.

                         Yes:  X                     No: ___
                              ---

       Indicate  the number of shares  outstanding  of each of the  Registrant's
classes of common stock, as of October 31, 2000:

Class                                   Number of Shares Outstanding
-----                                   -----------------------------
Common Stock, $.01 par value                6,388,403


<PAGE>

<TABLE>
<CAPTION>

                            ALPHANET SOLUTIONS, INC.

                                TABLE OF CONTENTS


<S>                  <C>                                                                                                    <C>
PART I.              FINANCIAL INFORMATION

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

                     Consolidated Balance Sheets
                     as of September 30, 2000 (unaudited)
                     and December 31, 1999.................................................................................. 2

                     Consolidated Statements of Operations
                     for the Three and Nine Months Ended
                     September 30, 2000 (unaudited) and September 30, 1999 (unaudited).......................................3

                     Consolidated Statements of Cash Flows
                     for the Nine Months Ended
                     September 30, 2000 (unaudited) and September 30, 1999 (unaudited)...................................... 4

                     Notes to Consolidated Financial Statements (unaudited)................................................ 5

       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 6.      Exhibits and Reports on Form 8-K...................................................................... 20

SIGNATURES................................................................................................................ 21

</TABLE>

<PAGE>

                                     PART I.

                              FINANCIAL INFORMATION

                          Item 1. Financial Statements



<PAGE>

<TABLE>
<CAPTION>

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


                                                                                        September 30,        December 31,
                                                                                            2000                 1999
                                                                                          ----------          -----------
ASSETS                                                                                    (unaudited)
<S>                                                                                     <C>                    <C>
Current assets:
         Cash and cash  equivalents  . . . . . . . . . . . . . . . . ..                $  16,150               $ 16,485
         Accounts receivable, less allowance for doubtful accounts of
         $4,023 at September 30, 2000 and $3,289 at December 31, 1999 .                   17,527                 26,700
         Inventories . . . . . . . . . . . . . . . . . . . . . . . . ..                    1,631                  2,533
         Deferred income tax asset . . . . . . . . . . . . . . . . . ..                    1,576                  1,889
         Prepaid expenses and other current assets . . . . . . . . . ..                      494                  1,234
         Costs in excess of billings . . . . . . . . . . . . . . . . ..                        0                    481
                                                                                       ---------               --------
                    Total current assets . . . . . . . . . . . . . . ..                   37,378                 49,322

Property and equipment, net . . . . . . . . . . . . . . . . . . . . . .                     3,736                  4,459
Other assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . ..                     2,305                  2,240
                                                                                       ----------              ---------
                    Total assets. . . . . . . . . . . . . . . . . . . .                $   43,419              $  56,021
                                                                                       ==========              =========
LIABILITIES AND SHAREHOLDERS' EQUITY

Current liabilities:
         Current portion of capital lease obligations . . . . . . . . .                $      22               $     20
         Accounts payable . . . . . . . . . . . . . . . . . . . . . . .                    4,887                  7,473
         Accrued expenses . . . . . . . . . . . . . . . . . . . . . . .                    4,886                  3,988
         Accrued MTA contract liability. . .  . . . . . . . . . . . . .                    1,655                     --
                                                                                       ---------               ---------
                    Total current liabilities . . . . . . . . . . . . .                   11,450                 11,481

Long term liabilities:
         Advance from principal shareholder . . . . . . . . . . . . . .                        0                    675
         Capital lease obligations . . . . . . . . . . . . . . . . . ..                       14                     31
                                                                                       ---------               ---------
           Total liabilities . . . . . . . . . . . . . . . . . . . . ..                   11,464                 12,187
                                                                                       ---------               ---------
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,
         6,538,403 and 6,423,399 shares issued and outstanding at
         September 30, 2000 and December 31, 1999, respectively . . . .                       67                     64
         Additional paid-in capital. . . . . . . . . . . . . . . . . .                    35,006                 34,150
         Retained earnings. . . . . . . . . . . . . . . . . . . . . . .                  (2,398)                 10,340
         Treasury stock - at cost; 150,600 and 136,800 shares at
         September 30, 2000 and December 31,1999, respectively.                            (720)                  (720)
                                                                                       ---------               --------
                    Total shareholders' equity . . . . . . . . . . . .                    31,955                 43,834
                                                                                       ---------               --------
                    Total liabilities and shareholders' equity . . . .                 $  43,419               $ 56,021
                                                                                       =========               ========

</TABLE>

          See accompanying notes to consolidated financial statements.

