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UNITED STATESSECURITIES AND EXCHANGE
COMMISSIONWashington, D.C. 20549

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FORM 10-QSB

(Mark One)

|/x/ | Quarterly report under Section 13 or
      15(d) of the Securities Exchange Act of
1934
|--- | ---------------------------------------------------------------------------------------

For the quarterly period ended September 30,
2001

or

|/ / | Transition report under Section 13 or
      15(d) of the Exchange Act
|--- | ---------------------------------------------------------------------

For the transition period from

to

Commission file number 000-17001

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CECS CORP.(Exact
Name of Small Business Issuer as Specified in Its Charter)

Delaware(State or Other Jurisdiction ofIncorporation or
      Organization)
    
    52-1529536(I.R.S. Employer Identification No.)121 Vine StreetSuite
    1903Seattle, Washington(Address of Principal Executive Offices)
    
    98121(Zip Code)Issuer's Telephone
      Number, Including Area Code206-443-6948(Former Name, Former Address and Former Fiscal Year, if
      changed since last report)


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Check whether the issuer: (1) filed all
reports required to be filed by Section 13 or 15 (d) of the Exchange
Act during the past 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 / /

State the number of shares outstanding of the
issuer's Common Stock, as of September 30, 2001:47,970,875

Transitional Small Business Disclosure Format
(check one):Yes / /  No /x/

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PART I. Financial Information

Item 1. Financial Statements

CECS CORP. (A development
stage company) CONDENSED BALANCE SHEET (Unaudited)

|                                         |                                                   | September 30,2001                                                     |                                                           
|---------------------------------------- | ------------------------------------------------- | --------------------------------------------------------------------- | ----------------------------------------------------------
|ASSETS                                   |                                                   |                                                                       |                                                           
|Current assets:                          |                                                   |                                                                       |                                                           
|                                         | Cash                                              |                                                                       | $                                                         
|                                         | Marketable securities                             |                                                                       |                                                           
|                                         | Prepaid rent                                      |                                                                       |                                                           
|                                         |                                                   |                                                                       |                                                           
|                                         |                                                   |                                                                       | Total current assets                                      
|                                         |                                                   |                                                                       |                                                           
|Other assets:                            |                                                   |                                                                       |                                                           
|                                         | Furniture fixtures and equipment                  |                                                                       |                                                           
|                                         | Less accumulated depreciation of
    $6,304       |                                                                       |                                                           
|                                         | Notes receivable                                  |                                                                       |                                                           
|                                         |                                                   |                                                                       |                                                           
|                                         |                                                   |                                                                       | Total assets                                              
|                                         |                                                   |                                                                       |                                                           
|LIABILITIES AND STOCKHOLDERS'
    EQUITY |                                                   |                                                                       |                                                           
|Current liabilities:                     |                                                   |                                                                       |                                                           
|                                         | Accounts payable                                  |                                                                       | $                                                         
|                                         | Accrued expenses                                  |                                                                       |                                                           
|                                         | Accrued professional fees                         |                                                                       |                                                           
|                                         | Notes payable current                             |                                                                       |                                                           
|                                         |                                                   |                                                                       |                                                           
|                                         |                                                   |                                                                       | Total current liabilities                                 
|                                         |                                                   |                                                                       |                                                           
|Commitments and contingencies            |                                                   |                                                                       |                                                           
|Stockholders' Equity:                    |                                                   |                                                                       |                                                           
|                                         | Preferred stock, par value $0.01 per
      share: |                                                                       |                                                           
|                                         |                                                   | Authorized 50,000,000 shares11.416 issued
      and outstanding       |                                                           
|                                         | Common stock, par value $0.01 per
    share:      |                                                                       |                                                           
|                                         |                                                   | Authorized 200,000,000 shares:47,970,875
      issued and outstanding |                                                           
|                                         | Additional paid-in-capital                        |                                                                       |                                                           
|                                         | Accumulated deficit                               |                                                                       |                                                           
|                                         | Accumulated other comprehensive
income            |                                                                       |                                                           
|                                         |                                                   |                                                                       |                                                           
|                                         |                                                   |                                                                       | Total stockholder's equity
(deficit)                      
|                                         |                                                   |                                                                       |                                                           
|                                         |                                                   |                                                                       | Total liabilities and stockholder's equity
      (deficit)
|                                         |                                                   |                                                                       |                                                           

See accompanying notes to financial statements.

