SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549


                                  FORM 10-KSB/A

[X]    Annual Report Pursuant to Section 13 or 15(d) of the Securities Exchange
       Act of 1934 FOR THE FISCAL YEAR ENDED DECEMBER 31, 2000
[ ]    Transition Report under Section 13 of 15(d) of the Securities Exchange
       Act of 1934

For the transition period from ___________ to __________


                        Commission file number 001-14827


                      EDUCATIONAL VIDEO CONFERENCING, INC.
                 (Name of small business issuer in its charter)

              Delaware                                           061488212
   (State or other jurisdiction of                           (I.R.S. Employer
   incorporation or organization)                           Identification No.)

         35 East Grassy Sprain Road, Suite 200, Yonkers, New York 10710
               (Address of principal executive offices) (Zip code)

         Issuer's telephone number, including area code: (914) 787-3500

         Securities registered under Section 12(b) of the Exchange Act:

         TITLE OF EACH CLASS           NAME OF EACH EXCHANGE ON WHICH REGISTERED
            Common stock,                        Boston Stock Exchange
      $.0001 par value per share                 Pacific Exchange, Inc.

         Securities registered under Section 12(g) of the Exchange Act:

                                  Common stock,
                           $.0001 PAR VALUE PER SHARE
                                (Title of class)


     Check whether the issuer: (1) filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such
shorter period that the registrant was required to file such reports), and (2)
has been subject to such filing requirements for the past 90 days.
Yes  X   No
   ----    ----

     Check if there is no disclosure of delinquent filers in response to Item
405 of Regulation S-B contained in this form, and no disclosure will 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-KSB/A or any amendment to this form 10-KSB/A. __________

     The issuer's revenues for its most recent fiscal year were $8,658,846.


<PAGE>

     As of March 19, 2001, the aggregate market value of the issuer's common
equity held by non-affiliates was $10,531,500, based on the closing price of
$2.344 for its common stock on The Nasdaq SmallCap Market on March 19, 2001.

     4,492,961 shares of the issuer's common stock were outstanding as of March
19, 2001.

Documents Incorporated by Reference: None

Transitional Small Business Disclosure Formats (check one): Yes     No  X
                                                                ---    ---

                                       ii


<PAGE>


                                TABLE OF CONTENTS

                                                        PAGE

PART I.........................................................................1

Item 1. Description of Business................................................1
Item 2. Description of Property...............................................22
Item 3. Legal Proceedings.....................................................23
Item 4. Submission of Matters to a Vote of Security Holders...................23

PART II.......................................................................23

Item 5. Market for Common Equity and Related Stockholder Matters..............23
Item 6. Management's Discussion and Analysis of Financial Condition
        and Results of Operations.............................................23
Item 7. Financial Statements..................................................30
Item 8. Changes in and Disagreements with Accountants on Accounting
        and Financial Disclosures.............................................30

PART III......................................................................31

Item 9. Directors, Executive Officers, Promoters and Control Persons;
        Compliance with Section 16(a) of the Exchange Act.....................31
Item 10. Executive Compensation...............................................34
Item 11. Security Ownership of Certain Beneficial Owners and Management.......37
Item 12. Certain Relationships and Related Transactions.......................38
Item 13. Exhibits and Reports on Form 8-K.....................................38

INDEX TO FINANCIAL STATEMENTS................................................F-1

EXHIBIT INDEX................................................................E-1


                                       1




<PAGE>



                                     PART I

ITEM 1.  DESCRIPTION OF BUSINESS.

  GENERAL

     We have two business segments. We aggregate educational and training
content provided by others and deliver it, to remote locations, synchronously
using interactive video conferencing technologies, and asynchronously using the
narrow band Internet. These technologies include our broadband network design
and enabling technology that permits video conferencing at approximately 30
frames per second (broadcast quality). We also provide on campus education and
training, currently through Interboro Institute, a two-year college located in
New York City. Our campus education segment provided approximately 87% of our
revenues during 2000. For this and other reasons discussed below, in the first
quarter of 2001, we decided to place greater emphasis on growing this segment of
our business through internal expansion and acquisition. This change in
emphasis, has been materially influenced by the following:

               o  The deployment of our broadband network design and visual
                  communications technology and related marketing and sale of
                  our aggregated higher education content and broadband
                  technology continues to be stalled primarily due to delays by
                  major communications carriers in providing broadband services.

               o  Our ability to sell and license our network technology, and to
                  market and sell our aggregated corporate training and
                  professional development content to corporations, has also
                  been substantially impeded by the global economic slow down,
                  the curtailment of infrastructure and network purchases by
                  telecommunications carriers and other businesses and the
                  financial difficulties of DSL providers, such as Northpoint
                  Communications.

               o  Our co-marketing alliance with Verizon, Excite@Home, and
                  others have not produced material revenue for us, primarily
                  due to the factors referred to in the two bullet points above
                  and also to other factors specific to each alliance.

               o  We need to conserve capital by reducing our expenses and by
                  using our limited resources to capitalize on our proven
                  strengths in order to maximize our potential for revenue
                  growth and profitability.

               o  We believe the prospects for raising additional capital for
                  growth are currently much better for our campus education
                  segment.

               o  We have been presented with, what we believe, is a viable
                  opportunity to significantly expand our campus education
                  segment by acquiring control of International Business Schools
                  Inc. IBS, is a privately held operator and franchiser of
                  post-secondary business career schools in Canada that has been
                  struggling under a debt burden resulting from a management
                  leveraged buy-out in October 1999. Additional brief disclosure
                  regarding IBS is included below. We are working to close
                  agreements we have with IBS shareholders and, unless and until
                  such closing occurs, we believe that we should not make the
                  detailed

                                       1
<PAGE>

                  disclosures that are necessary for investors to make
                  an informed decision regarding this transaction and its
                  potential impact on us. If we are unable to close the IBS
                  transaction, we will continue to seek opportunities to acquire
                  other campus schools.

     We were organized in March 1997. We completed an underwritten initial
public offering of our common stock in the first quarter of 1999. Our principal
executive offices are located at 35 East Grassy Sprain Road, Suite 200, Yonkers,
New York 10710 and our telephone number is (914) 787-3500.

     Reference is made to the Risk Factors below.

DEMAND FOR CAREER EDUCATION

     A number of national, economic, demographic and social trends are
contributing to the growing demand for career-oriented education.

     RECOGNITION OF NEED FOR TRAINING AND PROFESSIONAL DEVELOPMENT EDUCATION

     We believe that employers recognize the need for continuous enhancement of
employee education and skill levels and that individuals recognize that training
and professional development are essential to acquiring, maintaining and
advancing their employment and, consequently, their standard of living.

     During economic slow downs we believe corporate budgets are typically
reduced for technology infrastructure, and more so for higher education and
internal training of employees.

     We believe that enrollment for post-secondary, campus-based schools
increases during economic slow downs because individuals have greater motivation
and time to enhance their academic and professional qualifications in order to
compete for jobs.

     FUNDING

     Corporate, federal and state tuition assistance programs are available to
pay training and tuition costs. In addition to budgets for internal training and
development, many corporations have limited budgets to pay for their employees'
higher education through tuition reimbursement. Typically, these plans reimburse
employees or pay for courses given by accredited academic institutions as long
as the course has relevance to the employee's job, and the employee achieves a
minimum grade. While payment for providing higher education content to employers
of corporations is conditional, indirect (through the academic institution) and
very slow, payment for corporate training content is usually not conditional and
the content provider is generally paid directly.

     INCREASING DEMAND FOR CONVENIENT ACCESS TO EDUCATION AND TRAINING

     Burdened by the competing and stressful time demands of work and family,
students increasingly want education and training that can be easily accessed at
conveniently located campuses or while they are at work or at home.

     ADDITIONAL SOURCES OF REVENUE

     Education providers are seeking additional sources of revenue and recognize
that increasing adult student enrollment, using distance learning technologies,
is an important opportunity for economic growth.

                                       2
<PAGE>

CAMPUS EDUCATION AND TRAINING

     INTERBORO

     Since January 14, 2000, we have owned and operated Interboro Institute, a
two-year college in New York City that is accredited by the New York State Board
of Regents. Interboro offers degree programs leading to the Associate of
Occupational Studies Degree in business administration (accounting and business
management), ophthalmic dispensing, paralegal studies, administrative
secretarial arts (executive, legal correspondence or medical secretary) and
security services and management. Interboro operates as a college campus and
will also provide content for remote delivery by us after requisite regulatory
approvals are obtained. Most of Interboro's student body consists of
non-traditional students who pay their tuition using federal (Pell) and New York
State (TAP) tuition grants. There are approximately 900 students enrolled at
Interboro for the Spring Semester.

     Some of our accomplishments since we acquired Interboro include:

               o  assembling a new senior management team, with significant
                  business and educational experiences, including a president
                  and compliance officer;

               o  satisfying all audit obligations and payables, necessary to
                  restore Interboro to a pre-pay status for TAP and PELL
                  financial aid programs;

               o  strengthening Interboro's academic programs, including
                  curriculum revision, new faculty hires and library and
                  computer lab upgrading;

               o  increasing enrollments over comparable terms in 1999;

               o  renewing activity in professional associations;

               o  new marketing strategies; and

               o  incorporating new retention strategies.

     Interboro's plans for the immediate future include:

               o  enrolling the first class of students at Interboro's first
                  off-site location, in Flushing, New York, with a capacity for
                  approximately 500 full-time students.

               o  offering Associate Applied Sciences (AAS) degrees in addition
                  to the AOS degrees now offered by Interboro. Requests for
                  degree authority in computer networking and programming were
                  filed with the New York State Education Department in February
                  2001. AAS degrees carry a higher percentage of liberal arts
                  and sciences and are more easily accepted for transfer to
                  baccalaureate schools than the AOS degree.

               o  significantly revising the secretarial science and security
                  majors to include a major emphasis on computing and
                  technology;

               o  creating a new insurance and financial services, certificate
                  and degree program; and

                                       3
<PAGE>


               o  seeking Middle States Association accreditation.

     POTENTIAL ACQUISITION OF CONTROL OF IBS

     The IBS business model and marketing strategies are very similar to those
of Interboro. IBS is one of the largest providers of private career education
and training in Canada. IBS owns, operates and franchises approximately 50
post-secondary business career schools located throughout Canada.

     IBS operates approximately 30 owned schools and franchises 20 schools.
These schools operate under the trademarks and brand names: "Toronto School of
Business", "CompuCollege School of Business", "The Career College", "Career
Canada College" and "Success CompuCollege." The IBS curriculum consists of a
wide range of practical career programs in the areas of business administration,
administrative studies, information technology and health care sciences. In
2000, IBS schools operated approximately 400 classrooms and enrolled
approximately 14,000 students (8,000 in its owned schools and 6,000 in its
franchised schools). The majority of IBS students depend on government
assistance programs to pay their tuition.

DISTANCE EDUCATION AND TRAINING

     COURSE OFFERINGS AND DELIVERIES

     We aggregate accredited college courses and degree programs as well as
corporate training, professional development and continuing education programs.
As a content aggregator and distributor, we presently have contracts that allow
us to offer more than 3,200 courses, 260 degree and certificate programs and
well over 500 professional development and continuing education courses from
approximately 20 content providers. Since initially delivering courses in
February 1998, through December 31, 2000, we have delivered 632 courses provided
by six content providers that have resulted in 13,505 completed student course
registrations. In 2000, we delivered synchronously to 53 sites located in 20
cities. In 2000, we have completed delivery via the Internet to129 locations, of
134 asynchronous courses provided by two content providers representing 636
student course registrations.

     Synchronous two-way video conferencing permits the instructor to see and
hear the students as the students see and hear the instructor and the students
see and hear each other. The instructor and the students can also share data at
multiple locations. We are currently delivering synchronously over high-speed
point-to-point or multi-point digital data lines (T-1 or ISDN).

     We also distribute content asynchronously via the narrow band Internet.
Asynchronous delivery allows self-paced learning and limited interactivity. The
student can choose from a variety of media, complete the coursework according to
the class syllabus or outline, then submit the completed material to the
instructor for evaluation. Unlike synchronous delivery, asynchronous courses can
generally be accessed anytime, anywhere.

     Synchronous and asynchronous online learning has opened many options
including the ability to download course content from a virtual classroom using
a Web browser; interaction with instructors and fellow students via chat rooms,
e-mail or audio; participation in videoconferencing-based sessions; and access
to online labs, simulations and real-time updates to course content. In
addition, offline computer based training, using CD-Roms and audio and video
cassettes are readily available.

                                       4

<PAGE>


     NETWORK TECHNOLOGY

     We have designed a broadband network that enables us to offer high-speed
Internet Protocol communication for video, audio and data transmission, in
several different formats, between numerous parties, simultaneously, at
diversified sites. Our network design includes proprietary software,
communications, network infrastructure and hardware. This combination allows us
to transmit video over the network at 30 frames per second (broadcast quality)
and control a multi-point environment.

     Our broadband network design uses a combination of proprietary software,
ATM switches, MCU bridges and high-speed communication lines leased from major
carriers. We transmit signals by creating a virtual circuit from the point of
origin directly to the customer's premises while controlling the bandwidth at
416Kb. The network allows us to connect with end-users whether they use ATM,
DSL, or cable modem.

     We spent approximately $2,000,000 in 2000, $1,150,000 in 1999 and
approximately $80,000 in 1998 in developing our broadband network design,
including approximately $2,200,000 for equipment purchases.

     DELAYS IN BROADBAND DEPLOYMENT

     Throughout 2000, our attempts to complete deployment of our broadband
network design at strategically located hubs in New York, Virginia and
California, were frustrated by our inability to obtain broadband connections.
Verizon was unable to install the required lines until March 2001, a seven-month
delay from the scheduled date in early September 2000. We elected not to
activate our Virginia and California hubs until Excite@work is able to provide
connections from its national network to customers we obtain. This final
connection is often referred to as the last mile. Connecting to the Excite@work
national network was a key component of our strategy. Excite@work is trying to
resolve this last mile issue, but there can be no assurance it will, or that we
will find an alternative for our plan to connect to a national broadband
infrastructure.

     We currently anticipate that, barring further delay in obtaining
appropriate telecommunication services, we will connect our equipment located at
a hub in New York City to Verizon's broadband network by the end of our second
quarter 2001. Once connected, we will depend on Verizon for DSL last mile line
connections from its network to our customers. In the event delays in obtaining
last mile connections from Verizon do not abate, we may be required to seek
other providers at the risk of damaging our co-marketing alliance with Verizon.

     Our inability to provide a separate and complete network solution for
education, training and communication has greatly impeded our efforts to obtain
contracts and sell our aggregated synchronous content. Corporate customers are
generally not receptive to using their existing broadband networks for reasons
that include:

               o  our network design would use a significant amount of bandwidth
                  that could impair other network uses;

               o  importing our content could jeopardize the integrity of the
                  customer's firewall;

               o  a problem with our technology could cause damage to or shut
                  down the customer's broadband network.


                                       5
<PAGE>


         STRATEGY

     Our current plan for our distance learning sector is based on the following
strategies:

               o  sell or license our technology to corporations that want to
                  use it for their own internal communications solutions, with
                  or without our aggregated content, with upfront charges for
                  equipment and monthly fees for equipment and usage;

               o  market our technology and services to leads provided by
                  others, such as Verizon, and refrain from engaging in broad
                  marketing campaigns;

               o  initially target corporations, municipalities and schools that
                  can most easily connect to our New York hub;

               o  license our technology to international telecommunications
                  carriers, where their networks permit connectivity without
                  having to install last mile connections, for an upfront
                  payment and reoccurring usage fees;

               o  obtain new co-marketing partners to sell our technology and
                  content; and

               o  obtain new strategic partners to help us service our
                  contracts.

     VIDEO CONFERENCING SYSTEMS

     The hardware for our interactive video conferencing systems is generally
off-the-shelf equipment that is modified by our proprietary software. The basic
end-user equipment involves either video kits or teamstations, depending on the
requirements of the user. Both are functionally identical on our broadband
network. The video kit is installed on a Pentium II or III (running at 450 mhz
or higher), desktop computer, loaded with our proprietary software. The
teamstations are also computer-based and have a larger monitor in order to
facilitate use by larger groups.

     In addition to the standard voice, video and data transmission, auxiliary
equipment connected to our video conferencing equipment provides a number of
other features. For example, the instructor can display visual presentations to
the class using a separate document video camera or a VCR unit can be installed
and used for pre-taped instructional material. A caller add-on feature can also
be used to invite a subject matter expert to interact verbally with the class
without having to be physically present.

     Our proprietary software applications dictate the manner in which the video
conferencing takes place. The software is a user friendly, Windows NT based,
program developed for us. The software varies depending upon the application and
can be modified. The software is icon activated.

     CUSTOMERS

     EVCI is offering and delivering educational and training content to a
limited number of corporate customers, outreach programs and school districts.

     In 2000, we delivered higher education courses principally to employees of
Citibank, N.A., American International Group, Inc. and Merrill Lynch & Co., Inc.

     CORPORATE CUSTOMER AGREEMENTS. Generally, our agreements with our corporate
customers have terms of three to five years and are subject to automatic
extensions. EVCI delivers courses over its corporate customers' existing
installed base of video

                                       6
<PAGE>

conferencing room systems or video conferencing equipment supplied by us. Our
recent agreements require an upfront negotiated fee for equipment.

     OUTREACH PROGRAMS. In 2000, economically disadvantaged students who
qualified for substantial federal and state tuition assistance received
educational content provided by Mercy College and Touro College. These course
were delivered by us to churches, community centers and schools, located in the
New York City and Rochester metropolitan areas. We do not expect that we will
continue to offer these programs from Mercy College and Touro College beyond the
third quarter of this year because revenues have not generated adequate margins.

     We believe that courses offered to outreach programs by Interboro will
generate satisfactory margins. Regulatory approval is required for Interboro to
offer distance learning courses.

     During 2000 we began, offering educational and training and professional
development content to, among others, disabled Americans and, existing and
potential customers of Verizon.

     HIGHER EDUCATION PROVIDERS

     During 2000, we had, and continue to have, 10 colleges and universities
that can provide us with higher education content. A brief description of these
providers and their course and program offerings follows:

     Adelphi University offers courses given by its School of Management and
Business leading to a Bachelor of Business Administration, with a specialization
in finance, human resources or marketing, and a Masters of Business
Administration, with specialization in, among other areas, accounting, banking
and financial markets, corporate finance and investments, international
business, human resource management and personnel administration.

     Clemson University's Office of Off-Campus, Distance and Continuing
Education offers continuing education courses that include management,
engineering, manufacturing, textiles, professional development for women and
managing for diversity.

     Concordia College offers degree courses leading to a Bachelor of Science in
Business Administration and Bachelor of Arts in Behavioral Science.

     Golden Gate University offers all of its undergraduate, graduate and
doctoral degree programs and continuing education programs.

     Manhattan College offers courses leading to a Master of Science degree in
electrical, computer and mechanical engineering.

     Mercy College offers courses leading to a Bachelor of Science in Business
with a specialization in banking, direct marketing, finance, general business,
international business, marketing or management. Mercy College also offers
courses leading to a Master of Science in direct marketing and a Master of
Business Administration. In addition, we recruit students who want to
participate in Mercy College's Merlin program, an Internet asynchronous course
delivery system.

     St. John's University College of Business offers courses leading to a
Bachelor of Science and Master of Business Administration degrees, with
specializations in finance, international business or marketing as well as
non-credit courses in business.

     The College of Insurance, now part of St. John's University, offers courses
leading to undergraduate and graduate degrees in insurance and risk management,
along with courses leading to insurance certification or designation, with
specializations in property and casualty, reinsurance, ocean marine, life-health
and risk management. It also offers preparation courses for insurance licensing
exams.

                                       7
<PAGE>

     Touro College offers both non-degree and degree courses in business
management and administration, computer science, education, human services,
liberal arts and sciences, social sciences and psychology.

     Touro University International offers courses leading to a Bachelor of
Science in Business Administration, with specializations in finance, general
management, internal auditing, health care management, information technology
and tourism and hospitality. Touro University International also offers degree
courses leading to a Master of Business Administration, and a Ph.D. in Business
Administration or Health Sciences.

     During 2000, we delivered content remotely that was provided by Adelphi
University, Mercy College, The College of Insurance, Touro University
International and Touro College. We did not offer courses provided by our other
content providers principally because of the unavailability of broadband
connections which thereby prevented us from obtaining students for synchronous
courses.

     TRAINING AND PROFESSIONAL DEVELOPMENT CONTENT PROVIDERS

     We have approximately eight training and professional development
providers. A brief description of the most significant of these providers and
their course offerings follows:

     COMPUTER GENERATED SOLUTIONS, INC. Under a multi-year co-marketing and
education provider agreement, made in February 2000, CGS is marketing our
services and we are marketing CGS's information technology corporate training
programs. As a premier IBM business partner, and Microsoft solutions provider,
CGS offers over 250 instructor-led courses, Web-based training, multi-media
computer based training and custom-developed applications courses.