<PAGE>

<TABLE>
<CAPTION>

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

                                                                         Three Months ended                    Nine Months ended
                                                                             September 30,                        September 30,
                                                                       -----------------------               ----------------------
                                                                        2000              1999               2000              1999
                                                                        ----              ----               ----              ----
<S>                                                               <C>                  <C>             <C>               <C>
Net sales:
       Product sales. . . . . . . . . . . . . . . . . .           $    10,194          $ 25,817        $    35,943       $   64,075
       Services and support . . . . . . . . . . . . . .                11,650            14,420             34,808           38,423
                                                                  -----------          --------        -----------       ----------
                                                                       21,844            40,237             70,751          102,498
Cost of sales:
       Product sales . . . . . . . . . . . . . . . . .                  9,093            23,234             33,004           57,362
       Services and support . . . . . . . . . . . . ..                  8,102             9,278             25,012           26,001
       MTA contract loss recognition and other charges                      0                 0              4,851                0
                                                                  -----------          --------        -----------       ----------
                                                                       17,195            32,512             62,867           83,363
                                                                  -----------          --------        -----------       ----------
Gross Profit:
         Product.......................................                 1,101             2,583              2,939            6,713
         Service and support...........................                 3,548             5,142              9,796           12,422
         MTA contract loss recognition and other
         charges.......................................                    --                --             (4,851)              --
                                                                  -----------          --------        -----------       ----------
                                                                        4,649             7,725              7,884           19,135
Operating expenses:
       Selling, general & administrative . . . .  . .                   5,737             7,186             19,085           19,423
       Recovery of capitalized asset  . . . . . . . .                       0              (139)                 0             (139)
                                                                  -----------          --------        -----------       ----------
                                                                        5,737             7,047             19,085           19,284
                                                                  -----------          --------        -----------       ----------
Operating income (loss) . . . . . . . . . . . . . . . .               (1,088)               678            (11,201)            (149)

Other income (expense):
       Interest  income . . . . . . . . . .  . . . . .                   261                212                822              630
       Nex-i.com loss . . . . . . . . . . . . . . . . .                 (642)                 0             (2,249)               0
       Other Income . . . . . . . . . . . . . . . . .                    372                 (3)               364              (17)
                                                                  -----------          --------        -----------       ----------
                                                                          (9)               209             (1,063)             613
                                                                  -----------          --------        -----------       ----------
Income (loss) before income taxes. . . . . . . . . . .                (1,097)               887            (12,264)             464
Provision  for income taxes . . . . . . . . . . . . . .                    0                364                474              187
                                                                  -----------          --------        -----------       ----------
Net income (loss) . . . . . . . . . . . . . . . . . . .           $   (1,097)          $    523        $   (12,738)      $      277
                                                                  ===========          ========        ===========       ==========
Basic-Net income (loss) per share . . . . . . . . . . .           $    (0.17)          $    .08        $    (2.01)       $      .04
                                                                  ===========          ========        ===========       ==========
Diluted-Net income (loss) per share. . . . . . . . . .            $    (0.17)          $    .08        $    (2.01)       $      .04
                                                                  ===========          ========        ===========       ==========
Weighted average number of common shares outstanding .                 6,372              6,255             6,339             6,247
                                                                  ===========          ========        ===========       ==========
Weighted average number of common and common equivalent
shares outstanding. . . . . . .                                        6,372              6,260             6,339             6,249
                                                                  ===========          ========        ===========       ==========

</TABLE>

          See accompanying notes to consolidated financial statements.

<PAGE>

<TABLE>
<CAPTION>

                            ALPHANET SOLUTIONS, INC.
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                                 (in thousands)
                                   (unaudited)
                                                                                                                Nine Months ended
                                                                                                                   September 30,
                                                                                                             -----------------------
                                                                                                             2000        1999
                                                                                                             ----        ----
<S>                                                                                                    <C>             <C>
Cash flows from operating activities:
     Net income . . . . . . .. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .       $ (12,738)      $     277
     Adjustments to reconcile net income to net cash
     (used in) provided by operating activities:
           Depreciation and amortization . . . . . . . . . . . . . . . . . . . . . . . . . . . .           1,903           2,005
           Nex-i.com loss recognition                                                                      2,249              --
           MTA contract loss                                                                               4,400              --
           Deferred income taxes. . . . . . . .. . . . . . . . . . . . . . . . . . . . . . . . .             313            (472)
           Recovery of capitalized asset. . . . . . . . . . . . . . . . . . . . . . . . . . . . .             --            (139)
           Increase (decrease) from changes in:
                 Accounts receivable. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .          9,174          (4,924)
                 Inventories . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .             902          (1,369)
                 Prepaid expenses and other current assets . . . . . . . . . . . . . . . . . . .             740           1,147
                 Other assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .           (225)           (258)
                 Accounts payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .         (2,584)          1,105
                 Accrued expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .            898              69
                 Costs in excess of billings/accrued MTA contract liability, net. . . . . . .             (2,264)         (1,036)
                                                                                                       ---------       ---------
           Net cash provided (used in) by operating activities . . . . . . . . . . . . . . . . .           2,768          (3,595)
Cash flows from investing activities:
     Property and equipment expenditures . . . . . . . . . . . . . . . . . . . . . . . . . . . .          (1,021)           (889)
     Investment in nex-i.com . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .          (1,833)             --
                                                                                                       ---------       ---------
     Net cash from investing activities . . . . . . . . . . . . . . . . . . . . . . . . . . . . .         (2,854)           (889)
Cash flows from financing activities
     Exercises of stock options and employee stock purchases . . . . . . . . . . . . . . . . . .             440             168
     Repayment of capital lease obligations . . . . . . . . . . . . . . . . . . . . . . . . . . .            (17)            (11)
     Repayment of shareholder advance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .           (675)             --
     Repurchase of common stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .              3             (53)
                                                                                                       ---------       ---------
          Net cash provided by financing activities. . . . . . . . . . . . . . . . . . . . . . .            (249)            104
                                                                                                       ---------       ---------
Net (decrease) in cash and cash equivalents                                                                 (335)         (4,380)
Cash and cash equivalents, beginning of period . . . . . . . . . . . . . . . . . . . . . . . . . .        16,485          13,377
                                                                                                       ---------       ---------
Cash and cash equivalents, end of period. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .    $  16,150       $   8,997
                                                                                                       =========       =========

</TABLE>

          See accompanying notes to consolidated financial statements.

