<PAGE>   1

                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549

                                   ----------

                                    FORM 10-K
                  FOR ANNUAL AND TRANSITION REPORTS PURSUANT TO
           SECTIONS 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

         [X]    ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF
                      THE SECURITIES EXCHANGE ACT OF 1934
                     For the fiscal year ended June 30, 2000

         [ ]  TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
                      THE SECURITIES EXCHANGE ACT OF 1934
                  For the transition period from _____ to ____

                         Commission file number 0-28579

                              eVENTURES GROUP, INC.
             (Exact name of Registrant as Specified in Its Charter)

         DELAWARE                                         75-2233445
(State or Other Jurisdiction of             (I.R.S. Employer Identification No.)
Incorporation or Organization)

                          300 CRESCENT COURT, SUITE 800
                               DALLAS, TEXAS 75201
                    (Address of Principal Executive Offices)

                                  214-777-4100
              (Registrant's telephone number, including area code)

           SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT:
                                      None

           SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT:

                   COMMON STOCK, PAR VALUE $0.00002 PER SHARE
                                (Title of Class)

         Indicate by a check mark whether the registrant: (1) has file 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 by a check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein, and will not be contained,
to the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [ ]

         Aggregate market value of the voting and non-voting common equity held
by non-affiliates of the registrant as of September 15, 2000 was $227,683,796.

        APPLICABLE ONLY TO REGISTRANTS INVOLVED IN BANKRUPTCY PROCEEDINGS
                        DURING THE PRECEDING FIVE YEARS:

         Indicate by a check mark whether the registrant has filed all documents
and reports required to be filed by Section 12, 13 or 15(d) of the Securities
Exchange Act of 1934 subsequent to the distribution of securities under a plan
confirmed by a court. Yes [ ] No [ ]

         As of September 15, 2000, there were 51,989,745 shares of our common
stock, par value $0.00002 outstanding.

                       DOCUMENTS INCORPORATED BY REFERENCE

PART III     --     Incorporated by reference to our proxy statement to be
                    mailed or sent to securities holders on or about October 10,
                    2000


<PAGE>   2


                                TABLE OF CONTENTS

<TABLE>
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                                                                                                               PAGE
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<S>                   <C>                                                                                      <C>
PART I

         ITEM 1.      Business...................................................................................1

         ITEM 2.      Properties................................................................................25

         ITEM 3.      Legal Proceedings.........................................................................26

         ITEM 4.      Submission of Matters to a Vote of Security Holders.......................................26

PART II

         ITEM 5.      Market for Registrant's Common Equity and Related Stockholder Matters.....................26

         ITEM 6.      Selected Financial Data...................................................................27

         ITEM 7.      Management's Discussion And Analysis Of Financial Condition And Results Of
                      Operations................................................................................28

         ITEM 7A.     Quantitative And Qualitative Disclosures About Market Risk................................34

         ITEM 8.      Financial Statements And Supplementary Data...............................................35

         ITEM 9.      Changes In And Disagreements With Accountants On Accounting And Financial
                      Disclosure................................................................................35

PART III

         ITEM 10.     Directors and Executive Officers of the Registrant........................................35

         ITEM 11.     Executive Compensation....................................................................35

         ITEM 12.     Security Ownership of Certain Beneficial Owners and Management............................35

         ITEM 13.     Certain Relationships and Related Transactions............................................35

PART IV

         ITEM 14.     Exhibits, Financial Statement Schedules, and Reports on Form 8-K..........................35

SIGNATURES......................................................................................................42

EXHIBIT INDEX...................................................................................................44
</TABLE>


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<PAGE>   3



                PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995
                        SAFE HARBOR CAUTIONARY STATEMENT

                           FORWARD-LOOKING STATEMENTS

         "Forward-looking" statements have been included throughout this
document. These statements describe our attempt to predict future events. The
words "believe," "anticipate," "expect," and similar expressions are used to
identify "forward-looking" statements. The important factors listed in the
section entitled "Risk Factors", as well as any cautionary language in this
annual report, provide examples of risks, uncertainties and events that may
cause our actual results to differ materially from the expectations described in
these "forward-looking" statements. You should be aware that the occurrence of
the events described in these risk factors and elsewhere in this annual report
could have an adverse effect on our business, results of operations or financial
condition.

         You should be aware that these "forward-looking" statements are subject
to a number of risks, assumptions, and uncertainties, such as:

         o        risks associated with our capital requirements, including the
                  need to provide working capital for operations and to fund
                  planned capital expenditures;

         o        risks associated with increasing competition in the
                  communications industry, including industry over-capacity and
                  declining prices; and

         o        changes in laws and regulations that govern the communications
                  industry.

         This list is only an example of some of the risks that may affect the
forward-looking statements. If any of these risks or uncertainties materialize
(or if they fail to materialize), or if the underlying assumptions are
incorrect, then actual results may differ materially from those projected in the
forward-looking statements. We undertake no obligation to revise these
statements to reflect future events or circumstances.


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<PAGE>   4



                                     PART I


ITEM 1.  BUSINESS

         BUSINESS OVERVIEW

         We are a global broadband network services provider. We offer a variety
of communications services over an expanding, facilities-based network. Our
network currently reaches 31 domestic and nine international cities in North
America, Central America, Europe, Asia, the Middle East and Mexico. During the
twelve months ended June 30, 2000, we transmitted approximately 500 million
minutes of packet-based voice traffic on our network and maintained
relationships with approximately 300 service providers.

         ORGANIZATION AND HISTORY

         We were originally incorporated in Delaware in 1987 as "Adina, Inc." We
allowed our corporate existence to lapse in February 1996 and were subsequently
reinstated as "eVentures Group, Inc." in August 1999. In the fall of 1999, we
completed a series of transactions following which we became a holding company
with two wholly-owned operating subsidiaries, e.Volve Technology Group, Inc.
("e.Volve") and AxisTel Communications, Inc. ("AxisTel"), and a strategic
investment in PhoneFree.com, Inc. ("PhoneFree"). We have since acquired Internet
Global Services, Inc. ("iGlobal") and have made additional strategic
investments, including investments in ORB, Inc., Fonbox Inc., LC39 Venture Group
LLC and Spydre Labs, LLC.

         Through August 2000, our strategy, which we referred to as building a
Communications Econet, was to build a family of interdependent companies by
operating, developing and investing in communications-related businesses and
support services that leverage the power of the Internet. At the center of our
strategy were investments in our wholly-owned subsidiaries, AxisTel, e.Volve and
iGlobal, which focus on the deployment and operation of private, managed global
communications networks. Since the initial deployment of those networks, we have
utilized our networks primarily to provide communications services to
Communications Service Providers, such as Qwest Communications, AT&T and RSL
Communications.

         We are now in the process of combining and expanding the AxisTel,
e.Volve and iGlobal networks to deploy a range of broadband network services
that we can offer to our customers. As we expand our network, we anticipate
increasing our product and service offerings and our customer base. By
consolidating our network businesses, we intend to establish a single entity
that is well positioned to capitalize on the growth in the market for global
broadband network services. We have begun to take steps to implement our plan,
including:

         o        developing a combined organizational structure;

         o        integrating our networks and completing a network rollout
                  plan;

         o        expanding our core network products and services;

         o        attracting new customers; and

         o        forging strategic relationships with key vendors and
                  suppliers.

         In addition to consolidating our networks, we will continue to seek
strategic investments which compliment our core network businesses and offer
opportunities to expand the product and service offerings and customer base.

         MARKET OPPORTUNITY

         We believe that the global market for broadband network services,
including transport, Internet access and value added communications services,
will grow significantly due to a number of factors, including:


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         The Growing Importance of the Internet

         The Internet has experienced tremendous growth in the past decade and
has emerged as the central global medium for communications and commerce. The
growth in data that is transmitted over the Internet is driven by a number of
factors, including the rapidly increasing number of network-enabled and
Internet-based applications, the growing number of users linked to the Internet
through personal computers, advances in network-enabled devices, servers and
routers, and the increasing availability of broadband connections.

         The explosive growth of the Internet and the increasing demand for data
services are expected to continue. According to International Data Corporation
("IDC"), the number of Internet users worldwide will increase from approximately
142 million at the end of 1998 to approximately 502 million by the end of 2003,
representing a compound annual growth rate of approximately 29%. In addition,
according to IDC, the number of web pages is expected to grow from approximately
1.7 billion in 1999 to approximately 13.1 billion in 2003, representing a
compound annual growth rate of approximately 67%. This growth is expected to
lead to a substantial increase in the demand for broadband network services.

         Convergence of Global Telecommunications and Data Services

         The global telecommunications industry has grown at a rapid rate over
the last decade, driven by domestic and international deregulation,
technological development, network deployment and the globalization of business.
The number of Communications Service Providers has also been increasing as a
result of competition fostered by domestic and international deregulation. These
factors have contributed to a substantial decrease in the cost of communications
services delivered over the traditional circuit switched network. This decrease
in price, however, has been more than offset by an increase in total revenue
driven by the growth in demand that low prices and new services have created.

         In addition, over the last decade, the volume of traffic on data
networks has grown at an unprecedented rate. According to TeleGeography, in
1998, data surpassed voice as the dominant traffic for the U.S. long distance
market. This growth has been driven by several factors, including technological
innovation, high penetration of personal computers and, in particular, by the
rapid expansion of the Internet as a global medium for business activity. The
increase in data traffic has necessitated additional data network capacity,
quality and services.

         We believe that the combination of increasing demand on the traditional
telephone network and the proliferation of data networks, with their enhanced
functionality and efficiency, is driving the convergence of voice and data
networks, including the Internet. We expect this convergence to accelerate as
enterprises and network infrastructure providers attach increasing value to data
networks and as the functionality of computers and computing devices, such as
personal digital assistants, is enhanced by voice capability.

         Legacy Approach of Traditional Communications Service Providers

         The majority of the traditional, incumbent Communications Service
Providers have taken steps over the past several years to position themselves as
vertically integrated providers. This was done to create low cost, high quality
differentiated services. While leveraging the natural barrier to entry of
network ownership to protect the distribution channel, capture valuable customer
relationships and determine service offerings has been the legacy strategy, new
entrants to the broadband network services industry are migrating toward a
horizontally segmented market. In this approach, new entrants are disaggregating
historical service offerings and turning their focus to core competencies and
recognition of the importance of network intelligence, data and switching
capabilities needed to best serve the end user. By focusing on core
competencies, capital and human resources are conserved and new entrants are
able to offer best of breed solutions in a time and cost effective manner. New
entrants are able to focus on a specific portion of the traditional telecom
value chain to establish expertise and gain market share quickly. In addition,
new entrants will be positioned to outperform the traditional incumbents as a
result of having no installed base to protect and having the ability to engage
in a cannibalization of the communications service industry.

         In addition, the traditional, incumbent Communications Service Provider
responded to demand for new network capabilities by building out physically
separate networks to incorporate new technologies. As a result,


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these Communications Service Providers have invested billions of dollars in
stand-alone networks that are designed to provide vertically integrated services
and do not possess interoperability with converged network architectures. This
creates a significant cost advantage to new entrants operating converged
networks.

         The mass of regulation which continues to weigh on the traditional
Communications Service Providers may be the most significant legacy encumbrance.
Access charges, tariffs and billing standards only make sense in a circuit
switched context and a transition to an Internet Protocol environment will
render these regulations irrelevant and create a competitive advantage for new
entrants. Protected, high margin revenue sources will decline for the
traditional provider.

         OUR SOLUTION

         Deploying a Converged Network. We are taking advantage of underlying
changes in the communications industry and the increasing demand for broadband
network services through the development of a converged network that allows us
to offer a variety of broadband transport, Internet access and value added
services. By integrating the networks that have been deployed by e.Volve,
AxisTel and iGlobal, and by expanding that combined network, we intend to
provide a range of broadband network services and bundled value added services
to our customers. Our broadband network service solutions will enable our
customers to outsource their communications infrastructure needs to a single
provider.

         Focusing on Significant Users of Bandwidth. We intend to continue to
target customers that we believe will have increasing needs for bandwidth,
including Internet, Application and Communications Service Providers. This
target market is a large and growing market with many potential customers.
Moreover, the growth and success of the underlying businesses within the
targeted customer segments further drives demand for bandwidth and other network
services. We also believe that we will have the opportunity to leverage our
customer relationships to extend additional value added services as those
services become available. By targeting this group of customers, we believe that
we have the opportunity to maximize our growth potential.

         Flexible Solution. We operate a converged packet-based network capable
of offering a range of broadband network solutions including transport, Internet
access and value-added services. As we expand our network footprint, we plan to
broaden our network service offerings to our customers. Our network
architecture, network intelligence and interconnections with other carriers will
provide us flexibility in managing traffic, scaling the network and deploying
additional service offerings.

         Our network is engineered using Internet Protocol and Asynchronous
Transfer Mode technologies, which enable us to offer multiple voice and data
solutions on the same network. Internet Protocol technology refers to software
that keeps track of the Internet's addresses for different nodes, routes
outgoing messages and recognizes incoming messages. Internet Protocol technology
allows packets to traverse multiple networks on the way to their final
destination. Asynchronous Transfer Mode is a high speed transmission technology
that allows for fixed-site packets to be transported along a pre-determined
route along a single network or between interconnected networks.

         OUR STRATEGY

         Our objective is to become a leading global provider of broadband
network services by designing, deploying and operating a facilities-based
converged network. The principal elements of our strategy include:

         Expanding the Reach and Capacity of Our Network. We plan to expand our
network's geographic footprint by aggressively adding Points of Presence both
domestically and internationally. Points of Presence are physical locations
where our network interconnects with our customers or another network. In
addition, we plan to add network capacity by leasing and/or purchasing
significant fiber optic route miles. As a part of our network expansion we are
deploying state-of-the-art equipment from vendors such as Cisco Systems and
Lucent Technologies to maximize the capacity, flexibility and functionality of
our fiber network.

         Controlling Our Network Facilities. As we expand both domestically and
internationally, we intend to control the operation and expansion of our network
facilities by:


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         o        Purchasing our own equipment, either directly or through
                  capital leases;

         o        Installing our equipment in locations that we lease from
                  landlords; and

         o        Interconnecting our facilities over fiber optic cables that we
                  lease or own through Indefeasible Rights of Use.

         We believe that our network deployment strategy provides us with
greater flexibility and control over the performance and reliability of our
network and enables us to increase our capacity more quickly to meet increasing
customer demand.

         Expanding Our Sales Force and Focusing Our Sales Efforts on Internet,
Application and Communications Service Providers. We intend to target customers
with significant bandwidth demands such as Internet, Application and
Communications Service Providers. Providing services to this target market
positions us to benefit from the rapid growth and expansion of the demand for
broadband network services. We intend to develop and expand our direct sales
force, both domestically and internationally, focusing our efforts on markets
with the highest concentration of potential customers.

         Pursuing Strategic Acquisitions, Investments and Alliances. We intend
to pursue selective acquisitions and investments that will allow us to quickly
and cost-effectively extend our geographic presence, customer base and product
and service offerings. Additionally, we intend to make strategic investments in
or enter into joint ventures or alliances with complementary businesses to
broaden our market presence or expand our strengths in key products and
services. We believe that successfully pursuing these strategic transactions or
alliances will enable us to expand our geographic reach and to broaden our
services to our customers.

         Using Our Internet Protocol and Networking Experience. We intend to use
our experience in Internet Protocol and networking in the deployment of
innovative Internet infrastructure and value added services. Since our
inception, we have made strategic investments in several networking, Internet
telephony and Voice Over Internet Protocol or VOIP service companies. As a
result, we have acquired significant experience in these areas. We intend to
leverage our experiences and relationships to provide leading-edge product and
service offerings for our customers more quickly than if we attempted to develop
products or services internally.

         OUR NETWORK

         We offer our customers broadband network services over a global,
facilities-based converged network. Our network transmits packetized information
using the operating standards established for Internet Protocol and Asynchronous
Transfer Mode technologies, which facilitate high-speed, large-scale
communications.

         Our network transmits voice, data, Internet and fax traffic within the
United States and to certain countries around the world. Our customers can
interconnect with this network through dedicated circuits from their facilities
to one of our Points of Presence. Alternatively, our customers may elect to
collocate and install equipment directly at our facilities in Jersey City,
Dallas, Kansas City, Mexico City or Miami to eliminate the cost of back-hauling
traffic from their facilities to one of our Points of Presence.

         We either lease or own our network capacity under short-term leases and
Indefeasible Rights of Use. The majority of our current network traffic is
currently transmitted over leased fiber capacity. We intend to continue to build
our network through both leasing or buying fiber infrastructure from various
bandwidth providers. We will continue to utilize multiple fiber providers to
ensure higher reliability, quicker deployment of new technology and faster
provisioning.

         We currently incorporate network equipment in both the deployment of
our network as well as the integration of customer's equipment onto the network.
We purchase or lease our network equipment from a variety of vendors, including
Cisco Systems, Lucent Technologies, Siemens, Sun, Hewlett Packard, Network
Equipment Technologies, Micro Muse, Dell, NetSpeak, Ericsson Hewlett Packard
Technologies and Alcatel.


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<PAGE>   8
         Today, our network consists of digital switching, routing and signal
management equipment and digital fiber optic cable lines, integrated and
deployed by AxisTel, e.Volve and iGlobal. The networks are interconnected
through common Points of Presence in Miami, Dallas, Jersey City and Kansas City.

         Our current network configuration reaches 31 domestic and nine
international cities in North America, Central America, Europe, Asia, the Middle
East and Mexico. During the twelve months ended June 30, 2000, we transmitted in
excess of 500 million minutes over our network. We own or lease significant
bandwidth at various capacities up to OC-12, which is capable of transmitting
data at speeds of up to 622 megabits per second and plan to upgrade most of our
network backbone to OC-48, which is capable of trasmitting data at speeds of up
to 2.5 gigabits per second, or greater capacity. Four core locations will serve
as primary gateways for continental markets worldwide - London for the European
market, Los Angeles for the Asian market, Miami for the Latin American market
and Jersey City for the domestic and international market.

         As of June 30, 2000, we had network facilities and Points of Presence
in the following locations:

<TABLE>
<CAPTION>
              Country                                                 City
              -------                                                 ----
<S>                                <C>
      United States.........       Jersey City and Newark, New Jersey; Buffalo and New York City, New
                                   York; Philadelphia, Pennsylvania;  Alpharetta and Atlanta, Georgia;
                                   Boston and Cambridge, Massachusetts; Miami, Florida; Austin, Dallas,
                                   Denton, El Paso, Fort Worth, Houston, Lubbock, Midland and San Antonio,
                                   Texas; Denver, Colorado; Detroit, Michigan;  Las Vegas, Nevada;
                                   Overland Park, Kansas (Kansas City); Milwaukee, Wisconsin; San
                                   Francisco, California; Washington D.C.; Minneapolis, Minnesota;
                                   Oklahoma City, Oklahoma; Los Angeles, California; Chicago, Illinois;
                                   Cleveland and Columbus, Ohio; Seattle, Washington

      Jamaica...............       Montego Bay

      Mexico................       Mexico City

      India.................       New Dehli

      United Kingdom........       London
</TABLE>

         At many of our Points of Presence, we use our equipment to translate
voice to data for transmission and retrieval over our network, and provide
private line, Asynchronous Transfer Mode and frame relay data services. Our
Points of Presence include Gateways and Network Access Points which are
connections to the public switched telephone network, and Internet access points
as well as interconnection facilities to large Communications Service Providers.
These Points of Presence facilitate the movement of traffic between our network
and those other transmission facilities.

         During the next 24 months, we plan to expand our network aggressively
to include more than 30 Gateway locations and 175 Network Access Points reaching
more than 100 locations around the world. This network expansion will allow us
to provide a full suite of facilities-based broadband network services to our
customers.

         Our network consists of the following elements:

         o        Gateways. Each of the Gateway locations will provide robust
                  connectivity to the network. Our Gateways will have fiber
                  connections at speeds ranging from OC-3 to OC-48 or higher.
                  Gateways will be equipped with state-of-the-art routing and
                  switching equipment and will utilize Asynchronous Transfer
                  Mode and Internet Protocol technologies. Our Gateways are
                  designed to deliver all of our broadband network services.

         o        Network Access Points. Network Access Points will principally
                  be located in second and third tier cities. Network Access
                  Points will have connectivity speeds ranging from T-1 to OC-3,
                  and will contain equipment designed primarily to support our
                  value added services. As a Network Access Point gains
                  significant customer traffic it can be converted into a
                  Gateway with the deployment of additional optical equipment
                  and the leasing of additional capacity. The network's
                  architecture effectively supports Gateway conversion. Network
                  Access Points will utilize Internet Protocol routers and other
                  similar equipment as appropriate to support the volume of
                  traffic.


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<PAGE>   9

         o        Peering. Our network also connects with Internet exchange
                  points to provide access to and from the Internet. We have
                  direct and indirect peering arrangements with Internet
                  backbone providers in order to support Internet Protocol
                  services to and from the Internet. These arrangements allow us
                  to access the Internet directly, minimizing the amount of time
                  our customers communications traffic has to travel over the
                  Internet.

         o        Network Operations Center. To service our network effectively,
                  we have established network operations centers ("NOC") which
                  monitor and manage our network from central locations, 7 days
                  a week, 24 hours a day. Our primary NOC is located in Jersey
                  City with a secondary NOC in Dallas, Texas. These facilities
                  allow us to monitor all aspects of our network, including the
                  routers, databases, switches, leased lines, Internet
                  connections, gatekeepers and gateways, to ensure equipment
                  functionally and efficiency. Our NOCs utilize a combination of
                  leading edge monitoring technologies. By utilizing
                  technologically-advanced, real-time management and monitoring
                  systems, we seek to reduce system downtime and ensure that our
                  customers will not experience any noticeable interruption in
                  their service.

         Our network is engineered to provide the following advantages:

         o        Scalability. The software and hardware that we use in our
                  network is scalable, allowing for new Points of Presence to be
                  easily integrated into our network with minimal incremental
                  investment.

         o        Flexibility. Leasing and purchasing our network capacity
                  provides us with greater flexibility and control over the
                  performance and reliability of our network. This enables us to
                  increase our capacity and to more quickly to meet customer
                  demand.

         o        Manageability. We directly control the quality of our services
                  over our network from one central location.

         o        Global Reach. Our network allows users to gain access to our
                  services from any country where we have a Point of Presence.

         PRODUCTS AND SERVICES

         Our network infrastructure has been engineered to accommodate a wide
array of customers and their respective communications needs. Currently our
suite of products and services includes Broadband Services, Value Added Services
and Prepaid Services. Broadband Services consist of transport services such as
private line, Asynchronous Transfer Mode and frame relay; Internet access
services such as dedicated bandwidth, dial-up Internet access and DSL; and
collocation services. Value Added Services include software services that
leverage the packet-based infrastructure of our network to deliver advanced
communications services to end-users. Value Added Services consist of VPN, or
virtual private network services, VOIP, or Voice-over Internet Protocol, and
other packet-based voice services and Internet Services including unified
communications, virtual second line, ISV Mail and web hosting and development.
We also offer Prepaid Services through the sale of calling cards on a wholesale
and retail basis.

         Our suite of products and services provides diversification to our
revenue streams, leverages the network efficiently and positions us in rapidly
growing segments of the communications industry. Each of the service offerings
is outlined below:

         Broadband Services

         We offer Broadband Services to Internet, Application and Communications
Service Providers and to enterprises that need to transmit large amounts of
data, voice or video quickly and efficiently.


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<PAGE>   10

         Transport. Our transport services are generally purchased by
Communications and Internet Service Providers requiring additional capacity. Our
transport services, which accounted for approximately 3.0% of our total revenues
in fiscal 2000 include:

         o        Private Line Service. Our private line service provides
                  dedicated point-to-point transport services through
                  non-switched, non-usage sensitive dedicated facilities. Our
                  private line service is supported over our dedicated SONET, or
                  Synchronous Optical Network facilities, which results in a
                  highly reliable network. SONET is a set of standards that are
                  designed to allow the simultaneous transmission of digital
                  signals at various speeds without the use of multiplexing.
                  These services are comprised of bandwidth delivered in units
                  of: (i) full or fractional T-1, which is capable of
                  transmitting data at speeds of up to 1.44 megabits per second;
                  (ii) DS-3, which is capable of transmitting data at speeds of
                  up to 45 megabits per second; (iii) OC-3, which is capable of
                  transmitting data at speeds of up to 155.520 megabits per
                  second; (iv) OC-12; and (v) OC-48/STM 16.

         o        Asynchronous Transfer Mode Service. Our Asynchronous Transfer
                  Mode service is primarily offered to Internet and
                  Communications Service Providers with high bandwidth
                  transmission requirements between one or multiple locations.
                  Our Asynchronous Transfer Mode transport services provide
                  logical permanent virtual connections, thereby supporting
                  applications that send information at a constant or variable
                  bit rate. We offer a wide range of these services on a
                  per-packet basis, and at guaranteed speeds, to enable our
                  customers to match their application needs to the desired
                  amount of bandwidth.

         o        Frame Relay. Our frame relay services allow for the transport
                  of packet-based data and compressed video and voice services
                  between networks with the use of a fixed, dedicated circuit.
                  Our frame relay services provide our customers with a
                  cost-effective means to interconnect geographically disparate
                  equipment. Frame relay services are generally sold based on a
                  minimum committed transmission speeds and allow customers to
                  burst transmission up to a maximum predetermined capacity. Our
                  network allows frame relay traffic to ride inside core
                  Asynchronous Transfer Mode packet transport.

         Internet Access. We offer a variety of Internet access services to our
enterprise and service provider customers, including dedicated access, dial-up
and DSL. Our Internet access services, which accounted for approximately 1% of
our total revenues in fiscal 2000 include:

         o        Dedicated Access. Internet via high-speed private connections
                  at speeds ranging from full or fractional T-1 to OC-12. Our
                  network is engineered for business-critical operations.
                  Through our public and private peering relationships,
                  customers have dedicated access solutions.

         o        Digital Subscriber Line Access. Our DSL, or digital subscriber
                  line access service, enables high speed digital transmission
                  over telephone lines. Through our reseller agreements with
                  national and regional DSL providers such as Covad
                  Communications and IP Communications, we currently offer a
                  wide range of dedicated access speeds from 144 kilobits per
                  second to 1.5 megabits per second. We offer DSL services on a
                  wholesale basis primarily to our Internet Service Provider
                  customers at a fixed monthly fee per user. In addition, we
                  also offer our service provider customers certain
                  administrative services such as service establishment, network
                  connectivity, bulk billing and second tier technical support.

         o        Dial-up Access. Our dial-up access service enables users to
                  connect to the Internet using a local telephone number. Our
                  customers can connect to the Internet through our regional
                  facilities in Texas and Oklahoma and, through our virtual
                  Internet Service Provider reseller relationship with Cable &
                  Wireless, USA, to more than 325 local Internet access points
                  in the United States.

         o        Collocation Services. Our collocation services provide our
                  customers with a physical location to collocate communications
                  equipment at our Points of Presence. This service allows our
                  service provider customers to expand their market areas
                  without extensive recurring real estate charges, build-out
                  fees and overhead costs.