     DEARBORN INSTITUTE. Under its agreement with Kaplan Educational Centers,
Inc., EVCI can offer Dearborn securities and insurance licensing preparation,
training and professional development courses.

     TELECOMMUNICATIONS RESEARCH ASSOCIATES. Under a multi-year agreement made
in 2000, TRA agreed to bundle our content delivery services with its offering of
high quality communications courses to telecommunications professionals and we
agreed to introduce TRA to companies outside of its client base.

     EDUCATION PROVIDER AGREEMENTS

     EVCI's education provider agreements generally have terms of three to five
years and are subject to automatic extensions and, in addition to the services
provided by EVCI, typically include the following terms.

     The education provider obtains the necessary licenses and accreditation for
course and program offerings.

     Generally, the education provider is required to schedule courses between
8:00 A.M. and 11:00 P.M. Monday through Friday and 9:00 A.M. to 3:00 P.M. on
Saturdays. The courses to be delivered by us and their time slots are determined
each semester by us and the education provider. By adding Golden Gate University
and other geographically dispersed education providers, we will be able to
offer, synchronously, more course hours per day to students in other time zones
after we have broadband delivery capability in California.

     For our services, we receive a fee based on a percentage of tuition
payments actually received by the education provider.

                                       8
<PAGE>

     Most of our education providers have agreed not to offer courses via
competing interactive video conferencing systems to our corporate customers and
their employees during the term of the education provider's agreement with us
and for one year after its termination.

     SERVICES

     We differentiate our services from other distance learning companies by
functioning as a telecommunications, technology and marketing bridge between our
customers and education providers. Our staff, and increasingly third party
strategic partners selected by us, will provide comprehensive services to
address the technology and other needs of our customers that will encompass the
technical, marketing, educational and administrative services necessary to:

               o  provide and install video conferencing equipment at education
                  providers;

               o  install or enhance the video conferencing systems of our
                  customers when required;

               o  provide the multi-conferencing units required to permit live,
                  interactive multimedia communications between multiple
                  parties;

               o  arrange for high speed data lines for signal transmission;

               o  train users how to communicate effectively using interactive
                  video conferencing systems (including by using charts, graphs,
                  pictures, video tapes and presentation software) so as to
                  maintain a student-centered, active learning environment;

               o  determine course and degree program preferences;

               o  offer courses and degree programs from multiple education
                  providers; and

               o  recruit and enroll students;

               o  coordinate the delivery of courses from the education
                  providers to the students.

     MARKETING AND SALES

     EVCI's president, chief operating officer and vice president of sales and
marketing are responsible for the development of EVCI's marketing strategies and
the conduct of sales activities.

     Long-term relationships with customers, education providers and
co-marketing partners are principally pursued by means of referrals and
introductions by co-marketing partners and independent consultants, and
demonstrations of EVCI's video conferencing delivery method. For the foreseeable
future, we expect that our marketing and sales activities will principally
involve targeting specific opportunities obtained by our co-marketing partners
and that we will not engage in broad marketing campaigns.

     CO-MARKETING AGREEMENTS.

     Obtaining and implementing co-marketing agreements, such as those described
below, were significant components of our 2000 strategy.

     VERIZON. A multi-year co-marketing agreement entered into in September
1999, provides for marketing accredited college courses, degree programs

                                       9
<PAGE>

and other corporate training programs through synchronous, multi-point video
conferencing technology to both existing and potential users of Verizon's
broadband lines. A key component of our decision in 2000 to significantly
increase emphasis on providing corporate training and development content and to
hire more our sales and technical staff was our expectation for prospective
business as a result of our co-marketing agreement with Verizon. EVCI and
Verizon believed the cost savings for corporations receiving EVCI content and
proprietary technology and the convenience to their employees, resulting from
the reduction of travel time, would justify the cost of building out broadband
networks for Verizon corporate customers. Accordingly, by September 2000 we had
trained approximately 900 Verizon sales and customer service representatives to
sell the Verizon/EVCI Remote Learning Solutions. However, the Verizon internal
organizational issues resulting from the merger of Bell Atlantic and GTE, the
Verizon strike and Verizon's delay in providing line services materially impeded
progress of our co-marketing activities with Verizon. Verizon is currently
placing less emphasis on its agreement with us than it originally anticipated.

     EXCITE@HOME. This agreement contemplates marketing to Excite@Home cable
subscribers. Bandwidth availability has been a continuing problem that has
prevented this agreement from being implemented. We are working with Excite to
try to solve the problem but are not now optimistic about the prospects for the
agreement.

     WE MEDIA, INC. We Media has advertised our services in their monthly
magazine and on their web site. This has not produced any material results due
in part to a technology problem with their web site that did not allow potential
students to be passed on to EVCI. In addition, many of the students that started
the enrollment process were at locations that were not serviced by existing
broadband lines and asynchronous delivery was not in great demand. In addition,
we believe We Media internal management changes and the overall slow acceptance
of interactive video conferencing contributed to the poor results. EVCI will
continue to promote its service in We Media advertising, but will not devote
material resources of its own until such time, if any, as demand requires.

     EDCOR DATA SERVICES. We are marketing edcor's tuition assistance processing
services to our current and potential customers on a limited basis. edcor's
services in educational and training administration include processing
applications and registrations; identifying appropriate accredited colleges,
universities and technical schools for students; preparing checks and
reimbursing employees; making training site arrangements; and determining that
employees receive training that contributes to the employer's goals. edcor plans
to market our content and delivery services to edcor's current and potential
customers. edcor currently provides its services primarily to approximately 70
Fortune 500 companies.

GOVERNMENT REGULATION

     DISTANCE LEARNING. Federal, state and local authorities, as well as
independent educational accreditation organizations, have taken an increasing
interest in distance learning in recent years. Federal departments and agencies
are seeking to balance governmental interests in encouraging new technologies
against other interests such as protecting the integrity of federally-funded
educational programs and ensuring that the benefits of new technologies will be
available to all Americans. State and local authorities are reevaluating
licensing requirements and are joining multi-jurisdictional collaborative
efforts to address complex issues that are unique to distance learning.

     Much of this activity reflects general governmental support for the needs
and goals of distance learning providers. Several federal departments, including
the Departments of Agriculture, Defense, Labor and Education, have authorized
pilot programs that utilize or promote distance

                                       10
<PAGE>

learning. These authorizations may provide additional sources of funding for
EVCI and other distance learning companies.

     Other governmental and regulatory activities could have a less-favorable
impact on our business. For example, the Higher Education Act imposes numerous
restrictions on students and institutions participating in federal student
financial aid programs. Lawmakers are reevaluating these restrictions in
response to rapid advances in distance learning programs and technologies, but
there can be no guarantee that the restrictions will be relaxed, or that the
Department of Education, Congress or other state or local regulatory entity will
not impose stricter or additional requirements on distance learning providers.
Increased federal regulations, continued uneven licensing or approval processes
by and among state governments or accreditation organizations, or changes to
other laws, such as copyright or telecommunications laws, could increase our
costs or make it harder for us to attract and retain the educational providers
upon which our business depends. All of these issues are in various stages of
review throughout all levels of government. EVCI cannot predict the scope,
outcome or impact on EVCI of these reviews, or the extent to which these reviews
will be favorable or adverse to EVCI.

     INTERBORO INSTITUTE

     EVCI has owned and operated Interboro Institute since January 14, 2000.

     ACCREDITATION. The New York Board of Regents accredits Interboro.
Accreditation provides the basis for (i) the recognition and acceptance by
employers, other higher education institutions and governmental entities of the
degrees and credits earned by students and (ii) qualification to participate in
Title IV of the Higher Education Act.

     Following the acquisition of Interboro by EVCI, the Board of Regents
approved the registration of Interboro's degree granting programs for a two-year
period ending on or about December 31, 2002. Pursuant to Regents regulations
governing a change of ownership, the Regents will issue degrees earned by
Interboro students during this period. The New York State Education Department
is reviewing Interboro for purposes of reaccreditation and the return of degree
granting authority to Interboro.

     Interboro's Associate of Occupational Sciences degree in Ophthalmic
Dispensing is also accredited by the Commission of Opticianry. This degree
program accreditation was last issued in March 1999 for a six-year period.

     PELL GRANTS. Interboro's participation in the Pell Grant program subjects
it to substantial regulatory oversight by the U.S. Department of Education under
Title IV. For the period July 1, 1999 through January 13, 2000, approximately
38% of Interboro's revenue was derived from Title IV funding. For the balance of
2000, the percentage of revenue derived from Title IV funding by Interboro was
approximately 42%.

     Aid under the Pell Grant and other Title IV programs is awarded on the
basis of financial need, generally defined as the difference between the cost of
attendance and the amount a student can reasonably contribute to that cost.

     Under the Pell program, Interboro is subject to frequent reviews and
detailed oversight and must comply with a complex framework of laws and
regulations. Periodic revisions of regulations and changes in interpretation of
existing laws and regulations could affect Interboro's continuing eligibility to
participate in the Pell Grant program.

                                       11

<PAGE>



     Factors that could affect Interboro's participation in the Pell Grant
program include:

               o  Interboro must satisfy minimum standards established to assess
                  its financial condition at the end of its fiscal year.
                  Interboro anticipates it will be able to satisfy the minimum
                  standard at the end of its current fiscal year.

               o  Interboro could lose its eligibility to participate in Title
                  IV if it receives in excess of 90% of its cash basis revenue
                  from Title IV programs for tuition, fees and institutional
                  charges. Interboro's percentage of Title IV funds continues to
                  be less than 45%.

               o  Interboro cannot pay any commission, bonus, or other incentive
                  payment based directly or indirectly on success in securing
                  enrollments or financial aid to any person or entity engaged
                  in any student recruitment, admission or financial aid
                  awarding activity. Interboro believes that its current method
                  of compensating enrollment counselors complies with Title IV.

               o  Interboro's participation in Title IV is based, in part, on
                  satisfying administrative capability requirements.

               o  Interboro's administration of Title IV funds is audited
                  annually by an independent accounting firm and the resulting
                  audit report is submitted to the Department of Education for
                  review. If it is determined that Interboro improperly
                  disbursed Title IV funds or violated a provision of the Higher
                  Education Act, it could be required to repay such funds and
                  might be assessed an administrative fine. Interboro could also
                  become subject to heightened monitoring or transfer from the
                  advance system of payment to the reimbursement system, under
                  which it must disburse its own funds to students and document
                  the student's eligibility for Title IV funds before receiving
                  funds from Department of Education.

               o  Violations of Title IV requirements could also subject
                  Interboro to other civil and criminal penalties.

     TAP GRANTS. Interboro is subject to extensive regulation in New York State
in connection with its participation in the New York State Tuition Assistance
Program. TAP is a tuition grant program in which many of Interboro's students
participate. Interboro is now receiving TAP disbursements in the ordinary
course.

     Funds disbursed to Interboro subsequent to academic year 1993 are still
subject to audit as are future disbursements. Interboro cannot predict if any
future disallowances might occur as a result of additional TAP audits. Interboro
does believe, however, that it is operating in compliance with TAP rules. The
purchase price payable by EVCI for Interboro would be reduced to the extent of
any disallowance under TAP or Pell with respect to periods prior to January 14,
2000.

COMPETITION

     DISTANCE LEARNING

     The distance learning market is fragmented, highly competitive and
encompasses a broad variety of learning formats. We face substantial competition
from distance learning companies, using asynchronous or synchronous delivery
methods, and other providers of educational content.

                                       12
<PAGE>

Traditional live classroom instruction by two and four year colleges is our most
significant competition. Some colleges and universities are using interactive
video conferencing systems to deliver their courses. Many education providers
have extension centers that attempt to address the issue of location and
scheduling convenience.

     In addition, we face increasing competition from other distance learning
companies that offer, among other products and services, one-way satellite video
conferencing, self-paced correspondence courses, video and audio cassettes,
CD-Roms and Internet based instruction. Distance learning competitors include,
but are not limited to, Apollo Group, Inc.'s University of Phoenix Online,
Caliber Learning Network, Inc., eCollege.com, SkillSoft, Inc. and Strayer
Education, Inc.

     Our primary focus has been to use interactive video conferencing to enable
students to experience an actual classroom environment. However, we recognize
that not everyone can afford the high quality delivery method preferred by us
for its customers or can make the time to attend regularly scheduled classes
using video conferencing enabled room systems or desktop computers. Accordingly,
we are offering one-way video, two-way audio and text only programs. We also
have the ability to archive and store content from its live classes for
retrieval by the user as he or she sees fit. Our archived content can be
accessed either from the narrowband Internet or high speed broadband Internet.

     There are no significant barriers to entry into the distance learning
market. We believe competition is primarily based on location and scheduling
convenience, cost effectiveness of marketing, relevance and quality of course
content, quality and reliability of content delivery and customer support.

     INTERBORO INSTITUTE

     Interboro competes with four-year and two-year degree granting public and
private colleges and universities as well as with a variety of business
providers, primarily in the proprietary training sector.

INTELLECTUAL PROPERTY

     EVCI currently protects its intellectual property as a trade secret.

EMPLOYEES

     As of March 1, 2001, we had 114 full-time employees, including 87 Interboro
employees. In addition, Interboro had 25 adjunct professors. In January and
February 2001, we reduced EVCI's full-time staff by 31 employees. None of EVCI's
or Interboro's employees is covered by a collective bargaining agreement. We
believe that our relationship with our employees is satisfactory.

RISK FACTORS

     If any of the following or other risks actually occur, our business,
financial condition or results of operations could be materially and adversely
affected.

IF WE CANNOT GENERATE SIGNIFICANTLY MORE REVENUES TO OFFSET OUR CONTINUING
LOSSES WE MAY NOT BE ABLE TO ACHIEVE PROFITABILITY.

     Our net revenue for the year ended December 31, 1999 was $752,777 and our
accumulated deficit at December 31, 1999 was $9,578,439. Our net revenue for the
year ended December 31, 2000 was $8,591,433 and our accumulated deficit at
December 31,

                                       13
<PAGE>

2000 was $21,720,786. We may be unable to generate enough revenue to offset our
operating costs for the foreseeable future. We cannot assure you that we will
ever generate sufficient revenue to achieve or sustain profitability.

OUR CONTINUED NEGATIVE CASH FLOW COULD MATERIALLY IMPEDE OUR ABILITY TO OPERATE.

     Because our expenses have been growing at a much faster rate than our
revenues, we have experienced, and could to continue to experience, negative
cash flow from operations for the foreseeable future. Our negative cash flow
from operations was $2,304,980 in 1998, $6,084,932 in 1999 and $10,142,969 for
2000. At December 31, 2000, we had $6,332,934 in cash and cash equivalents. The
rate at which we have used cash to operate and grow our business has limited and
may further limit our ability to continue to implement our business strategy.
Accordingly, in the first quarter of 2001, we reduced our expenses
substantially, primarily with reductions in staff and related expenses. We
expect to make further reductions in expenses. These reductions have limited,
and will further limit, our operations.

OUR SUCCESS MAY DEPEND ON OUR ABILITY TO OBTAIN SUBSTANTIAL ADDITIONAL
FINANCING.

     From our inception in March 1997 through December 31, 2000, we have
received net proceeds from offerings of our debt and equity securities of
approximately $35,000,000. At December 31, 2000, we had working capital of
$6,400,075. Assuming we do not close the IBS transaction, based on current plans
and assumptions relating to our operations, we believe that cash flow from our
operations and the cash remaining from our Series B Preferred Stock financing
will be sufficient to satisfy our cash requirements until at least December 31,
2001. After that, we expect to require additional funding in order to operate
and grow. If, however, we are underestimating our cash needs, we will require
additional debt or equity financing sooner. Furthermore, our plans for operating
IBS require substantial additional financing. Our ability to obtain necessary
financing, and its cost to us, are uncertain.

OUR COMMON STOCK WILL BE ADVERSELY AFFECTED IF IT IS DELISTED FROM THE NASDAQ
SMALLCAP MARKET.

     Nasdaq has notified us by letter dated April 4, 2001 that we no longer
comply with one of the continued listing rules for The Nasdaq SmallCap Market.
This rule requires us to have a minimum of $2,000,000 of net tangible assets or
a market capitalization of at least $35,000,000 or, for our most recently
completed fiscal year or at least two of our three most recently completed
fiscal years. Using Nasdaq's methods of calculating these amounts:

               o  We had a net tangible asset deficit of approximately
                  $(455,000) at December 31, 2000.

               o  Our market capitalization was approximately $6,500,000 at
                  April 2, 2001.

               o  We had net losses of $(2,728,438) for 1998, $(6,127,879) for
                  1999 and $(10,140,240) for 2000.

     If we are unsuccessful in persuading Nasdaq that we can achieve and sustain
compliance with this and all other listing requirements, Nasdaq will delist our
common stock from The Nasdaq SmallCap Market.

     If our common stock is delisted, subsequent trading, if any, in our common
stock would likely be conducted on the OTC Bulletin Board. An investor could
find it more difficult to dispose of or to obtain accurate quotations for our
common stock if it is delisted. In addition, delisting may cause a decline in
our common stock price, the loss of news coverage about us and

                                       14
<PAGE>

difficulty for us in obtaining future financing. Consequently, the liquidity of
our common stock could be impaired, not only as to the volume of shares
which could be bought and sold during specific time intervals, but also by
delays in the timing of transactions.


COMMERCIALIZATION OF OUR BROADBAND NETWORK DESIGN MAY NOT RESULT IN ANY
SIGNIFICANT REVENUES OR PROFITS FOR US.

     Significant technical problems or delays in installing our broadband
network design, as well as unanticipated operational problems, have occurred,
and may continue to occur, including delays, by major communications carriers in
providing line services, that are exacerbated by a slowing U.S. economy and the
problems of DSL providers. We have no experience in installing or operating
broadband networks except for our own installation that has been used to test
its effectiveness. We also have no experience in pricing our broadband network
design software for sale to others or in installing our software in their
networks. These and other factors, including a sustained economic downturn and
the costs of marketing our software and support services, have prevented, and
could further prevent the successful implementation by us of our new broadband
network services. The implementation problems of our broadband network design
are requiring us to seek strategic partners with substantially greater resources
and capital than we have to handle many of our operations. Even if this strategy
is successful, our expenses may exceed the revenue from the commercialization of
our technology.

OUR BROADBAND NETWORK DESIGN MAY NOT PROVIDE A SHORT OR LONG-TERM COMPETITIVE
ADVANTAGE.

     We currently intend to protect our broadband network design as a trade
secret and have not sought any patent protection for it. This may be inadequate
to protect us. Our competition may, at any time, develop similar or superior
technology that diminishes any advantage which our technology may now have in
the marketplace. To remain competitive we expect we will be required to invest
substantial resources in additional technology development and deployment,
including asynchronous delivery technologies.

OUR GREATER EMPHASIS ON PROVIDING CORPORATE TRAINING CONTENT HAS NOT
SUBSTANTIALLY INCREASED OUR REVENUES.

     In 2000, we decided to place greater emphasis on offering corporate
training and professional development content to existing and potential
corporate customers. We believed this strategy could help us increase student
course registrations more rapidly than offering higher education courses. Our
change in strategy has required us to expend substantial time and effort to
obtain contracts with corporate training providers. While doing this, our
ability to offer and sell corporate training content has been adversely affected
by our inability to provide broadband connectivity to potential customers and
the fact that the economic slow down has a significantly limited corporate the
training dollars available. To date the new strategy has not accelerated our
revenue growth and it may never.

THE SUBSTANTIAL TIME, FINANCIAL RESOURCES AND EFFORT REQUIRED FOR US TO OBTAIN
ADDITIONAL CAPITAL AND CONTRACTS HAS IMPEDED OUR GROWTH AND ABILITY TO BECOME
PROFITABLE.

     During 2000, our focus on raising additional capital, and obtaining
contracts with co-marketing partners, and content providers, limited our ability
to sign new corporate customers contracts and realize the potential of existing
corporate contracts. Once contact with a potential customer is initiated, it
generally takes at least six months to conclude a contract. In some instances
discussions have been ongoing for more than 12 months and in many cases, we
still do not have a

                                       15
<PAGE>

contract. Our ability to conclude contracts with large corporate customers and
co-marketing partners is also affected by the reputation and standing of our
content providers and their ability to offer the training and professional
development courses and programs needed by corporate customers and the higher
education programs approved by them.

OUR DEPENDENCE ON A LIMITED NUMBER OF CONTENT PROVIDERS FOR COURSES AND PROGRAMS
HAS LIMITED OUR ABILITY TO INCREASE ENROLLMENT TO PROFITABLE LEVELS.

