<PAGE>

                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549


                                   FORM 10-K/A
                           AMENDMENT NO.1 TO FORM 10-K
                                   (Mark One)


     |X| ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934

         For the fiscal year ended December 31, 2001

                                       OR


     |_| TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934

         For the transition period from              to
                                        ------------    ------------

                          Commission File No. 000-20364


                                 ePresence, Inc.
             (Exact Name of Registrant as Specified in Its Charter)


            Massachusetts                              04-2798394
   (State or Other Jurisdiction of         (I.R.S. Employer Identification No.)
    Incorporation or Organization)

                120 Flanders Road, Westboro, Massachusetts 01581
              (Address and Zip Code of Principal Executive Offices)


                                  508-898-1000
              (Registrant's telephone number, including area code)


           Securities registered pursuant to Section 12(b) of the Act:
                                      None


           Securities registered pursuant to Section 12(g) of the Act:


                          Common Stock, $.01 par value
                                (Title of Class)


     Indicate by check mark whether the registrant: (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes |_| No |X|


     Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of Registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K/A or any amendment to
this Form 10-K/A. |X|


     The aggregate market value of the voting common stock held by
non-affiliates of the Registrant, based on a per share fair market value as of
March 22, 2002 of $4.01, was approximately $62,056,992. For this purpose, any
officer, director or 5% stockholder of the Company is deemed to be an affiliate.
The Registrant has no shares of non-voting Common Stock authorized or
outstanding.

     On March 22, 2002, there were 22,830,539 shares of Common Stock
outstanding.


                       DOCUMENTS INCORPORATED BY REFERENCE


     Specifically identified portions of the Registrant's Definitive Proxy
Statement, which was filed with the Securities and Exchange Commission within
120 days after December 31, 2001 in connection with the Company's 2002 Annual
Meeting of Stockholders, are incorporated by reference into Part III of this
Amendment No. 1 to Annual Report on Form 10-K/A.

<PAGE>

                                EXPLANATORY NOTE

     The purpose of this Amendment No. 1 to Annual Report on Form 10-K/A is to
restate our audited financial statements for the fiscal year ended December 31,
2001 and to correspondingly modify related disclosures.


     The restatement of our financial statements for the fiscal year ended
December 31, 2001 disclosed in this Amendment No. 1 to Annual Report on Form
10-K/A are described in detail under the heading "Management's Discussion and
Analysis of Financial Condition and Results of Operations - Restatement of
Financial Statements", included herein within Item 7 of Part II, and our
consolidated financial statements and related notes, including, without
limitation, Note 3, included herein as Item 8 of Part II.


     We have amended and restated in its entirety each Item of our Annual Report
on Form 10-K for the fiscal year ended December 31, 2001 that has been affected
by these restatements. This Amendment No. 1 to Annual Report on Form 10-K/A does
not reflect events occurring after the April 1, 2002 filing of our Annual Report
on Form 10-K for the fiscal year ended December 31, 2001 or modify or update the
disclosures set forth in that Annual Report on Form 10-K in any way, except as
required to reflect the effects of the re-audit of our financial statements for
the fiscal year ended December 31, 2001 and the related restatements disclosed
herein.

     The Items of our Annual Report on Form 10-K for the fiscal year ended
December 31, 2001, which are amended and restated herein, are:


          o    Item 1 of Part I;
          o    Items 5, 6, 7, 7a and 8 of Part II; and
          o    Item 14 of Part IV

The remaining Items originally contained in our Annual Report on Form 10-K for
the fiscal year ended December 31, 2001, in the form filed with the Securities
and Exchange Commission on April 1, 2002, are not amended hereby.





                                       2

<PAGE>

                                 ePresence, Inc.


                            Index to Annual Report on
                           Form 10-K/A filed with the
                   Securities and Exchange Commission for the
                          Year Ended December 31, 2001


                     Items in Form 10-K/A (Amendment No. 1)

<TABLE>
<CAPTION>

                                                                                                              Page No.
                                                                                                              --------
<S>         <C>                                                                                                  <C>
                                                          PART I
Item 1.     Business                                                                                              5
                                                          PART II
Item 5.     Market for Registrant's Common Equity and Related Stockholder Matters                                 8
Item 6.     Selected Financial Data                                                                               8
Item 7.     Management's Discussion and Analysis of Financial Condition and Results of Operations                 9
Item 7A.    Quantitative and Qualitative Disclosures About Market Risk                                           22
Item 8.     Financial Statements and Supplementary Data                                                          23

                                                          PART IV
Item 14.    Exhibits, Financial Statement Schedules, and Reports on Form 8-K                                     51
            Signatures                                                                                           54
</TABLE>





                                       3

<PAGE>

                           FORWARD-LOOKING STATEMENTS


     This Amendment No. 1 to Annual Report on Form 10-K/A contains
forward-looking statements that are subject to a number of risks and
uncertainties, including, without limitation, information with respect to our
plans and strategy for our business, statements relating to the sufficiency of
cash and cash equivalent balances, anticipated expenditures, the anticipated
effects of our cost reduction measures including the discontinuation of our
operations in Europe and Australia, and our sales and marketing and product
development efforts. We cannot guarantee future results, levels of activity,
performance or achievements and you should not place undo reliance on our
forward-looking statements. For this purpose, any statements contained herein
that are not statements of historical fact may be deemed to be forward-looking
statements. Without limiting the foregoing, the words "will", "believe",
"anticipate", "plan", "expect" and similar expressions are intended to identify
forward-looking statements. There are a number of important factors that could
cause actual events or our actual results to differ materially from those
indicated by such forward-looking statements. These factors include, without
limitation, the factors set forth under the caption "Management's Discussion and
Analysis of Financial Condition and Results of Operations--Factors Affecting
Future Operating Results" which is in Part II of this Amendment No. 1 to Annual
Report on Form 10-K/A. From time to time, we may also provide oral or written
forward-looking statements in other materials we release to the public. We do
not assume any obligation to update any of the forward-looking statements we
make.


     As noted in "Explanatory Note" above, the risks described in "Management's
Discussion and Analysis of Financial Condition and Results of Operations -
Factors Affecting Future Operating Results", and elsewhere herein do not reflect
events occurring after April 1, 2002 and are not modified or updated, except as
required to reflect the effects of the restatements discussed in "Explanatory
Note" above. For current information regarding risks, uncertainties and other
factors that may affect operating results, business prospects and the market
price of our stock, in this Form 10-K/A please see "Management's Discussion and
Analysis of Financial Condition and Results of Operations - Factors Affecting
Future Operating Results" included in Item 2 of Part I of our Quarterly Report
on Form 10-Q for the quarterly period ended June 30, 2002.