1

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CECS CORP. (A development
stage company) CONDENSED STATEMENTS OF OPERATIONS (Unaudited)

|                                                   |                                                              | For the Three Months
      EndedSeptember 30, |         | For the Nine Months
      EndedSeptember 30, |        
|-------------------------------------------------- | ------------------------------------------------------------ | --------------------------------------------- | ------- | -------------------------------------------- | -------
|
|Operating costs and expenses:                      |                                                              |                                               |         |                                              |        
|                                                   | General and administrative expenses                          |                                               | $       | 21,580                                       |        
|                                                   | Professional and consulting expenses                         |                                               |         | 0                                            |        
|                                                   |                                                              |                                               |         |                                              |        
|                                                   |                                                              | Total operating costs and expenses            |         |                                              | 21,580 
|Other income (expense):                            |                                                              |                                               | 0       |                                              |        
|                                                   |                                                              |                                               |         |                                              |        
|Income (loss) from operations                      |                                                              |                                               | (21,580 | )                                            |        
|                                                   |                                                              |                                               |         |                                              |        
|Non-operating gain (loss):                         |                                                              |                                               |         |                                              |        
|                                                   | Sale of investments                                          |                                               |         | 0                                            |        
|                                                   | Other investments, note receivable and other
    adjustments |                                               |         | (70,000                                      | )      
|                                                   | Gain on sale of contract rights                              |                                               |         | 0                                            |        
|                                                   |                                                              |                                               |         |                                              |        
|                                                   |                                                              | Total non-operating gain (loss)               |         |                                              | (70,000
|                                                   |                                                              |                                               |         |                                              |        
|Net income                                         |                                                              |                                               | (91,580 | )                                            |        
|                                                   |                                                              |                                               |         |                                              |        
|Other comprehensive income (loss)                  |                                                              |                                               | 0       |                                              |        
|                                                   |                                                              |                                               |         |                                              |        
|Net comprehensive income (loss)                    |                                                              | $                                             | (91,580 | )                                            | $      
|                                                   |                                                              |                                               |         |                                              |        
|Net income (loss) per share of common
      stock: |                                                              |                                               |         |                                              |        
|                                                   | Basic income (loss) per share:                               |                                               | $       | (0.00                                        | )      
|                                                   |                                                              |                                               |         |                                              |        
|                                                   | Diluted income (loss) per share                              |                                               | $       | (0.00                                        | )      
|                                                   |                                                              |                                               |         |                                              |        

See accompanying notes to financial statements.

2

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CECS CORP. (A development
stage company) CONDENSED STATEMENT OF STOCKHOLDERS' EQUITY For
the Nine Months EndedSeptember 30, 2001 (Unaudited)

|                                                                     |  | Preferred |   | Common |       |   |            |  |   |         |  |   |           
|-------------------------------------------------------------------- |  | --------- | - | ------ | ----- | - | ---------- |  | - | ------- |  | - | ----------
|
|
|Balance at December 31, 2000                                         |  | 17.741    |   | $      | 0.18  |   | 47,717,875 |  | $ | 477,179 |  | $ | 22,081,901
|Issuance of common stock on conversion of
      preferred stock      |  | (6.325    | ) |        | (0.06 | ) | 253,000    |  |   | 2,530   |  |   | (2,530    
|Net income (loss) for the nine months ended
      September 30, 2001 |  |           |   |        |       |   |            |  |   |         |  |   |           
|Accumulated other comprehensive
    income                           |  |           |   |        |       |   |            |  |   |         |  |   |           
|                                                                     |  |           |   |        |       |   |            |  |   |         |  |   |           
|Balance at September 30, 2001                                        |  | 11.416    |   | $      | 0.12  |   | 47,970,875 |  | $ | 479,709 |  | $ | 22,079,371
|                                                                     |  |           |   |        |       |   |            |  |   |         |  |   |           

See accompanying notes to financial statements.

3

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CECS CORP. (A development
stage company) CONDENSED STATEMENT OF CASH FLOWS (Unaudited)