<PAGE>



                             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 an information  technology
professional   services  firm   specializing  in  network   design,   operation,
management, and security. The Company provides services in information security,
network  implementation,   professional  development,  project  management,  and
Internet-related matters.

        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, 1999,  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.


<PAGE>


Note 2 - Net Income Per Share:

<TABLE>
<CAPTION>

                        COMPUTATION OF EARNINGS PER SHARE
                     (in thousands, except per share amounts)
                                   (unaudited)
                                                                         Three Months ended              Nine Months ended
                                                                           September 30,                    September 30,
                                                                         2000           1999             2000            1999
                                                                         ----           ----             ----            ----
<S>                                                                <C>                 <C>            <C>               <C>
Net income  (loss) . . . . . . . . . . . . . . . . . . . .         $  (1,097)          $   523        $ (12,738)        $   277
Basic:

  Weighted average number of shares outstanding. . . . . .             6,372             6,255            6,339           6,247
   Net income (loss) per share.  . . . . . . . . . . . . .         $   (0.17)          $  0.08        $   (2.01)        $  0.04
Diluted:
   Weighted average number of shares outstanding . . . . .             6,372             6,255            6,339           6,247
   Dilutive effects of stock options . . . . . . . . . . .                --                 5               --               2
                                                                   ----------           ------         --------         -------
   Weighted average number of common and common
   Equivalent shares outstanding                                       6,372             6,260            6,339           6,249
   Net Income (loss) per share . . . . . . . . . . . . . .         $   (0.17)          $  0.08        $   (2.01)        $  0.04
                                                                   ==========          =======        ==========        =======

</TABLE>

<PAGE>


Note 3 - Investment in nex-i.com:

         On January 14, 2000, the Company  invested $1.8 million in exchange for
3,101,000  shares of Series A  Convertible  Participating  Preferred  Stock 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  has  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, in which the Company did not participate. A further $9,900,000 may be
invested by the Series B investors in February 2001,  depending upon nex-i.com's
satisfaction of certain  operating  performance  milestones.  Following the July
financing, the Company's investment in nex-i.com represents 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 up to 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 are exercisable for a
period of five years.

         On April 27, 2000,  the Company  entered into an agreement  with Fallen
Angel Capital,  LLC, ("Fallen Angel") the general partner of Fallen Angel Equity
Fund,  LP.,  a  Delaware  limited  partnership  which  owns more than 10% of the
Company's  common  stock and of which a director of the Company is a  principal.
Under the agreement,  the Company agreed to issue,  and at the Company's  Annual
Meeting of Shareholders held on May 19, 2000 the Company's shareholders approved
for  issuance,  warrants to Fallen  Angel to  purchase  up to 200,000  shares of
common  stock of the  Company  at a  purchase  price of $5.00  per  share  for a
one-year   period   commencing  May  19,  2000.  The  warrants  were  issued  in
consideration  for the  services  provided by Fallen  Angel in  negotiating  the
business and financial  terms of the  Company's  preferred  stock  investment in
nex-i.com.  The  warrants,  with an  estimated  fair  value  of  $416,000,  were
accounted  for as a cost of the  Company's  preferred  stock  investment.

         As of  September  30,  2000,  the  Company  has  recognized  losses  of
$2,249,000,  representing a full write-down of the book value of its investment,
and associated investment fees which were capitalized.


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.  As amended by SAB 101A and SAB 101Bs,  this SAB must be implemented
no later than the fourth  quarter of 2000.  The Company is evaluating the impact
that SAB101 and related SEC guidance may have on its  financial  statement  upon
implementation and plans to adopt this standard in the 2000 fourth quarter.


Note 5 -Acquisition of Assets of Omnitech Corporate Solutions, Inc.:

         In June 2000, the Company acquired certain assets of Omnitech Corporate
Solutions,  Inc.  ("Omnitech")  for  $250,000  in cash.  The  asset  acquisition
included all of  Omnitech's  then-existing  information  technology  and network
infrastructure  services business,  including all of Omnitech's client contracts
and  customer  list.  Omnitech  was a  provider  of  "thin  client"/server-based
technology  solutions.  The Omintech acquisition was accounted for as a business
purchase combination and resulted in goodwill valued at $250,000. The operations
of Omintech  have been  included in the  Company's  operations  from the date of
acquisition.   Pro  forma  financial  data  has  not  been  presented,  as  this
acquisition is not material.