     Our success depends upon our ability to establish and maintain
relationships with training and professional development organizations and
colleges and universities that can provide the programs and courses desired by
our customers and their employees. We have multi-year agreements with our
approximately 20 content providers. However, in many instances our content
providers do not offer either the programs or courses desired by our corporate
customers and their employees. In fact we are presently offering courses from
only six providers. This stems from factors that include academic standing,
scheduling of class times and creating sufficient demand for particular courses
or degree programs so that classes have minimum numbers of students. We,
therefore, are continually seeking to diversify our available training,
professional development and higher education content by obtaining agreements
with other content providers in anticipation of broadband being available to a
greater number of potential customers.

WE BELIEVE WE NEED TO SUBSTANTIALLY INCREASE ENROLLMENT BY EMPLOYEES OF LARGE
CORPORATE CUSTOMERS IN ORDER FOR OUR DISTANCE LEARNING SERVICES TO BECOME
PROFITABLE.

     For the year ended December 31, 2000, approximately 87% of our net revenue
is attributable to Interboro, approximately 6% resulted from courses completed
by our corporate customers and the balance resulted primarily from courses
completed by participants in community outreach programs. Our distance learning
services cannot become profitable without substantially greater increases in
enrollment in courses and programs offered by us.

WE ARE DEPENDING ON OTHERS TO MATERIALLY INCREASE OUR STUDENT ENROLLMENT.

     We need to market our services to large numbers of potential students in
order to materially increase our enrollment. We believe this requires us to have
access to the employees of large corporations and that this access can best be
obtained by having co-marketing alliances with entities that have large customer
bases and experienced sales personnel. We have, accordingly, focused less on
obtaining new corporate customers on our own in favor of obtaining co-marketing
partners such as Verizon and We Media. As a result, we are largely dependent
upon them to increase our marketing reach and effectiveness. We do not have
control over the marketing, or budgeting priorities of our co-marketing partners
or the effort and resources they devote to marketing our content and delivery
services. For example, the merger of Bell Atlantic and GTE, the Verizon strike
and Verizon's delay in providing line services have materially delayed the
progress of our co-marketing activities with Verizon. Verizon is allocating less
resources to co-market our technology and content than it originally
anticipated. In addition Excite@Work's inability to provide the last mile
connection has prevented us from implementing our agreement with it. Our
co-marketing strategy has not, and may never, substantially improve our student
enrollment.

OUR REQUIRING ADVANCE TUITION PAYMENTS AND CORPORATE GUARANTEES OF DEFERRED
TUITION IS HINDERING OUR EFFORT TO INCREASE REGISTRATION FOR OUR HIGHER
EDUCATION COURSES AND PROGRAMS.

     We require advance payment of at least 50% of tuition for higher education
courses or, alternatively, that deferred payments be guaranteed by the corporate
employer. The advance

                                       16
<PAGE>

payment does not apply to non-corporate registrations which are TAP or Pell
guaranteed. This new policy has made recruiting more difficult and time
consuming and has had an adverse impact on student enrollment.

OUR CASH FLOW FROM OUR DELIVERY OF HIGHER EDUCATION CONTENT IS UNPREDICTABLE
BECAUSE WE DO NOT CONTROL TUITION BILLING BY OUR HIGHER EDUCATION PROVIDERS AND
COLLECTION FROM OUR CORPORATE CUSTOMERS.

     Our higher education providers control the entire billing and collection
process for deferred tuition payments and we do not receive our share of tuition
until they receive payment. In most cases, we have been receiving our share more
than 90 days after completion of courses and, in some cases, more than nine
months after completion of courses. We believe this is caused mostly by the
inability of our education providers to expedite billing procedures and of our
corporate customers to expedite processing requests for payment from their
employees. The requirement by most of our corporate customers that they receive
evidence of satisfactory completion of higher education courses by their
employees, before requests for payment can be processed, also contributes
significantly to these delays. Collecting tuition for students who achieve a
poor grade and do not receive corporate reimbursement is not cost effective.

IN AN ECONOMIC DOWNTURN, IT COULD BECOME INCREASINGLY DIFFICULT FOR US TO
OPERATE AND GROW.

     If we are to survive a sustained economic slow down in the U.S. economy, we
will need to be lean, flexible and quick to implement new strategies. We have
had no experience operating our business during a downturn. We have already had
to make significant cutbacks in personnel and reallocate our resources in order
for us to continue operations. As the slowdown continues, we may be required to
make additional cutbacks and/or reallocate additional resources.

OUR CONTRACTS DO NOT PROTECT US FROM CHANGES IN TRAINING AND EDUCATION POLICIES
OF OUR CORPORATE CUSTOMERS.

     Our contracts with our corporate customers do not give us protection
against subsequent changes in their corporate tuition reimbursement policies or
shifts in their attitudes toward corporate training and higher education
opportunities for employees. Similarly, contracts we may obtain to deliver
training or professional development content may not protect us against changes
in corporate training budgets or policies. Curtailment of training budgets and
tuition reimbursement, as a result of the current economic slow down, has
impeded the growth of our distance learning business and could result in
declines in enrollment

THE LACK OF EXCLUSIVITY AND NON-COMPETE PROVISIONS COULD MATERIALLY IMPAIR THE
VALUE OF OUR CORPORATE CUSTOMER AGREEMENTS.

     None of our agreements with customers gives us an exclusive right to
deliver courses to their employees or constituents and we do not foresee being
able to obtain exclusivity. There are no restrictions in our agreements with
customers, and none are contemplated, to prohibit them from competing with us or
from using products or services that compete with us. Accordingly, our customers
could materially impair our ability to enroll their employees or constituents in
our courses and programs by actively encouraging them to enroll in competing
courses and programs.

                                      17
<PAGE>

DEMAND FOR OUR SERVICES HAS NOT AND MAY NOT INCREASE RAPIDLY BECAUSE TRAINING
AND EDUCATION VIA LIVE INTERACTIVE VIDEO CONFERENCING HAS NOT BECOME WIDELY
ACCEPTED.

     Training and education via video conferencing is a relatively new
alternative to traditional classroom instruction that is not being readily
accepted by teachers, students or corporations. Video conferencing is relatively
expensive compared to asynchronous and other distance learning delivery systems
because it requires special equipment and is most effectively delivered over
broadband high speed transmission lines. Our experience has been that some
instructors are unwilling to teach by means of interactive video conferencing
systems or to adopt our method of teaching. We have also encountered some
reluctance from some students to use our content delivery method. For these and
other reasons, many colleges, universities, professional training providers and
students may be unwilling to accept our delivery concept as an appropriate way
to provide quality training and education. The extent to which training and
education using video conferencing is accepted, and the rate of acceptance, will
materially affect our ability to achieve our objectives.

WE DEPEND ON OUR CHAIRMAN, PRESIDENT AND OTHER KEY MANAGEMENT PERSONNEL TO
OPERATE AND GROW.

     We believe the efforts of our executive officers and other management
personnel, especially Dr. Arol I. Buntzman, our chairman and chief executive
officer, and Dr. John J. McGrath, our president, are essential to our operations
and growth. The loss of the services of Drs. Buntzman or McGrath would
materially adversely affect us. We maintain insurance on the life of Dr.
Buntzman in the amount of $2 million. We have employment agreements, expiring
December 31, 2001, with both Dr. Buntzman and Dr. McGrath.

TO OPERATE AND GROW, WE NEED TO SECURE STRATEGIC PARTNERS, RETAIN OUR SENIOR
MANAGEMENT AND ATTRACT AND RETAIN ADDITIONAL ADMINISTRATORS AND TECHNICIANS.

     Our business currently requires the services of strategic parties with
skilled administrators who can properly outsource and manage student recruitment
and enrollment, develop strategies to increase student retention, train
instructors and deal generally with college and corporate administrators. If we
acquire more campus schools, we will need additional administrators with
appropriate skills. Our senior management will be required to oversee the
activities of our strategic partners and school administrators. We will also
require new strategic partners with engineers and technicians who can
effectively operate our interactive video conferencing systems and deploy and
operate broadband network design. Our senior technicians will be required to
oversee the activities of these strategic partners. If we cannot obtain
appropriate strategic partners or compete for new employees or retain and
motivate our existing employees, we will be adversely affected.

CONTENT PROVIDERS AND OTHERS WITH GREATER RESOURCES AND NAME RECOGNITION COULD
MAKE IT VERY DIFFICULT FOR US TO BE COMPETITIVE IN OUR AGGREGATION AND DELIVERY
OF TRAINING AND EDUCATION CONTENT.

     Two and four year colleges and professional training organizations offering
traditional classroom instruction are our most significant competition in our
distance learning business and with respect to the on-campus courses and
programs given by Interboro Institute. In addition, alternative methods of
delivering courses are proliferating rapidly. These alternatives are usually
less expensive and more readily available than video conferencing. Interactive
video conferencing equipment has been used throughout the world for less than
ten years. The technology upon which it is based is established and its cost has
been declining. We expect a significant increase in direct competition from
numerous colleges, universities, professional training organizations and large
corporations

                                       18
<PAGE>

including our own content partners. In addition, the Higher Education Act
encourages more competition by providing government incentives for distance
learning companies.

SINCE THERE ARE NO SIGNIFICANT BARRIERS TO ENTRY INTO OUR MARKET, OUR DISTANCE
LEARNING ACTIVITIES ARE FACING INCREASING COMPETITION FROM OTHER COMPANIES THAT
OFFER A VARIETY OF OTHER PRODUCTS AND DELIVERY SERVICES.

     Our current distance learning competition includes numerous companies that
offer a variety of asynchronous and synchronous delivery methods. These include
Internet-based instruction, one-way and limited two-way satellite video
conferencing, video and audio cassettes and CD-Roms. New products and services
will probably be developed, including by competitors and potential competitors
that are much larger and have greater development, marketing and financial
resources than we do.

OUR AGREEMENTS AND RELATIONSHIPS WITH OUR CONTENT PROVIDERS MAY HELP THEM TO
COMPETE WITH US.

     Our agreements with our content providers do not restrict the education
provider from competing with us except, in most cases, as long as it does not
offer courses via competing interactive video conferencing systems to our
corporate customers and their employees during the term of the agreement and for
one year after its termination. By teaching our content providers how to give
courses and programs via interactive video conferencing, we may be helping them
to compete with us, even during the terms of their agreements with us. Some
providers may terminate their contracts with EVCI in order to focus their
resources on their own distance education programs.

REPLACING OBSOLETE OR DISCONTINUED EQUIPMENT MAY RESULT IN SUBSTANTIAL
UNANTICIPATED COSTS OR DELAYS.

     Our success will depend on our ability to adapt timely and effectively to
rapidly occurring technological advances in telecommunications and video
conferencing equipment. To remain competitive, we may need to make substantial
capital investments in new equipment that has made our existing equipment
obsolete. We have designed our network software based, in part, on Intel video
conferencing equipment that Intel has discontinued manufacturing. We could be
wrong in our belief that we will have available to us enough inventory of this
discontinued equipment and enough time to permit us to supersede it with later
generation equipment without adversely affecting our business. Other
technologies developed by competitors may significantly reduce demand for our
services or render our services obsolete. As we are required to adopt newer
equipment, our software may have to be reengineered to function with the new
hardware.

REGULATORY CHANGES MAY IMPOSE CONSTRAINTS, ADDITIONAL COSTS OR OTHER BURDENS ON
US AND OUR EDUCATION PROVIDERS.

     State and local agencies, as well as federal lawmakers, are continually
evaluating laws and regulations that could have a significant impact on our
business. It is uncertain to what extent this impact will be favorable or
adverse, or when regulatory authorities will take action.

     Many states are re-evaluating their educational licensing requirements to
reflect new developments in distance learning. Our agreements with our content
providers require them to obtain the accreditation and licenses necessary to
offer their courses and certificate and degree programs. State departments of
education are generally requiring out-of-state schools to meet their
accreditation standards when teaching to instate students. If this trend
continues or if state or local authorities impose new or more burdensome
licensing requirements on our education providers, we may be unable to attract
or retain the education providers on which a significant part our business
depends.

                                       19
<PAGE>

     Federal agencies and independent accreditation organizations are also
conducting reviews of new and existing laws and policies. We cannot predict the
scope or outcome of these reviews. Additional regulation resulting from these
reviews, if any, may materially adversely affect us by increasing the costs or
administrative burdens of providing education programs, or by discouraging
education providers from participating in our distance learning business.

INTERBORO INSTITUTE IS SUBJECT TO EXTENSIVE FEDERAL AND NEW YORK STATE
REGULATION BECAUSE IT DEPENDS ON SUBSTANTIAL FEDERAL AND STATE FUNDS IN ORDER TO
OPERATE.

     Interboro's participation in the Pell Grant program under Title IV of the
Higher Education Act subject it to frequent reviews and detailed oversight and
require it to comply with complex laws and regulations. Similarly, Interboro is
subject to extensive regulation and oversight by New York State administrators
of the TAP program. Approximately $6.9 million in Pell and TAP financial aid was
provided to Interboro students during 2000. Most of Interboro's students rely on
this aid to pay all of their tuition. Any significant curtailment or delays in
disbursement of Pell or TAP funds would have a material adverse effect on
Interboro and, therefore, on our company.

INTERBORO INSTITUTE'S PRIOR PROBLEMS WITH REGULATORS COULD REOCCUR AND ADVERSELY
AFFECT ITS OPERATIONS.

     Prior to our acquiring Interboro, TAP administrators disallowed
approximately $4,800,000 of grants previously disbursed to Interboro for
academic years 1989/1990 through 1991/1992. After protracted litigation,
Interboro was required to repay approximately $5,850,000, including $1,050,000
of interest, to the New York State Higher Education Services Corporation. The
entire amount has been fully paid and all but approximately $700,000 was paid
prior to our purchase of Interboro. However, funds disbursed to Interboro
subsequent to academic year 1992 are still subject to audit by TAP
administrators as are future disbursements. In addition, Pell administrators
could suspend or disallow Pell grants.

OUR CHAIRMAN AND OTHER PRINCIPAL STOCKHOLDERS CAN ACT TOGETHER TO CONTROL OUR
BUSINESS AND POLICIES WITHOUT THE APPROVAL OF OTHER STOCKHOLDERS.

     Our officers and directors as a group, together with Tayside Trading, Ltd.,
DEWI Investments Limited and B&H Investments Ltd. can vote more than 40% of our
currently outstanding common stock. This is probably sufficient to control the
outcome of any stockholder vote except where the vote of our Series B preferred
stock is required on matters that include:

               o  any increase or decrease in our authorized capital stock;

               o  the sale of all or substantially all of our assets or the
                  assets of any of our subsidiaries; or

               o  any merger involving us or any of our subsidiaries.

     In addition, as a result of voting agreements our chairman has with our
president and chief financial officer, our chairman has the power to direct the
vote of more than 20% of our common stock. This may be sufficient for Dr.
Buntzman to alone control the outcome of any stockholder vote not requiring the
vote of holders of our Series B preferred stock.


                                       20
<PAGE>

OUR SHARE PRICE HAS RANGED GREATLY SINCE WE WENT PUBLIC AND MAY BE VERY VOLATILE
IN THE FUTURE.

     Since our public offering in February 1999, the market price of our common
stock has ranged between $0.68 and $40.94.

     In the future, our share price could be affected by a number of factors,
including:

               o  actual or anticipated fluctuations in our operating results;

               o  changes in expectations as to our future financial performance
                  or changes in financial estimates of securities analysts;

               o  increased competition from major corporations or well-known
                  colleges, universities and professional training
                  organizations;

               o  announcements of technological innovations;

               o  the operating and stock price performance of other comparable
                  companies;

               o  general stock market or economic conditions; o sales of our
                  stock by our management or others pursuant to a prospectus or
                  otherwise;

               o  acquisition of post-secondary institutions; and

               o  additional financings.

     In addition, the stock market in general has experienced volatility that
often has been unrelated to the operating performance of particular companies.
These broad market and industry fluctuations may adversely affect the trading
price of the common stock regardless of our actual operating performance.

PROVISIONS OF LAW AND TWO AGREEMENTS MAY PREVENT TAKEOVERS AND DEPRESS THE PRICE
OF OUR SHARES.

     Certain provisions of Delaware law, an agreement with our chief executive
officer and an agreement with holders of our Series B preferred stock could make
it more difficult for a third party to acquire, or discourage a third party from
attempting to acquire, control of us. The provisions of these agreements
include:

               o  our chairman is entitled to certain payments if his employment
                  is terminated following a change of control of our company.

               o  Series B preferred stockholders can require redemption of
                  their shares if there is a change of control of our company.

               o  Series B preferred stockholders must consent to transactions
                  that, in addition to those referred to above, include:

               o  paying dividends on our common stock;

                                       21
<PAGE>

               o  incurring indebtedness in excess of $15,000,000; or

               o  issuing additional shares of our capital stock at a discount
                  to the then current market price of our common stock, other
                  than excluded shares (as defined in the certificate of
                  designations).

     Such provisions could limit the price that investors might be willing to
pay in the future for the common stock because they believe our management and
holders of our Series B preferred can defeat a takeover of our company that
could be beneficial to non-management stockholders.

OUR CLASSIFIED BOARD LIMITS STOCKHOLDER VOTING FOR ELECTION AND REMOVAL OF
DIRECTORS.

     Our board of directors is divided into three classes. The directors in each
class will be elected for three year terms when their class stands for election
at a stockholder meeting. This staggering of director terms protects directors
from being removed from office by anyone engaged in a proxy contest for control
of the board and dilutes the ability of stockholders to influence corporate
governance policies. Furthermore, a director may only be removed, with or
without cause, by the holders of 66 2/3% of the shares entitled to vote at an
election of directors.

INDEMNIFICATION AND LIMITATION OF LIABILITY OF OUR OFFICERS AND DIRECTORS MAY
INSULATE THEM FROM ACCOUNTABILITY TO STOCKHOLDERS AT SUBSTANTIAL COST TO US.

     Our certificate of incorporation and by-laws include provisions whereby our
officers and directors are to be indemnified against liabilities to the fullest
extent permissible under Delaware law. Our certificate of incorporation also
limits a director's liability for monetary damages for breach of fiduciary duty,
including gross negligence. In addition, we have agreed to advance the legal
expenses of our officers and directors who are required to defend against
claims. These provisions and agreements may have the effect of reducing the
likelihood of suits against directors and officers even though such suits, if
successful, might benefit our stockholders and us. Furthermore, a stockholder's
investment in our company may be adversely affected if we pay the cost of
settlement and damage awards against directors and officers.

ITEM 2.  DESCRIPTION OF PROPERTY.

     We currently utilize 8,000 square feet of space in Yonkers, New York for
our corporate and administrative offices, under a lease expiring in August 2002,
that provides for monthly rent payments of approximately $20,000, subject to
annual increases. We also currently sublease 8,000 square feet of space for our
operations in Tarrytown, New York for approximately $13,000 per month under a
lease that expires on June 30, 2002. Consistent with our recent staff
reductions, we are attempting to significantly reduce the total square footage
we are leasing.

     Our multi-point conferencing units are located and serviced in Bohemia, New
York, under a month to month tenancy. Our rent for space and telecommunications
lines is approximately $11,000 per month and is subject to increase or decrease
as equipment and digital data lines are added or removed.

     Interboro Institute occupies approximately 28,000 square feet at 450 West
56th Street, New York, New York, pursuant to a lease expiring in January, 2004
and requiring monthly rent payments of approximately $40,000 including
utilities. Interboro is opening an extension center at 135-27 38th Avenue,
Flushing, New York, that is leased for a term expiring December 31, 2005 at a
rental of $40,000 per month, subject to annual increases.

                                       22
<PAGE>

ITEM 3.  LEGAL PROCEEDINGS.

         Not applicable.

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

         Not applicable.

PART II

ITEM 5.  MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS.

     EVCI's common stock is quoted on The Nasdaq SmallCap Market under the
symbol "EVCI," and on the Pacific Exchange and the Boston Stock Exchange under
the symbol "EVC." The following table sets forth the high and low sales prices,
of our common stock, as reported by Nasdaq, for each quarter of 1999, since the
commencement of trading and of 2000.

         1999:
         First Quarter (from February 23, 1999)        $18.000           $13.875
         Second Quarter                                 16.125             7.844
         Third Quarter                                  15.750             6.000
         Fourth Quarter                                 21.000            13.250
         2000:
         First Quarter                                 $40.938           $15.500
         Second Quarter                                 38.000            12.000
         Third Quarter                                  18.500            10.375
         Fourth Quarter                                 12.063             1.750

     As of January 16, 2001, the number of stockholders of round lots (100 or
more shares) of our common stock was 933.