|                                                                                                |                                                                       | For the Nine Months
      EndedSeptember 30                           |         
|----------------------------------------------------------------------------------------------- | --------------------------------------------------------------------- | --------------------------------------------------------------------- | --------
|
|Cash flows from operating activities:                                                           |                                                                       |                                                                       |         
|Income (loss) from operations                                                                   |                                                                       | $                                                                     | (187,331
|Adjustments to reconcile net loss to net cash
      provided by (used in) operating activities: |                                                                       |                                                                       |         
|                                                                                                | Depreciation and amortization                                         |                                                                       |         
|                                                                                                | Realized loss (gain) on sale of investments                           |                                                                       |         
|                                                                                                | Other adjustments for Non-cash items                                  |                                                                       |         
|                                                                                                | Change in operating assets and
      liabilities:                     |                                                                       |         
|                                                                                                |                                                                       | (Increase) decrease in cash due from
      brokers                    |         
|                                                                                                |                                                                       | Increase (decrease) in accounts payable and
      accrued liabilities |         
|                                                                                                |                                                                       |                                                                       |         
|Total adjustments                                                                               |                                                                       |                                                                       | 151,911 
|                                                                                                |                                                                       |                                                                       |         
|Net cash provided by (used in) operating
      activities                                       |                                                                       |                                                                       | (35,420 
|                                                                                                |                                                                       |                                                                       |         
|Cash flows from investing activities:                                                           |                                                                       |                                                                       |         
|                                                                                                | Additions to furniture and fixtures                                   |                                                                       |         
|                                                                                                | Acquisition of non-marketable investments and
      rights            |                                                                       |         
|                                                                                                | Issuance of notes receivable                                          |                                                                       |         
|                                                                                                | Loss on other investments                                             |                                                                       |         
|                                                                                                | Other investing activities                                            |                                                                       |         
|                                                                                                |                                                                       |                                                                       |         
|Net Cash provided by (used in) investing
      activities                                       |                                                                       |                                                                       | (321,013
|                                                                                                |                                                                       |                                                                       |         
|Cash flows from financing activities:                                                           |                                                                       |                                                                       |         
|                                                                                                | Proceeds from the sale of marketable securities
      and investments |                                                                       |         
|                                                                                                | Proceeds from notes payable                                           |                                                                       |         
|                                                                                                | Payments of notes payable                                             |                                                                       |         
|                                                                                                | Proceeds from issuance preferred stock,
      net                     |                                                                       |         
|                                                                                                | Other financing activities                                            |                                                                       |         
|                                                                                                |                                                                       |                                                                       |         
|Net cash provided from financing
      activities                                               |                                                                       |                                                                       | 259,235 
|                                                                                                |                                                                       |                                                                       |         
|Net increase (decrease) in cash                                                                 |                                                                       |                                                                       | (23,966 
|Cash at the beginning of the period                                                             |                                                                       |                                                                       | 23,966  
|                                                                                                |                                                                       |                                                                       |         
|Cash at the end of the period                                                                   |                                                                       | $                                                                     | 0       
|                                                                                                |                                                                       |                                                                       |         
|Supplemental disclosure of cash flow
      information:                                         |                                                                       |                                                                       |         
|                                                                                                | Cash paid during the period for
    interest                          |                                                                       | $       
|                                                                                                |                                                                       |                                                                       |         
|                                                                                                | Non-cash exchange of notes payable for
      preferred stock          |                                                                       | $       
|                                                                                                |                                                                       |                                                                       |         

See accompanying notes to financial statements.

4

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CECS CORP. (A development
stage company) NOTES TO FINANCIAL STATEMENTS Quarters ended
September 30, 2001 and 2000

Note 1 Nature of Operations

Business Activities

The Company was incorporated under the
laws of the State of Maryland on July 11, 1985, as "PPV
Enterprises, Inc." On August 18, 1987, the Company changed its name to
"DataVend, Inc." and reincorporated under the laws of the State of
Delaware. On March 14, 1990, the Company changed its name to Choices
Entertainment Corporation. On June 16, 1997, the Company sold substantially
all of its assets and business to West Coast Entertainment Corporation. On
August 30, 1999, the Company entered into an agreement the effect of which
would have been to change the company to a hotel properties holding and
operating company. On January 16, 2000, the Company's Board of Directors
adopted a plan to change the business of the Company to that of a technology
holding company and terminated the plan to become a hotel company effective as
of December 30, 1999. On May 26, 2000, the Company's shareholders
approved the change of the name of the corporation to CECS CORP.

Note 2 Summary of
Significant Accounting Policies

Equity Securities

The Company accounts for investment in
accordance with SFAS No. 115 "Accounting for Certain Investments in Debt
and Equity Securities," which classifies investments as trading securities,
available for sale securities, and held to maturity securities. SFAS
No. 115 requires unrealized holding gains and losses for available-for-sale
securities to be excluded from earnings and reported as a net amount in a
separate component of shareholders' equity until realized.

Non-marketable securities are carried at
cost, unless the Company believes and has reason to believe that the securities
should be valued at some lower basis due to impairment or realization.

Comprehensive Income

The Company accounts for other
comprehensive income in accordance with SFAS No. 130, "Reporting
Comprehensive Income." SFAS No. 130 establishes standards for reporting
comprehensive income and its components (revenues, expenses, gains, and losses)
in a full set of general purpose financial statements. SFAS No. 130
requires that the Company (a) classify items of other comprehensive income
by their nature in a financial statement and (b) display the accumulated
balance of other comprehensive income separately from retained earnings and
additional paid-in capital in the equity section of a statement of financial
position. The Company's other comprehensive income is composed of unrealized
holding gains during the year and reclassification adjustments for realized
gains are included in net income or loss.

Use of Estimates

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

5

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Reclassification and
Restatement

In order to facilitate the comparison of
financial information, certain amounts reported in prior year comparative totals
have been reclassified to conform with the current year presentation.

Development Stage Enterprise

The Company is considered as a dormant
enterprise that was reactivated to undertake development stage activities.
Statement of Financial Accounting Standards No. 7, "Accounting and
Reporting by Development Stage Enterprise", requires the disclosure of
cumulative amounts of results of operations and cash flows from the inception of
each development stage. The cumulative amounts from January 16, 2000 to
December 31, 2000 are substantially the same as the results of operations
and cash flows for the year ended December 31, 2000.