Note 6 -MTA Contract:

         In December 1997, the Company  entered into a four-year,  $20.4 million
contract  with 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.

         On July 19, 2000, the MTA advised the Company of a determination by the
Bureau  of  Labor  Law  (hereinafter,   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.  The Company intends to continue to seek appropriate  legal relief
to recover such increased  costs, but there can be no assurance the Company will
be successful, either in whole or in part, in such efforts.

         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,  which  the  Company  believes  will  likely  result  in  a
reclassification  of the Company's  cabling  labor force,  as well as lower than
anticipated  gross  margins on  networking  activities  and higher than expected
costs going  forward,  the Company  revised its estimated  costs for the project
during the 2000 second quarter. As a result, the Company recognized an estimated
contract  loss of $4.4 million.  This charge  represents  the Company's  current
estimated loss on the MTA project (see pp. 15-16 in Management's  Discussion and
Analysis of Financial Condition and Results of Operations for further discussion
of the MTA Contract).



Note 7 -Income Taxes:


Set forth  below is a summary of the  Company's  tax  provision  benefit for the
three and nine months ended September 30, 2000.

<TABLE>
<CAPTION>
                                                       Three months ended                Nine months ended
                                                       September 30, 2000                September 30, 2000
                                                       ------------------                ------------------
<S>                                                    <C>                                <C>
Federal income tax benefit at statutory rate (34%)
                                                       $(373)                             $ (4,181)

State income tax benefit net of Federal effect
                                                         (81)                                 (907)

Valuation allowance                                      454                                 5,562
                                                       -----                              --------
                                                       $   0                              $    474
                                                       =====                              ========

</TABLE>

For the nine months ended  September 30, 2000, the Company  recognized an income
tax  valuation  allowance of  $5,562,000,  which  reduced its deferred tax asset
balance to  $1,576,000,  for which the Company has federal  income tax carryback
availability.

<PAGE>


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


General

       AlphaNet  Solutions,  Inc. (the  "Company") is an information  technology
("IT")  professional  services firm  specializing in network design,  operation,
management,  and security.  Through its Enterprise Network Management  Division,
the Company also offers remote  network  management,  call center  support,  and
managed security  services.  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 as an authorized  reseller of computer
hardware and software  product and, since 1990, has been developing and offering
related IT services.

      During the nine month period  ended  September  30, 2000,  the Company has
continued its  investment  and  expansion in the  professional  services  sector
through the following key events:

o     The purchase of a 30% preferred stock interest in nex-i.com inc. nex-i.com
      is a Princeton,  New Jersey-based  network services provider that installs
      fully  integrated  networks  in  multi-tenanted   office  buildings.   The
      Company's  30% interest in nex-i.com  was reduced to 15% as a result of an
      additional  issuance  by  nex-i.com  of  preferred  stock  to a  group  of
      investors in which the Company did not participate.

o     Acquisition of assets of Omnitech Corporate Solutions,  Inc. In June 2000,
      the Company acquired certain assets of Omnitech Corporate Solutions, Inc.,
      ("Omnitech")   a  provider   of  "thin   client"/server-based   technology
      solutions.  This acquisition,  along with the Company's  partnerships with
      Citrix Systems, Inc., Microsoft Corporation,  and Sun Microsystems,  Inc.,
      is  currently  expected to  strengthen  the  Company's  thin-client/server
      offerings.  Through the  acquisition  of  Omnitech,  the Company has added
      approximately 25 highly specialized engineers,  technicians,  and business
      development professionals to its professional services workforce.

o     Principals  of Gogh  Technology,  Inc.  joined  the  Company.  The  former
      principals of Gogh  Technology,  Inc. joined AlphaNet  Solutions,  Inc. to
      head its information security practice.

      The Company's  results for the third quarter and first nine months of 2000
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."
The Special  Charges  recorded in the 2000 third  quarter  consist of:  $642,000
($376,000  after tax)  associated  with the  Company's  investment in nex-i.com;
$394,000  ($230,000 after tax) of severance,  and $370,000  ($218,000 after tax)
attributable  to a  gain  associated  with  the  settlement  of  litigation.  An
aggregate  tax  valuation  allowance of $454,000  was recorded  during the third
quarter.

Results of Operations

Three Months Ended  September 30, 2000 Compared To Three Months Ended  September
30, 1999

         Net Sales.  Net sales  decreased by 45.7%,  or $18.4 million,  to $21.8
million for the third  quarter of 2000.  Product  sales  decreased by 60.5%,  or
$15.6 million,  to $10.2 million for the third quarter of 2000. This anticipated
decline in product  sales is the continued  result of the Company's  strategy of
transitioning   from  a  reseller   of  product  to  a   professional   services
organization.  For the reasons  indicated  below,  services and support  revenue
decreased by 19.2%,  or $2.7 million,  to $11.7 million for the third quarter of
2000. In 1999,  the Company's  product and service  business  benefited from Y2K
activities.  Further in prior  years,  as the Company  resold  product,  various
services,  including,  among other things,  desktop support,  configuration  and
installation  services,  were  performed to support these sales.  The Company is
currently  pursuing and obtaining new types of service work  independent  of its
product  business;  however the rate of new  business  has not been equal to the
reduction in servicing its product sales business.