                                       4

<PAGE>

                                     PART I

ITEM 1.    BUSINESS

General

     ePresence, Inc., ("ePresence," the "Company" or the "Registrant"), has two
reportable segments: services and Switchboard. The Company's reportable segments
are managed separately as they are separately traded public companies, and
market and distribute distinct products and services. See Note 23, Segment
Information, in the Company's Notes to Consolidated Financial Statements for the
year ended December 31, 2001, which is incorporated from Item 8 herein.


     "ePresence" is a servicemark of the Company. Other trademarks, tradenames
and servicemarks used in this Annual Report on Form 10-K/A are the property of
their respective companies or organizations.


Services

     ePresence is a leading consulting and systems integration company
delivering directory based solutions that help companies improve customer
service, enhance security and reduce costs. Our primary service offerings
include enterprise directory and security services, information technology
platform services, electronic provisioning services, next generation portal
services and operations management services.

     Enterprise directory and security services consist of directory and
security solutions that allow customers to manage and protect user identity,
access and security information across an enterprise. ePresence provides a
business-focused, collaborative approach to the planning, design, deployment and
management of enterprise directory and security services. We provide services
that include: structured workshops to explore the specific values, benefits and
business and technical considerations for deploying directory and meta-directory
services in an enterprise; a directory discovery service which is an
investigation that identifies and defines the technical and functional
specifications for a directory services engagement; directory concept prototype
development, where we build a limited, yet functional, model of a directory
solution; directory architecture, planning and design, which is a design process
that creates the directory architecture and detailed design and develops a
comprehensive implementation plan; directory implementation which is the
deployment of the directory services implementation plan; and directory
optimization, which is an ongoing service to provide administrative support of
directory services, performance monitoring, software and systems upgrades, new
application integration and ongoing maintenance.

     Information technology platform services involve migration to and
deployment of the latest operating system or infrastructure platform to allow
customers to form a solid base for integrating high-value business applications.
ePresence consultants provide platform-specific expertise and project management
support to help organizations move to next generation platforms, while providing
a wide range of services and capabilities designed to help organizations
maximize new platform benefits. These include packaged services, such as
structured workshops that use interactive, client-focused sessions to explore
the specific values, impacts and business and technical considerations for
deploying a new platform. Microsoft QuickStart (MSQS) Planning Programs for
Windows 2000 and Exchange 2000 and Business Desktop are offered in cooperation
with Microsoft. MSQS programs consist of intense, interactive design sessions
with ePresence and Microsoft consultants followed by documentation, review and
agreement before moving to the next topic. MSQS Special Edition for Novell
NetWare is offered exclusively by ePresence, which consists of a Novell
NetWare-specific edition of the MSQS program, with additional content and focus
on helping NetWare customers understand and correlate the differences between
their current environment and their new one. ePresence also provides custom
platform services ranging from planning and design to migration and deployment
to operations and optimization.

     Electronic provisioning services allow customers to provide their
employees, partners and customers with fast, convenient electronic access to
appropriate company resources and applications. We understand that today it is
even harder to manage the provisioning process because of the growing variety of
systems within an organization and the high cost of managing user identities and
permissions across organizations. Electronic provisioning streamlines the
provisioning process while making it more secure, and it also facilitates
de-provisioning (the rapid removal of access rights when a user leaves a
company) which is especially critical to enterprise security. ePresence provides
a full range of services around the planning, design, deployment and management
of an electronic provisioning solution. These services include: structured
workshops that use interactive, client-focused sessions to explore the specific
values, impacts and business and technical considerations for deploying an
electronic provisioning system; a provisioning discovery, which is an
investigation that identifies and defines the technical and functional
specifications necessary for an electronic provisioning solution; a provisioning
concept prototype development, where we build a limited, yet functional, model
of a provisioning solution; a provisioning architecture, planning and design,
which is a design process that creates a detailed provisioning architecture and
develops a comprehensive implementation plan; provisioning implementation, which
is the deployment of the provisioning implementation plan; and provisioning
optimization, which is an ongoing service to provide administrative support of
the provisioning system, performance monitoring, software and systems upgrades,
new application integration and ongoing maintenance.


                                       5

<PAGE>

     Next generation portal services enable customers to provide their
employees, partners and customers with a single point of secure access,
available anywhere, to all of the information and resources these groups need
through intranets, extranets and web sites. Next generation portal services
include: structured workshops that use interactive, client-focused sessions to
explore the specific values, impacts, and business and technical considerations
for deploying portals; portal discovery, which is an investigation that
identifies and defines the technical and functional specifications necessary for
a next generation portal project; portal concept prototype, where we build a
limited, yet functional, model of the portal; and portal optimization, which
provides administrative support, baselining, monitoring, maintenance and
operations.

     Operations management services allow customers to operate and optimize
enterprise solutions on an outsourced basis. These services consist of: systems
operations management, whereby we work with our customers to identify the
infrastructure components that need managed support and to create a support
solution; operations transition management, which takes an organization through
a seamless transition from one environment to another; and optimization
services. ePresence also provides custom operations management services to
satisfy a variety of needs a large IT organization might face.

     During 2001, with respect to services, we focused our efforts on improving
our operational efficiency primarily through the sale of our Australian
subsidiary, our exit from The Netherlands, domestic staff reductions, the
integration of two companies acquired in 2000, expanding and enhancing our
service offerings, continuing to invest in sales and marketing domestically, and
establishing new strategic alliances and strengthening existing partnerships.

Switchboard Incorporated


     Switchboard Incorporated ("Switchboard"), our majority-owned subsidiary
is a leading provider of web hosted directory technologies and customized yellow
pages platforms to yellow pages publishers, newspaper publishers and Internet
portals that offer online local directory advertising solutions to national
retailers and "brick and mortar" merchants across a full range of Internet and
wireless platforms. Switchboard offers a broad range of functions, content and
services, including yellow and white pages, product searching, location based
searching, and interactive maps and driving directions. Its web site,
Switchboard.com, is a showcase for its technology and breadth of directory
product offerings, and is a resource to consumers and businesses alike.