Note 3 Liquidity

The Company's financial statements
included herein have been presented on the basis that the Company is a going
concern, which contemplates the realization of assets and the satisfaction of
liabilities in the normal course of business. The Company has an accumulated
deficit of $23,023,220 as of September 30, 2001 and net loss of approximately
$91,580 and $859,602 for the quarters ended September 30, 2001 and 2000
respectively.

As of September 30, 2001, the Company
is substantially without cash. The Company's viability for the foreseeable
future is dependent upon its ability to find business opportunities and raise
needed capital. The Company's ability to raise needed capital is seriously in
question. In the event the Company is not successful in securing needed capital
in the near term, as to which no assurance can be given, the Company does not
believe that its viability as an ongoing business is assured. The Company's
business plan is focused, in the near term, on acquiring assets and building
operating companies. The Company is involved in discussions with several
companies about acquiring either the target company or certain assets of the
target company. None of the referenced discussions are sufficiently far advanced
to warrant specific disclosure about the target property or company. In each
case, additional capital is required to realize the value of the intellectual
property or franchise value of the target company to be acquired. Management
intends, among other things, to raise capital privately prior to the end of
December 2001. The Company is negotiating with several capital providers
but as yet no commitment to provide capital has been secured. If the Company is
unable to raise needed capital, then it is likely that current management will
not implement the current business plan.

Note 4 Marketable Equity
Securities

The Company's investments in marketable
equity securities are classified as available-for-sale. The cost and approximate
fair value of marketable equity securities available-for-sale are summarized as
follows at September 30, 2001:

Cost
    
    Unrealized Loss
    
    Fair ValuePublicly traded securities
    
    $
    3,808
    
    $
    3,413
    
    $
    395


Gross unrealized holding losses were
$3,413 gross proceeds from the sale of securities was $243,955, with an average
cost of $384,755 and gross realized losses of $140,820, using the average cost
method.

Note 5 Notes Receivable

We have provided capital on a loan basis
to Speaklink, Inc. (Speaklink), a privately held company based in Seattle,
Washington. The Company is the holder of two Speaklink promissory notes each in
the amount of $35,000. The first note, dated October 19, 2000, matured
December 19, 2000 and the second note, dated October 27, 2000, matured
December 27, 2000, in each case with accrued interest. The notes contain
all of the standard terms and conditions of commercially reasonable promissory
notes written or made in the

6

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ordinary course of business. The Company has demanded repayment
of the notes and is in discussion with Speaklink as to repayment, conversion of
the notes to equity or other satisfaction of the notes. It appears that
Speaklink will not have assets sufficient to repay the amount of the notes plus
interest. Accordingly, we have written down the value of the assets as
represented to $0.00.
We continue to have discussions with Speaklink as to repayment, conversion of
the notes to equity or other satisfaction of the notes.

Additionally the Company provided
capital on a loan basis to FastVoice, Inc. (FastVoice), a privately held
company based in Seattle, Washington. The Company is the holder of a FastVoice
promissory note in the amount of $72,000, dated January 20, 2001 with
interest at 12% per annum. The note contains all of the standard terms and
conditions of a commercially reasonable promissory note written or made in the
ordinary course of business. The Company has demanded repayment of the note
however it appears that FastVoice will not have assets sufficient to permit
repayment of the amount on the note plus interest. Accordingly, we have written
down the value of the asset as represented in the financial statements to $0.00.
We continue to have discussions with FastVoice as to repayment, conversion of
the notes to equity or other satisfaction of the notes.

Note 6 Notes Payable

As of September 30, 2001, the Company
has notes payable outstanding in the amount of $310,000. The Company's 12%
unsecured promissory notes in the principal amount of $310,000 matured in
December 2000. No written notice of default or demand for repayment has
been received by the Company. We have had discussions with certain noteholders
who have expressed a willingness to extend the notes at any time we can
substantiate a legitimate business purpose for doing so.

Note 7 Disclosure of
Information About Capital Structure

The Financial Accounting Standards Board
issued in February 1997, SFAS No. 129 "Disclosure of Information about
Capital Structure". SFAS 129 requires disclosure of descriptive information
about securities, e.g. rights and privileges of the various securities
outstanding, the number of shares issued upon conversion, exercise, or
satisfaction, or required conditions and liquidation preferences of preferred
stock (Convertible Preferred Shares).

At the Company's Annual Meeting of
Stockholders held in May 2000, the Company's stockholders approved an
increase of the capital stock of the Company to 200,000,000 shares of common
stock and 50,000,000 shares of preferred stock.

The Company's common stock is currently
traded in the over-the-counter market on the OTC-Bulletin Board. On
September 30, 2001 the quoted price was $.01 as reported by the OTC-Bulletin
Board.

The Company has not declared or paid any
dividends on its preferred or common stock. The Board of Directors does not
contemplate the payment of dividends in the foreseeable future.