         Gross Profit.  The Company's  gross profit  declined by 39.8%,  or $3.1
million, to $4.6 million for the third quarter of 2000. Measured as a percentage
of net sales,  the Company's  overall gross profit margin  increased to 21.3% of
net sales for the third  quarter  of 2000 from  19.2% for the third  quarter  of
1999. Despite continued downward pricing pressure on product sales, gross profit
margin attributable to product sales increased to 10.8% for the third quarter of
2000  from  10.0% for the third  quarter  of 1999 as a result of more  favorable
product mix. The Company expects that downward pricing pressure on products will
persist due to  continued  commoditization  of computer  products.  Gross margin
attributable to services and support revenue  decreased to 30.5% of services and
support  revenue for the third  quarter of 2000 from 35.7% for the third quarter
of 1999,  but  increased  from 28.6% in the second  quarter of 2000.  During the
third quarter of 2000,  services and support  contributed 76.3% of the Company's
gross margin dollars, as compared to 66.6% during the third quarter of 1999.

       Selling,  General  and  Administrative  Expenses.  Selling,  general  and
administrative expenses before special charges in each period, were $5.3 million
in the third  quarter of 2000,  as compared to $5.7 million in the third quarter
of 1999.  Special  charges  of $0.4  million  and $1.5  million  resulting  from
severance  costs and bad debt charges were recorded in the third quarter of 2000
and 1999, respectively.

       Interest income, net. Interest income, net totaled $261,000 for the third
quarter of 2000, up slightly from 1999.

       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 third  quarter  2000  charge of  $642,000  relating  to this
investment.  As of September 30, 2000,  the Company has, on a cumulative  basis,
recognized losses to the extent of its investment basis.

       Income  taxes.  During the three months  ended  September  30, 2000,  the
Company  generated a $454,000  benefit before an income tax valuation  allowance
provision.  The Company recorded a tax valuation  allowance  totaling  $454,000,
maintaining  its  deferred  tax asset  balance  of $1.6  million,  for which the
Company  has federal  income tax  carryback  availability.  In  determining  the
Company's  tax  expense  for the  quarter,  an  effective  tax rate of 41.5% was
utilized.


Nine Months Ended September 30, 2000 Compared to Nine Months Ended September 30,
1999

       Net sales.  Net sales  decreased  by 31.0%,  or $31.7  million,  to $70.8
million for the first nine months of 2000.  Product sales decreased by 43.9%, or
$28.2  million,  to $35.9  million  for the  first  nine  months  of  2000.  The
anticipated  decline in year-to-date  product sales continues to demonstrate the
Company's  long-term  strategy  of  transitioning  from a product  reseller to a
professional  services  organization.  Services and support revenue decreased by
9.4%, or $3.6 million,  to $34.8 million for the first nine months of 2000.

         Gross Profit.  The Company's gross profit  decreased by 58.8%, or $11.3
million,  to $7.9 million for the first nine months of 2000.  Total gross profit
measured as a  percentage  of net sales  decreased to 11.1% of net sales for the
first nine  months of 2000 from 18.7% for the first  nine  months of 1999.  This
decline is primarily  attributable  to second quarter of 2000 special charges of
$4.4  million  associated  with  the  Company's  contract  with the MTA and $0.5
million  associated  with  unrecoverable  vendor  charges.  Gross profit  margin
attributable  to product  sales  decreased  to 8.2% for the first nine months of
2000 from 10.5% for the first nine  months of 1999,  primarily  due to  downward
pricing pressure on product sales. Gross profit margin  attributable to services
and support  revenue  decreased to 28.1% of services and support revenue for the
first nine months of 2000 from 32.3% for the first nine  months of 1999.  During
the first nine months of 2000,  the gross profit  percentage in each  successive
quarter has  increased  from 25.1% in the first  quarter and 28.6% in the second
quarter  to 30.5% in the third  quarter.  During  the first  nine  months  ended
September  30,  2000,  services  and support  revenue  contributed  76.9% of the
Company's gross margin dollars,  excluding special charges, as compared to 64.9%
during the nine months ended September 30, 1999.

         Selling,  General and  Administrative  Expenses.  Selling,  general and
administrative  expenses  before  special  charges  in each  period,  were $17.1
million for the first nine months of 2000,  as compared to $17.9 million for the
first nine months of 1999.  During the nine months ended September 30, 2000, the
Company  incurred  special  charges which included $1.2 million of severance and
other special  compensation  payments,  and $0.7 million relating to a provision
for uncollectable  accounts  receivable related to, among other things,  various
receivables from the Company's telecom  business,  which was divested earlier in
the year.  In the third  quarter of 1999,  the Company  recorded a provision for
uncollectable accounts receivable of $1.5 million.

         Interest income,  net.  Interest income,  net, totaled $822,000 for the
nine months  ended  September  30, 2000 from  $630,000 for the nine months ended
September 30, 1999. This increase is primarily due to higher cash balances being
maintained by the Company during fiscal 2000 than in the prior year.