     On March 2, 2000, Switchboard consummated an initial public offering. Prior
to the offering we owned approximately 54% of Switchboard's outstanding common
stock. Subsequent to the IPO and through December 31, 2000 we continued to
consolidate Switchboard's results as part of our financial results as,
notwithstanding our 38% ownership of Switchboard's outstanding common stock
during this period, the Company maintained control over Switchboard's board of
directors under a Voting Rights Agreement by and among the Company, Switchboard
and Viacom Inc. ("Viacom"). As a result of the termination of this Voting Rights
Agreement on January 1, 2001, we ceased consolidating Switchboard's results as
part of our financial results for the first three quarters of 2001 and accounted
for our ownership interest in Switchboard under the equity method of accounting.
On October 26, 2001, Switchboard obtained approval from its stockholders and
closed a restructuring transaction with Viacom resulting in, in part, a
reduction in the number of outstanding shares of Switchboard's common stock and
the Company owning approximately 54% of Switchboard's outstanding common stock.
Due to our majority ownership, we have retroactively consolidated Switchboard's
results as part of our 2001 financial results beginning on January 1, 2001 in
order for the consolidated results of operations to be presented consistently
with the results of operations of 2000 and 1999. As of March 22, 2002, we own
approximately 52% of Switchboard's outstanding common stock. See Note 25, Viacom
Alliance, in the Company's Notes to Consolidated Financial Statements for the
year ended December 31, 2001 which is incorporated from Item 8 herein.

     Switchboard regards its patents, copyrights, service marks, trademarks,
trade dress, trade secrets, and other intellectual property as critical to its
success and relies on a combination of intellectual property law, trade secret
protection and confidentiality and license agreements to protect its proprietary
rights. All of Switchboard's employees have executed confidentiality and
assignment of invention agreements. As of December 31, 2001, Switchboard had six
patents issued by the U.S. Patent and Trademark Office, two patents issued by
the Canadian Intellectual Property Office and six patent applications pending,
all of which relate to the operation, features or performance of its web site.
In addition, Switchboard licenses software, content and other intellectual
property from third parties and the software code underlying Switchboard.com
contains software code which is licensed by third parties. Switchboard's
intellectual property rights may be successfully challenged by others and the
validity, enforceability and scope of protection of proprietary rights in
Internet-related industries is uncertain and still evolving.

     For a further discussion of the Company's relationship with Switchboard,
see Note 27, Related Parties, in the Company's Notes to Consolidated Financial
Statements for the year ended December 31, 2001 which are incorporated from Item
8 herein.




                                       6

<PAGE>

Customers

    Our services customers, which include many Fortune 1000 companies, typically
are medium to large-size businesses, financial institutions, professional
organizations and government entities, each with multiple sites dispersed over
wide geographic areas. In 2001, we initiated a number of new consulting
engagements with leading organizations such as ChevronTexaco, Marriott,
Automatic Data Processing (ADP), Saint Barnabas Healthcare Systems, Turner
Construction, and Underwriter's Laboratories Inc. (UL).

     For the year ended December 31, 2001, ChevronTexaco accounted for 12% of
consolidated revenues in 2001. No one customer accounted for more than ten
percent of consolidated revenues in 2000 and 1999.

Sales and Marketing

     We market our services primarily through sales professionals located in the
United States. Our principal U.S. regional offices are based in or near Boston,
Dallas, Detroit, New York and Washington, D.C. This regional focus, combined
with our local service approach, helps us to develop strong market presence and
recognition in each of our local markets. Our sales professionals operate
through a coordinated process to evaluate prospective customers and secure new
engagements.

     Our sales efforts are supplemented by marketing and communications
activities that are pursued to generate leads and build brand recognition in the
marketplace. These activities include a telemarketing program, public relations
program, attendance at industry conferences and business events, sales and
marketing materials, public speaking opportunities and general branding
initiatives.

     We have established alliances, including with the following companies, to
support our services solutions selling: Access360, Business Layers, IBM,
Microsoft, Netegrity, Stellent, Sun/iPlanet, The Burton Group and Vignette.

Competition

     The consulting and systems integration services business is highly
fragmented and increasingly competitive with no dominant set of consulting or
systems integration companies that we directly compete against. We believe that
our services business currently competes principally with consulting and systems
integration firms, application vendors and internal information systems groups.
Many of these companies have greater financial, technical and marketing
resources than we have and generate greater revenues and have greater name
recognition than us. In addition, there are relatively low barriers to entry
into our markets, and we have faced, and expect to continue to face, additional
competition from new entrants into our markets. We believe the primary factors
upon which competition in our industry are based are delivery capability
including technical and business knowledge, strong methodology, partnerships and
successful client implementations.

     Switchboard's competition consists of traditional and online white and
yellow pages publishers, companies providing alternative web-enabled white and
yellow page directories, companies providing alternative web-enabled advertising
solutions for small businesses and traditional advertising media, including TV,
radio and print. Switchboard competes in the markets for Internet content,
services, and advertising. These markets are highly competitive, and Switchboard
expects competition to increase in the future with the entrance of new
competitors. The online local advertising market is rapidly developing.

Employees

     At December 31, 2001, we employed 281 persons, including 235 in sales,
marketing, professional services delivery and related activities; and 46 in
finance, legal, administration and human resources. In addition, Switchboard
employed 80 persons as of such date. We have no collective bargaining agreement
with respect to our employees. We believe that our relations with employees are
good.

International Operations

     As a part of the Company's plan to improve results, in March 2001 the
Company sold its Australian subsidiary, in May 2001 it shut down its operations
in The Netherlands and in the first quarter of 2002, the Company decided to
close its remaining international operations in the United Kingdom and Germany.
As a result of the actions regarding the United Kingdom and Germany, we
anticipate non-recurring charges of $2,000,000 to $3,000,000 in the first
quarter of 2002. See Note 23, Segment Information and Note 28, Subsequent
Events, in the Company's Notes to Consolidated Financial Statements for the year
ended December 31, 2001 which are incorporated from Item 8 herein.


                                       7

<PAGE>

                                     PART II

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

     Information with respect to this item may be found under Item 6, "Selected
Financial Data" of this Annual Report on this Amendment No. 1 to Annual Report
on Form 10-K/A.


ITEM 6. SELECTED FINANCIAL DATA


The following selected consolidated financial data should be read together with
our audited consolidated financial statements and related notes and
"Management's Discussion and Analysis of Financial Condition and Results of
Operations," which are included elsewhere in this Amendment No. 1 to Annual
Report on Form 10-K/A. Our historical results are not necessarily indicative of
our results of operations to be expected in the future. As discussed in Item 8
of this Amendment No. 1 to Annual Report on Form 10-K/A and in Note 3 of our
Consolidated Financial Statements, we have restated our previously audited
consolidated statements for the fiscal year ended December 31, 2001. The effects
of these restatements are reflected in this selected consolidated financial
data.