Rights and Privileges

The holders of outstanding shares of
Common Stock are entitled to receive dividends out of assets legally available
therefore at such times and in such amounts as the board may from time to time
determine. The shares of Common Stock are neither redeemable nor convertible,
and the holders thereof have no preemptive or subscription rights to purchase
any securities of the Company. Upon liquidation, dissolution or winding up of
the company, the holders of Common Stock are entitled to receive the assets of
the company which are legally available for distribution, after payment of all
debts, other liabilities and any liquidation preference of any outstanding
preferred stock. Each outstanding share of Common Stock is entitled to one vote
on all matters submitted to a vote of stockholders. There is no cumulative
voting and no preemptive right.

The Convertible Preferred Shares are the
company's only authorized and outstanding series or class of preferred shares.

The Convertible Preferred Shares have no
liquidation preference. Upon liquidation, dissolution or winding up of the
Company, the holders of Convertible Preferred Shares will receive an amount
equal to the amount, if any, received by holders of the Common Stock, inpari passu.

7

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Dividends on the Convertible Preferred
Shares are non-cumulative and will only be paid when, as and if declared by the
Board of Directors of the Company, in its sole discretion, in an amount per
share equal to the amount of the dividend declared on the Common Stock, if any.

Convertible Preferred Shares are
convertible, in whole or in part, at any time, at the option of the holder, into
Common Stock at a ratio of 40,000 shares of the Company's Common Stock (as more
fully described above) for each Convertible Preferred Share. Holders of the
Convertible Preferred Shares are not entitled to any distributions unless
declared by the Board of Directors as described above.

The holders of Convertible Preferred
Shares have voting rights equivalent to the rights of holders of the Common
Stock. Each Convertible Preferred Share bears 40,000 votes on any matter brought
before the stockholders such as the election of Directors and are entitled to
notice of annual or special stockholder meetings. The Board of Directors of the
Company is not prohibited from adopting and submitting to the Company's voting
stockholders any proposed amendment to the Certificate of Incorporation of the
Company or a Certificate of Designation which would create a class of preferred
shares ranking senior to the Convertible Preferred Shares as to dividends and
liquidation preference.

Convertible Preferred Shares are not
redeemable by the Company.

Note 8 Stock Options

Stock Option and Appreciation
Rights Plan

The Company has an unallocated reserve
of 1,694,000 shares of its common stock for grant under its 1987 Stock Option
and Appreciation Rights Plan (the "1987 Plan"). Pursuant to the 1987 Plan, the
Company may grant either incentive stock options, intended to comply with the
requirements of Section 422A of the Internal Revenue Code of 1986, as
amended (the "Code"), or non-qualified stock options, as well as stock
appreciation rights.

All matters relating to the 1987 Plan
are administered by a committee selected by the Company's Board of Directors,
including selection of participants, allotment of shares, determination of price
and other conditions of purchase. The exercise price of incentive stock options
granted under the 1987 Plan may not be less than the fair market value of the
common stock on the date of grant and the term of the option may not exceed ten
years from the date of grant. In the case of incentive options granted to
individuals who own more than 10% of the outstanding common stock of the
Company, the exercise price may not be less than 110% of the fair market value
of the common stock on the date of the 1987 Plan grant and the term of the
option may not exceed five years from the date of grant. All options and stock
appreciation rights granted under the

1987 Plan are non-transferable other
than by will or by the laws of descent and distribution.

The following table sets forth
information with respect to incentive stock options under the Plan for the six
months ended June 30, 2001:

Expiration Date
    
    Numberof
Holders
    
    Shares ofCommon
      StockSubject toOption
    
    ExercisePriceper
      ShareNovember 29, 2001
    
    1
    
    1,500,000
    
    $
    0.75


Non-qualified management
incentive options

On January 31, 1991, the Board of
Directors approved the grant of 4,750,000 1991 Management Options to four
executive officers of the Company. One officer has subsequently retired and two
other officers have left the Company. One ex-officer exercised his options in
full, one ex-officer exercised 540,000 options leaving 510,000 options
outstanding, and 1,000,000 options held by the second officer who has left the

8

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Company remains outstanding. All of the 1991 Management Options
were issued at an exercise price of $.4325 per share, which represented the bid
price for the Company's common stock on the date of the grant of such options.
The 1991 Management Options vested fully as of August 2, 1991, and expire
January 31, 2001.

On February 9, 1994, the Board of
Directors approved the grant of 915,000 1994 Management Options to three
officers and one director of the Company at an exercise price of $.23 per share,
which represented the bid price for the Company's common stock on the date of
grant of such options. The 1994 Management Options vested fully as of
April 7, 1994, and expire on January 31, 2001.

Registration statements under the 1933
Act have been filed by the Company with respect to the 8,425,001 shares
underlying the 1987 Stock Option and Appreciation Rights Plan (the "1987 Plan"),
the outstanding Long-Term Management Incentive Options, the 1991 Management
Options, and the 1994 Management Options, and an option held by a director. Of
these options, 3,591,501 have either been cancelled, exercised or have expired
and 1,694,000 options remained unissued under the 1987 SOP.