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<PAGE>   11

         Value Added Services

         As service providers and enterprises continue to use the Internet as a
business-critical tool, we believe they will increasingly demand a wider range
of services to outsource management, ensure security, enhance productivity,
reduce costs and improve service reliability and scalability. Our value-added
services accounted for approximately 87% of our total revenues in fiscal 2000,
with substantially all of such revenues derived from the sale of VOIP services.
Today, we offer a range of value added services, including:

         o        Virtual Private Networks. With our VPN service, we enable an
                  enterprise and its employees, customers, suppliers and
                  business partners to securely send and receive information via
                  encrypted dial-up, dedicated or DSL connections. We offer our
                  customers variable amounts of capacity across their VPN.

         o        Voice-over-Internet Protocol. Through our suite of VOIP and
                  other packet-based voice services, we offer low-cost,
                  high-quality network transport to Internet and Communications
                  Service Providers providing VOIP services to their customers.
                  We complete calls to public switched telephone networks
                  worldwide. Customers can originate calls through their own
                  facilities using various signaling protocols. Customers can
                  interconnect at any of our Gateways, where a protocol
                  conversion device converts their traffic to a
                  voice-over-packet protocol. The calls are then delivered via
                  our network to the Gateway nearest to the destination of the
                  calls. Equipment at our Gateway converts the calls from the
                  packet format back to a circuit switched call, and terminates
                  the call onto the public switch telephone network through
                  local access providers. Utilizing our network reach and
                  ability to terminate a large portion of calls on-net, we also
                  offer a retail dial around long distance product to
                  residential consumers.

         o        Internet Services. Internet services include the following:

                       o    Unified Communications. Unified communications
                            provides users with a software-based solution for
                            managing all of their voice, fax and data
                            communications through a single client interface.

                       o    Virtual Second Line. The virtual second line product
                            is a software product that enables individuals
                            logged on to an Internet session to be notified of
                            an incoming call and to have the options of
                            forwarding, accepting or sending a message to the
                            calling party.

                       o    ISV Mail. ISV Mail is an internally developed
                            proprietary streaming video e-mail product, which is
                            a full motion audio and video stream hosted at the
                            ISV Mail data center.

                       o    Web Site Hosting and Development. We offer our
                            customers web site hosting and website design and
                            development services through an in-house creative
                            team.

         Prepaid Services

         A prepaid calling card is a defined-limit long distance service. A
consumer selects a spending limit and accesses the network through a toll free
number utilizing a personal identification number. The consumer is charged a
predetermined rate per minute on each call until the spending limit is reached.
We offer our prepaid services directly under the "AxisTel" brand name and on a
wholesale and private label basis in the United States. During fiscal 2000,
approximately 9% of our revenues came from prepaid services.

         We are also currently developing a product known as Web2Dial which will
allow individuals and businesses to provision and effect long-distance phone
calls over a combination of our private network and the Internet. Web2Dial will
also provide a web-based interface for online re-provisioning of traditional
phone cards and will offer other consumer value added products and services.


                                       8
<PAGE>   12

         OUR CUSTOMERS

         We primarily target service providers such as Internet, Application and
Communications Service Providers. As of June 30, 2000, we had approximately 300
service provider customers, including 30 Communications Service Providers, 250
Internet Service Providers and 20 Application Service Providers. We also had
approximately 500 enterprise customers, with over 150 of those consisting of
distributors of prepaid services. For fiscal 2000, approximately 68% of our
revenues came from Qwest. No other customer accounted for more than 5% of our
revenues during fiscal 2000.

         We have entered into switched services and carrier service agreements
with Qwest for international terminating traffic. Under these agreements, we
provide switched interstate telecommunications services and international
outbound telecommunications services to Qwest. Our switched services agreement
does not obligate Qwest to use our services, but permits Qwest to use our
services upon Qwest's periodic acceptance of our rates. Qwest may choose not to
use our services for a variety of reasons. Our carrier service agreement for
international terminating traffic, which was entered into on September 17, 1998,
is for a one-year term with automatic successive renewals for one-year periods
until termination by either party.

         SALES AND MARKETING

         Our sales efforts target leading service providers both in the United
States and overseas. The sales effort will be focused primarily on bandwidth
intensive service providers such as Internet, Application and Communications
Service Providers through a direct sales effort. We will also provide broadband
network services to certain enterprise customers.

         Through our existing relationships, we have significant long-standing
relationships in the telecommunications industry. Currently, we sell directly
to, and through, Communications Service Providers, corporations and
organizations.

         In overseas markets, we plan to establish relationships with local
service providers that have the local market expertise to provide termination
services. The opportunity to terminate a substantial volume of traffic makes us
an attractive partner. We anticipate targeting overseas service provider
partners such as carriers, call back companies, cellular and paging companies
and Internet Service Providers as an initial source of business development.

         Customer Service and Support

         Customer service and ongoing support are critical to maintaining
existing customer relationships and developing relationships with new customers.
We are developing an organizational infrastructure to support the sales effort,
product installation and customization, technical support, customer training and
product maintenance necessary for long-term customer relationships. Our NOCs in
Jersey City and Dallas operate 24 hours a day, seven days a week.

         Marketing & Branding

         To date, we have spent very little on advertising and marketing.
Traditional voice services have been sold to Communications Service Providers by
way of established relationships. Prepaid services have been sold on a wholesale
basis through distributors. As we expand our service reach and product
offerings, corporate branding will be augmented with product branding.

         As our network expands, we intend to market to potential service
providers. This marketing will comprise trade show participation and advertising
in publications, as well as targeted Internet channels and Internet-based
telecommunications exchanges.


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<PAGE>   13

         STRATEGIC INVESTMENTS

         From time to time we may acquire or take strategic minority positions
in other Internet and communications companies. We do this because we can expand
our network, service and customer base and promote opportunities for synergistic
business between our core business and companies that we invest in. For example,
we have provided prepaid calling card services to PhoneFree. While none of these
services has generated significant revenue to us, we have been able to advance
the business development of those companies by playing a strategic role.

         As of September 15, 2000, we had made strategic investments in the
following companies:

         PhoneFree

         PhoneFree develops and markets VOIP telephony services and operates a
website at www.PhoneFree.com. The PhoneFree software, which can be downloaded
from the website, allows users to conduct "real-time" duplex voice conversations
from PC to PC and PC to phone. This software functions with normal multimedia PC
hardware over the Internet. PC to PC and domestic PC to Phone calls are free to
users with Internet connections, regardless of their duration and, in the case
of PC to PC calls, destination while International PC to phone service is
generally available for a flat monthly fee. PhoneFree derives revenues from the
sale of advertising on its website, e-commerce transactions and targeted
marketing campaigns. As of June 30, 2000, over 1.4 million people were using
PhoneFree software to make telephone calls over the Internet.

         On March 3, 2000, we loaned $3.0 million to PhoneFree under a bridge
loan. On May 4th, 2000, we completed a $13.0 million investment in PhoneFree. We
purchased a total of 1,856,199 shares of newly-issued Series A Cumulative
Convertible Preferred Stock of PhoneFree in exchange for cash of $10.0 million
and the cancellation of the $3.0 million bridge loan. The PhoneFree preferred
stock that we purchased carries a 7% cumulative dividend, is convertible into
1,856,199 shares of PhoneFree common stock and votes with the PhoneFree common
stock on all matters. As part of our investment in PhoneFree, we also received a
four-year warrant to purchase 100,000 shares of PhoneFree common stock at $7.11
per share.

         In connection with the bridge loan, we also received a four-year
warrant to purchase 240,000 shares of PhoneFree common stock at a price equal to
110% of the conversion price of the bridge loan. The warrant may not be called
by PhoneFree.

         On September 1, 2000, PhoneFree acquired Callrewards. See "Callrewards"
below. After this transaction, assuming full conversion of our preferred stock
and including our two warrants, we own approximately 22% of the common stock of
PhoneFree.

         Four of our directors are members of the ten-member board of directors
of PhoneFree, although we have a contractual right to appoint only two directors
to PhoneFree's board.

         ORB

         ORB is a leading business-to-business provider of next-generation, end
to end Internet advertising and marketing solutions. ORB's products and services
include campaign strategy, creative services, media services and software that
includes real-time analysis, predictive modeling, real time optimization, system
integration, ad serving and data base marketing. ORB was founded in 1995.

         On May 26, 2000, we acquired approximately 24% of ORB. Our ownership
interest in ORB consists of 2,500,000 shares of ORB's newly issued Series A
Convertible Preferred Stock, representing approximately 6% of ORB, and 7,000,000
shares of ORB common stock, representing approximately 18% of ORB, that we
purchased from ORB's founders. The total purchase price was $8.0 million,
consisting of $4.5 million of cash and 284,167 shares of our common stock. We
also have an obligation, subject to certain conditions, to invest an additional
$2.5 million in ORB, representing approximately an additional 6% of ORB, on or
before October 7, 2000. It is likely that such conditions will be fulfilled.


                                       10
<PAGE>   14

         In connection with our investment in ORB, we received a five-year
option to purchase an additional 12% of ORB for $18 million in cash. Our
President was appointed to ORB's board of directors pursuant to an Investors
Rights Agreement among us, ORB and ORB's founding stockholders, and our Senior
Vice President - Investments was named a director and interim Chairman of ORB.

         Fonbox

         Fonbox is a development stage company which offers Internet-based
communications solutions for the Spanish-speaking and Portuguese-speaking market
in Latin America and elsewhere. Fonbox intends to offer cross-messaging, natural
language access and phone-based Internet access technologies through their
Lineabox (www.lineabox.com) unified messaging product. Fonbox intends to build a
network of Points of Presence in major Latin American markets and in certain
strategic U.S. markets. Fonbox currently offers its services in Miami, Sao
Paolo, Bogota, Mexico City and Buenos Aires. Our President is a member of the
board of directors of Fonbox. As of June 30, 2000 we own approximately 31% of
the voting equity interest of Fonbox.

         Callrewards

         On September 1, 2000, Callrewards completed a merger with PhoneFree.
Prior to the merger, we owned approximately 30% of the voting equity interests
in Callrewards. In the merger, we received approximately 104,000 shares of
PhoneFree common stock in exchange for 750,000 shares of Callrewards' Series A-1
Convertible Preferred Stock and promissory notes owed to us by Callrewards of
approximately $184,000. We received no other additional consideration in
connection with this transaction, and the merger was approved by the directors
of each of Callrewards and PhoneFree who were not affiliated with us.

         Other Investments

         Other investments include 10-K Wizard LLC, Launch Center 39 and Spydre
Labs.

         COMPETITION

         Competition in the Broadband Network Services Markets

         The growth and potential size of the broadband services market has
attracted traditional telecommunications companies as well as new entrants of
various sizes. Current and prospective industry participants include
multinational alliances, foreign and domestic long distance and local
telecommunications providers, systems integrators, cable television and
satellite communications companies, wireless telecommunications providers and
national, local and regional Internet Service Providers. In addition, we expect
that the predicted growth of these markets will attract other established
companies and multinational alliances. Further, there are established and
start-up companies building global networks and beginning to offer similar
communications services as part of a comprehensive communications services
portfolio. Our established competitors include AT&T, British Telecommunications
PLC, Cable & Wireless, Equant N.V., France Telecom, Infonet, Sprint, WorldCom,
Inc. (UUNET Technologies) and others and new entrants such as Level (3),
Genuity, Global Crossing, Qwest, Universal Access, 360networks inc., Viatel,
Primus Communications, Carrier1, World Access, ibasis, ITXC, PSINet, Williams
Communications Group, Enron, Broadwing, Net2Phone, deltathree.com, dialpad, GRIC
and others.

         We compete in highly fragmented markets. Most participants specialize
in specific segments of the market, such as transport, Internet access, and
value-added services, such as VOIP, prepaid services and Internet Services.

         We believe that competition in the broadband transport, Internet access
and value added communications services markets is mainly a function of the
ability to offer a broad variety of innovative, quality services available on a
reliable network supported by an effective service organization. While we
believe that our network infrastructure, suite of services and expertise in
designing, developing and implementing broadband network solutions distinguish
us from our competitors, many of our existing and potential competitors have
greater financial and other resources, more customers, a larger installed
network infrastructure, greater economies of scale, greater


                                       11
<PAGE>   15

market recognition, lower cost network structure and more established
relationships and alliances in the industry. As a result, these competitors may
be able to develop and expand their network infrastructure and service offerings
more quickly, adapt more swiftly to new or emerging technologies and changes in
customer demands, devote greater resources to the marketing and sale of their
offerings, pursue acquisition and other opportunities more readily and adopt
more aggressive pricing policies.

         Competition in the Long Distance Telephony Market

         The international communications industry is highly competitive and
significantly affected by regulatory changes, marketing and pricing decisions of
the larger industry participants, and the introduction of new services made
possible by technological advances. We believe that long distance service
providers compete on the basis of price, customer service, product quality, and
breadth of services offered. In each country of operations, we have a variety of
competitors. We believe that as the international communications markets
continue to deregulate, competition in these markets will increase, similar to
the competitive environment that has developed in the United States following
the AT&T divestiture in 1984. Prices of long-distance voice calls in the markets
in which we compete have declined historically and are likely to continue to
decrease. In addition, many of our competitors are significantly larger, have
substantially greater financial, technical, and market resources, and larger
networks.

         Privatization and deregulation have had, and are expected to continue
to have, significant effects on competition in the industry. For example, as a
result of legislation enacted in the United States, regional Bell operating
companies will be allowed to enter the long distance market, AT&T, WorldCom and
other long distance carriers will be allowed to enter the local telephone
services market, and cable television companies and utilities will be allowed to
enter both the local and long distance telecommunications markets. In addition,
competition has begun to increase in the European Union communications markets
in connection with the deregulation of telecommunications industry in most EU
countries, which began in January 1998. This increase in competition could
adversely affect net revenue per minute and gross margin as a percentage of net
revenue.

         As we expand our operations in markets outside the United States, we
will also encounter new competitors and competitive environments. Our foreign
competitors may enjoy a government-sponsored monopoly on telecommunications
services essential to our business, and will generally have a better
understanding of their local industry and longer working relationships with
local infrastructure providers.

         GOVERNMENT REGULATION

         As a global communications company, we are subject to varying degrees
of regulation in each of the jurisdictions in which we provide services. Local
laws and regulations, and the interpretation of such laws and regulations,
differ significantly among the jurisdictions in which we operate. There can be
no assurance that future regulatory, judicial and legislative changes will not
have a material adverse effect on us or that domestic and international
regulators or third parties will not raise material issues with regard to our
compliance or noncompliance with applicable regulations.

         Domestic Telecommunications Service Regulation

         With respect to our provision of domestic telecommunications services,
we are considered a nondominant domestic interstate and international carrier
subject to minimal regulation by the FCC. We are not required to obtain FCC
authority to expand our domestic interstate operations. We are required, and
currently hold, FCC authority under Section 214 of the Communications Act of
1934 to provide regulated international telecommunications services. In
conjunction with the provision of these services, we are required to file a
tariff or individual contracts with the FCC, as well as various other reports,
and pay various fees and assessments. Interstate common carriers must also offer
services on a nondiscriminatory basis at just and reasonable rates. As a
nondominant domestic interstate and international telecommunications service
provider, we are subject to the FCC's complaint jurisdiction. In particular, we
may be subject to complaint proceedings in conjunction with alleged
noncompliance. With respect to our provision of interstate and international
telecommunications services, there can be no assurance that the FCC, other
regulators, or third parties will not raise material issues with regard to our
compliance or noncompliance with applicable regulations, or that regulatory
activities will not have a material adverse effect on us.


                                       12
<PAGE>   16

         Our intrastate telecommunications operations are also subject to
various state laws and regulations, including, in most jurisdictions,
certification and tariff filing requirements. Some states also require the
filing of periodic reports, the payment of various fees and surcharges, and
compliance with service standards and consumer protection rules. States often
require pricing approval or notification for certain stock or asset transfers
or, in several states, for the issuance of securities, debt, or for name
changes. As part of our strategy, we are considering obtaining certificate and
tariff approvals to provide intrastate long distance services and competitive
local exchange services in a number of states. Certificates of authority can be
conditioned, modified, cancelled, terminated, or revoked by the state regulatory
authorities for failure to comply with state law or the rules, regulations, and
policies of the state regulatory authorities. Fines and other penalties also may
be imposed for such violations. State public service commissions also regulate
access charges and other pricing for telecommunications services within in each
state. The regional Bell operating companies and other local exchange carriers
have been seeking reduction of state regulatory requirements, including greater
pricing flexibility, which, if granted, could subject us to increased price
competition. We may also be required to contribute to universal service funds in
some states. With respect to our provision of intrastate telecommunications
services, there can be no assurance that state regulators or third parties will
not raise material issues with regard to our compliance or noncompliance with
applicable regulations, or that regulatory activities will not have a material
adverse effect on us.

         Regulation of Internet Telephony

         United States Government Regulation of the Internet and Internet
Telephony. We believe that under United States law the Internet-related services
that we provide constitute information services, rather than telecommunications
services. As such, our services are not currently regulated by the FCC or state
agencies responsible for regulating telecommunications carriers (although
aspects of our operations may be subject to state or federal regulation such as
regulations governing universal service funding, confidentiality of
communications, copyright, and excise taxes). However, several efforts have been
made to enact federal legislation that would either regulate or exempt from
regulation services provided over the Internet. Therefore, we cannot be sure
that Internet-related services such as ours will not be regulated in the future.
Increased regulation of the Internet may slow its growth by negatively impacting
the cost of doing business over the Internet. This would materially adversely
affect our business, financial condition and results of operations.

         We also cannot be sure that Internet Protocol telephony will continue
to be lightly regulated by the FCC and state regulatory agencies. Although the
FCC has determined that, at present, information service providers, including
Internet Protocol telephony providers, are not telecommunications carriers, we
cannot be certain that this position will continue. On April 10, 1998, the FCC
issued its report to Congress concerning the implementation of the universal
service provisions of the Telecommunications Act of 1996. In the report, the FCC
indicated that it would examine the question of whether certain forms of
phone-to-phone Internet Protocol telephony are information services or
telecommunications services. The FCC noted that it did not have, as of the date
of the report, an adequate record on which to make a definitive pronouncement,
but that certain forms of phone-to-phone Internet Protocol telephony appear to
have the same functionality as non-Internet telecommunications services and lack
the characteristics that would render them information services. If the FCC were
to determine that certain information services, like those we provide, are
subject to FCC regulation as telecommunications services, the FCC may require
providers of Internet Protocol telephony services to make universal service
contributions, pay access charges or be subject to traditional common carrier
regulation. It is also possible that Internet based PC-to-phone and
phone-to-phone services may be regulated by the FCC differently in the future.
In addition, the FCC sets the access charges on traditional telephony traffic
and if it reduces these access charges, the cost of traditional long distance
telephone calls will probably be lowered, thereby decreasing our competitive
pricing advantage.

         Changes in the legal and regulatory environment relating to the
Internet connectivity market, including regulatory changes which affect
telecommunications costs or that may increase the likelihood of competition from
the regional Bell operating companies or other telecommunications companies,
could increase our costs of providing service. For example, the FCC recently has
determined that subscriber calls to Internet Service Providers should be
classified for jurisdictional purposes as interstate calls. This determination
could affect a telephone carrier's costs for provision of service to these
providers by eliminating the payment of reciprocal compensation to carriers
terminating calls to these providers. The FCC has pending a proceeding to
encourage the development of cost-based compensation mechanisms for the
termination of calls to Internet Service Providers. Meanwhile, state agencies
will determine whether carriers receive reciprocal compensation for these calls.
If new compensation mechanisms


                                       13
<PAGE>   17

increase the costs to carriers of terminating calls to Internet Service
Providers or if states eliminate reciprocal compensation payments, the affected
carriers could increase the price of service to Internet Service Providers to
compensate, which could raise the cost of Internet access to consumers.

         Incumbent operators have commenced efforts to collect access charges
from Internet Protocol telephony providers. In September 1998, two regional Bell
operating companies advised Internet Protocol telephony providers that they
would impose access charges on such traffic. On April 5, 1999, Qwest (formerly
US West) filed a petition with the FCC asking the FCC to find that Internet
Protocol telephony services are telecommunications services, not enhanced or
information services, and therefore should be subject to access charge and
universal service obligations. To date, the FCC has not issued a public notice
requesting comment on the petition. If the FCC does ultimately determine that
Internet Protocol telephony is subject to the FCC's access charge and universal
service regimes, such a ruling would likely substantially increase the costs of
providing Internet Protocol telephony in the United States.

         The FCC is in the process of collecting additional information
regarding Internet Protocol telephony services. On September 29, 1999, the FCC
released a notice of inquiry seeking information as to whether Internet Protocol
telephony services should be made accessible to the disabled under Section 255
of the Communications Act, which applies to "telecommunications services."
Numerous parties filed comments in this proceeding opposing the classification
of Internet Protocol telephony as a telecommunications service. To date, the FCC
has not issued a decision in this docket. In addition, on October 22, 1999, the
FCC released a notice of proposed rulemaking to collect information on the
status of local telephone service competition and the deployment of advanced
telecommunications capability. The FCC recognized that, while it does not
regulate Internet services, Internet Protocol telephony may become an important
substitute for circuit-switched telephony and should be included in evaluating
local competition. Also, the FCC asked whether it should undertake a more
specific determination of the extent to which the Internet is being used to
provide telephony services. This proceeding is also pending.

         If the FCC determines that Internet Protocol telephony is subject to
regulation as a telecommunications service, it may subject providers of Internet
Protocol telephony services to traditional common carrier regulation and require
them to make universal service fund contributions and pay access charges to
terminate long distance traffic. In addition, it is possible that Internet
Protocol telephony providers may become subject to the Communications Assistance
for Law Enforcement Act, which requires telecommunications common carriers to
modify their networks to allow law enforcement authorities to perform electronic
surveillance. It is also possible that the FCC will adopt a regulatory framework
for Internet Protocol telephony providers different than that applied to
traditional common carriers. Moreover, Congressional dissatisfaction with the
FCC's conclusions regarding Internet Protocol telephony could result in
legislation requiring the FCC to impose greater or lesser regulation. Any change
in the existing regulation of Internet Protocol telephony by the FCC or Congress
could result in a material adverse effect on our business, financial condition,
operation results and future prospects.

         In addition to the FCC and Congress, state regulatory authorities and
legislators may assert jurisdiction over the provision of intrastate Internet
telephony or information services. Some states already have initiated
proceedings to examine the regulation of such services. Additional regulation of
Internet telephony by the states could preclude us from intrastate markets or
make entrance more difficult. There can be no assurance that future state
regulatory and legislative changes will not have a material adverse affect on
our provision of intrastate Internet telephone or information services.

         International Government Regulation of the Internet and Internet
Telephony. In connection with providing services to our customers the regulatory
treatment of Internet Protocol telephony and other communications services in
countries in Europe, Asia, Latin America, and the Middle East vary widely and is
subject to constant change. Some countries currently impose little or no
regulation on Internet Protocol telephony, as in the United States. Conversely,
other countries that prohibit or limit competition for traditional voice
telephony services generally do not permit Internet Protocol telephony or
strictly limit the terms under which it may be provided. Still other countries
regulate Internet Protocol telephony like traditional voice telephony services
or determine on a case-by-case basis whether to regulate Internet Protocol
telephony as a voice service or as another telecommunications service. For
example, iBasis, one of our competitors, has disclosed that the Israeli Minister
of Communications issued a letter requesting that iBasis cease and desist
terminating international calls over the Internet in Israel. Finally, in many
countries, Internet Protocol telephony has not been addressed by legislation or
the regulatory authorities. The varying and constantly changing regulation of
Internet Protocol telephony in the countries in which


                                       14
<PAGE>   18

we currently provide or may provide services may materially adversely affect our
business, financial condition and results of operations.

         With respect to the European Union, we believe that our Internet
Protocol telephony services fall outside the classification of regulated voice
telephony services. The European Union regulatory regime distinguishes between
voice telephony services and other telecommunications services. European
Commission Directive 96/19/EC requires that services other than voice telephony
be subjected to no more than a general authorization or declaration procedures.
For purposes of this Directive, "voice telephony" is defined as the commercial
provision for the public of the direct transport and switching of speech in real
time between public switch network termination points, enabling any user
connected to such a network termination point to communicate with another
termination point. On January 10, 1998, the European Commission issued a
Communication addressing whether Internet Protocol telephony was "voice
telephony" and thus subject to regulation as voice telephony by the Member
States. Consistent with its earlier directives, the European Commission stated
that Internet Protocol telephony could properly be considered voice telephony
only if all elements of its "voice telephony" definition were met, and the
European Commission concluded in this Communication that no form of Internet
Protocol telephony currently met the definition of "voice telephony" subject to
Member States' regulation. The Commission noted, however, that its conclusion
that Internet Protocol telephony cannot be considered voice telephony may not
apply to particular forms of service where, for example, an Internet Protocol
telephony service is marketed as an alternative form of voice telephony service,
users can dial out to any telephone number, and the provider guarantees the
quality of the Internet Protocol telephony service by bandwidth reservation and
claims that the quality of the service is the same as traditional voice
telephony service. Accordingly, the European Commission concluded that it would
continue to review its conclusion that Internet Protocol telephony is not "voice
telephony" in light of technological and market developments. The European
Commission recently launched a consultation, the "2000 Internet Protocol
Telephony Consultation," which is still pending, to determine whether Internet
Protocol telephony should now be regulated as voice telephony, given recent
developments.

         We provide our services in other countries in which the regulatory
status of Internet Protocol telephony is unclear or in the process of
development, and in countries in which regulatory processes are not as
transparent as in the United States. Changes in the regulatory regimes of these
countries that have the effect of limiting or prohibiting Internet Protocol
telephony, or that impose new or additional regulatory requirements on providers
of such services, may result in our being unable to provide service to one or
more of the countries in which we currently operate. That result could
materially adversely affect our business, financial condition and results of
operations.