<TABLE>
<CAPTION>
                                                                     Years ended December 31,
                                                        -----------------------------------------------------------
                                                          2001
                                                        Restated       2000         1999         1998         1997
                                                        --------       ----         ----         ----         ----
                                                                 (in thousands, except per share amounts)
<S>                                                     <C>          <C>            <C>         <C>        <C>
Statement of operations data:
    Revenues:
         Services                                      $  51,711     $ 61,300     $ 37,494     $ 21,320     $  9,797
         Switchboard                                      13,326       20,310        8,304        6,513          709
         Total revenues                                   65,037       81,610       45,798       27,833       10,506
         Loss from continuing operations(1,2)           (105,743)     (29,963)     (16,740)     (12,321)     (11,964)
         Net (loss)/income(3,4)                          (40,331)      15,055       28,149        1,115      (16,908)
Net (loss)/income per share:
    Basic                                              $   (1.76)    $   0.64     $   1.33     $   0.06     $  (0.97)
    Diluted                                            $   (1.76)    $   0.56     $   1.11     $   0.06     $  (0.97)
Balance sheet data:
    Working capital                                    $  71,703     $130,973     $112,443     $ 10,249     $ (2,732)
    Total assets                                         162,951      231,165      174,450       43,389       42,928
    Total shareholders' equity                           109,186      149,679      115,367       56,210        5,077

</TABLE>



QUARTERLY FINANCIAL INFORMATION (UNAUDITED)


<TABLE>
<CAPTION>
                                                                                    2001 Quarter Ended
                                                                                 (as Previously Reported)
                                                            --------------------------------------------------------
                                                             Dec. 31        Sept. 30        June 30         March 31
                                                             -------        --------        -------         --------
                                                                    (in thousands, except per share amounts)

<S>                                                         <C>             <C>            <C>             <C>
Revenues:
       Services                                             $ 11,917        $ 10,712        $ 13,115        $ 15,967
       Switchboard                                             3,787           3,171           4,798           4,270
       Total revenues                                         15,704          13,883          17,913          20,237
Loss from continuing operations(1)                           (37,966)        (31,803)        (16,393)        (12,871)
Net (loss)/income(2)                                         (20,703)        (26,378)         (5,867)         16,033
Net (loss)/income per share:
Basic                                                       $  (0.92)       $  (1.16)       $  (0.25)       $   0.68
Diluted                                                     $  (0.92)       $  (1.16)       $  (0.25)       $   0.64
</TABLE>



<TABLE>
<CAPTION>

                                                                                    2001 Quarters Ended
                                                                                         (Restated)
                                                            --------------------------------------------------------
                                                             Dec. 31        Sept. 30        June 30         March 31
                                                             -------        --------        -------         --------
                                                                      (in thousands, except per share amounts)
<S>                                                         <C>             <C>            <C>             <C>
Revenues:
    Services                                                $ 11,917        $ 10,712        $ 13,115        $ 15,967
    Switchboard                                                3,787           3,171           3,818           2,551
    Total revenues                                            15,703          13,883          16,933          18,518
Loss from continuing operations(1,2)                         (46,300)        (30,361)        (15,931)        (13,149)
Net (loss)/income                                            (25,105)        (25,731)         (5,590)         16,095
Net (loss)/income per share:
    Basic                                                   $  (1.12)       $  (1.13)       $  (0.24)       $   0.68
    Diluted                                                 $  (1.12)       $  (1.13)       $  (0.24)       $   0.64
         Stock price (close):
            High                                            $   4.94        $   3.75        $   4.94        $   7.81
            Low                                             $   2.81        $   2.73        $   3.35        $   4.00
</TABLE>



                                       8

<PAGE>


<TABLE>
<CAPTION>
                                                                                 2000 Quarters Ended
                                                            --------------------------------------------------------------
                                                            Dec. 31           Sept. 30           June 30          March 31
                                                            -------           --------           -------          --------
                                                                        (in thousands, except per share amounts)
<S>                                                         <C>               <C>               <C>               <C>
Revenues:
    Services                                                $17,651           $17,005           $14,593           $12,051
    Switchboard                                               6,026             5,700             4,766             3,818
    Total revenues                                           23,677            22,705            19,359            15,869
Loss from continuing operations(1)                           (8,025)           (6,877)           (5,745)           (9,315)
Net (loss)/income                                            (2,339)           (1,818)           (1,113)           20,328
Net (loss)/income per share:
    Basic                                                   $ (0.10)          $ (0.08)          $ (0.05)          $  0.88
    Diluted                                                 $ (0.10)          $ (0.08)          $ (0.05)          $  0.73
         Stock price (close):
            High                                            $  7.06           $  9.06           $ 16.75           $ 39.75
            Low                                             $  3.44           $  6.06           $  6.69           $ 15.75
</TABLE>


     For additional discussion on items such as discontinued operations, the
Company's name change, sales of Software.com shares and non-cash CBS advertising
expense, please refer to Management's Discussion and Analysis of Financial
Condition and Results of Operations.

     1. Includes approximately $9,680 and $11,824 in non-cash CBS advertising
     expense in 2001 and 2000, respectively. Includes a $22,203 non-cash loss on
     Switchboard's exchange of remaining advertising credits with Viacom for
     Switchboard stock for 2001.


     2. Includes an impairment of goodwill of approximately $12,364 for
     services and special charges of $17,300 for Switchboard related to the
     impairment of the AOL Directory Agreement and other charges.

     3. Includes a net realized gain of approximately $33,378 in 2001 for the
     sale of shares in Openwave. Includes a net realized gain of approximately
     $44,556 in 2000 for the sale of shares in Software.com.


     4. During 1999, the Company recorded a net gain of approximately $16,586
     for the sale of shares in an unaffiliated company, a one-time benefit from
     the reversal of deferred tax asset reserves of $21,655, and a one-time
     charge of $3,000, net of taxes, for the loss on disposal of business.

     The Company's common stock trades on the Nasdaq National Market under the
symbol "EPRE." The Company has not paid cash dividends on its common stock and
has historically retained earnings for use in its business. The Company has no
present intention to pay dividends. The Company intends to review its policy
with respect to the payment of dividends from time to time; however, there can
be no assurance that any dividends will be paid in the future.

     On March 22, 2002, the Company had 8,430 shareholders of record.

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

OVERVIEW

     ePresence has two reportable segments: services and Switchboard. The
Company's reportable segments are managed separately as they are separately
traded public companies, and market and distribute distinct products and
services. See Note 23 Segment Information in the Company's Notes to Consolidated
Financial Statements for the year ended December 31, 2001 which is incorporated
from Item 8 herein.

     ePresence is a leading consulting and systems integration company
delivering directory based solutions that help companies improve customer
service, enhance security and reduce costs. Our primary service offerings
include enterprise directory and security services, information technology
platform services, electronic provisioning services, next generation portal
services and operations management services. In addition, as of December 31,
2001, the Company owned approximately 54% of Switchboard's outstanding common
stock and, therefore, consolidated Switchboard's results with its financial
results. Switchboard is a leading provider of web hosted directory technologies
and customized yellow pages platforms to yellow pages publishers, newspaper
publishers and Internet portals that offer online local directory advertising
solutions to national retailers and "brick and mortar" merchants across a full
range of Internet and wireless platforms.