Generally, such registration permits the
immediate sale of the 3,139,500 vested shares upon exercise, subject to the
volume limitations imposed by Rule 144.

Holders of these options are afforded
certain anti-dilution and piggyback rights under the 1933 Act with respect to
the shares of common stock issuable upon exercise of said options.

On February 13, 1997, the Board of
Directors of the Company authorized the grant of non-qualified stock options to
purchase 450,000 shares of the Company's common stock at $.05 per share, the
fair market value of the common stock on that date, to three directors of the
Company. The options became fully vested after six months from the date of
grant.

Note 9 Net Income (Loss)
Per Share of Common Stock

Basic and diluted loss per share for the
quarters ended September 30, 2001 and 2000, was computed by dividing the net
loss by the weighted average number of common shares outstanding during the
periods. No consideration was given to the conversion of preferred stock since
the result of that calculation would be antidilutive. The approximate number of
shares used in the computation of loss per share amounts is as follows:

Quarter ended June
      30,
    
    Number of Sharesused in
      Calculation2001Basic and Diluted
    
    48,223,3242000Basic and Diluted
    
    29,315,235


Note 10 Income Taxes

The Company accounts for income taxes in
accordance with SFAS No. 109, Accounting for Income Taxes. SFAS
No. 109 requires the liability method of accounting for deferred income
taxes. Deferred tax assets and liabilities are determined based on differences
between financial reporting and tax bases of assets and liabilities, and are
measured by applying enacted tax rates for the taxable years in which those
differences are expected to reverse. Recognition of deferred tax assets is
subject to a valuation allowance if it is more likely than not that not all of a
deferred tax asset will be realized.

As of June 30, 2001 the Company had
approximately $20,000,000 of net operating loss carry-forwards for tax purposes
which may be available to offset future federal income, if any, through 2021.
The amount ultimately available, if any in future years, is subject to certain
limitations.

9

---

Should the Company operate profitably in
future years, it may be subject to current tax expense in certain states for
which no net operating loss carry-forwards are available.

Note 11 Commitments

The Company leases its office facilities
in Washington under a non-cancelable operating lease that expires
December 30, 2001. The rent is $4,292 per month through December 30,
2001. Before June 2000, the Company's President provided the Company's
executive office rent-free. The rent expenses for the quarters ended
June 30, 2001 and 2000 were $13,650 and $4,112 respectively. See
Note 14 Subsequent Events.

Note 12 Pending
Litigation

The Company is a defendant to the
lawsuit Dion Signs & Services, Inc. vs. Choices Entertainment
Corporation, Civil Action No. 91-6871. The case is now pending in the
Providence County Superior Court, Providence, Rhode Island. Dion
Signs & Services, Inc. alleges that it is owed approximately
$33,000 plus interest, costs and reasonable attorney's fees, totaling in the
aggregate approximately $95,000, for the failure by Choices Entertainment
Corporation to pay for signage that was erected at various locations pursuant to
a contract. See Note 14 Subsequent Events.

Note 13 Payments to
Related Parties

During the quarter and nine months ended
September 30, 2001 payments to Tracy M. Shier, President and CEO totaled $25,500
and to Thomas Renna, Vice President, totaled $14,900.

Note 14 Subsequent Events

The Dion Signs & Services vs.
Choices lawsuit discussed in Note 12 was settled in May 2001. The
Company agreed to pay $22,000 to Dion Signs & Services, Inc. over
the next six months in semi-monthly installments of $6,000 except for the first
installment, which is for $5,000. No provision for loss was made at
June 30, 2001 for this subsequent event. The Company was unable to make its
first installment under the settlement agreement and accordingly the liquidated
amount of the judgment is $30,000 plus interest.

The Company entered into a termination
arrangement with its sub-landlord to vacate corporate office facilities in
Seattle, Washington. According to the arrangement, the sub-landlord applied all
amounts of last months rent and security deposit to payment of the monthly lease
amounts through the date of termination on July 31, 2001. The reason for
the termination was that the sub-landlord needed the space for its own expansion
plans.

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Item 2. MANAGEMENT'S DISCUSSION AND
ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following is management's discussion
and analysis of certain significant factors that have affected the Company's
financial condition, changes in financial condition and results of operations.
It also includes a discussion of the Company's liquidity and capital resources
at September 30, 2001, and later dated information, where practicable. This
discussion should be read together with the Company's Financial Statements and
the Notes thereto.

Overview

The Board of Directors (the "Board") of
Choices Entertainment Corporation (the "Company" or "We") adopted a proposal on
January 17, 2000 to change the business of the Company to that of a
technology holding company. We are acquiring, investing in, and incubating
companies engaged in Internet, computing and other technologies in various
stages of development. On May 26, 2000 at the Annual Meeting, our
stockholders' adopted a resolution proposed by the board of directors of the
Company changing the name of the Company to CECS CORP.