         In addition, as we expand into foreign countries, such countries may
require that we qualify to do business in that particular country, that we are
otherwise subject to regulation or that we are prohibited from conducting our
business in that particular country. Our failure to qualify as a foreign
corporation in a jurisdiction in which we are required to do so, or to comply
with foreign laws and regulations, would materially adversely affect our
business, financial condition and results of operations, including by subjecting
us to taxes and penalties and/or by precluding us from, or limiting us in, the
enforcement of contracts in such jurisdictions. Likewise, our customers may be
or become subject to requirements to qualify to do business in a particular
foreign country, to otherwise comply with regulations, or to cease from
conducting business in that particular country. We cannot be certain that our
customers are currently in compliance with regulatory or other legal
requirements in their respective countries, that they will be able to comply
with existing or future requirements, and/or that they will continue in
compliance with any requirements. The failure of our customers to comply with
these requirements could materially adversely affect our business, financial
conditions and results of operations.

         Regulation of the Internet

         Congress has recently adopted legislation that regulates certain
aspects of the Internet, including online content, user privacy, taxation,
access charges, liability for third-party activities and jurisdiction. In
addition, a number of initiatives pending in Congress and state legislatures
would prohibit or restrict advertising or sale of certain products and services
on the Internet, which may have the effect of raising the cost of doing business
on the Internet generally. The European Union has also enacted several
directives relating to the Internet, one of which addresses online commerce. In
addition, federal, state, local and foreign governmental organizations are
considering other legislative and regulatory proposals that would regulate the
Internet. Increased regulation of the Internet may


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<PAGE>   19

hinder its growth, which may in turn negatively impact the cost of doing
business via the Internet or otherwise materially adversely affect our business,
results of operations and financial condition.

         The Federal Trade Commission has adopted regulations regarding the
collection and use of personal identifying information obtained from minors when
accessing websites, and may adopt additional online privacy regulations. These
regulations may include requirements that companies establish certain procedures
to disclose and notify users of privacy and security policies, obtain consent
from users for certain collection and use of information and to provide users
with the ability to access, correct and delete personal information stored by
the company. These regulations may also include enforcement and redress
provisions. There can be no assurance that we will adopt policies that conform
with any regulations adopted by the Federal Trade Commission. Moreover, even in
the absence of those regulations, the Federal Trade Commission has begun
investigations into the privacy practices of companies that collect information
on the Internet. One investigation resulted in a consent decree pursuant to
which an Internet company agreed to establish programs to implement the
principles noted above. We may become subject to a similar investigation, or the
Federal Trade Commission's regulatory and enforcement efforts may adversely
affect our ability to collect demographic and personal information from users,
which could have an adverse effect on our ability to provide highly targeted
opportunities for advertisers and electronic commerce marketers. Any of these
developments would materially adversely affect our business, results of
operations and financial condition.

         The European Union has adopted a directive that imposes restrictions on
the collection and use of personal data. Under the directive, citizens of the
European Union are guaranteed rights to access their data, rights to know where
the data originated, rights to have inaccurate data rectified, rights to
recourse in the event of unlawful processing and rights to withhold permission
to use their data for direct marketing. The directive could, among other things,
affect United States companies that collect information over the Internet from
individuals in European Union member countries, and may impose restrictions that
are more stringent than current Internet privacy standards in the United States.
In particular, companies with offices located in European Union countries will
not be allowed to send personal information to countries that do not maintain
adequate standards of privacy. The directive does not, however, define what
standards of privacy are adequate. As a result, the directive may adversely
affect the activities of entities such as us that engage in data collection from
users in European Union member countries.

         INTELLECTUAL PROPERTY

         We regard our copyrights, service marks, trademarks, trade dress, trade
secrets and similar intellectual property as critical to our success, and we
rely on trademark and copyright law, trade secret protection and confidentiality
and/or license agreements with our employees, customers, partners and others to
protect our proprietary rights. We pursue the registration of our trademarks and
service marks in the United States and have applied for the registration of
certain of our trademarks and service marks. AxisTel has applied for
registration of the names "AxisTel", "Global Telephony Xchange Service" and
"Web2Dial", but has not completed the registration process.

         We currently use the trade name "Telares" to market certain of our
value added services. We filed a trademark application with the United States
Patent and Trademark office (the "PTO") for the "Telares" name on August 1999.
Subsequently, in February of 2000, we received notice from the PTO that Callnet
Communications, Inc. had filed an application for the trademark "Telara" for a
similar use to that of "Telares". In August, 2000, the PTO issued a notice that
it was publishing the "Telara" trademark. Although there can be no assurance, we
believe that the "Telares" mark takes precedence, and we are currently deciding
whether to challenge publication of the "Telara" trademark.

         We are currently planning on filing a patent application for our
multimedia technology under the name "ISV Mail".

         We have never filed any application to protect the name "eVentures" and
do not currently have any patents or other material intellectual property.
Additionally, the name "eVentures" is generic in nature and we may not be able
to protect it. We do not own the domain name eVentures.com, which is being used
by a business that is soliciting business plans, capital and advisors for
start-up companies. We have notified such company of the potential confusion and
we intend to attempt to fully enforce whatever rights we may have to protect our
name.



                                       16
<PAGE>   20

         EMPLOYEES

         As of June 30, 2000, we had approximately 130 employees. We also employ
a limited number of independent contractors and temporary employees on a
periodic basis. Our employees are not represented by a labor union and we
consider our labor relations to be good.

         RISK FACTORS

         You should consider carefully risks associated with our forward-looking
statements, as well as the following investment considerations.

         RISK FACTORS RELATING TO OUR COMPANY

         WE HAVE A HISTORY OF OPERATING LOSSES AND ANTICIPATE THESE LOSSES FOR
AT LEAST THE NEXT SEVERAL YEARS.

         We have incurred operating losses of $28.8 million and $3.3 million for
the fiscal years ended June 30, 2000 and 1999, respectively. Our revenues may
not continue to grow or even sustain current levels. We plan to continue to make
significant investments to expand our capacity and network infrastructure,
develop brand recognition, broaden the range of our service offerings and expand
our sales, marketing, technical and customer support personnel. Our capital
expenditures program, as currently contemplated, will require approximately $105
million during the five-year period ending June 30, 2005, the majority of which
will be for the expansion of our network infrastructure. A substantial portion
of these expenditures will be made before any significant revenue related to
these expenditures may be realized.

         In addition, our operating expenses are based largely on anticipated
revenue trends and a significant portion of our expenses, such as personnel, the
leased portion of our network and our real estate facilities and depreciation of
our network infrastructure, is fixed. If our revenues fall below our
expectations, we would probably not be able to reduce our fixed or variable
expenses in sufficient time to respond to the shortfall. If we fail to achieve
significant increases in our revenues as a result of our investments, the size
of our operating losses may be larger than expected. We may never achieve
profitability or positive cash flows from operations in any period, and we may
not be able to sustain or increase profitability or positive cash flows on a
quarterly or annual basis.

         WE HAVE A LIMITED OPERATING HISTORY UPON WHICH TO BASE AN INVESTMENT
DECISION.

         We have only a limited operating history upon which you can evaluate
our business and prospects. We commenced commercial operations in June of 1998
and have only recently begun to combine our network operations. In addition,
because we expect an increasing percentage of our revenues to be derived from
our broadband network services, our past operating results may not be indicative
of our future results.

         You should consider our prospects in light of the risks, expenses and
difficulties we may encounter as an early stage company in the new and rapidly
evolving market for broadband network services. These risks include our ability:

         o        to increase our mix of revenues to include more high margin
                  broadband transport, Internet access and value-added services;

         o        to increase gross profits to cover the increased expenditures
                  we have planned;

         o        to compete effectively; and

         o        to offer new products and services and keep pace with
                  developing technology.

         WE MAY HAVE INSUFFICIENT FUNDING TO IMPLEMENT OUR STRATEGY.

         Unless we are able to generate sufficient cash from operations or raise
capital from outside investors, we will not have sufficient funds to implement
our strategy. We estimate that we will require approximately $170.0


                                       17
<PAGE>   21

million during the next 24 months to fund capital expenditures, operating losses
and working capital. Even if we do generate cash from operations and/or raise
additional capital, we may not have enough money to continue operations,
primarily because, due to our limited operating history and the nature of the
communications industry, our future operating performance and capital needs are
difficult to predict.

         We cannot assure our investors that adequate levels of additional
financing will be available at all or on acceptable terms. Any additional
financing could involve the issuance of securities with rights superior to those
of our common stockholders. The issuance of additional securities could also
result in significant dilution to our existing stockholders.

         OUR SUCCESS DEPENDS ON OUR IMPLEMENTATION OF AN UNPROVEN BUSINESS
         MODEL.

         Our business strategy is to increase our revenues and profitability by
offering broadband transport, Internet access and value added services. We can
neither assure you that we will be able to do this or that this strategy will be
profitable. Currently our revenues are primarily generated from private line and
VOIP services for Qwest and other Communications Service Providers and the sale
of prepaid calling cards on a direct and wholesale basis. The provision of
carrier transport services and broadband and value-added services have not been
profitable to date.

         In the future, we intend to generate increased revenues from multiple
sources, many of which are unproven, including the commercial sale of enhanced
Internet Protocol communications services. To date, we have recorded no revenue
from advertising. We expect that our revenues for the foreseeable future will be
dependent on, among other factors:

         o        sale of broadband transport, Internet access and value-added
                  services;

         o        acceptance and use of broadband Internet access;

         o        continued rapid growth of the demand for connectivity and
                  bandwidth;

         o        implementation of new service offerings;

         o        the effect of competition, regulatory environment,
                  international long distance rates and access and transmission
                  costs on our prices;

         o        continued expansion of our global network; and

         o        sale of Internet advertising.

         We may not be able to sustain our current revenues or successfully
generate additional revenues from the sale of our services in the future.

         WE DEPEND ON SALES TO QWEST.

         We currently depend on sales to Qwest for a substantial majority of our
revenues. Qwest accounted for 68% and 65% of our revenues for the fiscal years
ended June 30, 2000 and June 30, 1999, respectively. Qwest is not contractually
required to purchase services from us. Qwest resells a significant portion of
the carrier transmission services it purchases from us to third parties.
Although we could market our services directly to these third parties if Qwest
ceased purchasing services from us, we cannot assure you that we would succeed
in attracting these customers or that these customers would purchase our
services in the same volume or on the same terms as from Qwest.

         OUR SUCCESS DEPENDS ON OUR MANAGEMENT OF GROWTH AND OUR INTEGRATION OF
         EXISTING BUSINESSES.

         We are a new company formed by the combination of three separate and
distinct businesses with separate and distinct management teams: AxisTel,
e.Volve and iGlobal. We are faced with significant integration issues with
respect to these businesses and their management teams. We may not be successful
in integrating these


                                       18
<PAGE>   22

management teams, and we may not be able to hire and retain the quality of
personnel we need to sustain our business. To the extent that we continue to
grow internally or through strategic alliances, we will be faced with many
risks, including risks associated with the establishment of new operations,
Websites and personnel; the diversion of resources from our existing businesses;
integration with our existing networks and services; and our management's
ability to manage increased traffic on our networks.

         The reorganization has resulted in significant growth of our
operations. This growth has and will continue to place a significant strain on
our managerial, operational and financial resources. To manage this growth, we
will be required to implement and improve our operating and financial systems
and controls, expand, train and manage our employee base, develop, introduce and
market new products and services, secure space for new facilities and control
expenses. We will be dependent upon our management to assume and perform the
management functions formerly performed by management of each of our
subsidiaries. To the extent that our management is unable to assume or perform
these combined duties, our business, results of operations and financial
condition could be adversely affected. There can be no assurance that the
management, systems and controls currently in place or any steps taken to
improve such management, systems and controls will be adequate in the future. In
addition, the integration of our existing businesses and their operations will
require our management to make and implement a number of strategic and
operational decisions. The timing and manner of the implementation of these
decisions will materially impact our business operations.

         DIFFICULTIES IN CONSTRUCTING OUR NETWORK COULD INCREASE ITS ESTIMATED
         COST AND DELAY ITS SCHEDULED COMPLETION.

         The expansion, operation and any upgrading of our network is a
significant undertaking. Administrative, technical, operational and other
problems that could arise may be more difficult to address and solve due to the
significant size and complexity of the planned network. We are also dependent on
timely performance by third-party suppliers and contractors. Many of these
factors and problems are beyond our control. As a result, the entire network may
not be completed as planned for the cost and in the time frame that we currently
estimate. We may be materially adversely affected as a result of any significant
increase in the estimated cost of the network or any significant delay in its
anticipated completion.

         After its initial completion, future expansions and adaptations of our
network's electronic and software components may be necessary in order to
respond to:

         o        a growing number of customers;

         o        increased demands by our customers to transmit larger amounts
                  of data;

         o        changes in our customers' service requirements; and

         o        technological advances by our competitors.

         Any expansion or adaptation of our network will require substantial
additional financial, operational and managerial resources. If we are unable to
expand or adapt our network to respond to these developments on a timely basis
and at a commercially reasonable cost, then our business could be materially
adversely affected.

         OUR STRATEGY REQUIRES THE DEVELOPMENT OF EFFECTIVE OPERATIONS SUPPORT
         SYSTEMS TO IMPLEMENT CUSTOMER ORDERS AND TO PROVIDE AND BILL FOR
         SERVICES.

         Our strategy depends on our ability to implement effective operations
support systems. This is a complicated undertaking requiring significant
resources, expertise and support from third-party vendors. Operations support
systems are needed for, among other things:

         o        implementing customer orders for service;

         o        monitoring network performance;


                                       19
<PAGE>   23

         o        provisioning, installing and delivering these services; and

         o        monthly billing for these services.

         Since our strategy provides for rapid growth in the number and volume
of products and services we offer, we need to develop these operations support
systems on a schedule sufficient to meet our proposed service rollout dates. In
addition, we will require these operations support systems to expand and adapt
with our rapid growth. The failure to develop effective operations support
systems could have a material adverse effect on our ability to implement our
strategy.

         OUR BUSINESS MAY BE IMPEDED BY GOVERNMENTAL REGULATIONS.

         As a provider of domestic and international communications services, we
are subject to varying degrees of regulation in each of the jurisdictions in
which we provide services. Local laws and regulations, and interpretation of
such laws and regulations, differ significantly between jurisdictions. There can
be no assurance that future regulatory, judicial, and legislative changes will
not have a material adverse effect on us, that domestic or international
regulators or third parties will not raise material issues with regard to our
compliance or noncompliance with applicable regulations, or that regulatory
activities will not have a material adverse effect on us.

         The legal and regulatory environment that pertains to the Internet is
uncertain and is changing rapidly as the use of the Internet increases. For
example, in the United States, the FCC is considering whether to impose
surcharges or additional regulations upon certain providers of Internet Protocol
telephony.

         In addition, regulatory treatment of Internet Protocol telephony
outside the United States varies from country to country. There can be no
assurance that there will not be interruptions in Internet Protocol telephony in
these and other foreign countries or that we will be able to return to the level
of service we had in each of these countries prior to any interruptions.

         New regulations could increase our costs of doing business and prevent
us from delivering our products and services over the Internet, which could
adversely affect our customer base and our revenue. The growth of the Internet
may also be significantly slowed. In addition to new regulations being adopted,
existing laws may be applied to the Internet. See "Business -- Government
Regulation."

         WE MUST RECRUIT AND RETAIN KEY MANAGEMENT AND TECHNICAL PERSONNEL TO BE
         COMPETITIVE.

         Our success depends to a significant extent on the continued
contributions, experience and knowledge of our senior management team and key
technical and marketing personnel. The loss of any of these key personnel could
have a material adverse affect on our ability to operate our business or
implement our strategy. To implement our strategy, we need to hire a significant
number of additional employees, including new senior sales and network operating
personnel who are familiar with the service needs of Communications, Internet
and Application Service Providers, Internet telephony and Internet Protocol and
Asynchronous Transfer Mode technology. Our success also depends upon our ability
to identify, attract, hire, train, retain and motivate highly skilled technical,
managerial, sales and marketing personnel. Competition for these types of
personnel in the communications industry is intense. No assurance can be given
that we will be able to successfully attract, assimilate or retain a sufficient
number of qualified personnel. If we cannot attract and retain these key
personnel, we may not be able to effectively operate or grow our business, which
could impair our ability to create value for our stockholders and other
investors.

         IF WE DO NOT RESPOND EFFECTIVELY AND ON A TIMELY BASIS TO RAPID
         TECHNOLOGICAL CHANGES, OUR SERVICES MAY BECOME OBSOLETE AND WE WOULD
         PROBABLY LOSE CUSTOMERS AND BE UNABLE TO ATTRACT NEW ONES.

         The broadband network services industry is characterized by rapid
technological developments and frequent new product and service introductions
and enhancements. The introduction of new products or technologies could render
our network or service offerings obsolete, thereby requiring us to spend more
than we currently anticipate in future periods in order to remain competitive,
retain our existing customers and attract new ones. Similarly, technological
developments could reduce the cost or increase the supply of services similar to
those


                                       20
<PAGE>   24

that we provide or plan to provide, which could result in lower than expected
revenues in future periods. We may not be able to:

         o        anticipate or adapt to these new products or technologies on a
                  timely and cost-effective basis;

         o        obtain the necessary funds to develop or acquire new
                  technologies or products needed to compete; or

         o        address the increasingly sophisticated and varied needs of our
                  current and prospective customers.

         OUR ABILITY TO COMPETE COULD BE JEOPARDIZED IF OUR NETWORK AND SERVICES
         DO NOT PROPERLY OPERATE WITH THE EXISTING OR FUTURE EQUIPMENT OF OUR
         CUSTOMERS.

         We believe that our ability to compete successfully is dependent upon
the continued compatibility of our network and service offerings with products,
services and architectures offered by others, particularly our service provider
customers. Although we often work with vendors in testing newly developed
products, these products may not be compatible with our infrastructure. In
addition, although we currently intend to support emerging standards, there can
be no assurance industry standards will be established or, if they become
established, that we will be able to conform to these new standards in a timely
fashion and maintain a competitive position in the market. Our competitive
position would be adversely affected if we fail to conform to the prevailing
standards, or if common standards fail to emerge.

         WE MAY LOSE CUSTOMERS IF WE EXPERIENCE SYSTEM FAILURES THAT
         SIGNIFICANTLY DISRUPT THE AVAILABILITY AND QUALITY OF THE SERVICES THAT
         WE PROVIDE.

         Our operations depend on our ability to avoid and mitigate any damages,
physical or otherwise, from natural disasters, power losses, capacity
limitations, physical or electronic breaches of security, software defects,
telecommunications failures and intentional acts of vandalism, including
computer viruses. The failure of any equipment or facility on our network could
result in interruptions in service or reduced capacity for our enterprise and
service provider customers until we make the necessary repairs or install
replacement equipment. In addition, our customers may experience interruptions
in service if carriers or other service providers fail to provide the
communications capacity that we have leased in order to provide service to our
customers. Further, a majority of our traffic is transmitted over capacity that
we lease from third parties. The failure of any one of these connections also
could result in reduced performance.

         These interruptions in service or performance problems could undermine
confidence in our services and cause us to lose customers or make it more
difficult to attract new ones. In addition, because many of our services are
critical to the business of many of our customers, any significant interruption
in our service could result in lost profits or other loss to our customers.
Although we attempt to disclaim liability in our service agreements, a court
might not enforce a limitation on our liability, which could expose us to
financial loss.

         OUR INDUSTRY IS HIGHLY COMPETITIVE WITH PARTICIPANTS THAT HAVE GREATER
RESOURCES AND EXISTING CUSTOMERS.

         The broadband network services industry is highly competitive. Many of
our existing and potential competitors have financial, personnel, marketing and
other resources significantly greater than ours. Many of these competitors have
the added competitive advantage of an existing customer base. In addition,
significant new competitors could arise as a result of:

         o        increased consolidation and strategic alliances in the
                  industry resulting from recent Congressional and FCC actions;

         o        allowing foreign carriers to compete in the U.S. market;

         o        further technological advances; and


                                       21
<PAGE>   25

         o        further deregulation and other regulatory initiatives.

         OUR MEXICAN OPERATIONS EXPOSE US TO CURRENCY RISKS.

         Because our agreements with our Mexican suppliers are denominated in
Mexican pesos, we may be exposed to fluctuations in the Mexican peso, as well as
to downturns in the Mexican economy, all of which may adversely affect our
profitability.

         OUR STRATEGY CONTEMPLATES FUTURE INTERNATIONAL EXPANSION BUT THERE ARE
         SIGNIFICANT OPERATIONAL AND FINANCIAL RISKS ASSOCIATED WITH
         INTERNATIONAL OPERATIONS.

         Although we have not derived significant revenues from our
international operations in the past, an important component of our strategy is
to expand significantly our presence in international markets. As we expand, we
will substantially increase our exposure to the risks inherent in international
operations, including, among others, the following:

         o        general economic, social and political conditions;

         o        unexpected changes in legal or regulatory requirements
                  resulting in unanticipated costs and delays;

         o        differences in technology standards;

         o        tariffs, export and exchange controls and other trade
                  barriers;

         o        fluctuations in foreign currency exchange rates;

         o        difficulty of enforcing agreements and collecting accounts
                  receivables;

         o        adverse tax consequences;

         o        change in United States laws and regulations relating to
                  foreign trade and investment; and

         o        inability to offer some services in some countries due to
                  regulatory and other barriers.

         Further, to expand our international operations, we may enter into
joint ventures or outsourcing agreements with third parties, acquire rights to
high bandwidth transmission capability, acquire complementary businesses or
operations or establish and maintain new operations outside the United States.
We may be heavily dependent on third parties to be successful in our
international operations. We may not be able to successfully sell our services
or adequately establish or maintain operations outside the United States.

         WE EXPECT THAT THE RATES WE CHARGE FOR OUR SERVICES WILL DECLINE OVER
         TIME, AND WE MAY NOT BE SUCCESSFUL IN REDUCING OUR OPERATING EXPENSES
         OR INTRODUCING NEW SERVICES THAT WILL COMPENSATE FOR THESE LOST
         REVENUES.

         We expect to continue to experience decreasing prices for our services
as we and our competitors increase transmission capacity on existing and new
networks, as a result of our current agreements with customers, through
technological advances or otherwise, and as volume-based pricing becomes more
prevalent. For example, we have experienced significant and persistent downward
price pressure on the rates we charge for VOIP services to Mexico. Accordingly,
our historical revenues are not indicative of future revenues based on
comparable traffic volumes. If the prices for our services decrease for whatever
reason and we are unable to offer additional services from which we can derive
additional revenues or otherwise reduce our operating expenses, our operating
results will decline and our business and financial results will suffer.


                                       22
<PAGE>   26

         WE RELY ON LIMITED SOURCES FOR SUPPLYING CRITICAL COMPONENTS OF OUR
         NETWORK INFRASTRUCTURE. IF WE ARE UNABLE TO OBTAIN SUFFICIENT
         QUANTITIES OF CRITICAL EQUIPMENT FROM THESE SOURCES WHEN NEEDED, WE MAY
         BE FORCED TO DELAY OUR DEVELOPMENT AND EXPANSION PLANS, WHICH WOULD
         NEGATIVELY AFFECT OUR COMPETITIVE POSITION.

         We depend on vendors to supply the critical components of our network
infrastructure as we expand our network both domestically and internationally.
If we are unable to obtain these critical components on a timely basis, we may
have to abandon or delay our expansion plans, which would adversely affect our
competitive position. Some of our networking equipment is available only from
one or a small number of sources. For instance, we rely on Cisco Systems for our
network routers and Lucent Technologies for our optical electronic equipment. We
typically purchase or lease all of our components under purchase orders placed
from time to time. We do not carry significant inventories of components and
have no guaranteed supply arrangements with vendors. Our vendors also sell
products to our competitors and we cannot assure you that they will not enter
into exclusive arrangements with our competitors.

         WE NEED TO OBTAIN ADDITIONAL CAPACITY FOR OUR NETWORK FROM OTHER
         PROVIDERS IN ORDER TO SERVE OUR CUSTOMERS AND KEEP OUR COSTS DOWN.

         We lease telecommunications capacity and obtain Indefeasible Rights of
Use in fiber optic strands from both long distance and local telecommunications
carriers in order to extend the range of our network. Our inability to obtain
this additional capacity on acceptable terms, or at all, could adversely affect
our ability to quickly expand our network, attract new customers and serve our
existing customers or could increase our costs of doing so.

         OUR NETWORK AND OPERATIONS MAY BE VULNERABLE TO SECURITY BREACHES.

         Our network is potentially vulnerable to physical or electronic
computer viruses, break-ins and similar disruptive problems and security
breaches, which could cause interruptions, delays or loss of services to our
users. We believe that the secure transmission of confidential information over
the Internet, such as credit card numbers, is essential in maintaining user
confidence in our services. We rely on licensed encryption and authentication
technology to effect secure transmission of confidential information, including
credit card numbers. It is possible that advances in computer capabilities, new
technologies or other developments could result in a compromise or breach of the
technology we use to protect user transaction data. A party that is able to
circumvent our security systems could misappropriate proprietary information or
cause interruptions in our operations. Security breaches also could damage our
reputation and expose us to a risk of loss or litigation and possible liability.
As of this date, we have not experienced security breaches of which we are
aware. However, we cannot guarantee you that our security measures will prevent
security breaches in the future.

         OUR NETWORK MAY NOT BE ABLE TO ACCOMMODATE OUR CAPACITY NEEDS.

         We expect the volume of traffic we carry over our network to increase
significantly as we expand our operations and service offerings. Our network may
not be able to accommodate this additional volume. In order to ensure that we
are able to handle additional traffic, we may have to enter into long-term
agreements for leased capacity. To the extent that we overestimate our capacity
needs, we may be obligated to pay for more transmission capacity than we
actually use, resulting in costs without corresponding revenues. Conversely, if
we underestimate our capacity needs, we may be required to obtain additional
transmission capacity from more expensive sources. If we are unable to maintain
sufficient capacity to meet the needs of our users, our reputation could be
damaged and we could lose customers.

         RISK FACTORS RELATED TO OUR COMMON STOCK

         OUR COMMON STOCK HAS A LIMITED TRADING HISTORY AND AN ILLIQUID MARKET.

         There has only been a limited public market for our common stock. We
cannot predict the extent to which an active trading market will develop or how
liquid that market might become.


                                       23
<PAGE>   27

         THE INFINITY ENTITIES OWN A MAJORITY OF OUR COMMON STOCK AND MAY HAVE
         PLANS FOR THE COMPANY THAT MAY BE DIFFERENT FROM THOSE OF OTHER HOLDERS
         OF OUR STOCK.

         IEO Investments, Limited, Infinity Emerging Subsidiary Limited and
Infinity Investors, Limited (the "Infinity Entities") own a majority of our
shares of capital stock. The Infinity Entities, therefore, may exercise
significant control over our business, policies and affairs and, in general,
determine the outcome of any corporate transaction or other matters submitted to
the stockholders for approval, all in a manner that could conflict with the
interests of other shareholders.