                                       9

<PAGE>

     In 2001, as a result of unfavorable economic conditions and to offset
declines in revenue particularly associated with our web solutions business, we
took a number of actions to mitigate the negative effects of these conditions
while enhancing our competitive capabilities. Cost reduction initiatives
included the sale of our Australian subsidiary, the closing of our operation in
The Netherlands, office closures, asset write-offs and reductions in staff. In
January 2002, we announced our plans to close our remaining international
operations, Germany and the United Kingdom, during the first quarter of 2002.
These actions will allow us to better align the Company's resources with revised
revenue expectations and fully focus on the domestic market.

     During 2000, we focused our efforts on strengthening our position in the
services marketplace with the acquisition of two services companies and the
initial public offering of Switchboard. Due to these acquisitions and an
increase in engagements, the Company was able to increase revenues from $45.8
million in 1999 to $81.6 million in 2000.

     In 1999, we announced a decision to exit our software business and began to
account for the software business as discontinued operations. Included in the
1999 results of operations is an estimated loss from disposal of discontinued
operations of $3 million, net of tax. Since 1995, software revenues had declined
primarily due to competitive pressures in the network operating system and
electronic messaging markets.

RESTATEMENT AND RECLASSIFICATION OF FINANCIAL STATEMENTS

Our previously issued consolidated financial statements for the year ended
December 31, 2001, and the consolidated financial statements for the quarters
ended March 31, 2001, June 30, 2001, September 30, 2001 and December 31, 2001
have been restated. The restatements are described in detail below.

In the first quarter of 2001, Switchboard sold banner advertising to a single
customer that resulted in $2.7 million of revenue recognized in 2001. While
seeking to collect payment, additional information about the customer and its
relationship with one of Switchboard's vendors was evaluated by Switchboard and
its recently engaged independent auditors, Ernst and Young LLP. This information
led Switchboard to conclude that it would have been more appropriate to record
the 2001 banner advertising revenue as a reduction of expense. Accordingly, as
part of this Switchboard restatement, Switchboard reduced 2001 annual revenue by
$2.7 million, reduced 2001 annual sales and marketing expenses by $1.5 million
and reduced the 2001 special charges by $1.2 million. There was no effect on
Switchboard's or our net loss for the year ended December 31, 2001 related to
this issue.

Contemporaneous with Switchboard's decision to restate its 2001 financial
statements for the banner advertising arrangement, Arthur Andersen LLP, our and
Switchboard's independent auditors for fiscal 2001, advised us and Switchboard
that its Boston office had ceased operations and would be unable to render a
report on our and Switchboard's restated 2001 financial statements. Therefore,
Ernst and Young commenced a re-audit of our 2001 financial statements in August
2002.

As a result of the re-audit, it was determined that the previously reported 2001
consolidated financial statements should also be restated for the following
Switchboard items: a reduction in operating expenses of $1.1 million; an
impairment charge relating to Switchboard's directory and local advertising
platform agreement entered into with America Online, Inc. ("AOL") in December
2000 ("Directory Agreement") of $11.7 million; a reduction in the 2001 annual
amortization expense related to the Directory Agreement of $3.3 million and a
reduction in the number of shares of common stock used for computing earnings
per share by 746,260 shares. In addition, Switchboard reclassified $27,900,000
and $10,400,000 in marketable securities at December 31, 2001 and 2000,
respectively, from long-term to short-term, to reflect all marketable securities
with less than one year to maturity as short-term.

The reduction in Switchboard operating expenses of $1.1 million related to the
elimination of excess accrued liabilities that were reflected in the previously
issued December 31, 2001 consolidated financial statements.

The $11.7 million impairment charge related to the Directory Agreement was
determined pursuant to SFAS No. 121 "Accounting for the Impairment of Long-Lived
Assets and for Long-Lived Assets to be Disposed of." As a result of lower than
initially anticipated revenues earned by Switchboard under the Directory
Agreement during the first year of this arrangement, an impairment review was
performed on the net book value of the assets related to the Directory
Agreement, which totaled $11.7 million at December 31, 2001. Revised revenue
projections under the Directory Agreement were developed, and Switchboard
calculated estimated cash flows to be received over the term of the Directory
Agreement. Switchboard determined that the estimated future undiscounted cash
flows were below the carrying value of the assets related to the Directory
Agreement at December 31, 2001. The fair value of the assets related to the
Directory Agreement was then determined by discounting the cash flows at a rate
of 20% which represented a rate commensurate with the risk involved.

The $3.3 million reduction in Switchboard amortization expense resulted from a
change in the amortization rate used to amortize the prepaid asset related to
the Directory Agreement as presented on our balance sheet.

As a result of the re-audit, it was also determined that the previously reported
2001 consolidated financial statements should be restated for a reduction in our
operating expenses of $0.6 million for our services business related to the
elimination of excess accrued liabilities and a reduction of amortization
related to unearned compensation.

On January 1, 2001, we adopted SFAS No. 133, as amended which, among other
things, required derivatives to be measured at fair value and recognized as
either assets or liabilities in the financial statements, as discussed in Note 2
to the Consolidated Financial Statements. As a result we recorded a cumulative
effect in accounting change, net of taxes of $3.4 million, offset by a decrease
in the reported gain on the sale of Openwave as well as a decrease in the
provision for income taxes. The adoption of SFAS 133 had no effect on our
consolidated net income for the period ended December 31, 2001.


                                       10

<PAGE>


Because the above-described restatements reflect the timing of certain revenues
and expenses and non-cash transactions, our consolidated balance sheet was
correspondingly adjusted in various categories, including the asset related to
the Directory Agreement, other assets and accrued expenses. In addition, the
accumulated deficit at December 31, 2001 was increased by $3.5 million to
reflect the cumulative effect of these adjustments. Our capital resources were
not impacted by any of these restatements and reclassifications.

The Securities and Exchange Commission, ("SEC") has advised Switchboard that it
will be delivering a document request in connection with an investigation by the
SEC of the restatements of Switchboard's financial statements. Switchboard
intends to cooperate fully with the SEC regarding this investigation.