         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  charges  during the nine months ended  September  30, 2000 of
$2,249,000  relating to this investment.  On July 27, 2000,  nex-i.com  received
$12,100,000 in a Series B Convertible  Participating  Preferred Stock financing,
in which the Company did not participate.  A further  $9,900,000 may be invested
by  the  Series  B  investors  in  February  2001,  depending  upon  nex-i.com's
satisfaction of certain  performance  milestones.  Following the July financing,
the Company's investment in nex-i.com represents  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 made at the time of the Series A financing,  the Company
received  warrants  to  purchase  up to 100,000  shares of Series B  Convertible
Participating  Preferred  Stock at an exercise price ranging from $1.50 to $1.85
per share. The warrants are exercisable for a period of five years.

         On April 27, 2000,  the Company  entered into a letter  agreement  with
Fallen Angel Capital,  LLC ("Fallen Angel"), the general partner of Fallen Angel
Equity Fund, LP., a Delaware limited partnership which owns more than 10% of the
Company's  common  stock and of which a director of the Company is a  principal.
Under terms of the letter  agreement,  the Company  agreed to issue,  and at the
Company's  Annual  Meeting of  Shareholders  held on May 19, 2000, the Company's
shareholders  approved the issuance of,  warrants to Fallen Angel to purchase up
to 200,000  shares of common  stock of the Company at a purchase  price of $5.00
per share for a one-year period commencing May 19, 2000 and ending May 18, 2001.
The warrants were issued to Fallen Angel in consideration  of services  provided
in negotiating the business and financial terms of the Company's preferred stock
investment in nex-i.com.

         As of  September  30, 2000,  the Company  has, on a  cumulative  basis,
recognized losses to the extent of its investment basis.

       Income taxes.  For the nine months ended  September 30, 2000, the Company
recorded a benefit for income  taxes of $5.1  million,  which was  recorded at a
41.5%  effective  tax rate.  However,  the Company has  established  a valuation
allowance of $5.6 million  against this income tax benefit.  For the nine months
ended  September  30, 1999,  an income tax  provision of $187,000 was  recorded,
which was also based upon a 41.5% effective tax rate.


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 September 30, 2000, the Company acquired approximately 49.9%, and 25.3% of
its products for resale from Ingram and Tech Data, respectively.

         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,
they  (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. As the
market for IT products has matured,  price  competition  has  intensified and is
likely to continue to  intensify.  During the three months ended  September  30,
2000 as compared to the three months ended  September  30, 1999,  the  Company's
gross  profits  and  results  of  operations  were  adversely  affected  by such
continued  product  pricing  pressure and by a significant  reduction in product
purchase orders from the Company's customers. In addition, the Company's results
of  operations  could be  adversely  affected by a disruption  in the  Company's
sources of product supply.

         The Company offers enterprise network management, information security,
Internet-related,   eMobile  Solutions,  application  development,  professional
development,  help desk, and workstation support services.  Services and support
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 competition for quality technical  personnel has continued
to intensify  resulting in  increased  personnel  costs for the Company and many
other IT service  providers.  This intense  competition has caused the Company's
billing margins to be lower than they might otherwise have been.

         The  Company  believes  that its  ability to  provide a broad  range of
technical  services,  coupled with its  traditional  strength in satisfying  its
customers' IT product  requirements 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 and support component of
its business.  During the three and nine month periods ended September 30, 2000,
services  revenue,  before special  charges,  produced  approximately  76.3% and
76.9%,  respectively,  of the Company's total gross profit. 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's net sales, gross profit,  operating income and net income
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.  The Company believes,  therefore,  that
past operating  results and  period-to-period  comparisons  should not be relied
upon as 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 and support
revenue,  such as  administrative  support  personnel and facilities  costs, are
primarily  fixed  costs.  The  Company's  expense  levels  are  based in part on
expectations of future revenues.  Additionally, 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.
Technical personnel  utilization rates have been and are expected to continue to
be adversely affected during periods of rapid and concentrated hiring. Depending
upon the availability of qualified technical personnel, as necessary the Company
has utilized and in the future is likely to utilize  contract  personnel,  which
may adversely  affect gross  margins.  If the Company  successfully  expands its
service offerings,  periods of variability in utilization may continue to occur.
In addition,  the Company is likely to incur greater  technical  training  costs
during such periods.

         In December 1997, the Company  entered into a four-year,  $20.4 million
contract  with 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  (hereinafter,   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.  The Company intends to continue to
seek appropriate  legal relief to recover such increased costs, but there can be
no assurance the Company will be successful, either in whole or in part, in such
efforts.

      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  with the DRO in the
first and second  quarters  of 2000.  On August 16,  2000,  the DRO  conducted a
hearing on the  Company's  submissions  and the MTA's written  replies  thereto.
Further  written  submissions  from  the  parties  were  entertained  by the DRO
following  the  hearing.  It is not  yet  known  how the  DRO  will  rule on the
Company's appeal.  Under the terms of the MTA Contract,  the Company is entitled
to appeal any adverse  determination of the DRO to the trial-level  court in the
State  of New  York.  The  Company  believes  that  its  request  for  equitable
adjustment constitutes a valid claim under the MTA Contract.  However, there can
be no assurance the MTA will approve,  either in whole or in part, any equitable
adjustment in the contract amount or terms requested by the Company.