         SHARES OF OUR COMMON STOCK ELIGIBLE FOR FUTURE SALE MAY DECREASE THE
PRICE OF OUR COMMON STOCK.

         As of September 15, 2000, we had a total of 65,668,169 shares of common
stock eligible for future sale, consisting of:

         o        50,159,135 shares of restricted common stock outstanding;

         o        326,087 shares of common stock issuable upon conversion of our
                  Series B convertible preferred stock;

         o        869,832 shares of common stock issuable upon conversion of our
                  Series C convertible preferred stock;

         o        139,378 shares of common stock issuable upon the exercise of
                  warrants; and

         o        14,173,737 shares of common stock issuable upon the exercise
                  of stock options.

         We currently have 1,830,610 shares of freely tradable common stock. Of
the outstanding shares of common stock and shares issuable upon conversion of
our preferred stock and exercise of options and warrants, which are not freely
tradable, 43,627,253 shares of our common stock are subject to a lock-up
agreement under our registration rights agreement dated September 22, 1999. This
lock-up expires on September 23, 2001, but can be waived by the Infinity
Entities at any time. The resale restrictions governing the remaining 6,531,882
shares of common stock and shares of common stock issuable upon conversion of
our preferred stock or exercise of our warrants and stock options expire at
various times between November, 2000 and March 2002. If our shareholders sell
substantial amounts of their common stock in the public market, including shares
issued upon the conversion of convertible preferred stock or the exercise of
outstanding options, then the market price of our common stock could fall.

         ANTI-TAKEOVER PROVISIONS COULD LIMIT OUR SHARE PRICE AND DELAY A CHANGE
OF MANAGEMENT.

         Our certificate of incorporation and by-laws contain provisions that
could make it more difficult or even prevent a third party from acquiring our
company without the approval of our incumbent board of directors. These
provisions, among other things:

         o        divide our board of directors into three classes, with members
                  of each class to be elected in staggered three-year terms;

         o        limit the right of stockholders to call special meetings of
                  stockholders;

         o        limit the right of stockholders to present proposals or
                  nominate directors for election at annual meetings of
                  stockholders; and

         o        authorize our board of directors to issue preferred stock in
                  one or more series without any action on the part of
                  stockholders.

         These provisions could limit the price that investors might be willing
to pay in the future for shares of our common stock and significantly impede the
ability of the holders of our common stock to change management. Provisions and
agreements that inhibit or discourage takeover attempts could reduce the market
value of our common stock.


                                       24
<PAGE>   28

         OUR STOCK PRICE IS HIGHLY VOLATILE.

         The market price for our common stock has been highly volatile and is
likely to continue to be highly volatile. The trading prices of many technology
and Internet-related company stocks, including ours, have experienced
significant price and volume fluctuations in recent months. These fluctuations
often have been unrelated or disproportionate to the operating performance of
these companies. Any negative change in the public's perception of the prospects
of Internet or communications companies could depress our stock price regardless
of our results.

         The market price of our common stock may fluctuate significantly in
response to a number of factors, some of which are beyond our control,
including:

         o        quarterly variations in operating results;

         o        changes in financial estimates by securities analysts;

         o        changes in market valuations of Internet-related companies;

         o        announcements by us or our competitors of new products and
                  services or of significant acquisitions, strategic
                  partnerships or joint ventures;

         o        any loss of a major customer;

         o        additions or departures of key personnel;

         o        future sales of common stock; and

         o        volume fluctuations, which are particularly common among
                  highly volatile securities of Internet-related companies.

         In the past, companies in our industry have been the subject of class
action litigation by investors following periods of volatility in the price of
their publicly traded securities. We will incur substantial legal costs if the
market value of our common stock experiences adverse fluctuations and we become
the subject of similar litigation that may further affect the price of our
common stock.

         AVAILABLE INFORMATION

         We are subject to the information reporting requirements of the
Securities Exchange Act of 1934, as amended and in accordance therewith files
reports and other information with the Securities and Exchange Commission, as
amended. Such filings can be inspected and copied at the Public Reference
Section of the commission located at Room 1024, Judiciary Plaza, 450 Fifth
Street, N.W., Washington, DC 20549 and at regional public reference facilities
maintained by the Commission located at Citicorp Center, 500 West Madison
Street, Suite 1400, Chicago, Illinois 60661 and at Seven World Trade Center,
Suite 1300, New York, New York 10048. Copies of such material can be obtained at
prescribed rates from the Public Reference Section of the Commission by calling
1-800-SEC-0330. Such material may also be accessed electronically by means of
the commission's home page on the Internet (http://www.sec.gov).

ITEM 2. PROPERTIES

         Our corporate offices are located at 300 Crescent Court, Suite 800,
Dallas, Texas, occupying approximately 9,400 square feet. This lease expires on
July 31, 2004. We also maintain an office in New York located at 520 Madison
Avenue, New York, New York. This facility includes approximately 3,600 square
feet under a sub-lease from Freshfields LLP, which expires in May 2003.


                                       25
<PAGE>   29

         We also have offices at 12200 Stemmons Parkway, Suite 315, Dallas,
Texas, and at One Evertrust Plaza, Suite 800, in Jersey City, New Jersey. We
occupy approximately 12,500 square feet and approximately 15,500 square feet in
these locations, respectively. The leases expire in June 2004 and January 2009,
respectively.

         The Company also maintains network facilities in Kansas City, Miami,
Dallas and Mexico City, comprising approximately 10,500 square feet in the
aggregate.

ITEM 3. LEGAL PROCEEDINGS

         On April 18, 2000, the Mexican appellate court issued a final order
denying COFETEL a request for review of our Amparo and upholding the final
judgment of the district court.

         On August 21, 2000, we paid IXC Communications $150,000 in final
settlement of all amounts claimed by IXC in a contract dispute. No lawsuit was
ever filed.

         In January of 2000, we received a notice from Gayath Saad demanding an
arbitration to determine alleged obligations owed to Mr. Saad under a consulting
agreement between him and AxisTel. This case is pending before a three judge
panel of arbitrators in New York, New York. The proceeding is being conducted in
accordance with the rules of the American Arbitration Association. The dispute
arises out of purported breaches of a representation agreement between Mr. Saad
and AxisTel for consulting services in Syria. AxisTel contends that Mr. Saad
misrepresented the international settlement rate to which the Syrian
Telecommunications Establishment had committed and, therefore, was induced by
fraud to enter into the arrangement. Mr. Saad contends that AxisTel failed to
compensate him in accordance with the provisions of the agreement. AxisTel
intends to vigorously pursue its rights and defend the claims asserted against
it by Mr. Saad. The arbitration was held on September 6, 7 and 8, 2000, and a
decision is expected during our second fiscal quarter.

         On April 17, 2000, e.Volve and the company filed a lawsuit, captioned
e.Volve Technology Group, Inc. and eVENTURES Group, Inc. v. United Technology
Systems, Inc. d/b/a/, Uni-Tel in Superior Court of the State of New Jersey,
Mercer County (the "New Jersey Action"). In the lawsuit, the Company alleged
that Uni-Tel breached the terms of our joint venture to operate a
telecommunications network between the United States and India. We alleged
damages in excess of $10 million. Subsequent to the commencement of that
lawsuit, Uni-Tel filed a lawsuit against e.Volve in the 191st Judicial District
Court of Dallas County, Texas captioned United Technological Systems, Inc. d/b/a
Uni-Tel vs. e.Volve Technology Group, Inc. alleging breach of contract and
damages in excess of $5 million (the "Texas Action"). On July 21, 2000, the
judge in the New Jersey Action dismissed that lawsuit for lack of jurisdiction;
however, upon reconsideration, the judge vacated his dismissal, and we are now
awaiting a response to our complaint. There have been no further developments in
the Texas Action.

         The Company is involved in other legal proceedings from time to time,
none of which management believes, if decided adversely to us, would have a
material adverse effect on the business, financial condition or results of
operations of the Company.

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

         None.

                                    PART II


ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS

         Our common stock is traded on the National Association of Securities
Dealers' OTC Bulletin Board under the symbol EVNT. Prior to August 25, 1999, our
common stock traded on the OTC Bulletin Board under the symbol ADII and our
former name, Adina, Inc. Until recently, the market for the stock has been
relatively inactive. They reflect inter-dealer prices, without retail mark-up,
mark-down or commission, and may not necessarily represent actual transactions.


                                       26
<PAGE>   30

<TABLE>
<CAPTION>
                                                     Bid Price
                                             ------------------------
Quarter Ending                                 Low              High
--------------                               -------          -------
<S>                                          <C>              <C>
June 30, 2000                                  11.75            30.50
March 31, 2000                                 21.00            33.00
December 31, 1999                              12.00            32.75
September 30, 1999                              1.38            12.50
June 30, 1999(1)                                1.50             1.50
April 30, 1999                               0.02734            0.625
January 31, 1999                             0.02734          0.02734
October 31, 1998                             0.02734          0.02734
July 31, 1998                                0.02734          0.02734
</TABLE>

         (1)      Represents the transition period between April 30, 1999 and
                  June 30, 1999.

         The last sale price reported for the common stock on the OTCBB on
September 15, 2000 was $15.75. As of September 15, 2000, there were
approximately 1,060 shareholders of record of our common stock.

         RECENT SALES OF UNREGISTERED SECURITIES

         Effective May 26, 2000, we issued and sold 284,167 shares of our common
stock to the founders of ORB, in a private placement under Rule 506 of
Regulation D under the Securities Act. The consideration for the issuance was
approximately $8 million worth of ORB common stock.

         On June 16, 2000 we issued a total of 517,333 shares of common stock to
an affiliate of Qwest, in a private placement under Rule 506 of Regulation D
under the Securities Act. The consideration for this issuance was the
satisfaction of certain payment obligations to Qwest under our Indefeasible
Rights of Use agreement with Qwest totaling approximately $9.3 million.

         DIVIDEND POLICY

         The holders of our common stock are entitled to receive dividends at
such time and in such amounts as may be determined by our Board of Directors.
However, we have not paid any dividends in the past and do not intend to pay
cash dividends on our capital stock for the foreseeable future. Instead, we
intend to retain all earnings for use in the operation and expansion of our
business.

ITEM 6. SELECTED FINANCIAL DATA

         Prior to September 22, 1999, we were a publicly held company with no
material operations. We were formerly known as Adina, Inc., which was
incorporated in the state of Delaware on June 24, 1987. In September 1999, we
acquired (i) all of the outstanding shares of AxisTel; (ii) approximately 66.7%
of the outstanding shares of e.Volve; (iii) approximately 17% of the outstanding
shares of PhoneFree; and (iv) a note receivable from e.Volve in the amount of
approximately $8.5 million, including accrued interest ("Notes"). In a related
transaction, we acquired the remaining 33.3% of e.Volve in October 1999. All of
the acquisitions and the purchase of the Notes were settled through the issuance
of 26,827,552 shares of our common stock and are collectively referred to as the
"Initial Transaction".

         Since we had no material operations prior to the September 22, 1999
transaction, the acquisitions of the Infinity Entities' interests were accounted
for as a recapitalization of e.Volve. Accordingly, the historical financial
statements presented through June 30, 1999 are those of e.Volve. The interests
in PhoneFree and AxisTel contributed by the Infinity Entities have been included
from the date of investment by the Infinity Entities. The


                                       27
<PAGE>   31

financial statements as of and for the twelve months ended June 30, 2000 reflect
the consummation of the reorganization, and therefore are our consolidated
financial statements as of June 30, 2000 and for the period from September 22,
1999 through June 30, 2000. The subsequent acquisition of iGlobal has been
incorporated from March 10, 2000, the date of acquisition.

<TABLE>
<CAPTION>
                                                      PRO FORMA
CONSOLIDATED STATEMENTS                      ---------------------------
OF OPERATIONS DATA                               YEAR ENDED JUNE 30,                          YEAR ENDED JUNE 30,
                                             ---------------------------   --------------------------------------------------------
                                                 2000           1999           2000           1999           1998          1997
                                             ------------   ------------   ------------   ------------    -----------  ------------
<S>                                          <C>            <C>            <C>            <C>             <C>          <C>
 Revenues ................................   $ 62,149,705   $ 36,661,823   $ 55,354,030   $ 27,248,273    $ 1,713,403  $    921,599
 Direct costs ............................     59,616,970     31,624,140     51,656,016     23,311,584      1,944,073       578,944
                                             ------------   ------------   ------------   ------------    -----------  ------------
 Gross profit ............................      2,532,735      5,037,683      3,698,014      3,936,689       (230,670)      342,655
 Selling, general & administrative
  expense ................................     26,555,721     11,976,622     22,471,732      6,251,730      4,400,754       712,677
 Depreciation & amortization expense .....     22,753,691     22,753,691     10,007,859        957,966        105,044         5,685
                                             ------------   ------------   ------------   ------------    -----------  ------------
 Loss from operations, before
  other (income) expense .................    (46,776,677)   (29,692,630)   (28,781,577)    (3,273,007)    (4,736,468)     (375,707)


 Other (income) expenses:
 Interest (income) expense, net ..........     (1,122,086)       473,675       (920,161)     1,704,459        105,099            --
 Write off of unamortized debt discount ..             --      2,000,000        917,615             --             --            --
 Equity in loss of affiliates ............      5,236,183         33,776      5,236,183         33,776             --            --
 Foreign currency (gain) loss ............       (168,431)       126,575       (168,431)       126,575             --            --
 Other ...................................        176,114         73,627         29,057        (16,930)        12,604            --
                                             ------------   ------------   ------------   ------------    -----------  ------------
                                                4,121,780      2,707,653      5,094,263      1,847,880        117,703            --
                                             ------------   ------------   ------------   ------------    -----------  ------------
 Net loss ................................    (50,898,457)   (32,400,283)   (33,875,840)    (5,120,887)    (4,854,171)     (375,707)

 Imputed preferred dividend ..............    (10,407,954)            --    (10,407,954)            --             --            --
                                             ------------   ------------   ------------   ------------    -----------  ------------
 Net income (loss) available to
  common shareholders ....................   $(61,306,411)  $(32,400,283)  $(44,283,794)  $ (5,120,887)   $(4,854,171) $   (375,707)
                                             ============   ============   ============   ============    ===========  ============

 Net loss per share (basic & diluted) ....   $      (1.18)  $      (0.71)  $      (1.14)  $      (0.45)   $     (0.43) $      (0.03)
                                             ============   ============   ============   ============    ===========  ============
 Weighted average number of shares
  outstanding - (basic and diluted) ......     52,061,258     45,338,950     38,739,230     11,365,614     11,365,614    11,365,614
                                             ============   ============   ============   ============    ===========  ============
</TABLE>

<TABLE>
<CAPTION>
                                                                               AS OF JUNE 30,
                                                            -----------------------------------------------
                                                               2000              1999             1998
                                                            ------------     ------------      ------------
<S>                                                         <C>              <C>               <C>
CONSOLIDATED BALANCE SHEET DATA

Cash and cash equivalents .............................     $ 40,764,246     $     39,379      $  2,417,216
Working capital (deficit) .............................       33,703,069       (6,590,569)         (715,832)
Total assets ..........................................      218,316,373       12,588,409         4,305,175
Capital lease obligations, net of current portion .....        5,780,851        2,031,513           487,665
Long term debt ........................................        3,685,145        6,828,948         5,410,000
Total stockholders' (deficit) equity ..................      191,950,797       (5,932,221)       (5,121,478)
</TABLE>

         "Pro Forma" results are unaudited and reflect operating results for the
years ended June 30, 2000 and 1999 as though the acquisition of AxisTel, the
acquisition of the remaining 33.3% of e.Volve, and the purchase of 100% of
iGlobal each had occurred on July 1, 1998. The unaudited pro forma results are
not necessarily indicative of future results, or actual results of operations
that would have occurred had the acquisitions been made on July 1, 1998.

ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
        OF OPERATIONS

         The following discussion should be read in conjunction with the
consolidated financial statements and the notes thereto found on pages F-1 to
F-27 of this report.

         OVERVIEW

         Prior to the reorganization transactions, we had no material
operations. The financial information and other statistical data set out below
represent the financial condition and results of operations of e.Volve for all
periods prior to September 22, 1999. Thereafter, such information is the
consolidated information of eVentures and subsidiaries.


                                       28
<PAGE>   32

         We operate in one business segment, the provision of communication
services over a network which uses communications technologies that allow for
the simultaneous high speed, large scale transmission of voice, video and data.

         Revenues. Revenues are generated through the sale of our products and
services which can be divided into three general service categories: (i)
broadband, (ii) value added and (iii) prepaid. Broadband services consist of
transport services such as private line, Asynchronous Transfer Mode and frame
relay, and access services such as dial-up and dedicated Internet access, DSL
and collocation services. Value added services include software services that
leverage the packet-based infrastructure of our network to deliver advanced
communications services to end-users. Value added services consist of virtual
private network, VOIP services, unified communications, virtual second line, ISV
Mail and web hosting and development. We also offer prepaid services through the
sale of calling cards on a wholesale and retail basis. Historically, the
majority of our products and services have been measured and billed on a per
minute basis.

         We have derived substantially all of our revenues from the sale of VOIP
and transport services. Our agreements with our wholesale customers are short
term in duration and the rates are subject to change from time to time. Due to
increasing competition, management expects these rates to decline, which could
result in lower revenues and increased losses. Our three largest customers
accounted for 73% of our revenues during the twelve months ended June 30, 2000.
We anticipate that our dependence on these three customers will continue to
decline and our sales will increase as we broaden our sales and marketing
initiatives to include (i) adding new customers, (ii) increasing sales to
existing customers and (iii) increasing sales of broadband, value added and
prepaid services.

         Direct Costs. Direct costs include per minute termination charges and
lease payments and fees for fiber optic capacity. Historically, the call
termination expense component of these direct costs has declined as measured on
a cost per minute basis. The direct costs incurred for leasing capacity has also
declined on a per minute basis. However, the agreements we enter into for
leasing such capacity are generally at fixed rates for periods of more than one
year. We anticipate that our aggregate direct costs will continue to increase
over time as we build out our global network and enter into additional capacity
leases. We expect our call termination expenses, as measured on a cost per
minute basis, will continue to decline, offset by increases in the volume of
traffic on our network.

         Prior to September 1999, we provided international telecommunication
services only from the United States to Mexico. The majority of our termination
fees and certain fiber optic lease payments were payable in Mexican pesos. As a
result, we were exposed to exchange rate risk due to fluctuation in the Mexican
peso compared to the U.S. dollar. Continued fluctuation in the exchange rate may
make it cheaper or more expensive for us to purchase pesos to meet our peso
denominated expenses.

         Selling, General and Administrative Expenses. These expenses include
general corporate expenses, management salaries, professional fees, sales and
marketing expenses, travel expenses, benefits, facilities costs, and
administrative expenses. Currently we maintain our corporate headquarters in
Dallas, Texas, and have additional offices in Jersey City, New Jersey, New York,
New York, Kansas City, Missouri, Dallas, Texas, Miami, Florida and Mexico City,
Mexico. We anticipate that our selling, general and administrative expenses will
continue to increase over time as we are rapidly expanding the size of our staff
and facilities to meet the demands of our global network expansion.

         Depreciation and Amortization. Depreciation and amortization represent
the depreciation of property, plant and equipment and the amortization of
goodwill, resulting from the reorganization transactions and the
acquisition of iGlobal in March 2000. We anticipate that depreciation and
amortization expense will continue to increase over time as we continue to make
investments in our communications network and facilities.


                                       29
<PAGE>   33

         SUMMARY OF OPERATING RESULTS

         The table below summarizes our operating results:


<TABLE>
<CAPTION>
                                                                                YEAR ENDED JUNE 30,
                                             ----------------------------------------------------------------------------------
                                                 2000           %               1999          %            1998           %
                                             ------------   ----------     ------------    -------     ------------   ---------
<S>                                          <C>            <C>            <C>             <C>         <C>            <C>
Revenues.................................    $ 55,354,030        100.0%    $ 27,248,273      100.0%    $  1,713,403       100.0%
Direct costs.............................      51,656,016         93.3%      23,311,584       85.6%       1,944,073       113.5%
                                             ------------   ----------     ------------    -------     ------------   ---------
Gross profit.............................       3,698,014          6.7%       3,936,689       14.4%        (230,670)      (13.5)%
Selling, general & administrative              22,471,732         40.6%       6,251,730       22.9%       4,400,754       256.8%
  expenses...............................
Depreciation & amortization..............      10,007,859         18.1%         957,966        3.5%         105,044         6.1%
                                             ------------   ----------     ------------    -------     ------------   ---------
Loss from operations, before
    other (income) expense...............     (28,781,577)       (52.0)%     (3,273,007)     (12.0)%     (4,736,468)     (276.4)%


Other (income) expenses:
Interest expense (income), net...........        (920,161)        (1.7)%      1,704,459        6.3%         105,099         6.1%
Write off of unamortized debt discount...         917,615          1.7%              --        0.0%              --         0.0%
Equity in loss of affiliates.............       5,236,183          9.5%          33,776        0.1%              --         0.0%
Foreign currency (gain) loss.............        (168,431)        (0.3)%        126,575        0.5%              --         0.0%
Other....................................          29,057          0.1%         (16,930)      (0.1)%         12,604         0.7%
                                             ------------   ----------     ------------    -------     ------------   ---------
                                                5,094,263          9.2%       1,847,880        6.8%         117,703         6.9%
                                             ------------   ----------     ------------    -------     ------------   ---------
Net loss.................................     (33,875,840)       (61.2)%     (5,120,887)     (18.8)%     (4,854,171)     (283.3)%

Imputed preferred dividend...............     (10,407,954)                           --                          --
                                             ------------                  ------------                ------------
Net loss available to
    common shareholders..................    $(44,283,794)                 $ (5,120,887)               $ (4,854,171)
                                             ============                  ============                ============

Net loss per share (basic & diluted).....    $      (1.14)                 $      (0.45)               $      (0.43)
                                             ============                  ============                ============
Weighted average number of shares
    outstanding - (basic and diluted)....      38,739,230                    11,365,614                  11,365,614
                                             ============                  ============                ============
</TABLE>


         Fiscal Year Ended June 30, 2000 Compared To Fiscal Year Ended June 30,
         1999

         Revenues. Revenues increased to $55.4 million during fiscal 2000, an
increase of $28.2 million or 103% from $27.2 million in fiscal 1999. Fiscal 2000
revenues were generated through the sale of: (i) 87% VOIP services, (ii) 9%
prepaid services, (iii) 3% transport services and (iv) 1% Internet services. All
of fiscal 1999 revenues were generated through the sale of VOIP services.

         The increase in fiscal 2000 revenues primarily resulted from the
acquisition of AxisTel in September 1999 which increased revenues by $15.5
million. An increase in the sale of Internet Protocol telephony minutes also
contributed to the increase in revenues, which was partially offset by a
decrease in the average price per minute charged. During fiscal 2000, we
transmitted 504 million minutes versus 165 million minutes in fiscal 1999.
Excluding the 109 million minutes added as a result of the acquisition of
AxisTel, we increased minutes during fiscal 2000 by 230 million minutes as
compared to fiscal 1999, an increase of 139%. The average price per minute we
charged for these minutes decreased to $0.11 in fiscal 2000 from $0.17 in fiscal
1999.

         Direct Costs. Direct costs increased to $51.7 million during fiscal
2000 from $23.3 million during fiscal 1999, an increase of $28.4 million. The
increase in direct costs is primarily a result of the AxisTel acquisition in
September 1999 which increased direct costs by $16.5 million and increased
traffic volumes, which were offset partially by lower per minute termination
costs. The average cost per minute to terminate calls decreased to $0.09 during
fiscal 2000 from $0.14 during fiscal 1999. As a percentage of revenues, direct
costs during fiscal 2000 increased to 93% from 86% during fiscal 1999. The
increase in direct costs as a percentage of revenues was primarily due to the
average price per minute decreasing faster than the cost per minute for
termination.

         Selling, General and Administrative Expenses. Selling, general and
administrative expenses increased $16.2 million during fiscal 2000 to $22.5
million from $6.3 million in fiscal 1999. The increase in selling, general and
administrative expenses during fiscal 2000 resulted primarily from (i) expenses
incurred by companies acquired during fiscal 2000 of $6.1 million, (ii) an
increase in professional and consulting fees of $3.6 million, (iii) amounts


                                       30
<PAGE>   34

charged to expense as a result of the issuance of common stock for the
settlement of accounts payable totaling $2.8 million, (iv) compensation expense
of $2.0 million related to the issuance of options below the market value of our
stock; and (v) an increase in salary expense of $1.1 million as a result of
establishing and expanding our corporate office.

         Depreciation and Amortization. As a result of the reorganization
transactions in September 1999 and October 1999 and the acquisition of iGlobal
in March 2000, we recorded approximately $116.0 million in goodwill.
Amortization of goodwill in fiscal 2000 totaled $7.5 million. We recorded $2.5
million depreciation on fixed assets compared to $1.0 during fiscal 1999. The
increased depreciation during fiscal 2000 is reflective of our continued
investment in our network infrastructure.

         Interest (Income)Expense, Net. We recorded interest income, net of
expense of $0.9 million in fiscal 2000 compared to net interest expense of $1.7
million in fiscal 1999. This net change of $2.6 million primarily resulted from
the elimination of $8.0 million of e.Volve debentures as a result of the
reorganization transaction on September 22, 1999 and interest income on higher
cash balances maintained from the proceeds of private placements completed in
fiscal 2000.

         Write Off Of Unamortized Debt Discount and Recognition of Imputed
Preferred Stock Dividend. The $0.9 million write off of unamortized debt
discount in fiscal 2000 resulted from the elimination of e.Volve's outstanding
debentures as a result of the reorganization transaction. We reported an imputed
dividend in fiscal 2000 of $10.4 million as a result of the difference between
the market closing prices for our common stock on the dates which we issued
convertible preferred stock during the period and the price per share at which
such preferred stock is convertible into common shares.

         Equity in Losses of Affiliates. Equity in losses of affiliates resulted
from our minority ownership in certain investments that are accounted for under
the equity method of accounting. Under the equity method, our proportionate
share of each affiliate's operating losses and amortization of our net excess
investment over our equity in each affiliate's net assets is included in equity
in losses of affiliates. Equity in losses of affiliates was $5.2 million in
fiscal 2000. This loss primarily resulted from our 22% equity interest in
PhoneFree. We anticipate that our strategic investments accounted for under the
equity method will continue to invest in the development of their products and
services, and will continue to recognize operating losses, which will result in
future charges to earnings as we record our proportionate share of such losses.