Financial Condition, Liquidity
and Capital Resources

As of September 30, 2001, the Company
had a net working capital deficit of approximately $468,000 and no cash balances.

The Company had no revenues.

From September 2000 to
March 2001, the Company engaged in a selling program of its shares of
Photochannel Networks, Inc.

We anticipate that the Company will not
generate any significant revenues until we accomplish our business objective of
merging or acquiring revenue-producing assets from a nonaffiliated entity. We
presently have no liquid financial resources to offer an acquisition candidate
and must rely upon an exchange of our stock to complete a merger or acquisition.

The Company's viability for the
foreseeable future is and will continue to be dependent upon its ability to find
other business opportunities and to secure needed capital. No assurance can be
given that the Company will be successful in that regard. In the event the
Company is not successful, it is unlikely that there would be any amounts
available for distribution to the Company's stockholders.

We estimate that at the time of filing
this report, outstanding liabilities of the Company are approximately $489,000.

Capital Expenditures

The Company's capital expenditures were
$0 during the quarter and $2,013 for the nine months ended September 30, 2001.

Material Changes in Results of
Operations

September 30, 2001 compared to
September 30, 2000:

Net Loss:

For the quarter ended September 30,
2001, the Company had a net loss of $91,580 compared to net loss of $859,602
for the quarter ended September 30, 2000. For the nine months ended
September 30,
2001, the

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Company had a net loss of $575,151 compared to net loss of
$778,825 for the nine months ended September 30, 2000. The significant changes
between the periods are discussed below:

General and administrative expenses for
the quarter declined in the 2001 quarter compared to 2000,
generally because there was significantly reduced business activity due to a
shortage of capital.

Professional and consulting expenses
were approximately $0 in the quarter ending 2001 for the reasons stated above. During
the first quarter of 2000, the Company was involved in fund raising and a
private offering of Series C preferred stock, the results of which are
explained further below. Two Company officers were paid approximately $116,000
during this 2000 period compared to $14,000 charged to income in the 2001
period. Additionally there was $20,000 paid to a former officer in the
2000-quarter and none in 2001. The 2000 quarter expenses were offset by a
release to income of professional expenses accrued at December 31, 1999
which were determined not payable subsequently.

In the second quarter 2001, the Company
discontinued its efforts to acquire Tridium Research (Tridium) because the
market size did not warrant the asking price of the principals. Because Tridium
is not operating and does not have prospects for other financing, the Company
wrote off its investment in non-marketable securities by charging $75,000 to
"Other investment and note receivable losses" in the Condensed Statement of
Operations. The Company is investigating its legal rights and remedies against
Tridium and its principals.

In the second quarter 2001, the Company
discontinued its efforts to acquire FastVoice Inc. (FastVoice) because the
market size did not warrant the asking price of the principals. Because
FastVoice is not operating and does not have prospects for other financing, the
Company wrote off its note receivable by charging $72,000 to "Other investment
and note receivable losses" in the Condensed Statement of Operations. The
Company is investigating its legal rights and remedies against FastVoice and its
principals.

In the third quarter
2001, the Company discontinued its efforts to acquire Speaklink, Inc. (Speaklink) because the
market size did not warrant the asking price of the principals. Because
Speaklink is not operating and does not have prospects for other financing, the
Company wrote off its note receivable by charging $70,000 to "Other investment
and note receivable losses" in the Condensed Statement of Operations. The
Company is investigating its legal rights and remedies against Speaklink and its
principals.

In the second quarter 2001, a judgment
against the Company was awarded to Dion Sign, Inc. The Company recorded
this as a liability and charged the expense to Non-operating gain (loss) in the
Condensed Statements of Operations. See Legal Proceedings.

For the forgoing three occurrences there
were no comparable events or transactions in the second quarter 2000

In the first quarter 2001 there was a
Non-operating loss on the sale of investments totaling $140,820 while there was
none in the 2000 quarter. In the first quarter 2000 the Company completed a 506
C preferred stock offering as a first step in recapitalizing since the
shareholders approval to be reinvented as a technology company. This offering
exchanged $245,000 of debt for preferred stock and raised $523,000 of cash. This
amount was used generally to acquire approximately $467,000 of non-marketable
securities and rights. Certain of these rights were sold and the rest exercised
for marketable securities in the year ended December 31, 2000. After
conversion the Company entered a selling program to realize a gain on this
investment and realized a gain of $364,652 in the year ended December 31,
2000. The Company has sold generally all of its remaining holding in the quarter
ended June 30, 2001 receiving proceeds of $243,955 which was $140,820 below
average cost.