     EVCI has never declared or paid any cash dividends on its common stock and
does not expect to pay any cash dividends in the foreseeable future.

ITEM 6   MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
         RESULTS OF OPERATIONS.

     The following discussion should be read in conjunction with the financial
statements of EVCI and the notes thereto appearing elsewhere in this report.

OPERATIONAL OVERVIEW

     GENERAL

     During 2000, we were engaged in raising additional capital and adjusting
and implementing our business plan, primarily by:

               o  acquiring Interboro Institute Inc.;


                                       23
<PAGE>

               o  raising gross proceeds of $4,000,000 and net proceeds of
                  approximately $3,520,000 from the issuance of Series A 7.5%
                  Convertible Preferred Stock, which is no longer outstanding;

               o  placing significantly greater emphasis on the marketing of
                  training and professional development content to corporations
                  because they have significantly larger budgets and demand for
                  this kind of content than higher education content and
                  payments to us for delivering training and professional
                  development content would be more predictable and timely;

               o  working to complete deployment of our proprietary broadband
                  network design;

               o  seeking to license our broadband network design to foreign
                  telecommunications carriers;

               o  recruiting, hiring, training and redeploying management,
                  marketing, sales, technical and administrative personnel;

               o  allocating more time, personnel and other resources to
                  accelerate the implementation of agreements with our
                  co-marketing partners and corporate customers;

               o  entering into content provider agreements with Clemson
                  University, Golden Gate University, Computer Generated
                  Solutions, Inc., and Telecommunications Research Associates;

               o  entering into an agreement with Excite @ Home Business
                  Solutions to give us access to Excite's nationwide high-speed
                  broadband network;

               o  launching in the first quarter, and continuing throughout the
                  year, a marketing campaign with Verizon Remote Learning
                  Solutions that bundled the offering of Verizon's DSL services
                  with EVCI aggregated content, video conferencing and other
                  services;

               o  raising gross proceeds of $13,000,000 and net proceeds of
                  approximately $12,680,00 from the issuance of our Series B 7%
                  Convertible Preferred Stock; and

               o  entering into an alliance with Horizon.com, a Singapore-based
                  SGX listed Internet services company, relating to Horizon's
                  marketing of our content and technology in Asia and other
                  Pacific markets and our marketing of Horizon's broadband and
                  school portals by us outside of the areas where Horizon is
                  marketing our content.

     DISTANCE LEARNING REVENUE AND ACCOUNTS RECEIVABLE

     Our distance learning revenue is derived from sharing tuition payments
received by content providers based on a contractually agreed upon formula. The
payments that a content

                                       24
<PAGE>

provider pays to EVCI for its services is determined by negotiation between the
content provider and EVCI, and, to an extent, depends upon the reputation and
academic standing of, and the tuition charged by, the content provider. Revenue
attributable to a course is recognized ratably over the duration of the course
and, as this occurs, EVCI establishes a related accounts receivable. The
practices of the content provider to collect tuition, and the timing of such
collection, is subject to the billing practices of the content provider and the
tuition reimbursement and payment policies and practices of the student's
employer. To the extent tuition is not paid by the employer, the ability to
collect tuition is subject to the risk of non-collection from the student, who
is ultimately responsible for payment. If a student does not successfully
complete a course, the employer will generally not pay the tuition.

     In most cases, we have been receiving our share of distance learning
tuition payments from our higher education content providers more than 90 days
after completion of courses, and, in some cases, more than 12 months after
completion of courses. Frustrated by attempts to expedite billing practices by
these education providers and reimbursement practices by corporations, and by
students' failure to pay tuition after receiving reimbursement, since June 2000,
we have been requiring at least 50% of tuition to be paid in advance or,
alternatively, that deferred payments be guaranteed by the corporate employer.

     NETWORK RELATED REVENUE

     EVCI is trying to sell or license its broadband network design and service
based on factors that include usage, number of simultaneous sites, number of
ports, scheduling, monitoring, training, required bandwidth, equipment, and
broadband line changes.

     INTERBORO REVENUE AND ACCOUNTS RECEIVABLE

     Most of the students at Interboro receive aid for tuition and related fees.
The maximum aid a student can receive from New York State under TAP is $2,500
per semester. The maximum federal aid a student can receive from the PELL
program is $1,650 per semester. For the semester ended December 31, 2000
Interboro students qualifying for aid received an average of $2,195 in TAP
grants and $1,580 in PELL grants. We also have students who pay tuition without
aid. In 2000, approximately 93% of Interboro's net revenue consisted of TAP and
PELL grants. Students are responsible for the portion of their tuition that is
not paid with TAP and PELL funds.

     Pell funds are collected when certain criteria are met such as
matriculation into a program leading to a degree, satisfactory attendance,
meeting progress and pursuit standards during the prior semester, holding a high
school diploma or GED or demonstrating, through testing, the ability to benefit.
Pell funds are collected generally after 50% of the semester is completed and
generally 100% before the end of the semester.

     TAP is certified when certain criteria are met such as New York residency,
matriculation into a program leading to a degree, satisfactory attendance,
meeting progress and pursuit standards during the prior semester, holding a high
school diploma or GED, or demonstrating, through testing, the ability to
benefit. A portion of TAP funds can be received prior to the new semester, as a
pre-payment based on prior roster certification. At least 75% of the total TAP
funds receivable with respect to a semester is collected prior to the start of
the next semester and the balance is substantially collected over the next 3 to
4 months.

                                       25
<PAGE>


     OPERATING EXPENSES

     Cost of our distance learning sales consists primarily of costs relating to
operating our video conferencing equipment and to certain telecommunications
costs. These costs increase as more courses are delivered to more locations.
Interboro's cost of sales also includes salary costs of deans, instructors,
recruiters and library staff.

     Generally, marketing costs are expensed as incurred. However, costs of
courses and related materials are expensed over the duration of the course to
which they relate.

2000 COMPARED TO 1999

     Net revenue for 2000 increased to $8,591,433 from $752,777 for 1999,
primarily due to a 45% increase in our distance learning student course
registrations to 2,085 from 1,436 in 1999 and the addition of Interboro
Institute's 9,350 student course registrations. The Interboro registrations
resulted in additional net revenue of $7,479,376. Total student course
registrations were 11,435 for 2000 as compared to 1,436 for 1999.

     Tuition from Adelphi, The College of Insurance and Mercy College
constituted 8%, 3% and 52%, respectively, of our distance learning net revenue
in 2000 and 60%, 27% and 11%, respectively, of such net revenue in 1999. In
addition, 24% of 2000 distance learning net revenue was from Touro University
and College. Distance learning net revenue relating to tuition payments and
accounts receivable that are attributable to employees of EVCI's corporate
customers in 2000 and 1999 was as follows: AIG, 14% and 16%; Citibank, 17% and
13%; and Merrill Lynch, 27% and 9%. Distance learning net revenue from outreach
programs contributed 41% and 30% to segment net revenue in 2000 and 1999.

     Other income of $67,413 for 2000 includes miscellaneous income from tuition
applications fees and net book sales from Interboro Institute.

     Interest income decreased to $265,552 for 2000 from $437,645 for 1999
principally because the proceeds from our financings were used to fund our
operations during the year.

     Cost of sales increased to $2,703,705, (32% of net revenue) for 2000 from
$295,640 (39% of net revenue) for 1999 due primarily to an increase of
approximately $2,110,000 for wages of Interboro's professors, adjunct
professors, recruiters, librarian, and learning center, all of which are direct
costs, and an increase of approximately $295,000 in telecommunications costs for
our distance learning segment.

     Salaries and benefits increased by 178% to $8,800,731 for 2000 from
$3,167,196 for 1999 mostly as a result of staff increases. Our full-time staff
had increased to 145 by December 31, 2000 from 62 on January 1, 2000. The
acquisition of Interboro added 84 full-time administrative employees. EVCI had a
net decrease of one employee as a result of severing 10 recruiters and hiring
nine employees for sales and marketing, corporate training and technology
development and deployment. The difference of approximately $5,600,000 in salary
and benefit expense between 2000 and 1999, consists of: $2,730,000 for the
additional Interboro staff; $1,070,000 for EVCI salesmen hired late in 1999 who
worked throughout 2000; $725,000 for the nine new hires referred to above;
$300,00 for additional bonuses; $300,00 for salary increases; and $475,000 for
benefits for new employees.

                                       26
<PAGE>

     Marketing, brochures and student registrations costs increased to
$1,410,034 for 2000 from $1,170,755 for 1999, of which approximately $636,000 is
attributable to activities by Interboro and approximately $774,000 is
attributable to our distance learning activities. The distance learning decrease
of approximately $397,000 was due primarily to our greater reliance upon our
corporate customers to market to their employees which included a decrease of
approximately $327,000 resulting from the replacement of outside agents and
brokers with our own salesmen and our reduced attendance at trade shows.

     Professional and consulting fees increased to approximately $755,150 for
2000 from approximately $288,023 for 1999 primarily due to legal and accounting
fees, consulting fees relating to potential international transactions and our
network design and fees for outside enrollment services administration.

     Depreciation and amortization increased to $1,213,866 for 2000 from
$458,410 for 1999 as a result of purchases of videoconferencing and other
equipment, including for the testing and deployment of EVCI's broadband network
design and approximately $280,000 of additional expense attributable to
Interboro including goodwill amortization of approximately $155,000.

     Other expenses increased to $3,882,347 for 2000 from $1,740,623 for 1999
primarily due to increases of approximately $1,200,000 in rent, communications,
postage, insurance, computer expenses, travel and entertainment costs, office
supplies, equipment rental, investor relations costs , insurance and bad debt
expense. Approximately $940,000 of the increase relates to the rent, telephone,
insurance, equipment rental, and other expenses of Interboro Institute.

     We also incurred $56,000 in non-cash expenses in 2000 compared to 425,533
in 1999 relating to the issuance of warrants and options. Warrants are valued at
their face value at the date of issuance using the Black-Scholes option pricing
model or by obtaining an opinion of an investment banker as to value.

     Interest and financing costs of $8,439 in 2000 relates to interest on
capital lease obligations compared to $5,519 in 1999.

     We incurred a net loss of $45,283 on our investment in Visiocom USA
Incorporated, after giving effect to our sale of this investment for $150,000 in
January 2001.

     Net loss for 2000 was $10,140,240 as compared to $6,127,879 for 1999. Our
distance learning segment incurred a loss in 2000 of $10,788,120, which was
offset by the net income of $647,880 generated by Interboro.

     Reference is made to footnote 10 of Notes to Consolidated Financial
Statements for information about our Series A Preferred Stock redemption in
September 2000.

1999 COMPARED TO 1998

     Net revenue increased by 114% to $752,777 in 1999 from $351,598 in 1998 due
primarily to a 126 % increase in student course completions to 1,436 in 1999
from 634 completed courses in 1998. To increase the rate and amount of student
enrollment by employees of EVCI's corporate customers, in addition to
emphasizing training and professional development content delivery, EVCI has
been:

               o  working more closely with education providers and customers to
                  implement and administer their agreements with us;

                                      27
<PAGE>


               o  increasing the number of student recruiters (by eight during
                  fiscal year 1999);

               o  focusing on obtaining education providers with national and
                  international reputations or with regional appeal outside of
                  the Northeast; and

               o  training employees of co-marketing partners regarding student
                  recruitment.

     Interest income increased to $437,645 in 1999 from $56,369 in 1998 due to
the investment of the proceeds from our IPO. Cost of sales increased by 41% to
$295,640 in 1999, or 39% of net revenue, from $210,326, or 60% of net revenue in
1998 due primarily to increased communication costs for operating EVCI's
multipoint conferencing units. The improvement in gross margin results primarily
from volume discounts given to EVCI under its agreement with AT&T.

     Selling, general and administrative expense increased by $3,771,211 to
$6,591,609 in 1999 as compared to $2,820,398 in 1998. The components and reasons
for the increase:

               o  Salaries and benefits increased by 121% to $3,167,196 in 1999
                  from $1,435,525 in 1998 primarily due to the increase in
                  EVCI's staff during the year by 38 to 62 full-time employees.
                  The increase also includes bonuses of $412,185 in 1999 as
                  compared to $120,000 in 1998;

               o  Marketing, brochures and student registration costs increased
                  by 98% to $1,170,755 in 1999 from $591,827 in 1998 due
                  primarily to costs of marketing EVCI's services to an
                  increasing number of potential students, attending trade
                  shows, and utilizing independent sales representatives;

               o  Depreciation and amortization increased to $458,410 in 1999
                  from $234,984 in 1998 as a result of purchases of
                  videoconferencing equipment and other equipment required to
                  test the delivery of classes using the Company's proprietary
                  broadband network design;

               o  Other selling and general administrative expenses increased
                  212% to $1,740,623 in 1999 from $558,062 in 1998 primarily due
                  to increases in rent, professional fees, maintenance fees,
                  office telephone expenses, postage, insurance, computer
                  expenses, travel costs, and investor relations costs that were
                  incurred to support EVCI's growth; and

               o  Interest and financing costs of $5,519 in 1999 relates to
                  interest on capital lease obligations compared to $105,681 in
                  1998, which related to private placements in 1997 of debt that
                  was retired in 1998.

     EVCI also incurred $425,533 in non cash expenses in 1999 relating to the
issuance of options and warrants to outside consultants for services performed.
These options and warrants are valued at their fair value at the date of
issuance using the Black-Scholes option pricing model.

     In addition, EVCI incurred a loss of $54,715 on its investment in Visiocom
USA.

                                       28
<PAGE>

     See Note 3 of Notes to Financial Statements for information regarding
EVCI's agreement with Learningforce, Inc.

LIQUIDITY AND CAPITAL RESOURCES

     INTERBORO. On January 14, 2000, our newly formed wholly owned subsidiary,
Interboro Holding, Inc., acquired all of the outstanding stock of Interboro
Institute, Inc.

     The purchase price for the outstanding stock of Interboro is contingent
upon Interboro having earnings before interest, taxes, depreciation, and
amortization, as determined by our auditors, over the three fiscal years that
commenced January 1, 2001. The purchase price has two components: (i) a fixed
portion of $672,500, and (ii) a percentage portion equal to 50% of EBITA for the
years ended December 31, 2001, 2002 and 2003. The purchase price is payable out
of between 20% and 50% of EBITDA that is allocated first to the fixed and then
to the percentage portion of the purchase price. Any earned but deferred
percentage portion becomes payable in eight quarterly installments after the
fixed portion has been fully paid. Unless Interboro has sufficient EBITDA, the
fixed portion is not payable.

     In addition, we agreed to issue to the seller warrants to purchase up to
25,000 shares of our common stock at $25 per share, subject to adjustment. The
warrants are issuable at the rate of 5,000 warrants per year provided Interboro
has at least $500,000 of EBITDA for the applicable fiscal year during the five
year period commencing January 1, 2002.

     We have infused $1,000,000 into Interboro for working capital and to
satisfy certain net worth and other financial requirements.

     SERIES A PREFERRED. On February 3, 2000, we received gross proceeds of
$4,000,000 for our issuance, in a private placement with one investment fund, of
400,000 shares of 7.5% Series A Convertible Preferred Stock and three year
warrants to purchase 40,000 shares of our common stock at $21.27 per share. The
transaction costs of this private placement were approximately $480,000.

     A value of $378,918 was assigned to the warrants. Prior to being redeemed
by us, the Series A preferred stock was convertible into shares of our common
stock at a discount from the "market price", as defined. EVCI is accounting for
the issuance of the Series A preferred stock in accordance with "Emerging Issues
Task Force Issue No. 98-5," which addresses the issuance of convertible
securities that have a beneficial conversion feature. The conversion feature is
recognized and measured by allocating a portion of the proceeds equal to the
intrinsic value of that feature to additional paid-in capital. The amount is
calculated as the difference between the conversion price and the fair market
value of our common stock at the date of the issuance. Any discount resulting
from the allocation of proceeds to the beneficial conversion feature is
analogous to a dividend and will be recognized as a return to the preferred
stockholder over the period from the date of issuance through the date of the
earliest conversion, as defined.

     Accordingly, we recorded a non-cash $705,882 dividend charge for the twelve
month period ended December 30, 2000. In September 2000 the holder of the Series
A preferred stock converted 120,000 shares, or $1,200,000 in total stated value,
of preferred stock into 103,341 shares of our common stock at an average price
of approximately $11.80 per common share. The remaining balance of $2,800,000 of
Series A preferred stock was redeemed by us during September 2000 at a 15% over
the stated value, resulting in a charge to retained earnings of

                                       29
<PAGE>

$420,000. Upon redemption, accumulated accrued dividends on the Series A
preferred stock of $191,458 were paid by issuing 17,127 shares of our common
stock valued at $11.18 per share.

     SERIES B PREFERRED. On September 22, 2000 we designated 200,000 shares of
our authorized preferred stock as Series B 7% Convertible Preferred Stock.
Between September 22 and September 30, 2000, we received gross proceeds of
$13,000,000 from the issuance in a private placement with five investment funds,
of 130,000 shares of our Series B preferred stock and three year warrants to
purchase 722,223 shares of our common stock at $20.25 per share. A value of
$400,000 was assigned to the warrants. The transaction costs of this private
placement were approximately $320,000. The $400,000 assigned value to the
warrants and the transaction costs of approximately $320,000 is being recognized
as a deemed dividend to the preferred stockholders over three years. A portion
of the net proceeds from the sale of the Series B preferred was used to redeem
our Series A preferred stock that had not been converted into common stock.

     The Series B preferred stock is initially convertible into shares of our
common stock at $13.50 per share, the average closing bid price of our common
stock for 20 trading days prior to September 22, 2000. The Series B preferred
stockholders can require EVCI to redeem their preferred shares if our board of
directors decides to issue EVCI securities, for a price below the conversion
price, and the result is a change of control of EVCI that is reportable pursuant
to Schedule 14A of the proxy rules. For more information regarding our Series B
preferred stock and related warrants, reference is made to our 8-K filed October
6, 2000.

     EQUIPMENT. Capital expenditures for 2000 were $2,963,275 compared to
$1,896,013 for 1999. The additional purchases were directly attributable to
purchases of video conferencing equipment required at EVCI's education providers
and corporate customers' sites where our video conferenced programs are offered
and for the purchase of equipment to test our proprietary broadband network
design.

     CASH FLOW. We anticipate, based on current plans and assumptions relating
to our current operations (and assuming additional financing will be obtained to
complete the IBS transaction) that cash flow from operations and the proceeds
from its recent preferred stock offering will be sufficient to satisfy its cash
requirements at least until December 31, 2001. EVCI expects to require
additional funding, thereafter, in order to operate and currently in order to
grow and is considering various available financing options. If, however, EVCI
is underestimating its operating cash requirements, it will require additional
debt or equity financing before year end. There can be no assurance that any
such required debt or equity financing will be available on acceptable terms.

ITEM 7.  FINANCIAL STATEMENTS.

     The financial information required by this item is set forth beginning on
page F-1.

ITEM  8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
         FINANCIAL DISCLOSURES.

     Not applicable.


                                       30
<PAGE>

                                    PART III

ITEM 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS; COMPLIANCE
WITH SECTION 16(A) OF THE EXCHANGE ACT.

DIRECTORS AND EXECUTIVE OFFICERS

     The following table lists our directors and executive officers.

NAME                          AGE      POSITIONS WITH EVCI

Dr. Arol I. Buntzman*          57      Chairman of the board and chief executive
                                       officer

Dr. John J. McGrath*           47      President and director

Richard Goldenberg*            55      Chief financial officer, secretary and
                                       director

Philip M. Getter               64      Consultant and director

Arthur H. Goldberg             59      Director

Royce N. Flippin, Jr.          66      Director

-------------------------
*Executive Officer

     Biographical information provided to us by our directors and executive
officers follows.

     DR. AROL I. BUNTZMAN has served as chairman of the board and chief
executive officer of EVCI since it's inception in March 1997 and as a member of
the compensation committee since February 1999. From October 1996 until he
founded EVCI with Dr. John McGrath, Dr. Buntzman worked with Dr. McGrath on
EVCI's business plan. From August 1995 to October 1996 he was chairman of the
board and chief executive officer and a principal stockholder of Educational
Televideo Communications, Inc. a provider of distance learning services. From
July 1995 through June 1996, he served as director of interactive video
conferencing distance learning of Fordham University. From September 1992
through July 1995 he was an adjunct professor and the director of the weekend
program, a college program for working adults, at Mercy College, Dobbs Ferry,
New York.

     Dr. Buntzman received a doctorate in education through the executive
leadership program of Fordham University Graduate School of Education in May
1995, a professional diploma in educational administration from Fordham
University Graduate School of Education in May 1993 and a Masters of Business
Administration from Arizona State University in September 1970. His doctoral
dissertation focused on using live interactive video conferencing as an
educational delivery method and for graduate education programs.