         Foreign Currency Gain or Loss. Foreign currency gain during the year
ended June 30, 2000 was $0.2 million compared to a loss of $0.1 million during
the year ended June 30, 1999. This variance was the result of favorable exchange
rate fluctuations in the Mexican peso compared to the U.S. dollar.

         Fiscal Year Ended June 30, 1999 Compared To Fiscal Year Ended June 30,
         1998

         Revenues. Prior to fiscal 2000, all revenues were generated through the
sale of VOIP services. Revenues increased to $27.2 million during the year ended
June 30, 1999 from $1.7 million during the year ended June 30, 1998, an increase
of 1,490%. This primarily resulted from a successful launch in July 1998 of our
VOIP services and an increase in the traffic transmitted, primarily to Mexico.
During the year ended June 30, 1999, we transmitted over 165 million minutes,
compared with approximately 8.5 million minutes during the year ended June 30,
1998.

         Direct Costs. Direct costs increased to $23.3 million during the year
ended June 30, 1999 from $1.9 million during the year ended June 30, 1998, an
increase of 1,099%. This increase in direct costs resulted from an increase in
termination fees associated with the increase in traffic transmitted of $18.2
million and an increase in fees for leased fiber capacity of $3.1 million. As a
percentage of revenues, direct costs during the year-ended June 30, 1999
decreased to 86% from 114% during the year-ended June 30, 1998.

         Selling, General and Administrative. Selling, general and
administrative expenses increased to $6.3 million during the year ended June 30,
1999 from $4.4 million during the year ended June 30, 1998, an increase of 43%.
This increase resulted primarily from an increase in general professional and
consulting fees of $1.4 million.


                                       31
<PAGE>   35

         Depreciation and Amortization. Depreciation expense increased during
fiscal 1999 to $0.9 million compared to $0.1 million during fiscal 1998 as a
result of equipment acquisitions made in fiscal 1999.

         Interest Expense, Net. Interest expense, net increased to $1.7 million
during the year ended June 30, 1999 from $0.1 million during the year ended June
30, 1998, an increase of 1,522%. This increase was a result of higher charges
related to new equipment capital leases and interest on the debentures.

         LIQUIDITY AND CAPITAL RESOURCES

         General

         Our business plan contemplates expanding our network operations and
related services both domestically and internationally. Our primary expenditures
will be for equipment, network expansion, increased personnel costs, and working
capital. This strategy may also include strategic acquisitions and investments.
Sources of funding for our financing requirements may include vendor financing,
bank loans and public offerings or private placements of equity and/or debt
securities. There can be no assurance that additional financing will be
available or, if available, that financing can be obtained on a timely basis and
on acceptable terms. The failure to obtain such financing on acceptable terms
could significantly reduce our ability to fund our expenses, development,
acquisitions and operations.

         Since July 1, 1999, we have funded our operations primarily through
proceeds from private placements of common stock, preferred stock, options to
purchase common stock, borrowings under loan and capital lease agreements and
cash flows from operations. During fiscal 2000, we raised a total of (i) $86.7
million through private placements of common stock and preferred stock and (ii)
$4.6 million from borrowings pursuant to capital lease agreements and a credit
facility.

         Our principal uses of cash are to fund (i) the expansion of our
operations; (ii) working capital requirements; (iii) capital expenditures,
primarily for our network; (iv) operating losses; and (v) acquisitions and
strategic investments. As of June 30, 2000, we had capital commitments of $15.9
million consisting of capital lease payments with payment terms ranging from 12
to 60 months and notes payable. In addition, we have a commitment to invest an
additional $2.5 million in ORB upon ORB achieving certain defined operating
criteria, which is likely to occur on or before October 7, 2000.

         As of June 30, 2000, we had current assets of $50.6 million, including
cash and cash equivalents of $40.8 million. The working capital surplus at June
30, 2000 was $33.7 million. We estimate that our current network expansion plans
will require approximately $170.0 million over the next 24 months. While we have
not funded these operating or capital requirements, we expect to through
existing cash balances, expansion of our capital lease facilities and public and
private placements of equity and/or debt securities. Our cash and cash
equivalents are expected to provide sufficient liquidity to meet our operating
and capital requirements for approximately the next twelve months. If we are not
able to raise additional funds within the next six months we may not be able to
complete our global network expansion and increase our revenues pursuant to our
business strategy.

         The net cash provided by or used in operating, investing, and financing
activities for the years ended June 30, 2000, 1999, and 1998 is summarized
below:


                                       32
<PAGE>   36

<TABLE>
<CAPTION>
                                               FOR THE YEAR ENDED JUNE 30,
                                    ------------------------------------------------
                                        2000              1999              1998
                                    ------------      ------------      ------------
<S>                                 <C>               <C>               <C>
Net cash provided by (used in):     $ (9,159,753)     $ (1,430,791)     $ (1,761,710)
     Operating activities            (34,978,025)       (1,269,454)       (1,827,374)
     Investing activities             84,862,645           322,408         5,993,563
                                    ------------      ------------      ------------
     Financing activities             40,724,867        (2,377,837)        2,404,479
                                    ============      ============      ============
</TABLE>

         Cash flows from operating activities. The increased use of cash in
operating activities during fiscal 2000 as compared to 1999 is primarily
attributable to increased overhead costs associated with expanding our overall
operations which encompasses: (i) networks, (ii) facilities, (iii) employee
costs and (iv) costs incurred by companies acquired during fiscal 2000. The
decrease in net cash used in operating activities in fiscal 1999 as compared to
fiscal 1998 was principally a result of the decreased net loss, once adjusted
for non-cash charges, of $2.1 million verses $3.5 million in fiscal years 1999
and 1998, respectively, partially offset by fluctuations in cash provided by
other operating net assets of $1.1 million.

         Cash flows from investing activities. Net cash used in investing
activities was $35.0 million, $1.3 million, and $1.8 million in fiscal years
2000, 1999, and 1998 respectively. The increase in net cash used in investing
activities in fiscal 2000 as compared to fiscal 1999 was principally due to
strategic investments we made during the year of $21.1 million and purchases of
property and equipment of $13.6 million. The decrease in cash used in investing
activities in 1999 as compared to 1998 resulted from our strategic investments
during fiscal 1998 partially offset by increased equipment purchases in fiscal
1999.

         Cash flows from financing activities. Cash flows provided from
financing activities were $84.9 million, $0.3 million, and $6.0 million in
fiscal years 2000, 1999, and 1998 respectively. Fiscal 2000 cash flows from
financing activities primarily resulted from the receipt of $86.7 million from
the private placement of common and preferred stock, partially offset by
payments on capital leases. Fiscal 1999 cash provided from financing activities
was generated from $2.0 million issuance of debentures, offset by capital lease
payments. Fiscal 1998 cash provided from financing activities was generated from
the issuance of $6.0 million in debentures.

         Detailed below is a brief description of each of the private placements
that occurred during fiscal 2000. For a description of each of the equity
securities rights and privileges, please see Note 16 to the Consolidated
Financial Statements.

         On September 28, 1999, we completed a private placement of 2,470,000
shares of common stock and 1,000 shares of Series A Convertible Preferred Stock
with aggregate proceeds of approximately $5.9 million. Proceeds from these
issuances were used for general corporate purposes and for use as capital for
new investments and projects. All of the outstanding shares of Series A
Convertible Preferred Stock were converted into an aggregate of 200,000 shares
of our common stock on December 21, 1999.

         On November 19 and 26, 1999, we completed two private placements of
2,500 shares and 3,725 shares of our Series B Convertible Preferred Stock,
respectively, with aggregate proceeds of approximately $6.2 million. Proceeds
from these issuances are for general corporate purposes and for use as capital
for new investments and projects. Shares of our Series B Convertible Preferred
Stock are convertible into shares of our common stock under certain conditions.
On March 13, 2000, 2,500 shares of Series B Preferred Stock were converted to
181,159 shares of our common stock.

         On December 15, 1999, we completed a private placement of 775 shares of
our Series B Convertible Preferred Stock with aggregate proceeds of
approximately $0.8 million. Proceeds from this issuance are for general
corporate purposes and for use as capital for new investments and projects. The
Shares of our Series B Convertible Preferred Stock are convertible into shares
of our common stock under certain conditions.


                                       33
<PAGE>   37

         The Series B Convertible Preferred Stock was issued at a discount to
the market value of our common stock on the date that investors committed to
purchase shares of Series B Convertible Preferred Stocks. The market value of
our common stock at the time of the commitment was $16.00 per share. We have
recognized this discount by accounting for it as an imputed preferred stock
dividend of $1.1 million during fiscal 2000.

         In a series of transactions between January 6 and February 10, 2000, we
completed a private placement of 15,570 shares of our Series C Convertible
Preferred Stock to eight accredited investors, with aggregate proceeds of
approximately $15.5 million. Proceeds from this issuance are for general
corporate purposes and for use as capital for new investments and projects. The
shares of Series C Convertible Preferred Stock are convertible into shares of
our common stock at a price of $17.90 per share, subject to certain
anti-dilution adjustments. The conversion price was determined using the average
of the closing bid prices per share of our common stock for the 20 trading days
ended December 10, 1999. Proceeds of the offering were used to fund operating
losses and working capital, make investments and for general corporate purposes.
The effect of the favorable conversion rate was recorded as an imputed preferred
stock dividend of $9.3 million during fiscal 2000.

         On April 5, 2000 we completed a private placement of 2.5 million shares
of Common Stock with aggregate proceeds of approximately $58.5 million. Proceeds
from the private placement are being used for working capital purposes, the
development and expansion of our communications network and investments.

         RECENTLY ADOPTED ACCOUNTING STANDARDS

         See Note 3 to the Consolidated Financial Statements.

         EFFECTS OF INFLATION

         We do not believe that our business is impacted by inflation to a
significantly different extent than is the general economy. However, there can
be no assurances that inflation will not have a material effect on our
operations in the future.

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

         We are exposed to the impact of political instability, foreign
currency, interest rate and other risks.

         Political Instability Risks. We have relationships with foreign
suppliers in Jamaica, Mexico, India and other countries. We have not experienced
any negative economic consequences as a result of relationships with foreign
suppliers in these countries, but may be negatively affected should political
instability in any of these countries develop.

         Foreign Currency Risks. Since the agreements we have entered into with
foreign suppliers in Jamaica, Mexico, India and other countries are denominated
in U.S. dollars, we are not exposed to risks associated with fluctuations in
these foreign currencies. However, because our agreements with Mexican suppliers
are denominated in Mexican pesos, we may be exposed to fluctuations in the
Mexican peso, as well as to downturns in the Mexican economy, all of which may
affect profitability. During the twelve months ended June 30, 2000, $28.2
million of our direct costs were denominated in Mexican pesos.

         Interest Rate Risks. We have investments in money market funds of
approximately $40.8 million at June 30, 2000. We also have a variable rate
credit facility to purchase equipment with outstanding borrowings at June 30,
2000 of $3.7 million. Due to the short-term nature of our investments and the
relatively low amount of variable rate debt on our balance sheet at June 30,
2000, we believe that the effects of changes in interest rates are limited and
would not materially impact our profitability.

         Other Market Risks. We are also exposed to potential risks in dealing
with foreign suppliers in foreign countries associated with potentially weaker
protection of intellectual property rights, unexpected changes in regulations
and tariffs, and varying tax consequences.


                                       34
<PAGE>   38

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

         Please refer to pages F-1 to F-27.

ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
        FINANCIAL DISCLOSURE

         None.

                                    PART III


ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

         Information called for by Item 10 will be set forth under the caption
"Election of Directors" in our 2000 Proxy Statement, which will be filed not
later than 120 days after the end of our fiscal year ended June 30, 2000, and
which is incorporated herein by this reference.

ITEM 11. EXECUTIVE COMPENSATION

         Information called for by Item 11 will be set forth under the caption
"Executive Compensation and Other Matters" in our 2000 Proxy Statement, which
will be filed not later than 120 days after the end of our fiscal year ended
June 30, 2000, and which is incorporated herein by this reference.

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

         Information called for by Item 12 will be set forth under the caption
"Security Ownership of Directors, Management and Principal Stockholders" in our
2000 Proxy Statement, which will be filed not later than 120 days after the end
of our fiscal year ended June 30, 2000, and which is incorporated herein by this
reference.

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

         Information called for by Item 13 will be set forth under the caption
"Certain Relationships and Related Transactions" in our 2000 Proxy Statement,
which will be filed not later than 120 days after the end of our fiscal year
ended June 30, 2000, and which is incorporated herein by this reference.

                                    PART IV

ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K

         (a)      The following documents are filed as part of this report.

                  1.       Financial Statements:

                           Consolidated Financial Statements of
                           eVentures Group, Inc.
                           as of June 30, 2000, 1999 and 1998.

                  2.       Financial Statement Schedules

                           Schedule II-Valuation and Qualifying Accounts and
                           Reserves

                  3.       Exhibits


                                       35
<PAGE>   39


<TABLE>
<CAPTION>
     EXHIBIT                                                                                                                FILED
     NUMBER                                 DESCRIPTION                                  INCORPORATED BY REFERENCE         HEREWITH
     -------                                -----------                               -------------------------------      --------
                                                                                      FORM          DATE       NUMBER
<S>               <C>                                                                 <C>         <C>          <C>         <C>
      2.1         Agreement and Plan of Reorganization, dated as of September 22,      8-K        10/7/1999     2.1
                  1999, among the Registrant, eVentures Holdings, L.L.C., IEO
                  Holdings Limited, Infinity Investors Limited, Mick Y.
                  Wettreich, the purchasers listed on Schedule 1-A thereto and
                  the Contributing Persons listed on Schedule 1-B thereto.

      2.2         Agreement and Plan of Exchange, dated as of October 19, 1999,        8-K        10/7/1999     2.2
                  among eVentures Group, Inc., and the persons set forth on
                  Schedule 1 thereto (incorporated by reference to Exhibit 2.1 to
                  the report filed on Form 8-K on November 3, 1999).

      2.3         Share Exchange Agreement, dated as of February 22, 2000, among       8-K        3/27/2000     2.1
                  eVentures Group, Inc., IGS Acquisition Corporation and the
                  stockholders of iGlobal Services, Inc. parties thereto.

      2.4         Agreement and Plan of Merger, dated as of March 10, 2000, among      8-K        3/27/2000     2.2
                  eVentures Group, Inc., IGS Acquisitions Corporation and iGlobal.

      3.1         Amended and Restated Certificate of Incorporation of eVentures      10-Q        5/15/2000     3.1
                  Group, Inc.

      3.2         Amended and Restated Certificate of Designation of Rights,           10        12/20/1999     3.6
                  Preferences and Privileges of Series A Convertible Preferred
                  Stock, dated October 14, 1999.

      3.3         Certificate of Designation of Rights, Preferences and                10        12/20/1999     3.7
                  Privileges of Series B Convertible Preferred Stock, dated as of
                  November 10, 1999.

      3.4         Certificate of Amendment, dated as of December 15, 1999, to the      10        12/20/1999     3.8
                  Certificate of Designation of Rights, Preferences and
                  Privileges of Series B Convertible Preferred Stock.

      3.5         Certificate of Designation, Preferences and Rights of Series C      10/A         3/8/2000     3.9
                  Convertible Preferred Stock, dated as of February 22, 2000.

      3.6         Amended and Restated By-Laws of eVentures Group, Inc.               10-Q        5/15/2000     3.2

      4.1         Registration Rights Agreement, dated as of September 22, 1999,       8-K        10/7/1999     4.1
                  among the Registrant and the persons and entities set forth on
                  Schedule 1 thereto (the "First Registration Rights Agreement.

      4.2         Addendum to the First Registration Rights Agreement, dated as       10/A         3/8/2000     4.2
                  of October 19, 1999, among eVentures Group, Inc., the persons
                  set forth on Schedule 1 thereto and the other parties to the
                  First Registration Rights Agreement.

      4.3         Registration Rights Agreement, dated as of November 24, 1999,       10/A         3/8/2000     4.3
                  between eVentures Group, Inc. and the person and entities
                  signatories thereto, as holders of shares of Series B
                  Convertible Preferred Stock.

      4.4         Letter Agreement, dated December 15, 1999, to the parties to        10/A         3/8/2000     4.4
                  the Registration Rights Agreement dated as of September 27,
                  1999.
</TABLE>


                                       36
<PAGE>   40

<TABLE>
<CAPTION>
     EXHIBIT                                                                                                                FILED
     NUMBER                                 DESCRIPTION                                  INCORPORATED BY REFERENCE         HEREWITH
     -------                                -----------                               -------------------------------      --------
                                                                                      FORM          DATE       NUMBER
<S>               <C>                                                                 <C>         <C>          <C>         <C>
      4.5         Registration Rights Agreement, dated as of December 31, 1999,       10/A         3/8/2000     4.5
                  between eVentures Group, Inc. and the persons and entities
                  signatories thereto, as holders of shares of Series C
                  Convertible Preferred Stock.

      4.6         Registration Rights Agreement, dated as of March 10, 2000,           8-K        3/27/2000     4.1
                  among eVentures Group, Inc. and the persons and entities listed
                  on Schedule 1 thereto.

      4.7         Registration Rights Agreement, dated as of April 4, 2000, by        10-Q        5/15/2000     4.2
                  and among eVentures Group, Inc. and the signatories thereto.

      4.8         Registration Rights Agreement, dated as of May 26, 2000, by and                                             X
                  among eVentures Group, Inc., Andrew Pakula and Laura Berland.

      4.9         Registration Rights Agreement, dated as of June 16, 2000,                                                   X
                  between eVentures Group, Inc. and U.S. Telesource.

      10.1        Securities Purchase Agreement, dated as of June 11, 1998, among     10/A         3/8/2000
                  Orix Global Communications, Inc., certain of its shareholders
                  and the purchasers named thereunder and Exhibits thereto.

      10.2        Debenture, dated as of June 11, 1998.                                10        12/20/1999     10.2

      10.3        Letter Agreement, dated as of August 19, 1998 between Orix           10        12/20/1999     10.3
                  Global Communications and Infinity Investors Limited.

      10.4        Debenture, dated as of August 19, 1998.                              10        12/20/1999     10.4

      10.5        Letter Agreement, dated as of February 9, 1999 between Orix                    12/20/1999     10.5
                  Global Communications and Infinity Investors Limited.

      10.6        Debenture, dated as of February 9, 1999.                             10        12/20/1999     10.6

      10.7        Letter Agreement, dated as of April 15, 1999 among Orix Global       10        12/20/1999     10.7
                  Communications, Inc., Infinity Investors Limited and the
                  Founders (as defined therein).

      10.8        Amended and Restated Debenture, dated as of April 15, 1999.          10        12/20/1999     10.8

      10.9        Letter Agreement, dated as of April 29, 1999 between Orix            10        12/20/1999     10.9
                  Global Communications and Infinity Investors Limited.

     10.10        Debenture, dated as of April 29, 1999.                               10        12/20/1999    10.10

     10.11        Letter Agreement, dated as of April 30, 1999, between Orix           10        12/20/1999    10.11
                  Global Communications, Inc. and Infinity Investors Limited.

     10.12        Debenture, dated as of April 30, 1999.                               10        12/20/1999    10.12

     10.13        Note, dated as of August 20, 1999.                                  10/A         3/8/2000    10.13

     10.14        Promissory Note, dated as of March 2, 2000.                         10/A         3/8/2000    10.14

     10.15        Warrant Agreement, dated as of March 2, 2000, between i2v2.com      10/A         3/8/2000    10.15
                  Inc. and eVentures Group, Inc.
</TABLE>



                                       37
<PAGE>   41

<TABLE>
<CAPTION>
                                                                                                                            FILED
 EXHIBIT NUMBER                             DESCRIPTION                                  INCORPORATED BY REFERENCE         HEREWITH
 --------------                             -----------                               -------------------------------      --------
                                                                                      FORM          DATE       NUMBER
<S>               <C>                                                                 <C>         <C>          <C>         <C>
     10.16        Lease Agreement, dated December, 1998, between AxisTel               10        12/20/1999    10.13
                  International, Inc. and Evergreen America Corporation.

     10.17        Lease Agreement, dated November 24, 1997, between Orix Global        10        12/20/1999    10.14
                  Communications, Inc. and Trust F/3959 of Banco del Atlantico.

     10.18        Assignment Agreement, dated April 1, 1998, among Orix Global         10        12/20/1999    10.15
                  Communications, Inc., Latin Gate de Mexico S.A. de C.V. and
                  Trust F/3959 of Banco del Atlantico.

     10.19        Office Lease, dated January 23, 1998, between Orix Global            10        12/20/1999    10.16
                  Communications, Inc. and 2526 Investment Co.

     10.20        Sublease Agreement, dated January 31, 2000, between Totaltel        10/A         3/8/2000    10.20
                  Florida, Inc. and AxisTel Global Network Services, Inc.

     10.21        Office Lease, dated as of May 20, 1999, between Crescent Real       10-Q        5/15/2000    10.18
                  Estate Funding, I, L.P. and Marcus & Partners, L.P.

     10.22        First Amendment to Office Lease, dated as of March 28, 2000,        10-Q        5/15/2000    10.19
                  between Crescent Real Estate Funding I, L.P. and Marcus &
                  Partners, L.P.

     10.23        Assignment of Office Lease, dated as of March, 28, 2000, by and     10-Q        5/15/2000    10.20
                  between Marcus & Partners, L.P. and eVentures Group, Inc.

     10.24        Consent to Assignment of Office Lease, dated as of April 4,         10-Q        5/15/2000    10.21
                  2000, by and among Crescent Real Estate Funding I, L.P. and
                  eVentures Group, Inc.

     10.25        Second Amendment to Office Lease, dated as of April 24, 2000,       10-Q        5/15/2000    10.22
                  by and between Crescent Real Estate Funding I, L.P. and
                  eVentures Group, Inc.

     10.26        Letter Agreement, dated April 3, 2000, between Marcus &                                                     X
                  Partners, L.P. and eVentures Group, Inc.

     10.27        Guaranty Agreement by eVentures Group, Inc. as inducement to         10        12/20/1999    10.20
                  Telecommunications Finance Group to provide a lease to AxisTel
                  Communications, Inc., dated as of October 13, 1999.

     10.28        Management Services Agreement, dated as of September 22, 1999,       10        12/20/1999    10.21
                  between eVentures Group, Inc. and HW Partners, L.P.

     10.29        Amended and Restated 1999 Omnibus Securities Plan, dated as of      10/A         3/8/2000    10.23
                  September 22, 1999.  (compensatory agreement)

     10.30        Employment Agreement, dated as of April 4, 2000, between            10-Q        5/15/2000     10.1
                  eVentures Group, Inc. and Jeffrey A. Marcus. (compensatory
                  agreement)


     10.31        Stock Option Agreement, dated as of April 4, 2000 between           10-Q        5/15/2000     10.2
                  eVentures Group, Inc. and Jeffrey A. Marcus. (compensatory
                  agreement)

     10.32        Employment Agreement, dated as of April 4, 2000, between            10-Q        5/15/2000     10.3
                  eVentures Group, Inc. and Thomas P. McMillin. (compensatory
                  agreement)
</TABLE>


                                       38
<PAGE>   42

<TABLE>
<CAPTION>
                                                                                                                            FILED
 EXHIBIT NUMBER                             DESCRIPTION                                  INCORPORATED BY REFERENCE         HEREWITH
 --------------                             -----------                               -------------------------------      --------
                                                                                      FORM          DATE       NUMBER
<S>               <C>                                                                 <C>         <C>          <C>         <C>
     10.33        Stock Option Agreement, dated as of April 4, 2000 between           10-Q        5/15/2000     10.4
                  eVentures Group, Inc. and Thomas P. McMillin. (compensatory
                  agreement)

     10.34        Employment Agreement, dated as of April 4, 2000, between            10-Q        5/15/2000     10.5
                  eVentures Group, Inc. and Daniel J. Wilson. (compensatory
                  agreement)

     10.35        Stock Option Agreement, dated as of April 4, 2000 between           10-Q        5/15/2000     10.6
                  eVentures Group, Inc. and Daniel J. Wilson. (compensatory
                  agreement)

     10.36        Employment Agreement, dated as of April 4, 2000, between            10-Q        5/15/2000     10.7
                  eVentures Group, Inc. and Chad E. Coben. (compensatory
                  agreement)

     10.37        Stock Option Agreement, dated as of April 4, 2000 between           10-Q        5/15/2000     10.8
                  eVentures Group, Inc. and Chad E. Coben. (compensatory
                  agreement)

     10.38        Employment Agreement, dated as of April 4, 2000, between            10-Q        5/15/2000     10.9
                  eVentures Group, Inc. and Barrett N. Wissman. (compensatory
                  agreement)

     10.39        Stock Option Agreement, dated as of April 4, 2000 between           10-Q        5/15/2000    10.10
                  eVentures Group, Inc. and Barrett N. Wissman. (compensatory
                  agreement)

     10.40        Employment Agreement, dated as of April 4, 2000, between            10-Q        5/15/2000    10.11
                  eVentures Group, Inc. and Olaf Guerrand-Hermes. (compensatory
                  agreement)

     10.41        Stock Option Agreement, dated as of April 4, 2000 between           10-Q        5/15/2000    10.12
                  eVentures Group, Inc. and Olaf Guerrand-Hermes. (compensatory
                  agreement)

     10.42        Employment Agreement, dated as of April 17, 2000, between           10-Q        5/15/2000    10.13
                  eVentures Group, Inc. and Susie C. Holliday. (compensatory
                  agreement)

     10.43        Stock Option Agreement, dated as of April 17, 2000 between          10-Q        5/15/2000    10.14
                  eVentures Group, Inc. and Susie C. Holliday. (compensatory
                  agreement)

     10.44        Employment Agreement, dated as of March 10, 2000, between IGS                                               X
                  Acquisition Corporation and David N. Link. (compensatory
                  agreement)

     10.45        Employment Agreement, dated as of September 22, 1999, between        10        12/20/1999    10.23
                  eVentures Group, Inc. and Stuart J. Chasanoff. (compensatory
                  agreement)

     10.46        Amended and Restated Employment and Noncompetition Agreement,        10        12/20/1999    10.24
                  dated as of September 21, 1999, between AxisTel Communications,
                  Inc. and Samuel L. Litwin. (compensatory agreement)
</TABLE>


                                       39
<PAGE>   43

<TABLE>
<CAPTION>
                                                                                                                            FILED
 EXHIBIT NUMBER                             DESCRIPTION                                  INCORPORATED BY REFERENCE         HEREWITH
 --------------                             -----------                               -------------------------------      --------
                                                                                      FORM          DATE       NUMBER
<S>               <C>                                                                 <C>         <C>          <C>         <C>
     10.47        Amended and Restated Employment and Noncompetition Agreement,        10        12/20/1999    10.25
                  dated as of September 22, 1999, between AxisTel Communications,
                  Inc. and Mitchell Arthur. (compensatory agreement)

     10.48        Common Stock Subscription Agreement, dated as of April 4, 2000,     10-Q        5/15/2000    10.15
                  by and among eVentures Group, Inc. and the signatories
                  thereto.