         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 New York City Comptroller's Office
communicated  to the Company on July 19, 2000,  which the Company  believes will
likely result in a  reclassification  of the Company's  cabling labor force,  as
well as lower than anticipated gross margins on networking activities and higher
than expected costs in 2000 and going forward, the Company revised its estimated
costs for the project during the 2000 second quarter.  As a result,  the Company
has  recognized  an  estimated  contract  loss  of  $4.4  million.  This  charge
represents  the  Company's  current  estimated  loss on the MTA  project.  As of
September 30, 2000, approximately 54% of the value of the contract was complete.


Forward-Looking Statements

         Certain  statements are included in this Quarterly  Report on Form 10-Q
which are not  historical  and are  "forward-looking,"  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  anticipated  growth in the IT markets,  the  continuation  of the
trends favoring outsourcing of management  information systems ("MIS") functions
by large and mid-sized  companies,  the anticipated growth and higher margins in
the  services  and  support  component  of  our  business,  the  timing  of  the
development and implementation of AlphaNet  Solutions' new service offerings and
the  utilization  of such  services  by our  customers,  and  trends  in  future
operating performance,  and are forward-looking statements within the meaning of
The  Private  Securities  Litigation  Reform Act of 1995.  Such  forward-looking
statements  include  substantial  risks and  uncertainties,  including,  but not
limited to: (i) the substantial  variability of our quarterly  operating results
caused by a  variety  of  factors,  some of which are not  within  our  control,
including (a) the transition from product  reseller to IT professional  services
firm  and  all  expected  and  unexpected  costs  and  events  related  to  such
transition,  (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  which are  likely  to be  adversely
affected  during  periods of rapid and  concentrated  hiring;  (iii) the intense
competition  in the markets for the Company's  products and  services;  (iv) the
Company's  ability  to  effectively  manage its growth  which will  require  the
Company to continue  developing  and  improving its  operational,  financial and
other internal systems; (v) the ability to develop, market, provide, and achieve
market acceptance of new service offerings to new and existing  customers;  (vi)
the Company's ability to attract,  hire,  train, and retain qualified  technical
personnel in an increasingly competitive market; (vii) the Company's substantial
reliance  on a  concentrated  number  of  key  customers;  (viii)  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;  (ix) the  Company's  reliance on the
continued services of key executive officers and salespersons;  and (x) material
risks  and  uncertainties  associated  with the MTA  Contract.  Such  risks  and
uncertainties  may cause the Company's actual results to differ  materially from
the results discussed in the forward-looking statements contained herein.

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.  As amended by SAB 101A and SAB101B, this SAB must be implemented no
later than the fourth  quarter of 2000.  The  Company is  evaluating  the impact
SAB101 and  related  SEC  guidance  may have on its  financial  statements  upon
implementation and intends to adopt this standard in the 2000 fourth quarter.

<PAGE>

Liquidity and Capital Resources

         Cash and cash  equivalents  at September  30, 2000 were $16.2  million,
compared to $16.5 million at December 31, 1999. Working capital at September 30,
2000 was $25.9  million as  compared  to $37.8  million at  December  31,  1999,
representing a decrease of $11.9 million or 31.5%.

         Since its inception,  the Company has funded its  operations  primarily
from cash generated by operations,  as well as with funds from borrowings  under
the Company's  credit  facility and the net proceeds  from the Company's  public
offerings.  At September  30, 2000,  the Company had no  outstanding  borrowings
under the credit facility.

         Cash  provided  by  operating   activities   primarily   resulted  from
collections of accounts  receivable of approximately $9.2 million,  decreases in
inventory of $0.9  million,  and  decreases in prepaid  assets of $0.7  million,
offset  by the net loss  for the  nine-month  period  of  $12.7  million  net of
non-cash charges.  The Company's days sales  outstanding in accounts  receivable
decreased from 72 days at December 31, 1999 to 69 days at September 30, 2000.

         Cash used in investing activities related to the Company's $1.8 million
investment in nex-i.com and capital  expenditures  of $1.0 million.  The capital
expenditures were primarily for the purchase of computer  equipment and software
used by the Company.

         Cash provided by financing activities of $0.2 million primarily relates
to the  proceeds  from the  exercise of  employee  stock  options  and  employee
purchases of Company stock.