Following is a summary of changes to selected consolidated financial data as a
result of these restatements for the year ended December 31, 2001:


                                       11

<PAGE>


                                 EPRESENCE, INC.
           SUMMARY OF CHANGES TO SELECTED CONSOLIDATED FINANCIAL DATA
                AS A RESULT OF RESTATEMENTS AND RECLASSIFICATIONS
                    (In Thousands, Except Per Share Amounts)


STATEMENT OF OPERATIONS DATA:


<TABLE>
<CAPTION>
                                                                               Year Ended December 31, 2001
                                                                          --------------------------------------
                                                                          As Reported    Adjustments    Restated
                                                                          -----------    -----------    --------
<S>                                                                        <C>            <C>        <C>
 Revenues:
    Services                                                               $  51,711      $     -      $  51,711
    Switchboard                                                               16,026       (2,700)        13,326
                                                                           ---------      -------      ---------
         Total revenues                                                       67,737       (2,700)        65,037
                                                                           ---------      -------      ---------

 Cost of Revenues                                                             39,087          208         39,295
                                                                           ---------      -------      ---------

 Gross profit                                                                 28,650       (2,908)        25,742
                                                                           ---------      -------      ---------

 Operating Expenses:
    Sales and marketing                                                       45,048       (2,737)        42,312
    Product development                                                        6,701            -          6,702
    General and administrative                                                19,777         (585)        19,192
    Amortization of goodwill, intangibles and other assets                    10,685       (3,250)         7,435
    Impairment of goodwill                                                    12,364            -         12,364
    Restructuring and special charges                                         10,904       10,373         21,277
    Loss on Viacom transaction                                                22,203            -         22,203
                                                                           ---------      -------      ---------
                     Total operating expenses                                127,682        3,801        131,485
                                                                           ---------      -------      ---------

 Loss from operations                                                        (99,032)      (6,709)      (105,743)

 Other Income/(Expense)                                                       75,071       (2,081)        72,992

 Net loss from continuing operations before
    income taxes and cumulative effect of accounting change                  (23,961)      (8,790)       (32,751)
 Provision for/(benefit from) income taxes                                    12,880       (1,855)        11,025
                                                                           ---------      -------      ---------
 Net loss before cumulative effect of accounting change                      (36,841)      (6,935)       (43,776)
    Cumulative effect of accounting change, net of tax of $1,855                   -        3,445          3,445
                                                                           ---------      -------      ---------
 Net loss                                                                    (36,841)      (3,490)       (40,331)


 Net loss per share: Basic and Diluted                                     $   (1.60)     $ (0.16)     $   (1.76)
                                                                           =========      =======      =========


BALANCE SHEET DATA:                                                               As of December 31, 2001
                                                                          ---------------------------------------
                                                                          As Reported    Adjustments     Restated
                                                                          -----------    -----------     --------

 Current Assets                                                               78,351       21,236         99,587
 Non-Current Assets                                                           93,140      (29,776)        63,364
 Total Assets                                                                171,491       (8,540)       162,951
 Accrued Expenses and other current liabilities                               13,915       (1,549)        12,366
 Minority interests in consolidated subsidiaries                              29,636       (3,399)        26,237
 Stockholders equity                                                         112,778       (3,592)       109,186


                                                                                    As of December 31, 2000
                                                                          -------------------------------------------
                                                                          As Reported    Adjustments     Reclassified
                                                                          -----------    -----------     ------------
 Current Assets                                                              143,327       10,380        153,707
 Non-Current Assets                                                           87,838      (10,380)        77,458
 Total Assets                                                                231,165            -        231,165
</TABLE>


                                       12

<PAGE>


RESULTS OF OPERATIONS

Services Revenues

     Services revenues for 2001 decreased 16% to $51.7 million, compared with
$61.3 million in 2000. Services revenues were $37.5 million in 1999. The
decrease in 2001 was principally due to the sale of our Australian subsidiary in
March 2001, the closing of our operation in The Netherlands in May 2001 and
lower revenues from our portal solutions business. The increase in 2000 was
primarily due to revenues generated from consulting services due to an increase
in customer engagements, particularly in web-site design and implementation,
network integration, application integration and directory and security
planning. The increase in 2000 was also due to two acquisitions in the first six
months of 2000.

     International revenues for 2001 decreased 49% to $4.8 million, compared
with $9.6 million in 2000. International revenues were $11.5 million in 1999.
The decrease in 2001 was primarily due to the sale of our Australian subsidiary
in March 2001 and the closing of our operation in The Netherlands in May 2001.
The decrease in 2000 was primarily due to the sale of our French subsidiary in
January 2000 and the closing of our Malaysian and Japanese offices in 1999. In
January 2002, we announced the closing of our remaining international operations
in Germany and the United Kingdom, which accounted for approximately 60% of our
international revenue in 2001.

Services Gross Profit

     Gross profits from services in 2001 were 31%, or $15.9 million, compared
with 45%, or $27.4 million, in 2000 and 39% or $14.8 million, in 1999. The
decreases in gross profit dollars and percentages in 2001 were primarily due to
decreases in revenues from consulting services due to unfavorable economic
conditions and resultant lengthened sales cycles and decreased and deferred
technology spending for many of our customers in 2001 combined with decreased
utilization of consulting delivery resources. The increases in gross profit
dollars and percentages in 2000 were primarily due to increases in revenues from
consulting services and improved billing rates, offset in part by an increase in
delivery personnel and related costs to expand consulting services. Cost of
services revenues consists primarily of direct costs (e.g. salaries, benefits
and travel expenses) of consulting delivery personnel and third-party product
costs.

Services Operating Expenses

     Sales and marketing expenses for services decreased 12% to $17.7 million in
2001, compared with $20.2 million in 2000. Sales and marketing expenses were
$10.9 million in 1999. The decrease in 2001 was due primarily to cost reduction
initiatives in our international operations which included the sale of our
Australian subsidiary and the closing of our operation in The Netherlands, and
staff reductions in our web solutions business. These decreases were offset, in
part, by costs relating to increases in sales staff in the United States. The
increase in 2000 was due primarily to increases in sales staff in our expanded
consulting services activities and an increase in variable sales costs,
including commissions, as a result of higher revenues. Additionally, we incurred
approximately $1.7 million of corporate rebranding expense in 2000 relating to
the change of the Company's name to ePresence, Inc. from Banyan Systems
Incorporated. Sales and marketing expenses as a percentage of services revenues
were 34%, 33% and 29% for 2001, 2000 and 1999, respectively. Sales and marketing
expenses consist primarily of salaries, associated employee benefits and travel
expenses of sales and marketing personnel and promotional expenses.

     General and administrative expenses for services increased 3% to $15.0
million in 2001, compared with $14.5 million in 2000 and $11.9 million in 1999.
The increase in 2001 was primarily attributable to an incremental bad debt
provision for $0.6 million. The increase in 2000 was due primarily to additional
recruiting and training expenses related to the staffing of our expanding
consulting services activities. General and administrative expenses as a
percentage of services revenues were 29%, 24% and 32% for 2001, 2000 and 1999,
respectively. General and administrative expenses consist primarily of
compensation, benefits and travel costs for employees in the Company's
management, finance, human resources, information services, legal and operations
groups; recruiting and training costs for delivery personnel; facilities; and
depreciation expenses not allocated to sales or cost of revenues.