                                       31
<PAGE>

     DR. JOHN J. MCGRATH has served as president and a director of EVCI since
it's inception in March 1997. From October 1996 until he founded EVCI with Dr.
Buntzman, he worked with Dr. Buntzman on EVCI's business plan. From August 1995
to October 1996, he was president, a director and a principal stockholder of
Educational Televideo Communications, Inc.

     From January 1995 to February 1997, Dr. McGrath served as special assistant
to the president of the Mercy College, Dobbs Ferry, New York. Through December
1994, he served as assistant vice-president for extension Centers of Mercy
College where he was responsible for establishing and managing seven college
extension centers in New York City and Westchester County, New York. He also
served as the dean of the White Plains Campus of Mercy College from 1990 through
1993.

     Dr. McGrath holds a Ph.D. from the Fordham University Graduate School of
Arts and Sciences, with a specialization in law and criminal justice.

     RICHARD GOLDENBERG has served as chief financial officer, secretary and a
director of EVCI since its inception. From October 1996 until October 1997, Mr.
Goldenberg served as chief financial officer, treasurer and secretary of RDX
Acquisition Corp., a company that provides proprietary electronic messaging and
automation software. From 1986 through September 1996, he served as
vice-president, treasurer and secretary of Celadon Group, Inc., a publicly
traded transportation company. He has a B.B.A. in accounting from Baruch
College, CUNY.

     ROYCE N. FLIPPIN, JR. has been a director and a member of EVCI's audit
committee since February 1999. He has served, since 1992, as president of
Flippin Associates, a consulting firm focusing on the development of resources,
programs and new markets and human resource management for career planning,
communication and leadership skills. After serving as a tenured professor and
director of athletics at MIT from 1980 to 1992, he was a director of program
advancement at MIT from 1992 to 1999, in which capacity he provided consulting
services to the MIT Office of Individual Giving -Resource Development regarding
projects that include technology transfers, individual gift bequests and the
planned MIT athletic center. In 2000, Mr. F lippin was appointed a senior
managing director and member of the executive committee of Universal Genesis,
LLC, A Privately owned financial services and development company. Mr. Flippin
is a trustee or board member of several profit and non-profit organizations,
including Ariel Capital Management Funds (trustee since 1986), Radkowsky Thorium
Power Corporation, a privately-held company that is developing non-proliferative
nuclear fuels (director since 1994 and chairman from 1995-1997) and The
Princeton Club of New York. Mr. Flippin holds an A.B. degree from Princeton
University and an M.B.A. degree from Harvard University Graduate School of
Business Administration.

     ARTHUR H. GOLDBERG has been a director and member of EVCI's audit and
compensation committees since February 1999. He has served as president of
Manhattan Associates, L.L.C., an investment and merchant banking firm, since
1994. From 1990 through 1993, he served as chairman of Reich & Co., a New York
Stock Exchange member firm that specialized in investment banking and corporate
finance for small-cap companies. Mr. Goldberg holds a B.S. degree from New York
University Stern School of Business and a J.D. degree from New York University
School of Law.

     PHILIP M. GETTER has been a director since May 1999. Since December 2000,
he has been an independent financial consultant. From March 1996 to December
2000, he served as a

                                       32
<PAGE>

managing director and head of corporate finance of Prime Charter Ltd., the lead
underwriter of EVCI's IPO. From 1992 to March 1996, he was a senior vice
president, investment banking, at Josephthal Lyon & Ross. Mr. Getter has more
than 30 years of experience in the securities industry. From 1975 to 1981 he was
chairman and chief executive officer of Generics Corporation of America, a
public company that was one of the largest generic drug companies in the U.S. He
is a member of the League of American Theatres and Producers, serves on the
Board of the American Theatre Wing and is a Trustee of the Kurt Weill Foundation
for Music. Mr. Getter has produced events for Broadway, film and television. Mr.
Getter received his B.S. in industrial relations from Cornell University.

     Executive officers of EVCI are appointed by the board of directors and
serve at the discretion of the Board, subject to the terms of applicable
employment agreements. There are no family relationships among any of the
directors or executive officers of EVCI.

     As set forth above, each of Drs. Buntzman and McGrath was an executive
officer, director and principal stockholder of Educational Televideo. From
February 1995 through July 1996, Educational Televideo had delivered courses to
one customer, using video conferencing equipment and dedicated phone lines.
Educational Televideo ceased business operations in September 1996. Drs.
Buntzman and McGrath terminated their affiliation with Educational Televideo in
October 1996 when it became apparent to them that anticipated financing needed
to resume Educational Televideo's business would not be provided. Drs. Buntzman
and McGrath believe that, when they resigned, Educational Televideo's remaining
liabilities consisted solely of approximately $300,000 of accounts payable to
vendors, primarily for equipment and supplies. To the knowledge of Drs. Buntzman
and McGrath, bankruptcy proceedings have not been commenced or threatened by or
against Educational Televideo.

SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE.

     Section 16(a) of the Securities Exchange Act of 1934 requires our
directors, executive officers and beneficial owners of more than 10% of our
common stock to file with the SEC reports of their holdings of, and transactions
in, our common stock. Based solely upon our review of copies of such reports and
written representations from reporting persons that were provided to us, we
believe that our officers, directors and 10% stockholders complied with these
reporting requirements, except that DEWI Investment Limited filed a Form 5 in
lieu of one Form 4 that was not filed by the applicable deadline.

                                       33

<PAGE>



ITEM 10. EXECUTIVE COMPENSATION.

SUMMARY COMPENSATION TABLE

     The following table shows compensation paid for the years ended December
31, 2000, 1999, and 1998 to EVCI's chief executive officer and its other highest
paid executive officers who earned more than $100,000 in 2000.

<TABLE>
<CAPTION>

                                                                                                             LONG TERM
                                                  ANNUAL COMPENSATION                                       COMPENSATION
                                                  -------------------                                       ------------
                                                                                                               AWARDS
                                                                                                            COMMON STOCK
                                                                                     OTHER ANNUAL            UNDERLYING
NAME AND PRINCIPAL POSITION            YEAR        SALARY               BONUS        COMPENSATION             OPTIONS
--------------------------------------------------------------------------------------------------------------------------
<S>                                    <C>           <C>             <C>                 <C>                <C>
Dr. Arol I. Buntzman                   2000          332,750         500,000             ---                  ---
     Chairman of the                   1999          270,000         293,333 (1)         ---                120,000
     board and chief                   1998          210,000          70,000             ---                  ---
     executive officer

Dr. John J. McGrath                    2000          200,000          70,000             ---                   ---
     President                         1999          158,666          91,667 (2)         ---                 40,000
                                       1998          126,500           5,750             ---                   ---
                                                                                         ---                   ---

Richard Goldenberg                     2000          125,000          40,000             ---                   ---
     Chief financial officer           1999          117,666          55,000 (3)         ---                 15,000
                                       1998          102,000           4,750          13,200 (4)               ---

James H. Mollitor                      2000          120,000          20,000             ---                   ---
      Chief technical officer          1999          120,000           5,000             ---                   ---
                                       1998 (5)       57,500           2,000             ---                 50,000
</TABLE>
-------------------------

     (1)  Includes $43,333 of bonus earned in 1998, payment of which was
          deferred at the election of Dr. Buntzman.

     (2)  Includes $21,667 of bonus earned in 1998, payment of which was
          deferred at the election of Dr. McGrath.

     (3)  Includes $15,000 of bonus earned in 1998, payment of which was
          deferred at the election of Mr. Goldenberg.

     (4)  Consulting fees earned prior to Mr. Goldenberg's full-time employment
          by EVCI, the payment of which was deferred at the election of Mr.
          Goldenberg.

     (5)  Was employed from July 1998 to March 2001.


                                       34
<PAGE>


AGGREGATED OPTION EXERCISES IN 2000 AND 2000 YEAR-END OPTION VALUES
<TABLE>
<CAPTION>

                                   NUMBER OF SHARES OF COMMON STOCK        VALUE OF UNEXERCISED IN-THE-MONEY
                                  UNDERLYING UNEXERCISED OPTIONS AT                     OPTIONS AT
                                         DECEMBER 31, 2000                          DECEMBER 31, 2000 (1)

NAME                                EXERCISABLE   UNEXERCISABLE               EXERCISABLE (2)   UNEXERCISABLE (2)
----                                -----------   -------------               -----------       -------------
<S>                                  <C>             <C>                          <C>                 <C>
Dr. Arol I. Buntzman                 30,000          90,000                       0                   0

Dr. John J. McGrath                  10,000          30,000                       0                   0

Dr. Richard Goldenberg                3,750          11,250                       0                   0

James H. Mollitor                    10,000          40,000                       0                   0
</TABLE>

-----------------------

(1) Based on $3.75 per share, the December 29, 2000 last sale price reported on
    Nasdaq.
(2) Based on exercise prices ranging for $7.00 to $40.00 per share.

DIRECTOR COMPENSATION

     Directors who are not officers or employees of EVCI are paid $1,000 for
attending each meeting of the board of directors or any committee thereof and
travel expenses.

     In addition, our 1998 incentive plan authorizes the automatic grant of an
option to purchase 5,000 shares of common stock to non-employee directors on the
date on which he or she first becomes a non-employee director. Each non-employee
director is automatically granted an option to purchase 5,000 shares of common
stock on March 1 of each year, provided he or she is then a non-employee
director and, as of such date, he or she has served on the board of directors
for at least the preceding six months. Options granted to non-employee directors
vest in three annual installments commencing on the first anniversary of the
date of grant and have a term of ten years. The exercise price of options
granted to non-employee directors is 100% of the fair market value per share of
our common stock on the date of grant. A non-employee director who has been
granted stock or options by EVCI under a consulting or other arrangement is
ineligible to receive any subsequent automatic grants unless our compensation
committee determines otherwise.

EMPLOYMENT AGREEMENTS

     Each of Dr. Buntzman, Dr. McGrath, and Mr. Goldenberg has an employment
agreement with EVCI.

     The employment agreement with Dr. Buntzman provides for his employment as
chairman and chief executive officer at an annual salary of $346,500 since
November 15, 2000.

     The employment agreement with Dr. McGrath provides for his employment as
president at an annual salary of $210,000 since January 1, 2001.

     The employment agreement with Mr. Goldenberg provides for his employment as
chief financial officer at an annual salary of $150,000 since January 1, 2001.

                                       35
<PAGE>


     Each of the employment agreements expires December 31, 2001. Dr. Buntzman's
and Dr. McGrath's agreements expressly permit salary increases and bonuses as
the Board determines. Each employment agreement entitles the officer to
participate in the health, insurance, pension and other benefits, if any,
generally provided to our employees. Dr. Buntzman's and Dr. McGrath's agreements
entitle them to additional life insurance equal to three times their respective
salaries. Each employment agreement also provides that, with certain exceptions,
until 18 months after the termination of employment with EVCI, the officer may
not induce employees to leave the employ of EVCI or participate in any capacity
in any business activities that compete with the business conducted by EVCI
during the term of the employment agreement.

     EVCI can terminate the employment of an officer upon extended disability or
for cause (as defined in his agreement). If employment is terminated by EVCI
without cause, the agreements generally provide EVCI must pay the officer's
salary and health and insurance benefits until the earlier of a specified date
or the scheduled termination date of the employment agreement or, in the case of
each of Dr. Buntzman and Dr. McGrath, until 36 months after termination of his
employment.

CHANGE OF CONTROL AGREEMENT

     EVCI entered has an agreement with Dr. Buntzman providing for payments to
him, in the event his employment with EVCI is terminated after a change in
control of EVCI during the term of the agreement. A change of control means any
of the following:

               o  any person becomes the beneficial owner of 25% or more of our
                  voting securities; or

               o  during any consecutive three years, EVCI's directors at the
                  beginning of such three year period and any new director whose
                  election was approved by at least 662/3% of the directors,
                  cease to constitute a majority of the Board; or

               o  our stockholders approve a merger or consolidation other than
                  one where our outstanding voting securities before the
                  transaction constitute 50% or more of the outstanding
                  securities of the entity surviving the transaction or where a
                  recapitalization is effected in which no person acquires 25%
                  or more of EVCI's voting securities; or

               o  our stockholders approve a total liquidation of EVCI or sale
                  of all or substantially all of EVCI's assets.

     The agreement expires September 30, 2001, but is subject to automatic
extension to December 31, 2001, and, thereafter, for successive one-year terms,
unless otherwise terminated by either party. The agreement requires severance
payments to Dr. Buntzman of 2.99 times the sum of his base salary and the
highest annual bonus, if any, paid to him during the three previous years and
the continuation of his medical and dental insurance benefits. The agreement
requires these payments to be made in equal installments over a 36-month period
and for the insurance benefits to continue for 36 months.

                                       36
<PAGE>

ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

     The following table sets forth, as of March 9, 2001, the beneficial
ownership of common stock by each person (or group of affiliated persons) known
by EVCI to own beneficially more than 5% of the outstanding shares of common
stock, each director and executive officer of EVCI, and all directors and
executive officers as a group. Except as indicated in the footnotes to the
table, the persons named in the table have sole voting and investment power with
respect to all shares of common stock shown as beneficially owned by them.
<TABLE>
<CAPTION>


                                                              SHARES OF
                                                             COMMON STOCK            PERCENTAGE OF
NAME OF BENEFICIAL OWNER*                                  BENEFICIALLY OWNED         TOTAL SHARES
---------------------------------------------------------------------------------------------------
<S>                                                            <C>                       <C>
Dr. Arol I. Buntzman                                           965,754 (1)                21.3
Dr. John J. McGrath                                            200,146 (2)                 4.4
Richard Goldenberg (3)                                          66,627                     1.5
Tayside Trading Ltd. (4)                                       417,705 (5)                 9.0
  125/5 Sanhedria Murchevet, Jerusalem, Israel
DEWI Investments Limited (6)                                   507,334                    11.3
  37 Bar Ilan Street, Jerusalem, Israel
B&H Investments Ltd (7)                                        239,409 (8)                 4.2
  50 Town Range, Gibraltar
Amananth Trading LLC                                           493,669 (9)                 9.9
  2 American Lane, Greenwich, CT
Royce N. Flippin, Jr.                                            5,000 (10)                0.1
Arthur H. Goldberg                                             114,000 (11)                2.5
Philip M. Getter                                                38,333 (12)                0.7
All directors and executive officers as a group
(6 persons)                                                  1,120,820 (13)               23.4
----------------------
</TABLE>

          *Unless otherwise indicated, the address for each stockholder is c/o
          Educational Video Conferencing, Inc., 35 East Grassy Sprain Road,
          Suite 200, Yonkers, New York 10710.

(1)       Includes 60,000 shares underlying currently exercisable options. Also
          includes the 200,146 and 66,627 shares beneficially owned,
          respectively, by Dr. McGrath and Mr. and Mrs. Goldenberg. An agreement
          between Drs. Buntzman and McGrath gives Dr. Buntzman the right to
          direct the vote of the shares owned by Dr. McGrath as Dr. Buntzman
          directs until December 31, 2001. Additionally, Dr. Buntzman has the
          right to direct the vote of the shares owned by Mr. and Mrs.
          Goldenberg until December 31, 2001 pursuant to an agreement with them.

(2)       Includes 20,000 shares underlying currently exercisable options.

(3)       Includes 7,500 shares underlying currently exercisable options. The
          remaining shares are owned jointly by Mr. Goldenberg and his wife.
          Excludes 5,000 shares owned by Mr. Goldenberg's adult children, as to
          which Mr. and Mrs. Goldenberg disclaim beneficial ownership.

(4)       The ultimate beneficial owner is Mr. Esriel Pines.

(5)       Includes 167,705 shares underlying currently exercisable warrants.

(6)       The ultimate beneficial owner is Mr. Aron Gee.

(7)       The ultimate beneficial owners are Mr. Chaim Segal and Mr. Simcha
          Senerovitch.

(8)       Includes 46,545 shares underlying currently exercisable warrants.

                                       37
<PAGE>

(9)       Also owned beneficially by Amaranth Advisors, L.L.C., the managing
          member of Amaranth Trading, and Nicholas M. Maounis, the managing
          member of Amaranth Advisors. Includes 45,000 shares owned by Amaranth
          Securities LLC, an affiliate of Amaranth Trading, and 20,000 shares
          are owned by Mr. Maounis. The remaining 428,669 shares underlie a
          portion of the 100,000 shares of Series B preferred and related
          warrants issued initially to Paloma Strategic Fund L.P. and
          subsequently transferred to its affiliate, Amaranth Trading. Except
          for the ownership limitation described below, the 100,000 shares of
          Series B preferred stock would be convertible into 740,741 shares of
          common stock, based on the initial conversion price of $13.50 per
          share, and the related warrants would be exercisable for 555,556
          shares of common stock, or the total of 1,296,297 shares. However, the
          number of shares of common stock into which the shares of Series B
          preferred and related warrants are convertible and exercisable is
          limited to the number which would result in Amaranth Trading and its
          affiliates beneficially owning, together, not more than 9.99% of all
          the outstanding shares of our common stock. Amaranth Trading and its
          affiliates expressly disclaim beneficial ownership of any shares of
          our common stock in excess of this limitation. Amaranth Trading,
          Amaranth Advisors and Amaranth Securities also disclaim any beneficial
          ownership of the 20,000 shares owned by Mr. Maounis.

(10)      Shares underlying currently exercisable options.

(11)      Includes currently exercisable options and warrants to purchase 79,000
          shares.

(12)      Includes 3,750 shares owned by Mr. Getter's wife, as to which Mr.
          Getter disclaims beneficial ownership, 3,333 shares underlying
          currently exercisable options and 24,000 shares underlying currently
          exercisable warrants.

(13)      Includes [203,833] shares underlying currently exercisable options and
          warrants.

ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

     In November 2000, EVCI engaged Prime Charter Ltd. to value warrants to
purchase 722,223 shares of our common stock issued in September 2000 in the
private placement of 130,000 shares of our 7% Series B, Convertible Preferred
Stock described below. For this services, we paid Prime Charter $75,000 plus
accountable expenses not exceeding $500. Philip M. Getter, who is a Class 1
director and nominee, was a managing director and head of corporate finance of
Prime Charter when we received and paid for this valuation. Effective January 1,
2001, Mr. Getter became a consultant to EVCI, on a month to month basis, and is
being paid $10,000 per month by us for his services.

ITEM 13. EXHIBITS AND REPORTS ON FORM 8-K

(A) EXHIBITS. The following exhibits are filed as part of this report:

EXHIBIT NO.*               DESCRIPTION OF EXHIBIT

       3.1[1]     --       Certificate of Incorporation of the Registrant.

       3.1(a)[6]  --       Certificate of Amendment to Certificate of
                           Incorporation of the Registrant.

       3.2[6]     --       Amended and Restated By-Laws of the Registrant.

       3.3[1]     --       Certificate of Merger of Educational Video
                           Conferencing, Inc. (a New York Corporation) into the
                           Registrant (a Delaware Corporation).

       3.4[1]     --       Certificate of Correction of the Certificate of
                           Incorporation of the Registrant.

       3.5        --       Certificate Eliminating Reference to Series A 7.5%
                           Convertible Preferred Stock from the Certificate of
                           Incorporation of the Registrant.

                                       38
<PAGE>


       3.6[15]    --       Certificate of Designations of Series B 7%
                           Convertible Preferred Stock of the Registrant.

       3.6(a)[15] --       Certificate of Correction of Certificate of
                           Designations of the Series B 7% Convertible Preferred
                           of the Registrant.

       4.1[1]     --       Form of Common Stock Purchase Warrant issued to
                           investors in private placements and for services
                           provided in connection with such private placements.

       4.2[1]     --       Tayside Common Stock Purchase Warrant.

       4.3[5]     --       Adelphi Common Stock Purchase Warrant.

       4.4[5]     --       Form of Representative's Warrant Agreement (including
                           Form of Representative's Warrant).

       4.5[5]     --       Form of Common Stock Certificate.

       4.6[5]     --       Amended and Restated 1998 Incentive Stock Option Plan
                           of the Registrant.

       4.7[9]     --       Warrant Agreement, dated January 14, 2000, between
                           the Registrant and Bruce R. Kalisch.

       4.8[14]    --       Warrant Agreement, dated April 18, 2000, between the
                           Registrant and Peter J. Solomon Company Limited.

       4.9[10]    --       Common Stock Purchase Warrant, dated February 3,
                           2000, issued to The Shaar Fund Ltd.

       4.10[10]   --       Form of Finders' Warrant (relating to the issuance of
                           warrants to purchase 3,870 shares of the Registrant's
                           common stock).

       4.11[15]   --       Form of Common Stock Purchase Warrant

     +10.1[3]     --       Agreement between the Registrant and Adelphi
                           University for the Offering of Interactive Televideo
                           Courses, dated May 13, 1997.