     10.49A       Form of New Directors and Officers Indemnification Agreement                                                X

     10.49B       Schedule of Parties to New Directors and Officers                                                           X
                  Indemnification Agreement.

     10.50A       Form of Incumbent Directors and Officers Indemnification                                                    X
                  Agreement

     10.50B       Schedule of Parties to Incumbent Directors and Officers                                                     X
                  Indemnification Agreement.

     10.51        Securities Purchase Agreement, dated as of May 3, 2000, by and      10-Q        5/15/2000    10.23
                  among PhoneFree.com, Inc. and the purchasers listed on Schedule
                  A attached thereto.

     10.52        Issuer Option Agreement, dated as of April 10, 2000, between        10-Q        5/15/2000    10.16
                  eVentures Group, Inc. and Samuel L. Litwin. (compensatory
                  agreement)

     10.53        Issuer Option Agreement, dated as of April 10, 2000, between        10-Q        5/15/2000    10.17
                  eVentures Group, Inc. and Mitchell C. Arthur. (compensatory
                  agreement)

       11         Statement re-computation of per share earnings. (Information                                                X
                  regarding the computation of loss per share is set forth in the
                  Consolidated Financial Statements.)

      21.1        Subsidiaries of eVentures Group, Inc.                                                                       X

      23.1        Consent of BDO Seidman, LLP                                                                                 X

       24         Power of Attorney                                                                                          See
                                                                                                                          Signature
                                                                                                                            pages

      27.1        Financial Data Schedule                                                                                     X
</TABLE>


         (b)      During the quarter ended June 30, 2000, eVentures filed the
                  following Current Reports on Form 8-K:

                  1.       On April 6, 2000, eVentures filed a Current Report on
                           Form 8-K, announcing the completion of a $58.5
                           million strategic private placement with Liberty
                           Media, Chase Capital Partners, Goldman Sachs, The
                           Blackstone Group, First Union Capital Partners, and
                           others. The Current Report also announced that
                           Jeffrey A. Marcus was named Chairman and Chief
                           Executive Officer of eVentures.


                                       40
<PAGE>   44

                  2.       On May 11, 2000, eVentures filed a Current Report on
                           Form 8-K, announcing that it completed a $13 million
                           investment in PhoneFree.com Inc. through a purchase
                           of PhoneFree.com Inc. preferred stock.

                  3.       On June 27, 2000, eVentures filed a Current Report on
                           Form 8-K, announcing the completion of an Amended and
                           Restated IRU Agreement, a Payment Letter and a Common
                           Stock Subscription Agreement and a related
                           Registration Right Agreement between eVentures and
                           Qwest Communications, Inc. and one of its affiliates.


                                       41
<PAGE>   45

                                   SIGNATURES

         Pursuant to the requirements of Section 13 or 15(d) 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 in Dallas, Texas on the
28th day of September, 2000.

                                    eVentures Group, Inc.



                                    By: /s/  DANIEL J. WILSON
                                        ----------------------------------------
                                    Name:    Daniel J. Wilson
                                    Title:   Executive Vice President
                                             Chief Financial Officer

         KNOWN ALL MEN BY THESE PRESENTS, that each person whose signature
appears below constitutes and appoints Jeffrey A. Marcus AND Daniel J. Wilson
his true and lawful attorney-in-fact, each acting alone, with full power of
substitution and resubstitution for him and in his name, place and stead, in any
and all capacities to sign this Annual Report, and to file the same, with all
exhibits thereto, and other documents in connection therewith, with the
Securities and Exchange Commission, hereby ratifying and confirming all that
said attorney-in-fact or his substitutes, each acting alone, may lawfully do or
cause to be done by virtue thereof.

         Pursuant to the requirements of the Securities Exchange Act of 1934,
this Annual Report has been signed by the following persons in the capacities
and on the dates indicated:


<TABLE>
<CAPTION>
             SIGNATURE                                            TITLE                            DATE
             ---------                                            -----                            ----
<S>                                                <C>                                      <C>
/s/ JEFFREY A. MARCUS                              Chairman of the Board of Directors and   September 28, 2000
-------------------------------------              Chief Executive Officer (Principal
Jeffrey A. Marcus                                  Executive Officer)


/s/ DANIEL J. WILSON                               Executive Vice President and Chief       September 28, 2000
-------------------------------------              Financial Officer (Principal
Daniel J. Wilson                                   Accounting and Financial Officer)


/s/ FRED A. VIERRA                                 Vice Chairman of the Board of Directors  September 28, 2000
-------------------------------------
Fred A. Vierra

/s/ BARRETT N. WISSMAN                             President and Director                   September 28, 2000
-------------------------------------
Barrett N. Wissman

/s/ MARK R. GRAHAM                                 Director                                 September 28, 2000
-------------------------------------
Mark R. Graham

/s/                                                Director                                 September ___, 2000
-------------------------------------
Jan Robert Horsfall

/s/ CLARK K. HUNT                                  Director                                 September 28, 2000
-------------------------------------
Clark K. Hunt

/s/                                                Director                                 September ___, 2000
-------------------------------------
David Leuschen

/s/                                                Director                                 September ___, 2000
-------------------------------------
Stuart A. Subotnick
</TABLE>


                                       42
<PAGE>   46
                             eVENTURES GROUP, INC.
                   INDEX TO CONSOLIDATED FINANCIAL STATEMENTS


<TABLE>
<S>                                                                        <C>
 Report of Independent Certified Public Accountants....................... F-3

 Consolidated Balance Sheets as of  June 30, 2000 and 1999................ F-4

 Consolidated Statements of Operations for the years ended
         June 30, 2000, 1999 and 1998..................................... F-5

 Consolidated Statements of Shareholders' Equity (Deficit)
         for the years ended June 30, 2000, 1999 and 1998................. F-6

 Consolidated Statements of Cash Flows for the years ended
         June 30, 2000, 1999 and 1998..................................... F-8

 Notes to Consolidated Financial Statements............................... F-10

 Financial Statement Schedule:
         Schedule II - Valuation and Qualifying Accounts and Reserves..... FS-1
</TABLE>


                                      F-1
<PAGE>   47


                       THIS PAGE INTENTIONALLY LEFT BLANK


                                      F-2
<PAGE>   48

               REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS



To the Stockholders
eVentures Group, Inc.
Dallas, Texas

         We have audited the accompanying consolidated balance sheets of
eVentures Group, Inc. (the "Company"), see Note 1, as of June 30, 2000 and 1999
and the related consolidated statements of operations, shareholders' equity
(deficit) and cash flows for each of the three years in the period ended June
30, 2000. We have also audited the financial statement schedule listed in the
accompanying index. These financial statements and schedule are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements and schedule based on our audits.

         We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audits to obtain
reasonable assurance about whether the financial statements and schedule are
free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements and
schedule. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
presentation of the financial statements and schedule. We believe that our
audits provide a reasonable basis for our opinion.

         In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of the Company
at June 30, 2000 and 1999, and the results of its operations and its cash flows
for each of the three years in the period ended June 30, 2000, in conformity
with generally accepted accounting principles. Also, in our opinion, the
schedule presents fairly, in all material respects, the information set forth
therein.



                                           BDO Seidman, LLP

New York, New York
September 1, 2000

                                      F-3
<PAGE>   49

                              eVENTURES GROUP, INC.
                           CONSOLIDATED BALANCE SHEETS


<TABLE>
<CAPTION>
                                                                     As of June 30,
                                                            ------------------------------
                           ASSETS                              2000               1999
                                                            -------------    -------------
<S>                                                         <C>              <C>
CURRENT ASSETS
     Cash and cash equivalents ...........................  $  40,764,246    $      39,379
     Accounts receivable, less allowances for
       doubtful accounts ($793,900 - 2000; $0 - 1999) ....      3,607,053            6,129
     Prepaid expenses and other receivables ..............      2,979,489           24,414
     Deposits ............................................      1,020,584          242,310
     VAT receivable ......................................      2,131,277        2,757,368
     Notes receivable, affiliate .........................        100,000               --
                                                            -------------    -------------
                                                               50,602,649        3,069,600
                                                            -------------    -------------

LONG-TERM ASSETS
     Restricted cash .....................................        281,928        1,107,437
     Property and equipment, net .........................     35,419,120        6,219,874
     Investments in affiliates ...........................     23,373,190        2,191,498
     Goodwill and other intangibles, net .................    108,639,486               --
                                                            -------------    -------------
                                                              167,713,724        9,518,809
                                                            -------------    -------------
                                                            $ 218,316,373    $  12,588,409
                                                            =============    =============

                  LIABILITIES & STOCKHOLDERS' EQUITY (DEFICIT)

CURRENT LIABILITIES
     Capital leases, current portion .....................  $   4,703,053    $   1,916,761
     Accounts payable ....................................      8,244,480        4,609,806
     Accrued other .......................................      3,025,285        1,477,757
     Accrued interest payable ............................         78,016          383,163
     Customer deposits and deferred revenues .............        619,403        1,272,682
     Notes payable, current portion ......................        229,343               --
                                                            -------------    -------------
                                                               16,899,580        9,660,169
                                                            -------------    -------------
LONG-TERM LIABILITIES
     Notes payable, net of current portion ...............      3,685,145               --
     Capital leases, net of current portion ..............      5,780,851        2,031,513
     Debentures ..........................................             --        6,828,948
                                                            -------------    -------------
                                                                9,465,996        8,860,461
                                                            -------------    -------------

     Commitments and Contingencies .......................             --               --

STOCKHOLDERS' EQUITY (DEFICIT)
     Common stock ........................................          1,041               36
     Common stock to be issued ...........................              1               --
     Preferred stock .....................................             --               --
     Additional paid-in capital ..........................    248,907,665        4,418,508
     Accumulated deficit .................................    (54,634,559)     (10,350,765)
     Deferred compensation ...............................     (1,274,479)              --
     Notes receivable from shareholders ..................     (1,048,872)              --
                                                            -------------    -------------
                                                              191,950,797       (5,932,221)
                                                            -------------    -------------
                                                            $ 218,316,373    $  12,588,409
                                                            =============    =============
</TABLE>


See accompanying notes to consolidated financial statements.

                                      F-4
<PAGE>   50

                              eVENTURES GROUP, INC.
                      CONSOLIDATED STATEMENTS OF OPERATIONS


<TABLE>
<CAPTION>
                                                              Fiscal Year Ended June 30,
                                                     --------------------------------------------
                                                         2000            1999            1998
                                                     ------------    ------------    ------------
<S>                                                  <C>             <C>             <C>
Revenues .........................................   $ 55,354,030    $ 27,248,273    $  1,713,403
Direct costs .....................................     51,656,016      23,311,584       1,944,073
                                                     ------------    ------------    ------------
Gross profit (loss) ..............................      3,698,014       3,936,689        (230,670)
Selling, general and administrative expenses .....     22,471,732       6,251,730       4,400,754
Depreciation and amortization ....................     10,007,859         957,966         105,044
                                                     ------------    ------------    ------------
Loss from operations, before
    other (income) expense .......................    (28,781,577)     (3,273,007)     (4,736,468)

Other (income) expense
    Interest (income) expense, net ...............       (920,161)      1,704,459         105,099
    Write off of unamortized debt discount .......        917,615              --              --
    Equity in loss of affiliates .................      5,236,183          33,776              --
    Foreign currency (gain) loss .................       (168,431)        126,575              --
    Other ........................................         29,057         (16,930)         12,604
                                                     ------------    ------------    ------------
                                                        5,094,263       1,847,880         117,703
                                                     ------------    ------------    ------------
Net loss .........................................    (33,875,840)     (5,120,887)     (4,854,171)

Imputed preferred dividend .......................    (10,407,954)             --              --
                                                     ------------    ------------    ------------
Net loss available to common
    shareholders .................................   $(44,283,794)   $ (5,120,887)   $ (4,854,171)
                                                     ============    ============    ============

Net loss per share - (basic and diluted) .........   $      (1.14)   $      (0.45)   $      (0.43)
                                                     ============    ============    ============
Weighted average number of shares
    outstanding - (basic and diluted) ............     38,739,230      11,365,614      11,365,614
                                                     ============    ============    ============
</TABLE>


See accompanying notes to consolidated financial statements.

                                       F-5
<PAGE>   51

                              eVENTURES GROUP, INC.
            CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY (DEFICIT)

<TABLE>
<CAPTION>

                                                                          Preferred Stock         Common Stock
                                                                         ------------------   -----------------------
                                                                          Shares    Amount      Shares       Amount
                                                                         ---------  -------   ----------   ----------
<S>                                                                      <C>        <C>       <C>          <C>
Balance, June 30, 1997 .................................................       --    $  --       1,800,000   $     36

Gift of stock to employees .............................................       --       --              --         --

Net loss ...............................................................       --       --              --         --
                                                                          -------    -----   -------------   --------
Balance, June 30, 1998 .................................................       --       --       1,800,000         36

Fair value of shares issued in connection with debentures ..............       --       --              --         --

Fair value of warrants granted in connection with debentures ...........       --       --              --         --

Cost investment in PhoneFree ...........................................       --       --              --         --

Net loss ...............................................................       --       --              --         --
                                                                          -------    -----   -------------   --------
Balance, June 30, 1999 .................................................       --       --       1,800,000         36

Issuance of Common Stock in connection with the Initial Transaction

   Acquisition of AxisTel ..............................................       --       --      12,381,000        248

   Acquisition of eVentures ............................................       --       --      10,330,610        207

   Acquisition of 66.67% of e.Volve ....................................       --       --       9,565,614        190

   Net effect of the purchase of the remaining 33.33% of e.Volve .......       --       --       5,831,253        117

   Contribution of PhoneFree cost investment from Major Shareholders ...       --       --       2,879,386         58

Private Placements of Common and Preferred Stock:

   Issuance of Common Stock ............................................       --       --       5,013,477        100

   Issuance of Series A Preferred Stock ................................    1,000       --              --         --

   Issuance of Series B Preferred Stock ................................    7,000       --              --         --

   Issuance of Series C Preferred Stock ................................   15,570       --              --         --

Conversion of Series A Preferred Stock .................................   (1,000)      --         200,000          4

Conversion of Series B Preferred Stock .................................   (2,500)      --         181,159          4

Acquisition of iGlobal .................................................       --       --       2,551,087         51

Acquisition of minority interest in affiliates .........................       --       --         312,027          7

Issuance of Common Stock for settlement of accounts payable ............       --       --         426,799          9

Issuance of Common Stock as payment for assets .........................       --       --         517,333         10

Intrinsic value of stock options .......................................       --       --              --         --

Amortization of deferred compensation ..................................       --       --              --         --

Imputed preferred dividend .............................................       --       --              --         --

Acquisition of call options to purchase treasury stock .................       --       --              --         --

Net loss ...............................................................       --       --              --         --
                                                                          -------    -----   -------------   --------
Balance, June 30, 2000 .................................................   20,070    $  --      51,989,745   $  1,041
                                                                          =======    =====   =============   ========
</TABLE>


See accompanying notes to consolidated financial statements.

                                      F-6
<PAGE>   52
                             eVENTURES GROUP, INC.
           CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY (DEFICIT)


<TABLE>
<CAPTION>
                                                                         Common Stock to be Issued   Additional
                                                                         --------------------------    Paid-in       Accumulated
                                                                          Shares           Amount      Capital         Deficit
                                                                         --------         --------- -------------    -------------
<S>                                                                      <C>              <C>       <C>              <C>
Balance, June 30, 1997 .................................................       --           $  --   $      25,064    $    (375,707)

Gift of stock to employees .............................................       --              --          83,300               --

Net loss ...............................................................       --              --              --       (4,854,171)
                                                                          -------           -----   -------------    -------------
Balance, June 30, 1998 .................................................       --              --         108,364       (5,229,878)

Fair value of shares issued in connection with debentures ..............       --              --       2,000,000               --

Fair value of warrants granted in connection with debentures ...........       --              --         210,000               --

Cost investment in PhoneFree ...........................................       --              --       2,100,144               --

Net loss ...............................................................       --              --              --       (5,120,887)
                                                                          -------           -----   -------------    -------------
Balance, June 30, 1999 .................................................       --              --       4,418,508      (10,350,765)

Issuance of Common Stock in connection with the Initial Transaction

   Acquisition of AxisTel ..............................................       --              --      17,110,929               --

   Acquisition of eVentures ............................................       --              --          (2,980)              --

   Acquisition of 66.67% of e.Volve ....................................       --              --       8,540,159               --

   Net effect of the purchase of the remaining 33.33% of e.Volve .......       --              --      11,662,389               --

   Contribution of PhoneFree cost investment from Major Shareholders ...       --              --              --               --

Private Placements of Common and Preferred Stock:

   Issuance of Common Stock ............................................       --              --      63,202,526               --

   Issuance of Series A Preferred Stock ................................       --              --       1,000,000               --

   Issuance of Series B Preferred Stock ................................       --              --       6,997,500               --

   Issuance of Series C Preferred Stock ................................       --              --      15,469,985               --

Conversion of Series A Preferred Stock .................................       --              --              (4)              --

Conversion of Series B Preferred Stock .................................       --              --              (4)              --

Acquisition of iGlobal .................................................   71,513               1      85,352,234               --

Acquisition of minority interest in affiliates .........................       --              --       4,177,567               --

Issuance of Common Stock for settlement of accounts payable ............       --              --       7,888,592               --

Issuance of Common Stock as payment for assets .........................       --              --       9,571,060               --

Intrinsic value of stock options .......................................       --              --       3,311,250               --

Amortization of deferred compensation ..................................       --              --              --               --

Imputed preferred dividend .............................................       --              --      10,407,954      (10,407,954)

Acquisition of call options to purchase treasury stock .................       --              --        (200,000)              --

Net loss ...............................................................       --              --              --      (33,875,840)
                                                                          -------           -----   -------------    -------------
Balance, June 30, 2000 .................................................   71,513           $   1   $ 248,907,665    $ (54,634,559)
                                                                          =======           =====   =============    =============

<CAPTION>

                                                                                              Notes
                                                                                            Receivable
                                                                             Deferred          from
                                                                           Compensation     Shareholders          Total
                                                                           -------------    -------------    -------------
<S>                                                                        <C>             <C>               <C>
Balance, June 30, 1997 .................................................   $          --    $          --    $    (350,607)

Gift of stock to employees .............................................              --               --           83,300

Net loss ...............................................................              --               --       (4,854,171)
                                                                           -------------    -------------    -------------
Balance, June 30, 1998 .................................................              --               --       (5,121,478)

Fair value of shares issued in connection with debentures ..............              --               --        2,000,000

Fair value of warrants granted in connection with debentures ...........              --               --          210,000

Cost investment in PhoneFree ...........................................              --               --        2,100,144

Net loss ...............................................................              --               --       (5,120,887)
                                                                           -------------    -------------    -------------
Balance, June 30, 1999 .................................................              --               --       (5,932,221)

Issuance of Common Stock in connection with the Initial Transaction

   Acquisition of AxisTel ..............................................              --               --       17,111,177

   Acquisition of eVentures ............................................              --               --           (2,773)

   Acquisition of 66.67% of e.Volve ....................................              --               --        8,540,349

   Net effect of the purchase of the remaining 33.33% of e.Volve .......              --               --       11,662,506

   Contribution of PhoneFree cost investment from Major Shareholders ...              --               --               58

Private Placements of Common and Preferred Stock:

   Issuance of Common Stock ............................................              --               --       63,202,626

   Issuance of Series A Preferred Stock ................................              --               --        1,000,000

   Issuance of Series B Preferred Stock ................................              --               --        6,997,500

   Issuance of Series C Preferred Stock ................................              --               --       15,469,985

Conversion of Series A Preferred Stock .................................              --               --               --

Conversion of Series B Preferred Stock .................................              --               --               --

Acquisition of iGlobal .................................................              --       (1,048,872)      84,303,414

Acquisition of minority interest in affiliates .........................              --               --        4,177,574

Issuance of Common Stock for settlement of accounts payable ............              --               --        7,888,601

Issuance of Common Stock as payment for assets .........................              --               --        9,571,070

Intrinsic value of stock options .......................................      (3,311,250)              --               --

Amortization of deferred compensation ..................................       2,036,771               --        2,036,771

Imputed preferred dividend .............................................              --               --               --

Acquisition of call options to purchase treasury stock .................              --               --         (200,000)

Net loss ...............................................................              --               --      (33,875,840)
                                                                           -------------    -------------    -------------
Balance, June 30, 2000 .................................................   $  (1,274,479)   $  (1,048,872)   $ 191,950,797
                                                                           =============    =============    =============
</TABLE>


See accompanying notes to consolidated financial statements.

                                      F-7
<PAGE>   53

                              eVENTURES GROUP, INC.
                     CONSOLIDATED STATEMENTS OF CASH FLOWS

<TABLE>
<CAPTION>
                                                                          For the Year Ended June 30,
                                                                 --------------------------------------------
                                                                      2000           1999            1998
                                                                 ------------    ------------    ------------
<S>                                                              <C>             <C>             <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
     Net loss ................................................   $(33,875,840)   $ (5,120,887)   $ (4,854,171)
     Adjustments to reconcile net loss to net cash used in
        net operating activities:
        Depreciation and amortization ........................     10,007,859         957,966         105,044
        Other non-cash expenses ..............................      3,639,258       2,043,188         171,759
        Write-off accounts receivable ........................             --              --         615,232
        Write-off certain intangible assets ..................             --              --         420,000
        Equity in loss of affiliates .........................      5,236,183          33,776              --
        Change in operating assets and liabilities:
           Accounts receivable ...............................     (3,378,846)         98,293         (30,835)
           Prepaid expenses and other receivables ............     (1,302,900)        (18,593)         41,379
           VAT receivable ....................................        626,091      (2,611,318)        (44,775)
           Restricted cash ...................................      1,857,437      (1,107,437)             --
           Accounts payable ..................................      6,963,313       2,550,093       1,525,750
           Accrued other .....................................      2,404,151         301,695          75,495
           Accrued interest payable ..........................        195,012         369,751          13,412
           Customer deposits and deferred revenue ............     (1,531,471)      1,072,682         200,000
                                                                 ------------    ------------    ------------
Net cash used in operating activities ........................     (9,159,753)     (1,430,791)     (1,761,710)
                                                                 ------------    ------------    ------------

CASH FLOWS USED IN INVESTING ACTIVITIES:
     Deposits ................................................       (343,948)       (207,169)        (22,141)
     Proceeds from sale of available-for-sale securities .....             --         246,580          26,000
     Purchase of available-for-sale securities ...............             --              --        (277,057)
     Purchase of property and equipment ......................    (13,574,092)     (1,183,735)       (518,944)
     Investments in affiliates ...............................    (21,078,995)       (125,130)     (1,035,232)
     Transaction costs included in goodwill ..................       (490,011)             --              --
     Net cash acquired in acquisitions .......................        509,021              --              --
                                                                 ------------    ------------    ------------
Net cash used in investing activities ........................    (34,978,025)     (1,269,454)     (1,827,374)
                                                                 ------------    ------------    ------------

CASH FLOWS FROM FINANCING ACTIVITIES:
     Issuance of common stock and preferred stock ............     86,670,169              --              --
     Payments on capital leases ..............................     (1,322,780)     (1,656,672)        (67,357)
     Repayment on notes payable, net of advances .............       (184,744)             --              --
     Purchase of call options ................................       (200,000)             --              --
     Issuance of notes receivable - affiliate ................       (100,000)             --              --
     Proceeds from the issuance of debentures ................             --       2,040,000       6,000,000
     Advances - shareholders .................................             --         (60,920)         60,920
                                                                 ------------    ------------    ------------
Net cash provided by financing activities ....................     84,862,645         322,408       5,993,563
                                                                 ------------    ------------    ------------

NET CHANGE IN CASH AND CASH EQUIVALENTS ......................     40,724,867      (2,377,837)      2,404,479
CASH AND CASH EQUIVALENTS, beginning of year .................         39,379       2,417,216          12,737
                                                                 ------------    ------------    ------------
CASH AND CASH EQUIVALENTS, end of year .......................   $ 40,764,246    $     39,379    $  2,417,216
                                                                 ============    ============    ============
</TABLE>


See accompanying notes to consolidated financial statements.

                                      F-8
<PAGE>   54

                              eVENTURES GROUP, INC.
               CONSOLIDATED STATEMENTS OF CASH FLOWS - (CONTINUED)

<TABLE>
<CAPTION>
                                                                                  For the Year Ended June 30,
                                                                            --------------------------------------
                                                                                2000            1999        1998
                                                                            -------------   -----------   --------
<S>                                                                         <C>             <C>           <C>
SUPPLEMENTAL DISCLOSURE OF CASH FLOWS INFORMATION:

     Cash paid for:
        Interest .........................................................  $   1,349,592   $   376,000   $ 98,000
                                                                            =============   ===========   ========
        Taxes ............................................................  $          --   $        --   $     --
                                                                            =============   ===========   ========

SUPPLEMENTAL DISCLOSURE OF NON-CASH OPERATING,
     INVESTING AND FINANCING ACTIVITIES:

     Purchases of equipment under capital leases .........................  $   3,951,829   $ 4,809,785   $862,518
                                                                            =============   ===========   ========

     Fair value of original issue discount on warrants
        granted pursuant to certain of the debentures ....................  $          --   $   210,000   $     --
                                                                            =============   ===========   ========

     Fair value of original issue discount on shares issued in
        connection with debt on July 1, 1998 .............................  $          --   $ 2,000,000   $     --
                                                                            =============   ===========   ========

     Goodwill arising from acquisitions settled
        through the issuance of stock ....................................  $ 115,530,069   $        --   $     --
                                                                            =============   ===========   ========

     Net assets of subsidiaries acquired through an issue of stock .......  $     197,169   $        --   $     --
                                                                            =============   ===========   ========

     Stock issued for settlement of accounts payable .....................  $   7,888,601   $        --   $     --
                                                                            =============   ===========   ========

     Stock issued for purchase of equipment and equipment maintenance ....  $   9,571,070   $        --   $     --
                                                                            =============   ===========   ========

     Stock issued for purchase of minority interest in affiliates ........  $   4,177,574   $        --   $     --
                                                                            =============   ===========   ========
</TABLE>


See accompanying notes to consolidated financial statements.