Services Amortization of Goodwill and Intangibles

     Amortization of goodwill expenses for services was $2.7 million in 2001,
$2.2 million in 2000 and none in 1999. These increases were due to the
amortization of goodwill resulting from our acquisition of two services
companies in the first and


                                       13

<PAGE>

second quarters of 2000. Amortization expense as a percentage of services
revenues was 5% for 2001, 4% for 2000 and none in 1999. During 2001, using the
discounted cash flow method, we determined that the carrying value of goodwill
recorded in connection with these prior acquisitions was impaired. An impairment
charge totaling $12.4 million was recorded in 2001, reflecting the amount by
which the carrying amount of the assets exceeded their respective fair values.
There can be no assurance that we will not experience similar impairment losses
in the future. Any such loss could adversely and materially impact our results
of operations and financial condition.


Services Restructuring Charges

     In 2001, as part of the Company's plan to implement cost-cutting measures,
the Company recorded a net pre-tax charge of $4.0 million for services
restructuring charges. These charges included a workforce reduction of
approximately 100 positions, office closures and asset write-offs. At December
31, 2001, the Company had utilized approximately $2.4 million in total of the
liability of which $1.4 million was severance related costs, and the remainder
related to office closures and asset write-offs. The remaining liability at
December 31, 2001 was approximately $1.6 million. The Company anticipates that
it will utilize a substantial portion of the remaining liability by the end of
fiscal year 2002. See Note 11, Restructuring Charges, in the Company's Notes to
Consolidated Financial Statements for the year ended December 31, 2001 which is
incorporated from Item 8 herein.


Switchboard Revenues

     Total revenues from Switchboard in 2001 included in the consolidated
financial results of our operations were $13.3 million, compared with $20.3
million in 2000. Total revenues from Switchboard were $8.3 million in 1999. The
decrease in Switchboard revenues in 2001 was due primarily to a decrease in
national advertising and site sponsorship revenue, offset in part by an increase
in merchant network revenue. The increase in revenue in 2000 when compared to
1999 consisted primarily of increases in national advertising revenue, merchant
services revenue and syndication and licensing revenue.

Switchboard Gross Profit

     Gross profits from Switchboard in 2001 were 74%, or $9.8 million, compared
with 83%, or $16.8 million, in 2000 and 81%, or $6.7 million, in 1999. The
decreases in gross profit dollars and percentages in 2001 were primarily due to
decreased revenue being spread over relatively fixed costs of revenue. The
increases in gross profit dollars and percentage in 2000 were primarily due to
overall increases in revenue, offset in part by an increase in variable costs.

Switchboard Operating Expenses

     Sales and marketing expenses for Switchboard decreased 16% to $24.6 million
in 2001, compared with $29.2 million in 2000. Sales and marketing expenses were
$10.9 million in 1999. The decrease in 2001 was primarily due to a decrease in
merchant services program and CBS advertising expenses, offset in part by
increases in other advertising expenses, provision for doubtful accounts,
employee salaries and benefits and costs associated with additional leased
facilities. The increase in 2000 was primarily related to increases in CBS
advertising and merchant services program expenses; other advertising expenses;
and employee salaries and benefits. Sales and marketing expenses as a percentage
of Switchboard revenues were 185%, 144% and 131% for 2001, 2000 and 1999,
respectively.


     Product development expenses for Switchboard increased 92% to $6.7 million
in 2001, compared with $3.5 million in 2000. Product development expenses for
Switchboard were $1.9 million in 1999. The increases in both 2001 and 2000 were
due primarily to increases in salaries and benefits associated with new
personnel resulting from Switchboard's acquisition of Envenue Inc. ("Envenue");
outside consulting expenses; and depreciation and costs associated with
additional leased facilities, offset in part by the capitalization of deferred
project costs. Product development expenses as a percentage of Switchboard
revenues were 50%, 17% and 23% for 2001, 2000 and 1999, respectively.


     General and administrative expenses for Switchboard increased 27% to $4.2
million in 2001, compared with $3.3 million in 2000. General and administrative
expenses for Switchboard were $1.7 million in 1999. The increase in 2001 was due
primarily to increases in professional services; insurance expenses; and
salaries and benefits associated with new personnel, offset in part by a
decrease in franchise and excise taxes. The increase in 2000 was due primarily
to increases in salaries and benefits associated with new personnel; franchise
and excise taxes; costs associated with additional leased facilities;
professional services expenses; and additional travel expenses resulting from
new personnel. General and administrative expenses as a percentage of
Switchboard revenues were 31%, 16%, and 21% for 2001, 2000 and 1999,
respectively.

Switchboard Amortization of Goodwill, Intangibles and Other Assets

     Switchboard expenses for the amortization of goodwill, intangibles and
other assets was $4.8 million in 2001, $1.6 million in 2000 and $0.9 million in
1999. The increase in 2001 resulted primarily from amortization of goodwill
resulting from Switchboard's purchase of Envenue in November 2000, as well as
amortization of the value of stock issued and cash paid to AOL related to the
AOL Directory Agreement Switchboard entered into in December 2000. The increase
in 2000 was due primarily to


                                       14

<PAGE>

the amortization of the value of stock issued and cash paid to AOL and the
amortization of software licenses. Amortization expense as a percentage of
Switchboard revenues was 36%, 8%, and 10% for 2001, 2000 and 1999, respectively.

Switchboard Loss on Viacom Transaction

     Switchboard reported a one-time, non-cash accounting loss of $22.2 million
in 2001 related to the October 2001 termination of its advertising and promotion
agreement with Viacom. Switchboard agreed to terminate its right to the
placement of advertising on Viacom's CBS properties with an expected net present
value of approximately $45 million in exchange for, primarily, the reconveyance
by Viacom to Switchboard of approximately 7.5 million shares of Switchboard
common stock, the cancellation of warrants held by Viacom to purchase 533,469
shares of Switchboard's common stock and the reconveyance to Switchboard of the
one outstanding share of Switchboard series E special voting preferred stock.
The non-cash accounting loss of $22.2 million results from the difference
between the net present value of the terminated advertising rights, and the
value of the shares of Switchboard common and preferred stock reconveyed and the
warrants cancelled.

Switchboard Special Charges

     Switchboard recorded net pre-tax special charges of $17.3 million for the
three months ended December 31, 2001. These charges were comprised primarily of
$15.6 million for the impairment of certain assets, $1.0 million for costs
related to facility closures and $0.7 million in severance costs related to the
reduction of approximately 21% of Switchboard's workforce. The restructuring
resulted in 21 employee separations. The actions related to the restructuring
were substantially completed in 2001. Switchboard expects to spend approximately
$1.3 million in 2002 related to the restructuring.