         On June 30,  1997,  the  Company  and First  Union  National  Bank (the
"Bank")  executed a Loan and Security  Agreement  whereby the Bank  expanded the
Company's  credit facility to enable the Company to borrow,  based upon eligible
accounts  receivable,  up  to  $15.0  million  for  short-term  working  capital
purposes.  Such facility  includes a $2.5 million sublimit for letters of credit
and a $5.0 million sublimit for acquisition  advances.  Under the facility,  the
Company may borrow, subject to certain post-closing  conditions and covenants by
the Company,  (i) for working  capital  purposes,  at the Bank's prime rate less
0.50% or LIBOR plus 1.25% and (ii) for  acquisitions,  at the Bank's  prime rate
less 0.25% or LIBOR plus 1.50%.  The Company's  obligations  under such facility
are collateralized by a first priority lien on the Company's accounts receivable
and  inventory,  except  for  inventory  for  which  the Bank  has or will  have
subordinated  its position to certain  other lenders  pursuant to  intercreditor
agreements.  Effective  January 1, 2000,  the Company and the Bank  extended the
Company's credit facility  through  December 31, 2000 on  substantially  similar
terms;  however, the Bank provided $2.0 million of the $15.0 million credit line
to the Company on an  uncollateralized  basis.  Under the credit  facility,  the
Company is required  to maintain a minimum  fixed  charge  coverage  ratio and a
total  liabilities  to net worth ratio.  At September  30, 2000, no amounts were
outstanding  under the credit  facility.  At September 30, 2000, the Company was
not in compliance  with the fixed charge  coverage  ratio.  In October 2000, the
Company  agreed to accept  the  Bank's  offer to waive  such  non-compliance  in
consideration   of  a  cash   payment   to  the   Bank   of   $15,000   and  the
re-collateralization of the previously  uncollateralized $2.0 million portion of
the credit line.

         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 the nine months ended September 30, 2000, 29,642 shares of common
stock  were sold to  employees  under the plan for  approximately  $111,193,  an
average price of $3.75 per share. The Company has issued an aggregate of 160,221
shares since the  inception of the Employee  Stock  Purchase  Plan at an average
price of $4.97 per share, receiving total proceeds of $796,000.

         The Company purchases certain inventory and equipment through financing
arrangements  with Finova Capital  Corporation  and IBM Credit  Corporation.  At
September  30,  2000,  there were  outstanding  balances of  approximately  $2.3
million for Finova Capital  Corporation and  approximately  $0.6 million for IBM
Credit  Corporation  under such  arrangements.  Obligations under such financing
arrangements  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.

<PAGE>


PART II. OTHER INFORMATION


Item 1.  Legal Proceedings

         On August 10,  2000,  the Company  consummated  the  settlement  of the
lawsuit  filed by the Company on February 13, 1996 in the Superior  Court of New
Jersey,  Chancery  Division  (Morris County) against two former employees of the
Company and their current employer (together, the "Defendants") for, among other
things, alleged theft of services, theft of Company property, theft of corporate
opportunity and unauthorized use of Company credit cards by the Defendants.  The
Defendants had asserted certain counterclaims against the Company and certain of
its present and former  directors.  The settlement  implemented  the terms of an
Order of Disposition  issued by the court in August 1999.  Pursuant to the terms
of the  settlement,  the Company  received on August 10, 2000  $331,597 from the
Defendants, an insurance carrier and another defendant named by the Company, and
all parties have released one another of all claims and  counterclaims  filed in
the suit.  On September  21, 2000,  the Company  received the balance of $38,403
which  was  owing  to it from one of the  Defendants,  thereby  concluding  this
litigation.  Coincident with the settlement,  the Company  reimbursed Stan Gang,
the Company's Chairman and principal shareholder, for $675,000 of personal funds
which Mr.  Gang  previously  advanced  to the  Company  in  connection  with the
litigation.

         On July  7,  2000,  Polo  Ralph  Lauren  Corporation  ("Polo")  filed a
counterclaim  against the Company in a lawsuit filed by the Company against Polo
on February 16, 2000 in the Superior Court of New Jersey,  Law Division  (Morris
County) for  collection of an overdue  receivable in the amount of $893,330.  In
Counts One and Two of its counterclaim,  Polo alleges,  among other things, that
it sustained  damages of $4.7 million as a result of alleged breach of contract,
breach of  warranty  and  negligence  by the  Company in  "failing  to  maintain
accurate  shipping  records  and  documentation."  Discovery  to date  has  been
limited,  and no evidence has yet been  proffered in support of the  allegations
contained  in Counts  One and Two of the  counterclaim.  In  October  2000,  the
Company  secured  a  commitment  from  its  insurance  carrier,   subject  to  a
reservation of rights, to defend against the counterclaim.  The Company believes
it has meritorious defenses to the counterclaim and intends to vigorously pursue
recovery of all amounts owing to the Company by Polo.


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

(a)    Exhibit.

            27       Financial Data Schedule.

(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.


<PAGE>


                                   SIGNATURES

Pursuant  to the  requirements  of the  Securities  Exchange  Act of  1934,  the
Registrant  has duly  caused  this  report  to be  signed  on its  behalf by the
undersigned thereunto duly authorized.


                                  ALPHANET SOLUTIONS, INC.




DATE: November 9, 2000        By: DONALD A. DEIESO
                                  ---------------------------------------
                                  Donald A. Deieso
                                  President and Chief Executive Officer
                                  (Principal Executive Officer)



DATE:  November 9, 2000       By: WILLIAM S. MEDVE
                                  -------------------------------------
                                  William S. Medve
                                  Senior Vice President, Chief Financial Officer
                                  and Treasurer
                                  (Principal Financial and Accounting Officer)