     +10.2[2]     --       Agreement between the Registrant and The College
                           of Insurance for the Offering of Interactive
                           Televideo Courses, dated September 16, 1997.

     +10.3[2]     --       Agreement between the Registrant and Mercy College
                           for the Offering of Interactive Video Conferenced and
                           Computer Courses, dated March 10, 1998.

      10.4[1]     --       Agreement between the Registrant and Citibank, dated
                           May 20, 1997.

      10.5[1]     --       Agreement between the Registrant and American
                           International Group, dated May 21, 1997.

                                       39
<PAGE>

      10.6[1]     --       Agreement between the Registrant and Merrill Lynch
                           for the Offering of Interactive Televideo Courses and
                           Distance Learning Programs, dated June 3, 1998.

      10.7[8]     --       Agreement between the Registrant and Merrill
                           Lynch, Pierce, Fenner & Smith Incorporated for the
                           Offering of Interactive Televideo Courses and
                           Distance Learning Programs, dated June 30, 1999.

      10.8[5]     --       Agreement for Interactive Televideo Courses and
                           Distance Learning Programs between the Registrant and
                           Travelers Indemnity Company, dated July 24, 1998.

      10.9[6]     --       Lease Agreement between the Registrant and Realty Co.
                           (doing business as Royal Realty), dated December 15,
                           1998.

      10.11[1]    --       Employment Agreement between the Registrant and Dr.
                           Arol I. Buntzman, dated October 1, 1998.

      10.12[1]    --       Employment Agreement between the Registrant and Dr.
                           John J. McGrath, dated October 1, 1998.

      10.13[1]    --       Employment Agreement between the Registrant and
                           Richard Goldenberg, dated October 1, 1998.

      10.14[1]    --       Chief Executive Officer Change in Control Agreement
                           between the Registrant and Dr. Arol I. Buntzman,
                           dated October 1, 1998.

      10.15[1]    --       Form of Indemnification Agreement.

     +10.15[4]    --       Agreement between the Registrant and Manhattan
                           College for the Offering of Interactive Video
                           Conferenced Courses, dated November 23, 1998.

      10.16[12]   --       Agreement between Arol I. Buntzman and Richard and
                           Bonnie Goldenberg, dated March 1, 2000.

      10.17[12]   --       Agreement between Arol I. Buntzman and John J.
                           McGrath, dated March 1, 2000.

      10.18[8] --          Letter Agreement between Excite @Home Network and the
                           Registrant, dated July 26, 1999.

     +10.19(a)[8] --       Agreement, dated August 26, 1999, between We Media,
                           Inc. and the Registrant.

     +10.19(b)[8] --       Agreement, dated September 22, 1999, between We
                           Media, Inc. and the Registrant.

     +10.20[8]    --       Co-Marketing Agreement, dated September 1, 1999,
                           between the Registrant and Bell Atlantic Network
                           Services, Inc.

                                       40
<PAGE>

     +10.21[8]    --       Agreement, dated September 1, 1999, between the
                           Registrant and Touro College and Touro University
                           College and Touro University International.

     +10.22[8]    --       Agreement, between the Registrant and St. John's
                           University for the Offering of Interactive Video
                           Conferenced and Internet-Based Courses, dated
                           September 24, 1999.

      10.23[9]    --       Stock Purchase Agreement, dated January 14, 2000,
                           among Bruce R. Kalisch, Interboro Holding, Inc. and
                           Interboro Institute, Inc.

     +10.24[12]   --       Agreement between the Registrant and Golden Gate
                           University for the Offering of Interactive video
                           conference courses, dated March 3, 2000.

      10.25[12]   --       Educational Provider/Co-Marketing Agreement between
                           the Registrant and Computer Generated Solutions, Inc.
                           dated January 13, 2000.

     +10.26[14]   --      Agreement, dated April 27, 2000, between the
                           Registrant and Telecommunications Research Associates
                           for the Offering of Interactive Video Conferenced
                           Courses

      10.27[13]   --       Summary of Transaction Terms between edcor and the
                           Registrant, dated January 3, 2000.

      10.28[13]   --       Agreement, dated January 25, 2000, between the
                           Registrant and Clemson University for the Offering of
                           Non-Credit Interactive Video Conferenced Courses.

      10.29[15]   --       Form of Series B Stock Purchase Agreement.

      10.30[15]   --       Amended and Restated Registration Rights Agreements,
                           dated September 27, 2000, among Paloma Strategic Fund
                           L.P. ("Paloma"), Seneca Capital International, Ltd.
                           ("Seneca Ltd."), Seneca Capital, L.P. ("Seneca
                           L.P."), Merced Partners Limited Partnership
                           ("Merced") , Lakeshore International, Ltd.
                           ("Lakeshore") and the Registrant.

      10.31[15]   --       Amended and Restated Co-Sale Agreement, dated
                           September 29, 2000, among Dr. Arol I. Buntzman, the
                           Registrant, Paloma, Seneca Ltd., Seneca L.P., Merced
                           and Lakeshore.

      10.32[16]   --       Agreement, dated August 31, 2000, between the
                           Registrant and YAI National Institute for People with
                           Disabilities.

     +10.33[16]   --       IP Services and Dedicated Access Agreement, dated
                           September 15, 2000, between At Home Corporation,
                           through its @Work division, and the Registrant.

      23.1        --       Consent of Goldstein Golub Kessler LLP.

------------------------------

*    Numbers inside brackets indicate documents from which exhibits have been
     incorporated by reference.

                                       41
<PAGE>

+    Confidential treatment has been granted with respect to the redacted
     portions of this exhibit.

[1]  Incorporated by reference to the Registrant's Registration Statement on
     Form SB-2, dated October 23, 1998, registration no. 333-66085.

[2]  Incorporated by reference to Amendment No. 1, dated November 12, 1998, to
     the Registrant's Form SB-2, Registration no. 333-66085.

[3]  Incorporated by reference to Amendment No. 2, dated November 20, 1998, to
     the Registrant's Form SB-2, Registration No. 333-66085.

[4]  Incorporated by reference to Amendment No. 3, dated December 23, 1998, to
     the Registrant's Form SB-2, Registration No. 333-66085.

[5]  Incorporated by reference to Amendment No. 4, dated February 10, 1999, to
     the Registrant's Form SB-2, Registration No. 333-66085.

[6]  Incorporated by reference to Registrant's Form 10-QSB, for the quarter
     ended March 31, 1999.

[7]  Intentionally omitted.

[8]  Incorporated by reference to Registrant's Form 10-QSB for the quarter ended
     September 30, 1999.

[9]  Incorporated by reference to the Registrant's Form 8-K dated January 14,
     2000.

[10] Incorporated by reference to the Registrant's Form 8-K dated February 3,
     2000.

[11] Intentionally omitted.

[12] Incorporated by reference to the Registrant's Form 10-KSB for the year
     ended December 31, 1999.

[13] Incorporated by reference to the Registrant's Form 10-QSB for the quarter
     ended March 31, 2000.

[14] Incorporated by reference to the Registrant's Form 10-QSB for the quarter
     ended June 30, 2000.

[15] Incorporated by reference to the Registrant's Form 8-K dated September 22,
     2000.

[16] Incorporated by reference to the Registrant's Form 10-QSB for the quarter
     ended September 30, 2000.

                                       42
<PAGE>


(b)  REPORTS ON FORM 8-K. During the fourth quarter of 2000, EVCI filed a Form
     8-K report, dated September 22, 2000, covering Items 2 and 7.


                                       43
<PAGE>


                                   SIGNATURES

In accordance with Section 13 or 15(d) of the Exchange Act, the registrant has
duly caused this Form 10-KSB/A to be signed on its behalf by the undersigned,
thereunto duly authorized.


                                      EDUCATIONAL VIDEO CONFERENCING, INC.


Date: April 30, 2001                  By: /s/ Dr. Arol I. Buntzman
                                          ---------------------------------
                                           Dr. Arol I. Buntzman
                                           Chairman and Chief Executive Officer

     In accordance with the Exchange Act, this Form 10-KSB/A has been signed
below by the following persons on behalf of the registrant and in the capacities
and on the dates indicated.

SIGNATURE                                                           DATE
---------                                                           ----

/s/ Dr. Arol I. Buntzman                                        April 30, 2001
-----------------------------------------------
Dr. Arol I. Buntzman
Chairman and Chief Executive Officer

/s/ Dr. John J. McGrath                                         April 30, 2001
-----------------------------------------------
Dr. John J. McGrath
President and Director

/s/ Richard Goldenberg                                          April 30, 2001
-----------------------------------------------
Richard Goldenberg
Chief Financial Officer, Secretary and Director
(Principal Financial and Accounting Officer)

                                                                April   , 2001
-----------------------------------------------
Royce N. Flippin, Jr.
Director

/s/ Philip M. Getter                                            April 30, 2001
-----------------------------------------------
Philip M. Getter
Director

                                                                April   , 2001
-----------------------------------------------
Arthur H. Goldberg
Director

<PAGE>



              EDUCATIONAL VIDEO CONFERENCING, INC.AND SUBSIDIARIES
                        CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2000

                   INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

<TABLE>
<CAPTION>


<S>                                                                             <C>
INDEPENDENT AUDITOR'S REPORT                                                    F-2

CONSOLIDATED FINANCIAL STATEMENTS:

Balance Sheet as of December 31, 2000 and 1999                                  F-3
Statement of Operations for the Years Ended December 31, 2000 and 1999          F-4
Statement of Stockholders' Equity for the Years Ended December 31, 2000
  and 1999                                                                      F-5
Statement of Cash Flows for the Years Ended December 31, 2000 and 1999          F-6
Notes to Consolidated Financial Statements                                      F-7 -- F-20
</TABLE>








<PAGE>



INDEPENDENT AUDITOR'S REPORT

To the Board of Directors
Educational Video Conferencing, Inc.

We have audited the accompanying consolidated balance sheets of Educational
Video Conferencing, Inc. ("EVCI") and Subsidiaries as of December 31, 2000 and
1999, and the related consolidated statements of operations, stockholders'
equity, and cash flows for the years then ended. These financial statements are
the responsibility of EVCI's management. Our responsibility is to express an
opinion on these financial statements based on our audits.

We conducted our audits in accordance with auditing standards generally accepted
in the United States of America. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. 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 Educational Video
Conferencing, Inc. and Subsidiaries as of December 31, 2000 and 1999, and the
results of their operations and their cash flows for the years then ended in
conformity with accounting principles generally accepted in the United States of
America.



/s/
GOLDSTEIN GOLUB KESSLER LLP
New York, New York


January 19, 2001

                                      F-2

<PAGE>

              EDUCATIONAL VIDEO CONFERENCING, INC. AND SUBSIDIARIES
                           CONSOLIDATED BALANCE SHEET

<TABLE>
<CAPTION>

DECEMBER 31,                                                              2000          1999
-----------------------------------------------------------------------------------------------------
<S>                                                                    <C>           <C>
Current Assets:
Cash and cash equivalents                                              $ 6,332,934   $ 6,925,823
Student accounts receivable, less allowance for doubtful accounts of
  $250,000 and $75,000, respectively                                     1,482,001       461,234
Accounts receivable, other                                                 304,634          --
Prepaid expenses and other current assets                                   11,510       138,583
-----------------------------------------------------------------------------------------------------
TOTAL CURRENT ASSETS                                                     8,131,079     7,525,640

Property and Equipment - net                                             5,013,003     2,916,091

Intangible Assets                                                        1,349,588          --

License Agreement                                                          212,500       200,000

Deferred Income Tax Asset, net of valuation allowance of $1,581,000
 and $865,000, respectively                                                   --            --

Equity and Other Investments                                                  --         240,533

Other Assets                                                                45,081        15,246
-----------------------------------------------------------------------------------------------------
     TOTAL ASSETS                                                      $14,751,251   $10,897,510
=====================================================================================================
LIABILITIES AND STOCKHOLDERS' EQUITY

Current Liabilities:
Accounts payable and accrued expenses                                  $   793,466   $   524,539
Accrued purchase price payable for Interboro Institute                     673,376          --
Current portion of capital lease obligation                                 18,107        15,717
-----------------------------------------------------------------------------------------------------
     TOTAL CURRENT LIABILITIES                                           1,484,949       540,256
Capital Lease Obligation, net of current portion                            27,937        46,034
-----------------------------------------------------------------------------------------------------
     TOTAL LIABILITIES                                                   1,512,886       586,290
-----------------------------------------------------------------------------------------------------
Series B 7% Convertible Preferred Stock - $100 stated value;
 issued and outstanding 130,000 shares                                  12,342,266          --
-----------------------------------------------------------------------------------------------------
Stockholders' Equity:
  Preferred stock - $.0001 par value; authorized
   1,000,000 shares, including 200,000 shares designated Series B           --              --
  Common stock - $.0001 par value; authorized 20,000,000
   shares, issued and outstanding 4,492,961 shares and
   4,347,243 shares,  respectively                                           450             435
  Additional paid-in capital                                          22,370,380      19,889,224
  Accumulated deficit                                                (21,474,731)     (9,578,439)
-----------------------------------------------------------------------------------------------------
STOCKHOLDERS' EQUITY                                                     896,099      10,311,220
-----------------------------------------------------------------------------------------------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY                          $ 14,751,251    $ 10,897,510
=====================================================================================================
</TABLE>

                See Notes to Consolidated Financial Statements.

                                      F-3
<PAGE>

             EDUCATIONAL VIDEO CONFERENCING, INC. AND SUBSIDIARIES
                      CONSOLIDATED STATEMENT OF OPERATIONS

<TABLE>
<CAPTION>

YEAR ENDED DECEMBER 31,                                             2000            1999
-----------------------------------------------------------------------------------------------------
<S>                                                           <C>             <C>
Net revenue                                                   $  8,591,433    $    752,777
Other income                                                        67,413
-----------------------------------------------------------------------------------------------------
Total revenue                                                    8,658,846         752,777
-----------------------------------------------------------------------------------------------------
Operating expenses:
  Cost of sales                                                  2,703,705         295,640
  Selling, general and administrative                           16,134,211       6,591,609
  Noncash consulting services                                       56,000         425,533
-----------------------------------------------------------------------------------------------------
Total operating expenses                                        18,893,916       7,312,782
-----------------------------------------------------------------------------------------------------
Loss from operations                                           (10,235,070)     (6,560,005)

Other income (expense):
  Interest and financing costs                                      (8,439)         (5,519)
  Interest income                                                  265,552         437,645
  Loss from equity method investment                               (95,283)           --
  Gain on sale of equity investment                                 50,000            --
-----------------------------------------------------------------------------------------------------
Loss before provision for income taxes                         (10,023,240)     (6,127,879)

Provision for income taxes                                        (117,000)           --
-----------------------------------------------------------------------------------------------------
Net loss                                                       (10,140,240)     (6,127,879)
-----------------------------------------------------------------------------------------------------
Beneficial conversion feature of preferred stock - Series A       (705,882)           --
Accreted value of warrants - Series A                             (378,918)           --
Dividends on preferred stock - Series A and B                     (437,513)           --
Redemption premium                                                (420,000)           --
Accreted value of warrants and transaction costs - Series B        (59,794)           --
-----------------------------------------------------------------------------------------------------
Net loss available to common stockholders                     $(12,142,347)   $ (6,127,879)
=====================================================================================================
Basic and diluted loss per common share                       $      (2.76)   $      (1.48)
=====================================================================================================
Weighted-average number of common shares outstanding             4,391,533       4,147,604
=====================================================================================================
</TABLE>

                See Notes to Consolidated Financial Statements.

                                      F-4
<PAGE>

              EDUCATIONAL VIDEO CONFERENCING, INC. AND SUBSIDIARIES
                 CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>

                                                                                            PREFERRED STOCK
                                                                                               SERIES A
                                                                                    COMMON STOCK
                                                          NUMBER                       NUMBER
                                                         OF SHARES          AMOUNT    OF SHARES          AMOUNT
------------------------------------------------------------------------------------------------------------------------
<S>                                                      <C>                   <C>          <C>             <C>
Balance at December 31, 1998                              3,008,909   $        301           --              --

Issuance of common stock in connection with
  initial public offering                                 1,338,334            134           --              --

Issuance of common stock purchase warrants and
  stock options for services                                   --             --             --              --

Net loss                                                       --             --             --              --
-------------------------------------------------------------------------------------------------------------------------

Balance at December 31, 1999                              4,347,243            435           --              --

Issuance of preferred stock Series A                           --             --        400,000       $  4,000,000

Beneficial conversion feature of Series A                      --             --             --           (705,882

Allocated value of warrants issued with Series A               --             --             --           (378,918

Amortization of warrants and beneficial conversion             --             --             --          1,084,800
feature

Conversion of Series A preferred stock into                 103,341             10     (120,000)        (1,200,000)
common stock

Redemption of Series A preferred stock                          --            --       (280,000)        (2,800,000)

Exercise of warrants and stock options                       25,250              3           --                 --

Allocated value of warrants issued with Series B                --            --             --                 --

Dividends paid in common stock                               17,127              2           --                 --

Dividends accrued on preferred stock Series B                   --            --             --                 --

Issuance of common stock purchase warrants and stock
options for services                                            --            --             --                 --

Expenses incurred in connection with the issuance of stock      --            --             --                 --

Net loss                                                        --            --             --                 --
-------------------------------------------------------------------------------------------------------------------------
Balance at December 31, 2000                              4,492,961   $        450        $ - 0 -            $ - 0 -
=========================================================================================================================

<CAPTION>
                                                                               PREFERRED STOCK
                                                                             SERIES A (CONTINUED)

                                                                 ADDITIONAL
                                                                   PAID-IN        ACCUMULATED    STOCKHOLDERS'
                                                                   CAPITAL          DEFICIT         EQUITY
----------------------------------------------------------------------------------------------------------------------
<S>                                                            <C>             <C>             <C>
Balance at December 31, 1998                                    $  6,064,920    $ (3,450,560)   $  2,614,661

Issuance of common stock in connection with
  initial public offering                                         13,398,771            --        13,398,905

Issuance of common stock purchase warrants and
  stock options for services                                         425,533            --           425,533

Net loss                                                                --        (6,127,879)     (6,127,879)
----------------------------------------------------------------------------------------------------------------------

Balance at December 31, 1999                                      19,889,224      (9,578,439)     10,311,220

Issuance of preferred stock Series A                                (480,463)           --         3,519,537

Beneficial conversion feature of Series A                            705,882            --              --

Allocated value of warrants issued with Series A                     378,918            --              --

Amortization of warrants and beneficial conversion                      --        (1,144,594)        (59,794)
feature

Conversion of Series A preferred stock into                        1,199,990            --              --
common stock

Redemption of Series A preferred stock                                  --          (420,000)     (3,220,000)

Exercise of warrants and stock options                               108,473            --           108,476

Allocated value of warrants issued with Series B                     400,000            --           400,000

Dividends paid in common stock                                       191,456        (191,458)           --

Issuance of common stock purchase warrants and stock
options for services                                                  56,000            --            56,000

Expenses incurred in connection with the issuance of stock           (79,100)           --           (79,100)

Net loss                                                                --       (10,140,240)    (10,140,240)
----------------------------------------------------------------------------------------------------------------------
Balance at December 31, 2000                                    $ 22,370,380    $(21,474,731)   $    896,099
======================================================================================================================
</TABLE>

                See Notes to Consolidated Financial Statements.