                                      F-9
<PAGE>   55

                             eVENTURES GROUP, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS



1.   ORGANIZATION AND NATURE OF BUSINESS

     Prior to September 22, 1999, eVentures Group, Inc. ("eVentures or the
     Company") was a publicly held company with no material operations. The
     Company was formerly known as Adina, Inc., which was incorporated in the
     state of Delaware on June 24, 1987. In September 1999, the Company acquired
     (i) all of the outstanding shares of AxisTel Communications, Inc.
     ("AxisTel"); (ii) approximately 66.7% of the outstanding shares of e.Volve
     Technology Group, Inc. ("e.Volve"); (iii) approximately 17% of the
     outstanding shares of PhoneFree.com, Inc. ("PhoneFree"); and (iv) a note
     receivable from e.Volve in the amount of $8,540,159, including accrued
     interest ("Notes"). In a related transaction, the remaining 33.3% of
     e.Volve was acquired by the Company in October 1999. All of the
     acquisitions and the purchase of the Notes were settled through the
     issuance of 26,827,552 shares of common stock of eVentures and are
     collectively referred to as the "Initial Transaction". Upon completion of
     the Initial Transaction, approximately 77% of the outstanding common stock
     of the Company was owned by three shareholders that are affiliated with
     each other, (the "Major Shareholders"). At June 30, 2000, the Major
     Shareholders owned approximately 53% of the outstanding common stock of the
     Company.

     Allocation of consideration given for the assets acquired in the Initial
     Transaction is as follows:

<TABLE>
<S>                                                                                                     <C>
         Conversion of the Major shareholders options in AxisTel on September 22, 1999
              Cost of investment ..................................................................     $  3,497,662
              Net liabilities acquired ............................................................       (1,002,338)
                                                                                                        ------------
              Excess attributed to Goodwill .......................................................     $  4,500,000
                                                                                                        ============
         Purchase of 50% of AxisTel from AxisTel's founding shareholders on September 22, 1999
              Cost of investment ..................................................................     $ 12,459,657
              Net assets acquired .................................................................           99,532
                                                                                                        ------------
              Excess attributed to Goodwill .......................................................     $ 12,360,125
                                                                                                        ============
         Purchase of 1/3 of e.Volve on October 19, 1999
              Cost of investment ..................................................................     $ 11,662,506
              Net assets acquired .................................................................               --
                                                                                                        ------------
              Excess attributed to Goodwill .......................................................     $ 11,662,506
                                                                                                        ============
</TABLE>

     The above represent the final purchase price allocations. Consideration
     given was recorded at the fair value of eVentures common stock.

     As a result of the assets acquired in the Initial Transaction and the
     subsequent acquisition of Internet Global Services, Inc. ("iGlobal", see
     Note 9), eVentures is a network services company providing transport,
     Internet access and value added communications services over a
     facilities-based network which consists of digital switching, routing and
     signal management equipment, as well as digital fiber optic cable lines.

2.   BASIS OF PRESENTATION

     Since eVentures had no material operations prior to the September 22, 1999
     transaction, the acquisitions of the Major Shareholders' interests were
     accounted for as a recapitalization of e.Volve. The acquisitions of the
     remaining 50% of AxisTel and 33% of e.Volve were treated as purchases for
     accounting purposes. Accordingly, the historical financial statements
     presented through June 30, 1999



                                      F-10
<PAGE>   56

     are those of e.Volve. The interests in PhoneFree and AxisTel contributed by
     the Major Shareholders' have been included from the date of investment. The
     financial statements as of and for the twelve months ended June 30, 2000
     reflect the consummation of the reorganization, and therefore are the
     consolidated financial statements of eVentures and subsidiaries as of June
     30, 2000 and for the period from September 22, 1999 through June 30, 2000.
     The subsequent acquisition of iGlobal has been incorporated from March 10,
     2000, the date of acquisition. All significant inter-company accounts have
     been eliminated.


3.   SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

     Principles of Consolidation and Accounting for Ownership in Subsidiaries

     The Company accounts for its ownership interests in subsidiaries under
     three broad methods: consolidation, equity method and cost method. The
     applicable accounting method is generally determined based on eVentures'
     voting interest in the subsidiary, as well as eVentures' degree of
     influence over each of the subsidiaries.

     Consolidation. Companies in which eVentures directly or indirectly owns
     more than 50% of the outstanding voting securities are generally accounted
     for under the consolidation method of accounting. Under this method, a
     subsidiary's accounts are reflected within eVentures' Consolidated
     Statements of Operations. Participation of other subsidiary shareholders,
     if any, in the earnings or losses of a consolidated subsidiary is reflected
     in the caption "Minority interest" in the Consolidated Statements of
     Operations. Minority interest, if any, adjusts the consolidated net results
     of operations to reflect only eVentures' share of the earnings or losses of
     the consolidated subsidiary. As of June 30, 2000, eVentures owned 100% of
     the outstanding common stock of all subsidiaries accounted for under the
     consolidation method of accounting, and as a result there is no minority
     interest in the Consolidated Statements of Operations. The wholly owned
     subsidiaries as of June 30, 2000 are AxisTel, e.Volve and iGlobal.

     Equity Method. Subsidiaries whose results are not consolidated, but over
     whom the Company exercises significant influence, are generally accounted
     for under the equity method of accounting. Whether or not the Company
     exercises significant influence with respect to a subsidiary depends on an
     evaluation of several factors including, among others, representation on
     the subsidiary's board of directors and ownership level, which is generally
     a 20% to 50% interest in the voting securities of the subsidiary, including
     voting rights associated with eVentures' holdings in common stock,
     preferred stock and other convertible instruments in the subsidiary. Under
     the equity method of accounting, a subsidiary's accounts are not reflected
     within the Consolidated Statements of Operations. The Company's
     proportionate share of each affiliate's operating earnings and losses and
     the amortization of the Company's net excess investment over its equity in
     each affiliate's net assets are included in the caption "Equity in loss of
     affiliate" in the Consolidated Statements of Operations.

     Cost Method. Subsidiaries not accounted for under either the consolidation
     or the equity method of accounting are accounted for under the cost method
     of accounting. Under this method, eVentures' share of the earnings or
     losses of these companies is not included in the Consolidated Statements of
     Operations. In certain cases, the Company has representation on the board
     of directors of the subsidiaries accounted for under the cost method.

     Cash and Cash Equivalents

     The Company considers all highly liquid instruments purchased with an
     original maturity of three months or less to be cash equivalents. At June
     30, 2000 cash equivalents totaled $39.4 million and



                                      F-11
<PAGE>   57

     consisted of a money market account. The Company maintains the majority of
     its cash and cash equivalents with one financial institution.

     Deposits

     Deposits represent security deposits for facility leases, advance payments
     to vendors for the purchase of property and equipment and services to be
     provided.

     Property and Equipment

     Property and equipment are recorded at cost and are depreciated using the
     straight-line method over the estimated useful lives of the related assets.
     Maintenance and repairs are charged to expense as incurred. Significant
     renewals and betterments are capitalized. As of the time of retirement or
     other disposition of property and equipment, the cost and accumulated
     depreciation are removed from the accounts and any resulting gain or loss
     is reflected in operations.

     Goodwill

     Goodwill arising from the excess of cost over net assets of businesses
     acquired by the Company (see Notes 1 and 9) is amortized on a straight-line
     basis over periods ranging from five to ten years.

     Long-lived Assets

     The Company's long-lived assets consist of goodwill and property and
     equipment. In accordance with the Financial Accounting Standards Board
     ("FASB") Statement of Financial Accounting Standards No. 121, Accounting
     for the Impairment of Long-lived Assets and for Long-lived Assets to be
     Disposed of, the Company assesses the recoverability of long-lived assets
     by determining whether the net book value of the assets can be recovered
     through projected undiscounted future cash flows. The amount of impairment,
     if any, is measured based on fair value and is charged to operations in the
     period in which impairment is determined by management. During the year
     ended June 30, 1998, the Company recorded impairment losses on certain
     property and equipment totaling $278,324. No impairment losses were
     recorded in fiscal years 1999 and 2000. Impairment losses are recorded as a
     component of selling, general and administrative expenses.

     Revenue Recognition and Customer Deposits

     Revenues for communication services are recorded based on minutes (or
     fractions thereof) of customer usage. The Company records payments received
     in advance for prepaid calling card services and services to be supplied
     under contractual agreements as deferred revenue until such related
     services are provided.

     Internet access subscription service revenues are recognized over the
     period that services are provided.

     Server collocation service revenues are recognized ratably over the
     contractual period.

     Foreign Currency Gain or Loss

     The financial statements of a wholly-owned subsidiary formed for the
     purpose of transacting business in Mexico, are remeasured into the U.S.
     dollar functional currency for consolidation and reporting purposes.
     Current rates of exchange are used to remeasure monetary assets and
     liabilities and historical rates of exchange are used for nonmonetary
     assets and related elements of expense. Revenue and other expense elements
     are remeasured at rates which approximate the rates in effect on the
     transaction dates.



                                      F-12
<PAGE>   58

     Gains and losses resulting from this remeasurement process are recognized
     currently in the consolidated statement of operations. During fiscal 2000,
     1999 and 1998, there were no significant gains or losses with respect to
     this remeasurement process.

     Certain transactions are conducted in Mexican pesos and are remeasured at
     the time in which the services are rendered to the Company and are settled
     in U.S. dollars. Transaction foreign currency gains and losses are
     recognized as incurred.

     Income Taxes

     The Company accounts for income taxes in accordance with Statement of
     Financial Accounting Standards No. 109 ("SFAS 109"), "Accounting for Income
     Taxes." Under the asset and liability method of SFAS 109, deferred tax
     assets and liabilities are recognized for the future tax consequences
     attributable to differences between the financial statements carrying
     amounts of existing assets and liabilities and their respective tax basis.
     Deferred tax assets and liabilities are measured using enacted tax rates
     expected to apply to taxable income in the years in which those temporary
     differences are expected to be recovered or settled. Under SFAS 109, the
     effect on the deferred tax assets and liabilities of a change in tax rates
     is recognized as income in the period that includes the enactment date. A
     valuation allowance is provided for significant deferred tax assets when it
     is more likely than not that such assets will not be recovered.

     Stock Based Compensation

     The FASB issued Statement of Financial Accounting Standards No. 123 ("SFAS
     123"), "Accounting for Stock Based Compensation," which defines a fair
     value based method of accounting for stock-based compensation. However,
     SFAS 123 allows an entity to continue to measure compensation cost related
     to stock and stock options issued to employees using the intrinsic method
     of accounting prescribed by Accounting Principles Board Opinion No. 25
     ("APB 25"), "Accounting for Stock Issued to Employees". Entities electing
     to follow APB 25 must make pro forma disclosures of net income and earnings
     per share, as if the fair value method of accounting defined in SFAS 123
     had been applied. The Company has elected to account for its stock-based
     compensation to employees under APB 25.

     Earnings Per Share

     The FASB issued Statement of Financial Accounting Standards ("SFAS 128"),
     Earnings Per Share ("EPS"). SFAS 128 requires dual presentation of basic
     EPS and diluted EPS on the face of all income statements issued after
     December 15, 1997 for all entities with complex capital structures. Basic
     EPS is computed as net income divided by the weighted average number of
     common shares outstanding for the period. The weighted average shares
     outstanding for fiscal 2000 also includes 71,513 shares to be issued which
     were outstanding from March 10, 2000. Diluted EPS reflects the potential
     dilution that could occur from common shares issuable through stock
     options, warrants and convertible debentures. Diluted EPS has not been
     presented for the effects of stock options, warrants and convertible
     debentures, as the effect would be antidilutive. Accordingly, basic and
     diluted EPS did not differ for any period presented. For purposes of
     computation of EPS, the shares issued for the acquisition of 67% of e.Volve
     (11,365,614 shares) are deemed to have been in existence for the entire
     period.

     Comprehensive Income (Loss)

     The FASB issued Statement of Financial Accounting Standards No. 130 ("SFAS
     130"), "Reporting Comprehensive Income." This statement establishes
     standards for reporting the components of comprehensive income and requires
     that all items that are required to be recognized under accounting
     standards as components of comprehensive income (loss) be included in a
     financial statement that is



                                      F-13
<PAGE>   59

     displayed with the same prominence as other financial statements.
     Comprehensive income includes net income (loss) as well as certain items
     that are reported directly within a separate component of stockholders'
     deficit and bypass net loss. The Company adopted the provisions of this
     statement in Fiscal 1998. These disclosure requirements had no impact on
     the Company's financial statements.

     Fair Value of Financial Instruments

     The carrying value of financial instruments approximated fair value as of
     June 30, 2000 and 1999 due to either short maturity or terms similar to
     those available to similar companies in the open market.

     Segment Information

     In the fiscal year ended June 30, 1999, the Company adopted Statement of
     Financial Accounting Standards No. 131, which requires the reporting of
     segment information using the "management approach" versus the "industry
     approach" previously required. The Company has determined that it operates
     in one reportable segment.

     Effect of New Accounting Pronouncements

     In June 1998, the FASB, issued Statement of Financial Accounting Standards
     No. 133 ("SFAS 133"), "Accounting for Derivative Instruments and Hedging
     Activities". SFAS 133 requires companies to recognize all derivatives as
     either assets or liabilities in the statement of financial position and
     measure those instruments at fair value. SFAS 133, as amended by SFAS 137,
     is effective for fiscal years beginning after June 15, 2000. The adoption
     is not expected to materially impact the results of operations, financial
     position and financial statement disclosures in the period in which it is
     adopted, and is not expected to have a significant impact on future
     financial statements.

     In December 1999, the Securities and Exchange Commission ("SEC") issued
     Staff Accounting Bulletin No. 101 ("SAB 101"), "Revenue Recognition in
     Financial Statements." SAB 101 outlines the basic criteria that must be met
     to recognize revenue and provides guidance for disclosure related to
     revenue recognition policies. In June 2000, the SEC issued SAB 101B that
     delayed the implementation date of SAB 101 until the quarter ended December
     31, 2000 with retroactive application to the beginning of our fiscal year.
     The Company does not expect the adoption of SAB 101 to have a material
     impact on its financial position or results of operations.

     In March 2000, the Emerging Issues Task Force, or EITF, published their
     consensus on EITF Issue No. 00-2, Accounting for Web Site Development
     Costs, which requires that costs incurred during the development of web
     site applications and infrastructure, involving developing software to
     operate the web site, including graphics that affect the "look and feel" of
     the web page and all costs relating to software used to operate a web site
     should be accounted for under Statement of Position 98-1, Accounting for
     the Costs of Computer Software Developed or Obtained for Internal Use.
     However, if a plan exists or is being developed to market the software
     externally, the costs relating to the software should be accounted for
     pursuant to SFAS 86, Accounting for the Costs of Computer Software to Be
     Sold, Leased, or Otherwise Marketed. eVentures will be required to adopt
     EITF Issue No. 00-2 in its first fiscal quarter, beginning after June 30,
     2000. eVentures does not expect the adoption of EITF Issue No. 00-2 to have
     a material impact on its financial position or results of operations.

     In March 2000, the FASB issued Interpretation No. 44, "Accounting for
     Certain Transactions Involving Stock Compensation - an Interpretation of
     APB No. 25" ("FIN 44"). FIN 44 clarifies the application of Opinion No. 25
     for certain issues including: (a) the definition of employee for purposes
     of applying Opinion No. 25, (b) the criteria for determining whether a plan
     qualifies as a non-compensatory plan, (c) the accounting consequences of
     various modifications to the terms of a previously fixed stock option or



                                      F-14
<PAGE>   60

     award, and (d) the accounting for an exchange of stock compensation awards
     in a business combination. In general, FIN 44 is effective July 1, 2000.
     The Company does not expect the adoption of FIN 44 to have a material
     impact on its financial position or results of operations.

     Accounting 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.

     Reclassifications

     Certain prior year balances have been reclassified to be consistent with
     fiscal 2000 presentation.

4.   GOODWILL AND OTHER INTANGIBLES

     At June 30, 2000, goodwill and other intangibles is comprised of the
     following:

<TABLE>
<S>                                                                       <C>
         Goodwill arising from the Initial Transaction
              Conversion of Major Shareholders options in AxisTel ...     $   4,500,000
              Purchase of 50% of AxisTel ............................        12,360,125
              Purchase of 1/3 of e.Volve ............................        11,662,506
         Goodwill arising from the acquisition of iGlobal ...........        87,446,044
                                                                          -------------
                                                                            115,968,675
         Less:  Accumulated amortization ............................        (7,513,941)
         Other, net .................................................           184,752
                                                                          -------------
                                                                          $ 108,639,486
                                                                          =============
</TABLE>


5.   VAT RECEIVABLE

     VAT is a tax similar in nature to a sale and/or use tax. VAT is assessed by
     vendors operating in foreign countries, specifically Mexico. The tax is
     paid by the Company directly to the assessing vendor who remits the tax to
     the Mexican Taxing Authority ("MTA"). Based on an injunction received from
     the MTA, the Company is exempt from incurring this tax. As of June 30, 2000
     and 1999, VAT receivable consists of amounts due from either the assessing
     vendor or MTA (as applicable).

6.   RESTRICTED CASH

     Restricted cash at June 30, 2000 represents amounts received pursuant to a
     pending insurance claim. At June 30, 1999, restricted cash consisted of two
     certificates of deposits (including accrued interest) that served as
     collateral on a certain letter of credit totaling $1,061,000. As of June
     30, 1999, no amounts were drawn down on such letter of credit. The full
     amount of the letter of credit was drawn down on October 5, 1999 and repaid
     by December 31, 1999.




                                      F-15
<PAGE>   61

7.   PROPERTY AND EQUIPMENT

     Property and equipment consists of the following:

<TABLE>
<CAPTION>
                                                                                       June 30,
                                                              Useful        ------------------------------
                                                               Life             2000              1999
                                                            -----------     ------------      ------------
<S>                                                       <C>               <C>               <C>

         Leasehold improvements ......................                *     $  1,557,040      $    257,217
         Network equipment under capital leases ......         2-10 Yrs       13,322,232         5,985,121
         IRU fiber optic circuit .....................           20 Yrs       15,365,000                --
         Other network equipment .....................          3-5 Yrs        7,314,911           751,512
         Furniture and fixtures ......................          3-7 Yrs        1,075,176            10,552
                                                                            ------------      ------------

                                                                              38,634,359         7,004,402
         Accumulated depreciation and amortization ...                        (3,215,239)         (784,528)

                                                                            ------------      ------------
                                                                            $ 35,419,120      $  6,219,874
                                                                            ============      ============
</TABLE>

     * Respective lease term, ranging from 17 months to 5-years.

     During the years ended June 30, 2000, 1999, and 1998, depreciation and
     amortization expense totaled $2,493,918, $957,966, and $105,044,
     respectively.

     Property and equipment included assets under capital leases at June 30,
     2000 and 1999 with a cost of $13,322,232 and $5,985,121, respectively, and
     accumulated amortization of $2,196,404 and $664,905, respectively.


8.   INVESTMENTS IN AFFILIATES

     The Company has minority investments in the following Internet and
     communications companies:

<TABLE>
<CAPTION>
                                                                                                           BALANCE AT JUNE 30,
                                                         % OWNERSHIP *               ACCOUNTING      ------------------------------
            ACCOUNTING COMPANY NAME                 COMMON          PREFERRED          METHOD             2000             1999
            -----------------------             -------------     -------------     -------------    -------------    -------------
<S>                                             <C>               <C>               <C>              <C>              <C>
     PhoneFree ..............................            16.3%             31.7%    Equity / Cost    $  11,897,831    $   2,100,144
     ORB Communications & Marketing, Inc. ...            19.0%            100.0%    Equity               7,713,650               --
     FonBox, Inc. ...........................            14.0%             68.2%    Equity / Cost        2,034,632               --
     Launch Center 39 ("LC39") ..............             0.0%              2.1%    Cost                 1,000,000               --
     Callrewards ............................             0.0%            100.0%    Equity                 727,077               --
     Spydre Labs ............................             5.0%              0.0%    Cost                        --               --
     10-K Wizard ............................             5.0%              0.0%    Cost                        --               --
     Innovative Calling Technologies, LLC ...            50.0%              0.0%    Equity                      --           91,354
                                                                                                     -------------    -------------
                                                                                                     $  23,373,190    $   2,191,498
                                                                                                     =============    =============
</TABLE>

     *    The percentage ownership reflects eVentures' ownership percentage at
          June 30, 2000.

     At June 30, 2000, the Company had net excess investments ("implied
     goodwill") over its equity in the net assets of ORB and Fonbox of
     $8,931,721 and $433,790, respectively. The implied goodwill is being
     amortized over 5-years. Amortization of the implied goodwill is included in
     equity in loss of affiliates.

     In June 1999, the Company acquired 21% of the common stock of PhoneFree and
     accounted for its investment using the cost basis of accounting.
     Subsequently, the Company's ownership interest was diluted to 17% due to
     the sale of common stock by PhoneFree in July of 1999 and was diluted
     further to 16% due to a sale of common stock by PhoneFree in December of
     1999. On January 1, 2000, primarily



                                      F-16
<PAGE>   62

     as a result of board representation, the Company gained significant
     influence over the financial and operating activities of PhoneFree which
     resulted in a change to the equity basis of accounting for its investment
     in PhoneFree.

     On March 3, 2000, the Company loaned $3,000,000 to PhoneFree under a bridge
     loan due September 1, 2000 bearing interest at 7%. PhoneFree had the option
     to repay the bridge loan at any time, subject to the Company's right to
     convert it into PhoneFree common stock. The Company had the ability to
     convert the bridge loan into PhoneFree common stock if PhoneFree raised
     equity capital from other investors on or before August 31, 2000 at a price
     equal to 95% of the per share subscription price in such equity capital
     raise. In connection with the bridge loan, the Company also received a
     four-year warrant to purchase 240,000 shares of PhoneFree at a price equal
     to 110% of the conversion price of the bridge loan. PhoneFree may not call
     the warrants. The warrants have been valued at $829,092 using the Black-
     Scholes model, which the Company recorded as a deferred credit (decrease in
     the note receivable) and an additional investment in PhoneFree.
     Amortization of the premium is included in interest income in the statement
     of operations. PhoneFree raised equity capital from other investors in May
     2000.

     On May 4, 2000, the Company made an investment of $10,000,000 in cash and
     converted the $3,000,000 bridge loan and related interest receivable of
     $35,671 into 1,856,199 shares of PhoneFree's Series A Cumulative
     Convertible Preferred stock. The remaining deferred credit was recognized
     as interest income at the time the loan was converted. The Company received
     a warrant to purchase 100,000 shares at $7 per share in conjunction with
     the $10,000,000 investment.

     PhoneFree meets the criteria for a "significant subsidiary" as set forth in
     Rule 1.02(w) of Regulation S-X under the Exchange Act. Summarized financial
     information for PhoneFree after the elimination of any intercompany
     transactions with eVentures as of and for the six-months ended June 30,
     2000 is as follows:


<TABLE>
<S>                                                           <C>
          Financial position information:
            Current assets ..............................     $ 29,004,063
            Non-current assets ..........................        1,275,861
            Current liabilities .........................        5,397,169
            Non-current liabilities .....................               --
            Net assets ..................................       24,882,755
         Income statement information:
            Gross revenues ..............................          424,185
            Gross profit ................................           74,371
            Loss from operations ........................      (22,447,167)
            Net loss ....................................      (22,698,298)

            eVentures equity in PhoneFree's net loss ....     $ (4,067,078)
</TABLE>

     During fiscal 2000, the amount of equity loss recorded for PhoneFree
     reduced eVentures' common stock investment account of PhoneFree to zero and
     wrote-off implied goodwill of $1,273,482. Pursuant to EITF 99-10, the
     Company continued to recognize its proportionate share of losses according
     to its percentage ownership of outstanding preferred stock.

     On May 26, 2000, the Company acquired 19% of the outstanding common stock
     and 100% of the outstanding preferred stock of ORB for a combination of
     $4,500,000 in cash and 284,167 shares of the Company's common stock.




                                      F-17
<PAGE>   63

     On November 23, 1999, the Company acquired 500,000 shares of Series A
     preferred stock of Fonbox, representing approximately 22.7% of the
     outstanding preferred stock of Fonbox, for $500,000. Pursuant to an option
     granted in connection with the initial investment in Fonbox, on January 31,
     2000, the Company purchased an additional 1,000,000 newly issued shares of
     Series A preferred stock for $1,000,000. In addition, on January 31, 2000,
     the Company acquired 350,000 shares of common stock of Fonbox from each of
     Spydre Zeta LLC and NetProvide Ltd. in exchange for an aggregate of 27,860
     shares of the Company's common stock. At this time it was determined that
     the Company had significant influence over the operations of Fonbox
     resulting in a change to the equity basis of accounting. As of June 30,
     2000, the Company owns 14% of the outstanding common stock and 68% of the
     outstanding preferred stock of Fonbox.

     On January 28, 2000, the Company purchased 100,000 Series A Preferred Units
     of LC 39 representing approximately 2% of the equity and voting interests
     of LC39 for $1,000,000.

     On February 11, 2000, the Company purchased, for $750,000, a 30% ownership
     interest in CallRewards. Subsequent to year-end, CallRewards was merged
     with a subsidiary of PhoneFree. eVentures received 103,340 shares of
     PhoneFree common stock in exchange for eVentures' equity interest in
     CallRewards and as repayment of $100,000 advanced to CallRewards pursuant
     to a note agreement during fiscal 2000.

     On February 18, 2000, through its subsidiary, eVentures Latin America, the
     Company acquired a 5% interest in Spydre Labs, a pan-regional Internet
     incubator that accelerates early stage technology companies in Latin
     America and the U.S. Hispanic market in exchange for 5% of the outstanding
     equity securities of eVentures Latin America.

9. ACQUISITIONS

     On March 10, 2000, the Company issued an aggregate of 2,551,087 shares of
     common stock to the stockholders of iGlobal in exchange for all of the
     outstanding voting securities of iGlobal. In connection therewith, a total
     of 385,876 warrants and 580,678 options to purchase shares of common stock
     of iGlobal were converted into an aggregate of 139,378 warrants and 209,732
     options to purchase shares of eVentures' common stock pursuant to the terms
     of each agreement. Allocation of consideration given for the purchase of
     100% of iGlobal is as follows:


<TABLE>
<S>                                                        <C>
         Cost of investment ..........................     $ 85,352,404
         Add: Net liabilities acquired ...............        1,655,034
                                                           ------------
         Excess attributed to goodwill ...............     $ 87,007,438
                                                           ============
</TABLE>

     The above number represents the final purchase price allocation. In
     addition to the amounts presented above, the Company incurred $438,606 in
     transaction costs, which have been capitalized in Goodwill. See Note 17 for
     pro forma financial results.

     iGlobal is a domestic VOIP network company offering value added services.