This Quarterly Report on
Form 10-QSB contains forward looking information with respect to, among
other things, plans future events or future performance of the Company, the
occurrence of which involve certain risks and uncertainties that could cause
actual results or future events to differ materially from those expressed in any
forward looking statements. These risks and uncertainties include, but are not
limited to, the ability to identify and conclude alternative business
opportunities, and those risks and uncertainties detailed in the Company's
filings with the Securities and Exchange

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Commission. Where any forward-looking statement includes a
statement of the assumption or bases believed to be reasonable and are made in
good faith, assumed facts or bases almost always vary from actual result, and
the differences between assumed facts or bases and actual results can be
material, depending upon the circumstances. Where, in any forward looking
statement, the Company expresses and expectation or belief as to plans or future
results or events, such expectation or belief is expressed in good faith and
believed to have a reasonable basis, but there can be no assurance that the
statement of expectation or belief will result or be achieved or accomplished.
The words "believe", "expect" and "anticipate" and similar expressions identify
forward-looking statements.

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Part II OTHER INFORMATION

Item 1. Legal Proceedings

The Company is a defendant to the
lawsuit Dion Signs & Services, Inc. vs. Choices Entertainment
Corporation, Civil Action No. 91-6871. The case was brought in the
Providence County Superior Court, Providence, Rhode Island. Dion
Signs & Services, Inc. alleges that it is owed approximately
$33,000 plus interest, costs and reasonable attorney's fees for the failure by
Choices Entertainment Corporation to pay for signage that was erected at various
locations pursuant to a contract. The case has been settled and will require the
Company to pay $22,000 to Dion Signs & Services, Inc. over the
next six months in semi-monthly installments of $6,000 except for the first
installment which is in the amount of $5,000. The Company was unable to make the
first installment pursuant to the settlement agreement and accordingly the
agreed judgment in this lawsuit is liquidated at $30,000 with interest accruing
from the date of the agreement.

Item 6. Exhibits and Current
Reports

(a)INDEX TO EXHIBITS

|Exhibit No. |  | Description of
      Exhibit                                                                                                              
|----------- |  | ------------------------------------------------------------------------------------------------------------------------------------------
|3(a)        |  | Certificate of Incorporation, as
      amended(1)                                                                                         
|            |  | Certificate of Designations of Series C
      Preferred Stock, as amended(2)                                                              
|(c)         |  | Amended and Restated
    By-Laws,(13)                                                                                                     
|4           |  | Form of certificate evidencing shares of
      Common Stock(14)                                                                           
|10(a)       |  | Stock Option and Appreciation Rights Plan
      of 1987(4)                                                                                
|(b)         |  | Form of Long-Term Management Incentive
      Stock Option Agreement(5)                                                                    
|(c)         |  | Form of 1991 Management Option
      Agreement(5)                                                                                         
|(b)         |  | Consulting Agreement between Registrant
      and Ronald W. Martignoni(6)                                                                 
|(c)         |  | Severance Benefits Agreement, as amended,
      between Registrant and Lorraine E. Cannon(7)                                              
|(f)         |  | Form of 1994 Management Option
      Agreement(7)                                                                                         
|(e)         |  | Non-Employee Director Stock Option
      Agreement between                                                                                
|(f)         |  | Registrant and Fred E.
    Portner(8)                                                                                                     
|(h)         |  | Non-Employee Director Stock Option
      Agreement between Registrant and Fred E. Portner(9)                                              
|(i)         |  | Non-Employee Director Stock Option
      Agreement between Registrant and James D. Sink(9)                                                
|(j)         |  | Asset Purchase Agreement, dated December
      16, 1996, as amended, between West Coast Entertainment Corporation and
      Registrant(10)
|10.99(a)    |  | Consulting Agreement between Registrant
      and Thomas Renna(11)                                                                        
|(b)         |  | Letter of Intent to Acquire Republic
      Hotel Investors, Inc.(12)                                                                      
|(c)         |  | Termination Contract with Republic Hotel
      Investors, Inc.(13)                                                                        
|(d)         |  | Sublease Agreement between Northwest
      Strategies, Inc. and CECS, Inc. [sic.] dated May 25, 2000(14)                                  
|(e)         |  | Private Placement Subscription Agreement
      dated January 12, 2000 re: Photochannel Networks
  Inc.(14)                                

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|(f) |     | Subscription Agreement re: Tridium
      Research, Inc. dated March 1, 2000(14)
|--- | --- | -------------------------------------------------------------------------------
|(g) | (1) | Promissory Note Speaklink Inc. dated
      October 19, 2000(14)                
|(g) | (2) | Promissory Note Speaklink Inc. dated
      October 27, 2000(14)                
|(h) | (1) | Fastvoice Term Sheet Third Party dated
      October 31, 2000(14)              
|(h) | (2) | Promissory Note Fastvoice.com dated
      January 11, 2001(14)                 
|21  |     | Subsidiaries of
  Registrant(14)                                               

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(b) Current Reports

Form 8-K filed September 28, 2001 regarding withdrawal of independent
auditors.

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SIGNATURES

In accordance with the requirements of
the Exchange Act, the registrant caused this report on Form 10QSB for the
period ended September 30, 2001 to be signed on its behalf by the undersigned,
thereunto duly authorized.

|                 |  | CECS CORP.(Registrant)
|---------------- |  | ----------------------
|December 6, 2001 |  | By:                   

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