                                      F-5
<PAGE>

              EDUCATIONAL VIDEO CONFERENCING, INC. AND SUBSIDIARIES
                      CONSOLIDATED STATEMENT OF CASH FLOWS


<TABLE>
<CAPTION>

YEAR ENDED DECEMBER 31,                                                                    2000              1999
----------------------------------------------------------------------------------------------------------------------
<S>                                                                                    <C>             <C>
Cash flows from operating activities:
Net loss                                                                               $(10,140,240)   $ (6,127,879)
Adjustments to reconcile net loss to net cash used in operating
 activities:
Depreciation                                                                              1,060,171         458,410
Amortization of intangibles                                                                 153,695            --
Allowance for doubtful accounts                                                             125,000          40,000
Amortization of license agreement                                                            37,500            --
Common stock options and warrants issued for services                                        56,000         425,533
Loss from equity method investment                                                           95,283          54,717
Gain on equity investment                                                                   (50,000)           --
Changes in operating assets and liabilities:
  Increase in accounts receivable                                                          (981,874)       (274,458)
  Increase in licensing agreement                                                           (50,000)       (200,000)
  Decrease in inventory                                                                      97,152            --
  Decrease (increase) in prepaid expenses and other current assets                          315,816         (57,737)
  Increase in other assets                                                                  (29,835)         (7,414)
  Decrease in accounts payable and accrued expenses                                      (1,505,013)       (396,104)
  Accrued purchase price payable on Interboro Institute                                     673,376            --
----------------------------------------------------------------------------------------------------------------------
     NET CASH USED IN OPERATING ACTIVITIES                                              (10,142,969)     (6,084,932)
----------------------------------------------------------------------------------------------------------------------
Cash flows from investing activities:
Purchase of Interboro Institute, Inc., net of cash acquired                                (632,318)           --
Purchases of property and equipment                                                      (2,963,275)     (1,896,013)
Proceeds from sale of equity investment                                                     150,000            --
Net payments for equity and other investments                                                  --          (295,250)
----------------------------------------------------------------------------------------------------------------------
     NET CASH USED IN INVESTING ACTIVITIES                                               (3,445,593)     (2,191,263)
----------------------------------------------------------------------------------------------------------------------
Cash flows from financing activities:
Net proceeds from issuance of common stock                                                  108,473      13,398,905
Deferred offering costs                                                                        --           900,000
Principal payments on capital lease obligation                                              (15,707)        (11,587)
Net proceeds from issuance of preferred stock Series A                                    3,519,535            --
Redemption of preferred stock Series A                                                   (3,220,000)           --
Net proceeds from issuance of preferred stock Series B                                   12,682,472            --
Expenses incurred in connection with the issuance of preferred
 stock Series B                                                                             (79,100)           --
----------------------------------------------------------------------------------------------------------------------
     NET CASH PROVIDED BY FINANCING ACTIVITIES                                           12,995,673      14,287,318
----------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in cash and cash equivalents                                       (592,889)      6,011,123

Cash and cash equivalents at beginning of year                                            6,925,823         914,700
----------------------------------------------------------------------------------------------------------------------
Cash and cash equivalents at end of year                                                  6,332,934    $  6,925,823
======================================================================================================================
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:

  Cash paid during the year for interest                                                      8,439    $      5,519
======================================================================================================================
SUPPLEMENTAL SCHEDULE OF NONCASH INVESTING AND FINANCING ACTIVITIES:

  Conversion of Series A to common stock                                               $    120,000            --
  Issuance of common stock in lieu of dividends on Series A preferred stock                 191,458            --
  Capital lease obligations incurred                                                           --      $     73,338
======================================================================================================================
</TABLE>

                See Notes to Consolidated Financial Statements.

                                       F-6

<PAGE>


                                            EDUCATIONAL VIDEO CONFERENCING, INC.
                                      NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
--------------------------------------------------------------------------------
1. PRINCIPAL           Educational Video Conferencing, Inc. ("EVCI") was formed
   BUSINESS            on March 4, 1997. We have two business segments. We
                       aggregate educational and training content
                       provided by others and deliver it, to remote locations,
                       synchronously using interactive video conferencing
                       technologies, and asynchronously using the narrow band
                       Internet.  These technologies include our broadband
                       network design and enabling technology that permits video
                       conferencing at approximately 30 frames per second
                       (broadcast quality). We also provide on campus education
                       and training, currently through Interboro Institute, a
                       two-year college located in New York City.

                       In January 2000, EVCI acquired all the outstanding common
                       stock of Interboro Institute Inc. (the "Institute"). The
                       Institute's principal business activity consists of the
                       operation of a post-secondary two-year degree-granting
                       college located in New York City. The acquisition was
                       accounted for under the purchase method of accounting.

                       The accompanying consolidated financial statements
                       include the accounts of EVCI and its wholly owned
                       subsidiaries, Interboro Holdings, Inc. and Interboro
                       Institute Inc. (collectively referred to as the
                       "Company"). All significant intercompany accounts and
                       transactions have been eliminated in consolidation.

                       The Company considers all highly liquid instruments
                       purchased with a maturity of three months or less to be
                       cash equivalents. The Company maintains its cash in bank
                       deposit accounts which, at times, may exceed federally
                       insured limits. It has not experienced any losses in such
                       accounts.

                       The Company reviews long-lived assets and identified
                       intangibles for impairment whenever events or changes in
                       circumstances indicate that the carrying value of an
                       asset may not be fully recoverable. The Company performs
                       nondiscounted cash flow analyses to determine if an
                       impairment exists.

                       Intangible assets include goodwill, the excess of the
                       cost over the fair value of assets acquired and
                       noncompete agreements. Amortization is computed using the
                       straight-line method over 10 years and 5 years,
                       respectively, which are the expected benefit periods.
                       Accumulated amortization amounted to $153,695 at


                                       F-7
<PAGE>

                                            EDUCATIONAL VIDEO CONFERENCING, INC.
                                      NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
--------------------------------------------------------------------------------
                       December 31, 2000.

                       The Company recognizes income ratably over the semester
                       in which courses are given. The courses range from 8-week
                       to 16-week periods. During the year ended December 31,
                       2000, two education providers accounted for 76% (52% and
                       24%) of EVCI's net revenue. During the year ended
                       December 31, 1999, three education providers accounted
                       for 98% (60%, 27% and 11%) of EVCI's revenue.

                       The Institute participates in federal and state financial
                       aid programs (Title IV Programs, NYS TAP, etc.). Most of
                       the students attending the Institute rely on these
                       federal and state financial aid programs to meet their
                       tuition needs. Changes in the programs may have a direct
                       impact on the Institute.

                       Property and equipment is recorded at cost. Depreciation
                       is provided for by the straight-line method over the
                       estimated useful lives of the property and equipment.
                       Amortization of leasehold improvements is provided for by
                       the straight-line method over the term of the lease.

                       The preparation of financial statements in accordance
                       with generally accepted accounting principles requires
                       the use of estimates by management. Actual results could
                       differ from these estimates.

                       Advertising costs are expensed as incurred. The cost of
                       brochures is capitalized and amortized over the semester
                       to which the specific courses relate. Advertising
                       expenses approximated $1,125,000 and $635,000 for the
                       years ended December 31, 2000 and 1999, respectively.

                       The Company employs the liability method of accounting
                       for income taxes pursuant to SFAS No. 109, under which
                       method recorded deferred income taxes reflect the tax
                       consequences on future years of temporary differences
                       (differences between the tax basis of assets and
                       liabilities and their financial amounts at year-end). The
                       Company provides a valuation allowance that reduces
                       deferred tax assets to their net realizable value.

                       SFAS No. 128, Earnings per Share, requires dual
                       presentation of basic earnings per share ("EPS") and
                       diluted EPS on the face of all statements for all
                       entities with complex capital structures. Basic EPS is
                       computed as net earnings divided by the weighted-average
                       number of common shares outstanding for the period.
                       Diluted EPS reflects the potential dilution that could
                       occur from common shares issuable through stock-based
                       compensation including stock options,


                                      F-8
<PAGE>

                                            EDUCATIONAL VIDEO CONFERENCING, INC.
                                      NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
--------------------------------------------------------------------------------
                       restricted stock awards, warrants and other convertible
                       securities. Potential common shares have not been
                       included in the computation of diluted EPS since the
                       effect would be antidilutive. The Company accounts for
                       employee stock options in accordance with Accounting
                       Principles Board ("APB") Opinion No. 25, Accounting for
                       Stock Issued to Employees. Under APB No. 25, the Company
                       applies the intrinsic value method of accounting and
                       therefore does not recognize compensation expense for
                       options granted, because options are only granted at a
                       price equal to the market price on the day of grant. SFAS
                       No. 123, Accounting for Stock-Based Compensation,
                       prescribes the recognition of compensation expense based
                       on the fair value of options as determined on the grant
                       date. However, SFAS No. 123 allows companies to continue
                       applying APB No. 25 if certain pro forma disclosures are
                       made assuming hypothetical fair value method application
                       (see Note 10).

2. ACQUISITION OF      On January 14, 2000, EVCI acquired the outstanding shares
   INTERBORO           of Interboro Institute Inc. for $672,500 plus 50% of
   INSTITUTE INC.:     earnings before interest, taxes, debt and amortization
                       ("EBITDA") for the three years ending December 31, 2001,
                       2002 and 2003. Payment of the Institute's purchase price
                       is contingent upon there being EBITDA, as defined. The
                       acquisition was accounted for under the purchase method
                       of accounting and, accordingly, the results of operations
                       are included in the financial statements as of the date
                       of the acquisition, and the assets and liabilities are to
                       be recorded based upon their fair values at the date of
                       the acquisition. EVCI acquired assets with a fair value
                       of approximately $1,000,000 and assumed liabilities of
                       approximately $1,800,000.

                       In connection with the acquisition of the Institute, EVCI
                       recorded approximately $1,500,000 in goodwill and
                       noncompete agreements, which will be amortized on a
                       straight-line basis over a period of 10 years and 5
                       years, respectively.

                       The following summarized pro forma consolidated statement
                       of income (unaudited) assumes the acquisition of the
                       business of the Institute as if it had occurred at
                       January 1, 1999.

                       Year ended December 31, 1999
                       Net revenue                                  $ 7,181,825
                       Net loss                                     $(9,009,179)
                       Basic loss per
                         common share                                    $(2.17)

                       This pro forma financial information is presented for
                       informational purposes only and is not necessarily
                       indicative of the operating results that would have
                       occurred had the acquisition been consummated as of the
                       assumed date, nor is it necessarily indicative of future
                       operating results.


                                      F-9
<PAGE>

                                            EDUCATIONAL VIDEO CONFERENCING, INC.
                                      NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
--------------------------------------------------------------------------------

3. PROPERTY AND        Property and equipment, at cost, consists of the
   EQUIPMENT:          following:

<TABLE>
<CAPTION>

December 31,                                          2000          1999      Estimated Useful Life
<S>                                               <C>          <C>            <C>
Furniture and fixtures                            $  247,715   $   71,034     7 years
Office computers                                   1,872,424      506,250 3   3 to 5 years
Video teaching equipment                           4,028,004    2,774,201     5 years
Computer software                                    367,770      102,565     5 years
Automobile                                            22,233       22,233     5 years
Leasehold improvements                               154,994       59,774     Term of lease
Equipment acquired under capital lease                73,338       73,338     5 years
============================================================================================
                                                   6,766,478    3,609,395
--------------------------------------------------------------------------------------------

Less accumulated depreciation
  and amortization:

Equipment acquired under
  capital lease                                       23,453        7,334
Other                                              1,730,022      685,970
--------------------------------------------------------------------------------------------
                                                   1,753,475      693,304
--------------------------------------------------------------------------------------------
                                                  $5,013,003   $2,916,091
============================================================================================


4. INVESTMENTS,        Equity and other investments consist of the following at
   EQUITY AND          December 31, 1999:
   OTHER:
                       Investment in Visiocom (a)                     $195,533
                       Advance to Interboro Institute Inc.              45,000
--------------------------------------------------------------------------------------------
                                                                      $240,533
============================================================================================
</TABLE>

                   (a) On November 29, 1999, EVCI invested $250,000 for a
                       50% interest (33-1/3% of voting rights) in Visiocom USA
                       Incorporated ("Visiocom"), a newly formed Delaware
                       corporation. Visiocom provides business employees with
                       "one-on-one" training, via the Internet and video
                       conferencing, on how to use business software programs
                       and, using the same teaching methods, also provides
                       business employees with language courses. The investment
                       in Visiocom is accounted for under the equity method of
                       accounting whereby earnings or losses from the investment
                       are reflected in EVCI's earnings based on its pro rata
                       ownership interest. The net loss from this investment for
                       the year ended December 31, 2000 and 1999 aggregated
                       approximately $95,283 and $55,000, respectively. In
                       December 2000, the Company sold its interest in Visiocom
                       for $150,000.


                                      F-10
<PAGE>

                                            EDUCATIONAL VIDEO CONFERENCING, INC.
                                      NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
--------------------------------------------------------------------------------
5. LICENSE AGREEMENT:  During October 1999, EVCI entered into a five-year
                       exclusive limited license and services agreement with an
                       entity (the "Licensor") to utilize any and all
                       educational data management and college advising-related
                       software developed by the Licensor, including any and all
                       software code developed for use on the Internet. The
                       license fee under the agreement is $250,000.
                       Additionally, EVCI shall be entitled to receive 30% of
                       all revenue generated by the Licensor for the Licensor's
                       fee-based advising and remediation services. No royalties
                       were received during the year ended December 31, 2000.
                       Accumulated amortization amounted to $37,500 at December
                       31, 2000.


6. ACCOUNTS            Accounts payable and accrued expenses consist of the
   PAYABLE AND         following:
   ACCRUED
   EXPENSES:
                       December 31,                 2000                1999
                       ---------------------------------------------------------
                       Accounts payable           $431,807            $212,635

                       Accrued professional fees    78,126              25,586

                       Accrued telephone            71,484             122,456

                       Accrued state income
                       taxes                        62,517

                       Accrued salaries             55,000

                       Computer and
                       video equipment
                       payable                                          61,025

                       Accrued marketing
                       brochures                                        31,617

                       Accrued other                94,532              71,220
                       ---------------------------------------------------------
                                                  $793,466            $524,539
                       =========================================================


7. OBLIGATIONS         The Company leases office equipment under a capital lease
   UNDER CAPITAL       expiring in 2003. The lease requires monthly payments of
   LEASE:              principal and interest imputed at 14.2% per annum.

                       Minimum future obligations under this lease are as
                       follows:

                       Year ending December 31,
                       2001                                            $24,155
                       2002                                             24,155
                       2003                                              7,564


                                      F-11
<PAGE>

                                            EDUCATIONAL VIDEO CONFERENCING, INC.
                                      NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
--------------------------------------------------------------------------------

                                                                         9,830
                       Less amount representing interest                55,874
                       ---------------------------------------------------------
                                                                        46,044
                       Less current portion                             18,107
                       ---------------------------------------------------------
                                                                       $27,937
                       =========================================================

8. INCOME TAXES:       The tax effects of loss carryforwards and the valuation
                       allowance that give rise to deferred tax assets are as
                       follows:

                       December 31,                       2000           1999
                       ---------------------------------------------------------
                       Net operating losses          $  1,581,000    $  856,000

                       Less valuation allowance        (1,581,000)     (856,000)
                       ---------------------------------------------------------
                       DEFERRED TAX ASSETS            $       - 0 -   $    - 0 -
                       =========================================================

                       The provision (benefit) for income taxes differs from the
                       amount computed using the federal statutory rate of 34%
                       as a result of the following:

                       Year ended December 31,            2000           1999
                       ---------------------------------------------------------
                       Federal statutory rate            (34)%           (34)%

                       State income taxes of
                       Interboro                           1

                       Increase in valuation
                       allowance                          34              34
                       ---------------------------------------------------------
                                                           1%           - 0 -%
                       =========================================================
                       As of December 31, 2000, the Company had net operating
                       loss carryforwards available to offset future taxable
                       income of approximately $19,000,000 which expire in
                       various years through 2020. Between October 1997 and
                       August 1998, EVCI completed private offerings of
                       securities. In February 1999, EVCI had an IPO of its
                       securities. Under Section 382 of the Internal Revenue
                       Code, these activities effect an ownership change and
                       thus may severely limit, on an annual basis, the
                       Company's ability to utilize its net operating loss
                       carryforwards. The Company uses the lowest marginal U.S.
                       corporate tax of 15% to determine deferred tax amounts
                       and the related valuation allowance because the Company
                       had no taxable earnings through December 31, 2000.


                                      F-12
<PAGE>

                                           EDUCATIONAL VIDEO CONFERENCING, INC.
                                      NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
--------------------------------------------------------------------------------
9. COMMITMENTS         The Company leases office space and classrooms under
   AND                 noncancelable operating leases which expire in August
   CONTINGENCIES:      2004. The leases are subject to escalations for increases
                       in the Company's share of increases in real estate taxes
                       and other expenses.

                       Minimum future obligations under these leases are as
                       follows:

                       Year ending December 31,

                       2001                                      $  811,000
                       2002                                         690,000
                       2003                                         455,000
                       2004                                          38,000
                       ---------------------------------------------------------
                                                                 $1,994,000
                       ---------------------------------------------------------
                       Rent expense charged to operations for the years ended
                       December 31, 2000 and 1999 amounted to approximately
                       $774,000 and $267,000, respectively.

                       The Company has entered into employment agreements with
                       executive officers and other employees of the Company
                       which provide for compensation and other benefits as
                       defined in the agreements.

                      Aggregate compensation under the agreements is as follows:

                       Year ending December 31,
                       2001                                      $1,333,000
                       2002                                         390,000
                       2003                                         190,000
                       2004                                          93,000
                       ---------------------------------------------------------
                                                                 $2,006,000
                       ---------------------------------------------------------

                       In 1998, EVCI entered into a consulting agreement with
                       an individual who became a director of EVCI upon the
                       commencement of the IPO. The agreement entitles the
                       consultant to 5% of revenue received by EVCI from
                       activities, if any, with an education provider with
                       which EVCI does not currently have an agreement. The
                       agreement grants the consultant seven-year options to
                       purchase up to 100,000 shares of common stock at $7.00
                       per share, of which options to purchase 25,000 shares
                       are vested and options to purchase an additional 25,000
                       shares of common stock


                                      F-13
<PAGE>

                                           EDUCATIONAL VIDEO CONFERENCING, INC.
                                      NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
--------------------------------------------------------------------------------
                       vest each March of the years 1999 through 2001.

                       In May 2000, the Company entered into an employment
                       agreement which provided, as additional compensation, the
                       opportunity to be awarded up to 30,000 options to
                       purchase common stock at $31.31 per share. The options
                       are exercisable only upon the Company reaching certain
                       revenue goals, as defined in the agreement. Accordingly,
                       the Company will incur a charge to operations for the
                       intrinsic value of the options at such time as the
                       revenue goals are met.

                       In May 2000, the Company entered into an employment
                       agreement which provided, as additional compensation, the
                       opportunity to be awarded up to 20,000 options to
                       purchase common stock at $17.00 per share, based upon the
                       performance of the Institute, as defined in the
                       agreement. Any options awarded under the agreement shall
                       vest in equal amounts over three years. Accordingly, the
                       Company will incur a charge to operations for the
                       intrinsic value of the options at such time as the
                       revenue goals are met.

                       Tuition Assistance Program ("TAP") funds received through
                       the academic grant years 1992 have been audited.
                       Subsequent and future funds received are still subject to
                       audit. At this time, it is not possible to determine the
                       periods which will be audited or any adjustments which
                       might be necessary as a result.

10. STOCKHOLDERS'      In October 1998, the board of directors of EVCI adopted
    EQUITY:            an incentive stock option plan in which 356,000 shares of
                       common stock have been reserved for future issuance
                       through September 30, 2008. The plan provides for grants
                       of incentive stock options, nonqualified stock options
                       and shares of common stock to employees, nonemployee
                       directors and others. The option price cannot be less
                       than the fair market value of the shares of the incentive
                       stock options at the date of grant. Vesting of options
                       and stock awards and certain other conditions are
                       determined by, or a committee appointed by, the board of
                       directors. During the years ended December 31, 2000 and
                       1999, 40,000 and 255,000 options, respectively, were
                       granted under this plan.

                       In February 1999, EVCI completed an IPO of 1,200,000
                       shares of its common stock at $12.00 per share. The net
                       proceeds to the Company, after deducting underwriting
                       commissions and expenses of the offering of approximately
                       $2,500,000, were approximately $11,900,000. Additionally,
                       the Company received net proceeds of approximately
                       $1,500,000 from the issuance of 138,334 shares of common
                       stock and the underwriters' warrant to purchase an
                       aggregate of 120,000 shares of common stock pursuant to
                       an over-allotment option.


                                      F-14
<PAGE>

                                           EDUCATIONAL VIDEO CONFERENCING, INC.
                                      NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
--------------------------------------------------------------------------------
                       In May 1999, EVCI issued warrants to an unaffiliated
                       entity to purchase up to 50,000 shares of common stock
                       for $12.00 per share as additional consideration under a
                       consulting agreement. The warrants are exercisable upon
                       issuance and expire after seven years.

                       In September 1999, in connection with a consulting
                       agreement, EVCI issued warrants to an individual to
                       purchase 5,000 shares of common stock at $17.50 per
                       share. Warrants are exercisable upon issuance and expire
                       on February 22, 2004. Pursuant to the terms of the
                       agreement, EVCI will issue an additional 7,500 warrants
                       at $22.50 per share in January 2000, and another 7,500
                       shares at $25.00 per share in May 2000.