10.  NOTES PAYABLE

     iGlobal has a credit facility with Cisco Systems Credit Corporation for
     $12,000,000. The financing is divided into three categories: Tranche A, B
     and C. Under Tranche A, a maximum of $8,000,000 may be borrowed to purchase
     networking hardware from the vendor. Under Tranche B, an additional
     $2,000,000 may be used for costs associated with the integration and
     installation of the vendor's hardware, and under Tranche C $2,000,000 may
     be used for working capital purposes.



                                      F-18
<PAGE>   64

     The credit agreement has a remaining 57-month term. Interest is payable
     quarterly at a spread of 600 basis points above the three-month London
     Interbank Offered Rate ("LIBOR"). The outstanding principal balance at June
     30, 2000 was $3,669,488. Interest expense of $78,000 related to this note
     is included in the statement of operations for the year ended June 30,
     2000. The three-month LIBOR rate at June 30, 2000 was 6.77%. Principal
     maturities for the credit agreement by year are as follows:


<TABLE>
<S>                                              <C>
         For the year ended June 30,
         2001 ..............................     $  229,343
         2002 ..............................        917,372
         2003 ..............................        917,372
         2004 ..............................        917,372
         2005 ..............................        688,029
                                                 ----------
                                                 $3,669,488
                                                 ==========
</TABLE>

     Under the terms of the credit agreement, iGlobal is required to meet
     certain financial covenants on a quarterly and annual basis. At June 30,
     2000, iGlobal was in compliance with all debt covenants.

     Also included in Notes Payable is an unsecured promissory note with a
     former officer of iGlobal in the amount of $245,000 bearing interest at
     6.5%. Payment of the note and accrued interest is due upon the infusion of
     equity capital of $5.0 million into iGlobal subsequent to the date of the
     note and therefore has been classified as long term.


11.  OBLIGATIONS UNDER CAPITAL LEASES

     The Company is a lessee under certain non-cancelable capital leases, which
     are secured by certain property and equipment (see Note 7). Terms of the
     leases call for monthly payments ranging from $98 to $48,087, including
     implicit rates ranging from 10.0% to 15.4% per annum. Future minimum lease
     payments under capital leases are as follows:


<TABLE>
<CAPTION>
         For the year ended June 30,                           2000
                                                           ------------
<S>      <C>                                               <C>
         2001 ........................................     $  5,423,837
         2002 ........................................        2,815,972
         2003 ........................................        1,866,192
         2004 ........................................        1,360,250
         2005 ........................................          535,268
                                                           ------------
                                                             12,001,519
         Amount representing interest ................        1,517,615
                                                           ------------
         Present value ...............................       10,483,904
         Current portion .............................        4,703,053
                                                           ------------
         Long-term obligation under capital leases ...     $  5,780,851
                                                           ============
</TABLE>

12.  DEBENTURES

     During fiscal 1999 and 1998, the Company issued debentures aggregating
     $8,040,000 to the Major Shareholders. The debentures bore interest at 8%
     per annum, and generally matured within a two-year period. As part of the
     Initial Transaction (see Note 1), the Major Shareholders or predecessors in
     interest that owned such debentures sold their related notes receivable
     from e.Volve to eVentures and, as a result, debentures are reflected as
     long-term liabilities on the June 30, 1999 balance sheet. In December 1999,


                                      F-19

<PAGE>   65
     the debentures were eliminated through the use of inter-company payable and
     receivable accounts between e.Volve and eVentures and the remaining
     $917,615 of unamortized debt discount was written off.

13.  COMMITMENTS AND CONTINGENCIES

     Operating Leases

     The Company is a lessee under certain non-cancelable operating leases.
     Terms of the leases call for monthly payments ranging from $260 to $96,007.
     Future minimum lease payments under these non-cancelable operating leases
     are as follows:

<TABLE>
<CAPTION>
          For the year ended June 30,

          <S>                          <C>
          2001.........................$    3,184,422
          2002 .........................    2,884,621
          2003 .........................    1,852,360
          2004 .........................    1,178,540
          2005 .........................      552,627
                                           ----------
                                           $9,652,570
                                           ==========
</TABLE>

     During the years ended June 30, 2000, 1999 and 1998, the Company incurred
     rental expense of $2,574,896, $4,555,513 and $1,346,968, respectively,
     pursuant to the operating leases detailed above.

     Litigation

     The Company is a defendant in an arbitration suit to determine the amount,
     if any, owed pursuant to an agreement for consulting services in Syria. The
     Company intends to vigorously defend any claims asserted against it.

     On April 17, 2000 the Company filed a lawsuit captioned, e.Volve Technology
     Group, Inc. and eVentures Group, Inc. v. United Technology Systems, Inc.
     d/b/a Uni-Tel. In the lawsuit, the Company alleges Uni-Tel breached the
     terms of a joint venture agreement to operate a telecommunications network
     between the United States and India. The Company alleges damages in excess
     of $10,000,000. Subsequent to the Company filing the lawsuit, Uni-Tel filed
     a lawsuit against e.Volve alleging breach of contract and damages in excess
     of $5,000,000. The Company intends to vigorously defend any claims asserted
     against it.

     The Company is involved in other litigation arising out of the ordinary
     course of business.

     Management believes that none of the litigation matters in which the
     Company is involved would have a material adverse effect on the
     consolidated financial condition or operations of the Company.

     Employment Agreements

     The Company has entered into multi-year employment agreements or management
     contracts with thirteen of its senior executives. These agreements mature
     at various times through April 2003 and provide for annual salaries ranging
     between $100,000 and $200,000. In addition, certain of these employees were
     granted options to purchase eVentures' common stock. These options, if
     exercised, would represent the right to purchase 11,750,000 shares of
     common stock at various exercise prices ranging from $2.50 to $28.50 per
     option.


                                      F-20
<PAGE>   66

     Vendor Agreement

     The Company signed a purchase commitment dated February 26, 1999 with Qwest
     Communications Corporation ("Qwest") for the purchase of services. This
     agreement is for a three-year term and requires annual purchase minimums of
     $1,800,000. Under the agreement the Company is liable for under-utilization
     charges, generally equal to the purchase minimum less actual usage. Early
     termination charges are equal to the current year's under-utilization plus
     35% of the remaining annual commitments. Subsequent to year-end, Qwest
     waived the minimum purchase level for the initial 18-months of the
     agreement.

     The Company signed a purchase commitment dated November 16, 1999 with Cable
     and Wireless for the purchase of services. This agreement is for a term of
     3-years and requires monthly purchase minimums. Under the agreement, the
     Company is liable for under-utilization charges generally equal to the
     purchase minimum less actual usage. The term of the agreement has been
     amended to expire in August 2003. The minimum purchase commitment for
     fiscal year 2002, 2003 and 2004 are $12,175,000, $34,625,000 and
     $8,500,000, respectively.

     Capital Commitment

     The Company has a commitment to invest an additional $2.5 million in ORB
     upon ORB achieving certain defined operating criteria.

14.  CUSTOMER AND VENDOR CONCENTRATIONS

     The Company has concentrations of credit risk related to customers, and
     vendors as follows:

     Customer Concentrations

     During fiscal 2000, sales to Qwest represented 68% of total revenues, no
     other one customer represented greater than 10% of total revenues. As of
     June 30, 2000, there was no amount due from Qwest.

     During fiscal 1999, revenues from Qwest, RSL Communications, Inc. and Star
     Communication, Inc. ("Star") represented 65%, 18%, and 16% of the Company's
     total revenues. During fiscal 1998 two customers, Total Communications,
     Inc. and Star, represented approximately 90% of the Company's total
     revenues.

     Vendor Concentrations

     During fiscal 2000, the Company purchased 55% of its carrier and
     termination costs from two major vendors. During fiscal 1999 and 1998, the
     Company purchased 92% and 75% of its carrier and termination costs from one
     major vendor.

15.  INCOME TAXES

     There is no provision for income tax expense since the Company incurred net
     losses for all periods presented.

     At June 30, 2000, the Company had net operating loss carryforwards ("NOLs")
     of approximately $34.2 million. Due to limitations on the annual amount of
     NOLs which can be utilized if certain changes in ownership occur, the
     Company's ability to utilize the NOLs generated from operations prior to
     the Initial Transaction may be limited. The NOLs expire in years through
     2019.


                                      F-21
<PAGE>   67


     Deferred tax assets and liabilities for fiscal 2000 and fiscal 1999 reflect
     the impact of temporary differences between the amounts of assets and
     liabilities for financial reporting and income tax reporting purposes.
     Temporary differences that give rise to deferred tax assets and liabilities
     at June 30, 2000 and June 30, 1999 are as follows:


<TABLE>
<CAPTION>
                                                                                    2000            1999
                                                                                ------------    -------------
Deferred tax assets:
<S>                                                                             <C>             <C>
    Net operating loss carryforwards .....................................      $ 12,646,085    $  2,225,980
    Accrued expenses .....................................................           327,080              --
    Accounts receivable reserves .........................................           339,811              --
    Investment basis difference ..........................................         1,919,160              --
                                                                                ------------    ------------
                Total gross deferred tax assets ..........................        15,232,136       2,225,980
    Less valuation allowance .............................................       (14,312,505)     (2,225,980)
                                                                                ------------    ------------
                Deferred tax assets, net of valuation allowance...........           919,631              --
                                                                                ------------    ------------

Deferred tax liabilities:
    Accelerated depreciation .............................................           851,272              --
    Other ................................................................            68,359              --
                                                                                ------------    ------------
                Total gross deferred tax liabilities .....................           919,631              --
                                                                                ------------    ------------

                Net deferred tax assets ..................................      $         --    $         --
                                                                                ============    ============
</TABLE>

     Net deferred tax assets at June 30, 2000 and June 30, 1999 have been fully
     offset by valuation allowances due to the lack of certainty as to the
     ultimate realization of any benefits resulting from such NOLs. Deferred
     tax assets resulting from net operating losses include $3,455,046 relating
     to NOLs the Company acquired through acquisitions.

     A reconciliation setting forth the differences between the effective tax
     rate of the Company and the U.S. statutory rate is as follows:

<TABLE>
<CAPTION>
                                                         2000                       1999                         1998
                                               ------------------------   ------------------------     ------------------------
<S>                                            <C>             <C>        <C>             <C>          <C>             <C>
Statutory federal income tax ................  $ 11,856,545        35%    $  1,741,102          34%    $  1,650,418          34%
State tax rate, net of federal ..............       677,517         2%              --          --               --          --
Non-deductible expense ......................    (3,902,583)      (11)%             --          --               --          --
NOLs acquired ...............................     3,455,046        10%              --          --               --          --
Increase in valuation allowance .............   (12,086,525)      (36)%     (1,741,102)        (34)%     (1,650,418)        (34)%
                                               ------------    ------     ------------    --------     ------------    --------
Effective rate, net .........................  $         --        --     $         --          --     $         --          --
                                               ============    ======     ============    ========     ============    ========
</TABLE>

16.  STOCKHOLDERS' EQUITY (DEFICIT)

     Pursuant to the Amended and Restated Certificate of Incorporation of
     eVentures Group, Inc. dated April 4, 2000, the Company is authorized to
     issue 80,000,000 shares, consisting of (i) 75,000,000 shares of Common
     Stock, par value $0.00002 per share, and (ii) 5,000,000 shares of Preferred
     Stock, par value $0.00002 per share.

     Common Stock

     At June 30, 2000, the Company had 51,989,745 shares of Common Stock issued
     and outstanding. For the period ended June 30, 1999, the Company had common
     stock with a $.01 par value, 3,600 shares authorized, issued and
     outstanding.


                                      F-22
<PAGE>   68

     Preferred Stock

     The board of directors is authorized to establish and designate series of
     Preferred Stock, to fix the number of shares constituting each series, and
     to fix the designations and the preferences, limitations, and relative
     rights, including voting rights, of the shares of each series. At June 30,
     2000 Preferred Stock consisted of the following:

          Series A Convertible Preferred Stock ($.00002 par value, 5,000 shares
          authorized, 0 shares issued and outstanding) Holders of Series A
          Convertible Preferred Stock are not entitled to vote, except as
          provided by law and are not entitled to receive any dividends. In the
          event of liquidation, holders of Series A Convertible Preferred Stock
          are entitled to receive $1,000 per share out of the assets available
          for distribution to the Company's stockholders.

          Series B Convertible Preferred Stock ($.00002 par value, 25,000 shares
          authorized, 4,500 shares issued and outstanding) Holders of Series B
          Convertible Preferred Stock are not entitled to vote, except as
          provided by law and are not entitled to receive any dividends. In the
          event of liquidation, holders of Series B Convertible Preferred Stock
          are entitled to receive $1,000 per share out of the assets available
          for distribution to the Company's stockholders under the same terms as
          the holders of any outstanding shares of Series A Convertible
          Preferred Stock.

               7,000 shares of Series B convertible Preferred Stock were issued
               on November 19, 1999, November 26, 1999 and December 15, 1999 at
               a price of $1,000 per share. The shares are convertible into
               common shares at a price of $13.80 per share, subject to certain
               anti-dilution adjustments. On March 13, 2000, 2,500 shares of
               Series B Preferred Stock were converted to 181,159 shares of
               common stock.

          Series C Convertible Preferred Stock ($.00002 par value, 30,000 shares
          authorized, 15,570 shares issued and outstanding) Holders of Series C
          Convertible Preferred Stock are not entitled to vote, except as
          provided by law and are not entitled to receive any dividends. In the
          event of liquidation, holders of Series C Convertible Preferred Stock
          are entitled to receive $1,000 per share out of the assets available
          for distribution to the Company's stockholders under the same terms as
          the holders of any outstanding shares of Series A and Series B
          Convertible Preferred Stock.

               15,570 shares of Series C Convertible Preferred Stock were issued
               in a series of transactions closed between January 6 and February
               10, 2000 to 8 accredited investors, at a price of $1,000 per
               share. The shares are convertible into Common Stock at a price of
               $17.90 per share, subject to certain anti-dilution adjustments.

     As a result of the beneficial conversion rates applied to the Series B and
     Series C Preferred Stock, the Company recorded an imputed non-cash
     preferred dividend totaling $10,407,954 in fiscal 2000.

     Stock Options

     On September 22, 1999 as part of the Agreement and Plan of Reorganization
     entered into in connection with the Initial Transaction (see Note 1), the
     Company adopted a new share option plan, the 1999 Omnibus Securities Plan,
     (the "Plan") for its employees, officers, directors and consultants. The
     share option plans of e.Volve and AxisTel were terminated. The Plan
     provides for the grant of incentive stock options and non-qualified stock
     options. The terms of the options are set by the Company's board of
     directors. The options expire no later than ten years after the date the
     stock option is granted. The number of shares authorized for grants under
     the Plan is 15% of the total outstanding common stock, provided that no
     more than 4 million options can be "incentive" stock options. Additionally,
     during fiscal 2000 the Company issued options outside of the Plan.


                                      F-23
<PAGE>   69

     A summary of activity for the year ended June 30, 2000 is presented below:

<TABLE>
<CAPTION>
                                                     PLAN               NON-PLAN
                                             -------------------  ---------------------
                                                        WEIGHTED              WEIGHTED
                                                        AVERAGE               AVERAGE
                                              NUMBER    EXERCISE   NUMBER     EXERCISE
                                             OF SHARES   PRICE    OF SHARES    PRICE
                                             --------- ---------  ---------  ----------
<S>                                          <C>        <C>       <C>         <C>
Options Granted
    At Fair Market Value .................   3,282,997   $15.34   9,493,000   $   22.89
    Below Fair Market Value ..............     766,666     8.13     191,574       12.00
Options Exercised ........................          --       --          --          --
Options Expired ..........................          --       --          --          --
                                             ---------   ------   ---------   ---------
Options Outstanding at June 30, 2000 .....   4,049,663   $13.98   9,684,574   $   22.68
                                             =========   ======   =========   =========

Options exercisable at June 30, 2000 .....     450,000   $11.50          --   $     --
                                             =========   ======   =========   =========

Weighted average fair value of
    options granted during the year ......               $ 8.14               $   17.66
                                                         ======               =========
</TABLE>

     At June 30, 2000, the range of exercise prices, weighted average exercise
     price and weighted average remaining contractual life for options
     outstanding are as follows:

<TABLE>
<CAPTION>
                                                                        WEIGHTED AVERAGE            WEIGHTED AVERAGE
                                                OPTION PRICE                EXERCISE                    REMAINING
                     NUMBER OF SHARES              RANGE                     PRICE                  CONTRACTUAL LIFE
                     ----------------         ----------------          -----------------           -----------------
<S>                        <C>                <C>                       <C>                         <C>
PLAN                       408,332            $ 2.50 to $ 5.00               $ 3.52                     9.23 years
                         2,391,667            $ 5.01 to $10.00               $ 9.83                     9.24 years
                            93,164            $10.01 to $15.00               $14.42                     9.37 years
                           201,500            $15.01 to $20.00               $17.88                     9.96 years
                           100,000            $20.01 to $25.00               $23.50                     9.60 years
                           855,000            $25.01 to $28.50               $28.50                     9.71 years

NON-PLAN                   191,574            $10.01 to $15.00               $12.00                     9.69 years
                           200,000            $15.01 to $20.00               $18.00                     9.80 years
                         9,293,000            $20.01 to $25.00               $23.00                     9.76 years
</TABLE>

     The Company follows APB 25 in accounting for its stock options, and,
     accordingly, recorded deferred compensation of $3,311,250 equal to the
     intrinsic value of options granted to employees that had an exercise price
     lower than the market price of the underlying stock on the day of the
     grant. The deferred compensation is being amortized over the related
     vesting periods and the amortization is included in selling, general and
     administrative expenses in the statement of operations. During fiscal 2000
     amortization of deferred compensation totaled $2,036,771. At June 30, 2000
     the Company had $1,274,479 in remaining deferred compensation.

     The Company has adopted the disclosure-only provision of SFAS 123,
     "Accounting for Stock Based Compensation." SFAS 123 requires pro forma
     information be presented as if the Company had accounted for the stock
     options granted during fiscal 2000 using the fair value method. The fair
     value for these options was estimated as of the date of grant using the
     Black-Scholes option-pricing model with the following assumptions:


                                      F-24
<PAGE>   70

<TABLE>
<S>                                       <C>
                Expected volatility........60.0%
                Risk-free interest rate.....6.1%
                Dividend yield..............0.0%
                Expected life (years).......8.3
</TABLE>

     For purposes of pro forma disclosure, the estimated fair value of the
     options is amortized to expense over the options' vesting period. The
     Company's pro forma information relative to the Plan is as follows:

<TABLE>
<CAPTION>
PRO FORMA NET LOSS                                                         FISCAL 2000
                                                                          -------------
<S>                                                                       <C>
      Net loss available to common shareholders as reported.............  $(44,283,794)
      Additional compensation expense under SFAS 123....................   (17,471,952)
                                                                          ------------

                                                                          $(61,755,746)
                                                                          ============
      Pro forma net loss per share......................................  $      (1.64)

</TABLE>

     The share option plan of e.Volve was terminated as part of the Agreement
     and Plan of Reorganization entered into in connection with the Initial
     Transaction (see Note 1). The pro forma information relative to the options
     outstanding pursuant to e.Volve's share option plan at June 30, 1999 is as
     follows:

<TABLE>
<CAPTION>
PRO FORMA NET LOSS                                                        FISCAL 1999
                                                                          -----------
<S>                                                                       <C>
      Net loss as reported..............................................  $(5,120,887)
      Additional compensation expense under SFAS 123....................     (453,000)
                                                                          -----------
                                                                          $(5,573,887)
                                                                          ===========

      Pro-forma net loss per share......................................  $     (0.49)
</TABLE>

     Common Stock Issued in Settlement of Accounts Payable

     During fiscal 2000, the Company issued 426,799 shares of common stock to
     three vendors for settlement of accounts payable. The shares were issued at
     a discount below market value and resulted in a charge to selling, general
     and administrative expense of $2,764,026.

     Warrants and Options Issued in Connection with the iGlobal Acquisition

     In connection with the iGlobal acquisition on March 10, 2000, the Company
     issued 139,378 warrants to purchase shares of common stock of the Company
     to holders of iGlobal warrants. The warrants have exercise prices of
     $0.01384 and $9.6899 and expire in fiscal years 2004 through 2006. The fair
     value of the warrants on March 10, 2000 of $3,829,325 has been included in
     the initial cost of the iGlobal acquisition. Additionally, the Company
     issued 209,732 options to purchase eVentures stock in exchange for fully
     vested options of iGlobal. The fair value of the options on March 10, 2000
     of $5,467,561 has also been included in the initial cost of the iGlobal
     acquisition. The fair value of the warrants and options was determined
     using the Black-Scholes option-pricing model.

     Call Options

     During fiscal 2000, eVentures entered into Issuer Stock Option Agreements
     ("Call Options") with two senior officers of the Company. The Call Options
     grant eVentures the option to acquire a combined 700,000 shares of common
     stock of the Company at exercise prices of $15 to $20 per share based on
     the


                                      F-25
<PAGE>   71

     date exercised. The Call Options expire in September 2001. The Company has
     accounted for the purchase of the Call Options as an equity instrument and,
     accordingly, recorded a reduction to additional paid in capital of
     $200,000, the combined purchase price of the call options.

17.  RELATED PARTY TRANSACTIONS

     Sales to Affiliates

     During fiscal 2000, sales to PhoneFree and ICT totaled $155,461 and
     $47,225, respectively.

     Administrative Expenses

     In September 1999, the Company entered into a Management Services Agreement
     with HW Partners to perform various operational and administrative services
     for eVentures. Barrett Wissman, eVentures' President, is the sole manager
     of HW Partners. eVentures incurred $105,525 in expense pursuant to this
     agreement during fiscal 2000.

     In February 2000, eVentures paid a former majority shareholder of e.Volve
     $105,000 for consulting services.

     During the years ended June 30, 1999 and 1998, the Company shared office
     space, payroll and certain other administrative expenses with a related
     party. The Company paid $156,597 and $676,227 for the years ended June 30,
     1999, and 1998 respectively, with respect to such expenses.

     Notes Receivable From Shareholders

     In March 2000, 15 employees of iGlobal exercised 524,436 options to
     purchase common stock of iGlobal by the use of a note payable to iGlobal.
     The aggregate notes receivable of $1,048,872 bears interest at 8.5%, are
     payable on April 15, 2001, are secured by the common stock of eVentures
     received in the acquisition (189,426 common shares), and are fifty percent
     (50%) personally guaranteed by each maker.

     Notes Receivable From Affiliate

     During June 2000, eVentures advanced $100,000 to CallRewards pursuant to
     two promissory notes. The promissory notes are due on demand and bear
     interest at the prime rate plus 1.25%. The prime rate at June 30, 2000 was
     9.5%. Subsequent to year-end, as a result of CallRewards merging with a
     subsidiary of PhoneFree, these notes were converted into additional shares
     of PhoneFree (see Note 8).

     Equipment Purchase

     On April 3, 2000, in connection with the relocation of eVentures' corporate
     offices, eVentures entered into a letter agreement with certain of its
     executive officers for leasehold improvements, fixtures and other costs
     associated with the finish out of eVentures' new offices. The total payment
     pursuant to this letter agreement was $1.5 million, representing the actual
     costs paid by these executive officers for such items.


                                      F-26
<PAGE>   72

18. PRO FORMA FINANCIAL DATA (UNAUDITED)

     In September and October 1999, the Company acquired all of the outstanding
     shares of AxisTel and the remaining 33.3% of e.Volve (see Note 1). On March
     10, 2000 the Company acquired 100% of iGlobal (see Note 9).

     Set forth below is the Company's unaudited pro forma condensed statement of
     operations for the fiscal years ended June 30, 2000 and 1999 as though the
     above transactions had occurred on July 1, 1998:

<TABLE>
<CAPTION>
                                                                  For the Year Ended June 30,
                                                                  ---------------------------
                                                                      2000           1999
                                                                  ------------    -----------
<S>                                                               <C>             <C>
Revenues...................................................       $  62,149,705   $ 36,661,823
Net loss available to common shareholders..................       $ (61,306,411)  $(32,400,283)
Net loss per share.........................................       $       (1.18)  $      (0.71)
</TABLE>

     The unaudited pro forma results are not necessarily indicative of either
     actual results of operations that would have occurred had the transactions
     referred to above occurred on July 1, 1998, respectively, or of future
     results.


                                      F-27
<PAGE>   73
                             eVENTURES GROUP, INC.
                                  SCHEDULE II
                 VALUATION AND QUALIFYING ACCOUNTS AND RESERVES


<TABLE>
<CAPTION>
                                              BALANCE     CHARGED                  BALANCE
                                                AT        TO COSTS                    AT
                                             BEGINNING      AND       DEDUCTIONS/   END OF
                                             OF PERIOD    EXPENSES     WRITEOFFS    PERIOD
                                             ---------   ----------   -----------  --------
<S>                                         <C>         <C>          <C>           <C>
ALLOWANCE FOR DOUBTFUL ACCOUNTS:

  Year ended June 30, 1998.............      $    --      $     --     $      --   $     --
  Year ended June 30, 1999.............      $    --      $ 12,170     $ (12,170)  $     --
  Year ended June 30, 2000.............      $    --      $793,900     $      --   $793,900
</TABLE>


                                      FS-1
<PAGE>   74

                                INDEX TO EXHIBITS

<TABLE>
<CAPTION>
                                                                                                  FILED
 EXHIBIT NUMBER                             DESCRIPTION                                          HEREWITH
 --------------                             -----------                                          --------

<S>               <C>                                                                            <C>
      4.8         Registration Rights Agreement, dated as of May 26, 2000, by and                   X
                  among eVentures Group, Inc., Andrew Pakula and Laura Berland.

      4.9         Registration Rights Agreement, dated as of June 16, 2000,                         X
                  between eVentures Group, Inc. and U.S. Telesource.

     10.26        Letter Agreement, dated April 3, 2000, between Marcus &                           X
                  Partners, L.P. and eVentures Group, Inc.

     10.44        Employment Agreement, dated as of March 10, 2000, between IGS                     X
                  Acquisition Corporation and David N. Link.  (compensatory
                  agreement)

     10.49A       Form of New Directors and Officers Indemnification Agreement                      X

     10.49B       Schedule of Parties to New Directors and Officers                                 X
                  Indemnification Agreement.

     10.50A       Form of Incumbent Directors and Officers Indemnification
                  Agreement.                                                                        X

     10.50B       Schedule of Parties to Incumbent Directors and Officers
                  Indemnification Agreement.                                                        X

      21.1        Subsidiaries of eVentures Group, Inc.                                             X

      23.1        Consent of BDO Seidman, LLP                                                       X

       24         Power of Attorney                                                                See
                                                                                                Signature
                                                                                                  pages

      27.1        Financial Data Schedule                                                           X
</TABLE>



                                       44