                       In February 2000, the Company received gross proceeds of
                       $4,000,000 for the issuance of 400,000 shares of 7.5%
                       Series A Convertible Preferred Stock and three-year
                       warrants to purchase 40,000 shares of common stock at
                       $21.27 per share. The transaction costs of this private
                       placement were approximately $480,000. A value of
                       $378,918 was assigned to the warrants. The Series A
                       preferred stock was convertible into shares of our common
                       stock at a discount from the "market price," as defined.
                       The Company is accounting for the issuance of the Series
                       A preferred stock in accordance with Emerging Issues Task
                       Force No. 98-5 which addresses the issuance of
                       convertible securities that have a beneficial conversion
                       feature. The conversion feature is recognized and
                       measured by allocating a portion of the proceeds equal to
                       the intrinsic value of that feature to additional paid-in
                       capital. The amount is calculated as the difference
                       between the conversion price and the fair market value of
                       the common stock at the date of issuance. Any discount
                       resulting from the allocation of the proceeds to the
                       beneficial conversion feature is analogous to a dividend
                       and will be recognized as a return to the preferred
                       stockholder over the period from the date of issuance
                       through the date of the earliest conversion, as defined.

                       In April 2000, the Company issued warrants to an
                       unaffiliated entity to purchase up to 25,000 shares of
                       common stock for $16.09 per share as additional payment
                       under a consulting agreement. The warrants are
                       exercisable upon issuance and expire in seven years.
                       Accordingly, the Company recorded a noncash charge to
                       operations of $35,000, the value assigned to the warrants
                       issued.

                       In July 2000, in connection with an advertising
                       agreement, the Company issued warrants to purchase up to
                       15,000 shares of common stock as additional payment. The
                       warrants are exercisable upon issuance with exercise
                       prices ranging from $15.20 per share to $21.20 per share.
                       Accordingly, the Company recorded


                                      F-15
<PAGE>

                                           EDUCATIONAL VIDEO CONFERENCING, INC.
                                      NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
--------------------------------------------------------------------------------
                       a noncash charge to operations of $21,000, the value
                       assigned to the warrants issued.

                       In September 2000, certain holders of the Series A
                       preferred stock converted 120,000 shares or $1,200,000 in
                       total stated value into 103,341 shares of the Company's
                       common stock at an average price of approximately $11.80
                       per common share. The remaining balance of $2,800,000 of
                       Series A preferred stock was redeemed by the Company
                       during September 2000 at 15% over the stated value, thus
                       resulting in a charge to retained earnings of $420,000.
                       The accumulated accrued dividends on Series A preferred
                       stock of $191,458 were paid by issuing 17,127 shares of
                       common stock valued at $11.18 per share.

                       In September 2000, the Company designated 200,000 shares
                       of authorized preferred stock as Series B 7% Convertible
                       Preferred Stock. Between September 22 and September 30,
                       2000, the Company received gross proceeds of $13,000,000
                       from the issuance of 130,000 shares of Series B preferred
                       stock and three-year warrants to purchase 722,223 shares
                       of common stock at $20.25 per share. A value of $400,000
                       was assigned to the warrants. The transaction costs of
                       this private placement were approximately $320,000. The
                       $400,000 assigned value to the warrants and the
                       transaction costs of approximately $320,000 will be
                       recognized as a deemed dividend to the preferred
                       shareholders over three years. A portion of the net
                       proceeds from the sale of the Series B preferred was used
                       to redeem the Company's Series A preferred stock.

                       The Series B preferred stock is initially convertible
                       into shares of common stock at $13.50 per share, the
                       average closing bid price of the common stock for 20
                       trading days prior to September 22, 2000. The Series B
                       preferred stockholders can require the Company to redeem
                       their preferred shares upon the occurence of certain
                       matters as defined in the agreement.

                       The board of directors of EVCI has not yet approved
                       dividends of $246,055 as of December 31, 2000 on this
                       Series B preferred stock.

                       The following table represents the warrants outstanding
                       as of December 31, 2000 and 1999:


                              Exercise             Warrants Outstanding
                              Price per                 December 31,
Expiration Date                Warrant             2000             1999
-------------------------------------------------------------------------------

July 2001                      15.20               5,000             --



                                     F-16

<PAGE>

                                           EDUCATIONAL VIDEO CONFERENCING, INC.
                                      NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
--------------------------------------------------------------------------------
July 2001                      18.20               5,000             --

July 2001                      21.50               5,000             --

June 2002                       2.00                 500           11,500

August 2002                     4.00               2,000            5,500

October 2002                    4.00             100,000          100,000

October 2002                   20.00              50,000           50,000

December 2002                   4.00              17,000           18,000

January 2003                    6.00              88,252           88,252

February 2003                   6.00              37,500           37,500

February 2003                  21.27              40,000             --

April 2003                      6.00               4,000           12,000

August 2003                    12.00              25,000           25,000

September 2003                 20.25             722,223             --

February 2004                  17.50               5,000            5,000

February 2004                  19.80             120,000          120,000

February 2004                  20.00              10,000           10,000

February 2004                  22.50               7,500             --

February 2004                  25.00               7,500             --

February 2005                   5.44              37,500           37,500

January 2006                   25.00              25,000             --

May 2006                       12.00              50,000           50,000

April 2007                     16.09              25,000             --
--------------------------------------------------------------------------------
                                               1,388,975          570,252
================================================================================

Presented below is a summary of stock option activity for the periods shown:

<TABLE>
<CAPTION>
                                          Weighted-Average       Options        Weighted-Average
Exercise Price Range            Options    Exercise Price      Exercisable       Exercise Price
--------------------------------------------------------------------------------------------------
<S>                             <C>        <C>                    <C>            <C>
Balance at December 31, 1998    165,000    $   13.76              12,500         $   7.00
Granted                         225,000
--------------------------------------------------------------------------------------------------
Balance at December 31, 1999    420,000        11.84              55,000         $   9.09
Granted                          40,000
</TABLE>


                                      F-17
<PAGE>

                                            EDUCATIONAL VIDEO CONFERENCING, INC.
                                      NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>

Canceled                        (13,000)
Exercised                        (1,750)
-----------------------------------------------------------------------------------------------------
<S>                            <C>        <C>                   <C>             <C>
Balance at December 31, 2000    445,250    $   13.22             156,332         $   9.33
=====================================================================================================

The following table summarizes information for options currently outstanding and exercisable at
December 31, 2000:

<CAPTION>
-----------------------------------------------------------------------------------------------------------------------
                                  OPTIONS OUTSTANDING                                           OPTIONS EXERCISABLE
                                  -------------------                                         -------------------------
                                                          Weighted-Average  Weighted-Average           Weighted-Average
                           Exercise                           Remaining        Exercise                    Exercise
                         Price Range           Number           Life             Price         Number        Price
-----------------------------------------------------------------------------------------------------------------------
<S>                     <C>                    <C>              <C>             <C>            <C>           <C>
                        $4.80 - $10.00         110,000          5yrs.           $ 6.95         80,000        $ 6.86
                        10.00 - $20.00         260,250          4yrs.           $10.96         76,332        $11.93
                        20.00 - $30.00          35,000          6yrs.           $25.46           --             --
                        30.00 - $40.00          40,000          6yrs.           $34.45           --             --
-----------------------------------------------------------------------------------------------------------------------
                        $4.80 - $40.00         445,250          4yrs.           $13.32        156,332        $ 9.33
-----------------------------------------------------------------------------------------------------------------------
</TABLE>

                       The Company has elected, in accordance with the
                       provisions of SFAS No. 123, to apply the current
                       accounting rules under APB Opinion No. 25 and related
                       interpretations in accounting for stock options and,
                       accordingly, is presenting the disclosure-only
                       information as required by SFAS No. 123. If the Company
                       had elected to recognize compensation cost based on the
                       fair value of the options granted at the grant date as
                       prescribed by SFAS No. 123, the Company's net loss and
                       net loss per common share would approximate the pro forma
                       amounts shown in the following table.

                       Year ended December 31,      2000               1999
                       ---------------------------------------------------------
                       Reported net loss
                       available to
                       common shareholders        $(12,142,347)    $(6,127,879)
                       =========================================================
                       Pro forma net loss
                       available to
                       common shareholders        $(17,693,834)    $(6,498,459)
                       =========================================================
                       Reported net loss
                       per common share           $      (2.76)    $     (1.48)
                       =========================================================
                       Pro forma net loss
                       per common share           $      (2.89)    $     (1.03)
                       =========================================================
                       The fair value of options granted (which is amortized to
                       expense


                                      F-18
<PAGE>

                                            EDUCATIONAL VIDEO CONFERENCING, INC.
                                      NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
--------------------------------------------------------------------------------
                       over the option vesting period in determining the pro
                       forma impact) is estimated on the date of grant using the
                       Black-Scholes option-pricing model with the following
                       assumptions: no dividend yield, volatility of 104% in
                       2000 and 78% in 1999, risk-free interest rates ranging
                       from 5.18% to 6.57% and an expected life of 2 to 10 years
                       from the date of vesting.

                       The weighted-average fair value of options granted is as
                       follows:

                       Year ended December 31,        2000             1999
                       ---------------------------------------------------------
                       Fair value of each option    $14,745            $1,274
                       granted

                       Total number of options       40,000           260,000
                       granted
                       ---------------------------------------------------------
                       Total fair value of all     $589,799          $331,240
                       options granted
                       =========================================================

                       In accordance with SFAS No. 123, the weighted-average
                       fair value of stock options granted is required to be
                       based on a theoretical statistical model using the
                       preceding Black-Scholes assumptions. In actuality,
                       because EVCI's incentive stock options do not trade on a
                       secondary exchange, employees can receive no value or
                       derive any benefit from holding stock options under these
                       plans without an increase in the market price of EVCI.
                       Such an increase in stock price would benefit all
                       stockholders commensurately.

11. SEGMENT            The Company follows SFAS No. 131, Disclosure About
    REPORTING:         Segments of an Enterprise and Related Information. As a
                       result of the acquisition of the Institute, the Company
                       has two operating segments: (1) aggregator and
                       distributor, via live interactive video conferencing
                       systems, of accredited college courses and degree
                       programs, as well as corporate training, professional
                       development and continuing education programs, and (2)
                       operator of the Institute, a post-secondary two-year
                       degree-granting college.

                       For the year ended December 31, 2000, reportable segment
                       data were as follows:

                       Net revenue:
                                EVCI student course registration   $  1,112,085
                                Interboro Institute Inc.              7,546,761
                       ---------------------------------------------------------
                       TOTAL NET REVENUE                           $  8,658,846
                       =========================================================
                       Operating companies, net income (loss):
                               EVCI student course registration    $(10,788,120)
                                Interboro Institute Inc.                647,880
                       ---------------------------------------------------------
                       TOTAL NET LOSS                              $(10,140,240)



                                      F-19
<PAGE>

                       Interest income:
                                EVCI                               $    257,633
                                Interboro Institute Inc.                  7,919
                       ---------------------------------------------------------
                       TOTAL INTEREST INCOME                       $    265,552
                       =========================================================
                       Depreciation and amortization:
                                EVCI                               $    932,125
                                Interboro Institute Inc.                281,741
                       ---------------------------------------------------------
                       TOTAL DEPRECIATION AND AMORTIZATION         $  1,213,866
                       =========================================================
                       Assets:
                                EVCI                               $ 10,758,658
                                Interboro Institute Inc.              3,992,593
                       ---------------------------------------------------------
                       TOTAL ASSETS                                $ 14,751,251
                       =========================================================
                       Loss from equity method investments
                                EVCI                               $     95,283
                                Provision for income taxes -
                                Interboro Institute Inc.           $    117,000



                                      F-20

<PAGE>

                               EXHIBIT INDEX

EXHIBIT NO.*               DESCRIPTION OF EXHIBIT

       3.1[1]     --       Certificate of Incorporation of the Registrant.

       3.1(a)[6]  --       Certificate of Amendment to Certificate of
                           Incorporation of the Registrant.

       3.2[6]     --       Amended and Restated By-Laws of the Registrant.

       3.3[1]     --       Certificate of Merger of Educational Video
                           Conferencing, Inc. (a New York Corporation) into the
                           Registrant (a Delaware Corporation).

       3.4[1]     --       Certificate of Correction of the Certificate of
                           Incorporation of the Registrant.

       3.5        --       Certificate Eliminating Reference to Series A 7.5%
                           Convertible Preferred Stock from the Certificate of
                           Incorporation of the Registrant.

       3.6[15]    --       Certificate of Designations of Series B 7%
                           Convertible Preferred Stock of the Registrant.

       3.6(a)[15] --       Certificate of Correction of Certificate of
                           Designations of the Series B 7% Convertible Preferred
                           of the Registrant.

       4.1[1]     --       Form of Common Stock Purchase Warrant issued to
                           investors in private placements and for services
                           provided in connection with such private placements.

       4.2[1]     --       Tayside Common Stock Purchase Warrant.

       4.3[5]     --       Adelphi Common Stock Purchase Warrant.

       4.4[5]     --       Form of Representative's Warrant Agreement (including
                           Form of Representative's Warrant).

       4.5[5]     --       Form of Common Stock Certificate.

       4.6[5]     --       Amended and Restated 1998 Incentive Stock Option Plan
                           of the Registrant.

       4.7[9]     --       Warrant Agreement, dated January 14, 2000, between
                           the Registrant and Bruce R. Kalisch.

       4.8[14]    --       Warrant Agreement, dated April 18, 2000, between the
                           Registrant and Peter J. Solomon Company Limited.

       4.9[10]    --       Common Stock Purchase Warrant, dated February 3,
                           2000, issued to The Shaar Fund Ltd.

       4.10[10]   --       Form of Finders' Warrant (relating to the issuance of
                           warrants to purchase 3,870 shares of the Registrant's
                           common stock).

                                      E-1
<PAGE>

       4.11[15]   --       Form of Common Stock Purchase Warrant

     +10.1[3]     --       Agreement between the Registrant and Adelphi
                           University for the Offering of Interactive Televideo
                           Courses, dated May 13, 1997.

     +10.2[2]     --       Agreement between the Registrant and The College
                           of Insurance for the Offering of Interactive
                           Televideo Courses, dated September 16, 1997.

     +10.3[2]     --       Agreement between the Registrant and Mercy College
                           for the Offering of Interactive Video Conferenced and
                           Computer Courses, dated March 10,1998.

      10.4[1]     --       Agreement between the Registrant and Citibank, dated
                           May 20, 1997.

      10.5[1]     --       Agreement between the Registrant and American
                           International Group, dated May 21, 1997.

      10.6[1]     --       Agreement between the Registrant and Merrill Lynch
                           for the Offering of Interactive Televideo Courses and
                           Distance Learning Programs, dated June 3, 1998.

      10.7[8]     --       Agreement between the Registrant and Merrill
                           Lynch, Pierce, Fenner & Smith Incorporated for the
                           Offering of Interactive Televideo Courses and
                           Distance Learning Programs, dated June 30, 1999.

      10.8[5]     --       Agreement for Interactive Televideo Courses and
                           Distance Learning Programs between the Registrant and
                           Travelers Indemnity Company, dated July 24, 1998.

      10.9[6]     --       Lease Agreement between the Registrant and Realty Co.
                           (doing business as Royal Realty), dated December 15,
                           1998.

      10.11[1]    --       Employment Agreement between the Registrant and Dr.
                           Arol I Buntzman, dated October 1, 1998.

      10.12[1]    --       Employment Agreement between the Registrant and Dr.
                           John J. McGrath, dated October 1, 1998.

      10.13[1]    --       Employment Agreement between the Registrant and
                           Richard Goldenberg, dated October 1, 1998.

      10.14[1]    --       Chief Executive Officer Change in Control Agreement
                           between the Registrant and Dr. Arol I. Buntzman,
                           dated October 1, 1998.

      10.15[1]    --       Form of Indemnification Agreement.

     +10.15[4]    --       Agreement between the Registrant and Manhattan
                           College for the Offering of Interactive Video
                           Conferenced Courses, dated November 23, 1998.

      10.16[12]   --       Agreement between Arol I. Buntzman and Richard and
                           Bonnie Goldenberg, dated March 1, 2000.

                                      E-2
<PAGE>

      10.17[12]   --       Agreement between Arol I. Buntzman and John J.
                           McGrath, dated March 1, 2000.

      10.18[8]    --       Letter Agreement between Excite @Home Network and the
                           Registrant, dated July 26, 1999.

     +10.19(a)[8] --       Agreement, dated August 26, 1999, between We Media,
                           Inc. and the Registrant.

     +10.19(b)[8] --       Agreement, dated September 22, 1999, between We
                           Media, Inc. and the Registrant.

     +10.20[8]    --       Co-Marketing Agreement, dated September 1, 1999,
                           between the Registrant and Bell Atlantic Network
                           Services, Inc.

     +10.21[8]    --       Agreement, dated September 1, 1999, between the
                           Registrant and Touro College and Touro University
                           College and Touro University International.

     +10.22[8]    --       Agreement, between the Registrant and St. John's
                           University for the Offering of Interactive Video
                           Conferenced and Internet-Based Courses, dated
                           September 24, 1999.

      10.23[9]    --       Stock Purchase Agreement, dated January 14, 2000,
                           among Bruce R. Kalisch, Interboro Holding, Inc. and
                           Interboro Institute, Inc.

     +10.24[12]   --       Agreement between the Registrant and Golden Gate
                           University for the Offering of Interactive video
                           conference courses, dated March 3, 2000.

      10.25[12]   --       Educational Provider/Co-Marketing Agreement between
                           the Registrant and Computer Generated Solutions, Inc.
                           dated January 13, 2000.

     +10.26[14]   --       Agreement, dated April 27, 2000, between the
                           Registrant and Telecommunications Research Associates
                           for the Offering of Interactive Video Conferenced
                           Courses

      10.27[13]   --       Summary of Transaction Terms between edcor and the
                           Registrant, dated January 3, 2000.

      10.28[13]   --       Agreement, dated January 25, 2000, between the
                           Registrant and Clemson University for the Offering of
                           Non-Credit Interactive Video Conferenced Courses.

      10.29[15]   --       Form of Series B Stock Purchase Agreement.

      10.30[15]   --       Amended and Restated Registration Rights Agreements,
                           dated September 27, 2000, among Paloma Strategic Fund
                           L.P. ("Paloma"), Seneca Capital International, Ltd.
                           ("Seneca Ltd."), Seneca Capital, L.P. ("Seneca
                           L.P."), Merced Partners Limited Partnership
                           ("Merced") , Lakeshore International, Ltd.
                           ("Lakeshore") and the Registrant.

                                      E-3
<PAGE>

      10.31[15]   --       Amended and Restated Co-Sale Agreement, dated
                           September 29, 2000, among Dr. Arol I. Buntzman, the
                           Registrant, Paloma, Seneca Ltd., Seneca L.P., Merced
                           and Lakeshore.

      10.32[16]   --       Agreement, dated August 31, 2000, between the
                           Registrant and YAI National Institute for People with
                           Disabilities.

     +10.33[16]   --       IP Services and Dedicated Access Agreement, dated
                           September 15, 2000, between At Home Corporation,
                           through its @Work division, and the Registrant.

      23.1        --       Consent of Goldstein Golub Kessler LLP

------------------------------

*    Numbers inside brackets indicate documents from which exhibits have been
     incorporated by reference.

+    Confidential treatment has been granted with respect to the redacted
     portions of this exhibit.

[1]  Incorporated by reference to the Registrant's Registration Statement on
     Form SB-2, dated October 23, 1998, registration no. 333-66085.

[2]  Incorporated by reference to Amendment No. 1, dated November 12, 1998, to
     the Registrant's Form SB-2, Registration no. 333-66085.

[3]  Incorporated by reference to Amendment No. 2, dated November 20, 1998, to
     the Registrant's Form SB-2, Registration No. 333-66085.

[4]  Incorporated by reference to Amendment No. 3, dated December 23, 1998, to
     the Registrant's Form SB-2, Registration No. 333-66085.

[5]  Incorporated by reference to Amendment No. 4, dated February 10, 1999, to
     the Registrant's Form SB-2, Registration No. 333-66085.

[6]  Incorporated by reference to Registrant's Form 10-QSB, for the quarter
     ended March 31, 1999.

[7]  Intentionally omitted.

[8]  Incorporated by reference to Registrant's Form 10-QSB for the quarter ended
     September 30, 1999.

[9]  Incorporated by reference to the Registrant's Form 8-K dated January 14,
     2000.

[10] Incorporated by reference to the Registrant's Form 8-K dated February 3,
     2000.

[11] Intentionally omitted.


                                      E-4
<PAGE>

[12] Incorporated by reference to the Registrant's Form 10-KSB for the year
     ended December 31, 1999.

[13] Incorporated by reference to the Registrant's Form 10-QSB for the quarter
     ended March 31, 2000.

[14] Incorporated by reference to the Registrant's Form 10-QSB for the quarter
     ended June 30, 2000.

[15] Incorporated by reference to the Registrant's Form 8-K dated September 22,
     2000.

[16] Incorporated by reference to the Registrant's Form 10-QSB for the quarter
     ended September 30, 2000.


                                      E-5