     Included in the $15.6 million impairment charge is a charge of $11.7
million for the assets related to the Directory Agreement. As a result of lower
than initially anticipated revenues earned by Switchboard under the Directory
Agreement during the first year of this arrangement, an impairment review was
performed on the net book value of the assets related to the Directory
Agreement, which totaled $11.7 million at December 31, 2001. Revised revenue
projections under the Directory Agreement were developed, and Switchboard
calculated estimated cash flows to be received over the term of the Directory
Agreement. Switchboard determined that the estimated future undiscounted cash
flows were below the carrying value of the assets related to the Directory
Agreement at December 31, 2001. The fair value of the assets related to the
Directory Agreement was then determined by discounting the cash flows at a rate
of 20% which represented a rate commensurate with the risk involved.

     In December 2001, Switchboard exercised its rights under the Envenue
acquisition agreement to substantially reduce the funding of Envenue.
Switchboard evaluated the carrying value of its goodwill in Envenue, and
determined it would not be fully recovered through estimated undiscounted future
operating cash flows. As a result, during the three months ending December 31,
2001, Switchboard recorded as a component of the $15.6 million impairment charge
for certain assets an impairment charge of $1.9 million related to the Envenue
goodwill. The impairment was measured as the amount by which the carrying amount
of these assets exceeded the present value of the estimated discounted future
cash flows attributable to these assets.

     Also included in the $15.6 million impairment charge are amounts related to
prepaid advertising expenses. As a result of Switchboard's change in overall
strategy from a destination site to a technology provider, Switchboard no longer
considers this prepaid advertising to be complementary to their corporate
strategy. Accordingly, Switchboard recorded $1.4 million for the impairment of
these prepaid advertising assets.

Consolidated Other Income/(Expense) and Income Taxes

     Consolidated other income/(expense) was $73.0 million in 2001, $59.9
million in 2000 and $20.7 million in 1999. The increases in 2001 and 2000 were
due primarily to gains on sales of Openwave/Software.com stock of approximately
$38.7 million and $44.6 million for 2001 and 2000, respectively. The increase in
2001 was also due to the minority share of increased losses in Switchboard.

     Our effective tax rate for the year ended December 31, 2001 was (33.7)%.
This was negatively impacted by our deconsolidation of Switchboard for tax
purposes, as Switchboard net losses are not included in our tax return, upon our
percentage ownership change on June 30, 1999 and a full valuation allowance
provided against deferred tax assets. The Company recorded no tax benefit on its
operating losses for the year ended December 31, 2001, due to the uncertainty of
its realization.

In 2001 the Company evaluated the realizability of all of its deferred tax
assets. Because, the Company believes it is more likely than not that all of the
deferred tax assets will not be realized, a valuation allowance of $51,378,000
for the year ended December 31, 2001 was recorded. Of the $51,378,000 valuation
allowance, $24,373,000 pertains to Switchboard, and $27,005,000 pertains to
services.

Discontinued Operations

     In the fourth quarter of 1999, our Board of Directors approved a plan to
exit our software business and to focus on our services and Switchboard
businesses as our sole operating units. Included in the 1999 results of
operations is an estimated loss from disposal of discontinued operations of $3.0
million, net of tax.

     Revenues from discontinued operations for 1999 were $26.7 million.
Excluding the estimated loss from disposal of discontinued operations, expenses
from discontinued operations were $18.4 million in 1999.

Other Matters

     In May 2000, as a result of our strategic focus on the services market
place, we changed our name from Banyan Systems Incorporated to ePresence, Inc.

                                       15

<PAGE>

     For a discussion of the Company's relationship with Switchboard, see Note
27, Related Parties, in the Company's Notes to Consolidated Financial Statements
for the year ended December 31, 2001 which is incorporated from Item 8 herein.

     For a discussion of Switchboard's relationship with AOL, see Note 26, AOL
Alliance in the Company's Notes to Consolidated Financial Statements for the
year ended December 31, 2001 which is incorporated from Item 8 herein.


LIQUIDITY AND CAPITAL RESOURCES


     At December 31, 2001, consolidated cash, cash equivalents and marketable
securities and restricted cash were $122.1 million, of which $62.1 million was
held by ePresence and $60.0 million was held by Switchboard. At December 31,
2000, consolidated cash, cash equivalents and marketable securities were $152.2
million, of which $81.4 million was held by ePresence and $70.8 million was held
by Switchboard. Consolidated working capital decreased from $131.0 million at
December 31, 2000 to $72.6 million at December 31, 2001. Cash and cash
equivalents, excluding restricted cash of $0.9 million, decreased $6.7 million
resulting in a consolidated cash balance of $33.0 million at December 31, 2001.
This decrease was primarily due to net cash used in operating activities of
$33.6 million and cash used in financing activities of $4.6 million offset in
part by cash provided by investing activities of $31.7 million as follows.

     Net cash used in operating activities in 2001 of $33.6 million, was
primarily due to: a net loss of $40.3 million; a gain from sale of investments
of $33.4 million; our minority interest of Switchboard's losses of $35.1
million, and the cumulative effect of accounting change of 5.3 million offset in
part by a $22.2 million non-cash accounting loss on Switchboard's Viacom
transaction, the non-cash portion of our restructuring and special charges of
$19.4 million, an impairment of goodwill of $12.4 million, non-cash CBS
advertising of $9.7 million, depreciation and amortization of $7.4 million, a
decrease in accounts receivable of $6.7 million and a decrease in other
non-current assets of $4.1 million.


     Net cash used in financing activities in 2001 of $4.6 million was primarily
due to $6.1 million in stock repurchases pursuant to the Company's stock buyback
program, offset, in part, by proceeds from issuance of notes payable of $1.1
million related to a computer equipment sale-leaseback transaction by
Switchboard.

     Net cash provided by investing activities in 2001 of $31.7 million was
primarily related to the proceeds from sale of investments of $39.3 million,
offset, in part, by capital expenditures of $4.8 million and acquisition of
goodwill of $2.1 million.

     In January 2000, we acquired ePresence Inc. (currently named ePresence Web
Consulting, Inc.), a privately held e-business services company based in Red
Bank, New Jersey that specialized in web design, development and integration.
The estimated purchase price of the acquisition was approximately $10.6 million
comprised of cash and our common stock. The acquisition was accounted for
assuming the achievement of certain specified performance measures, using the
purchase method of accounting.

     In May 2000, we acquired Strategic Network Designs, Inc. (currently named
ePresence CRM, Inc.), a privately held e-business services company based in
Clark, New Jersey, that specialized in customer relationship management,
e-mobility, wireless and custom application solutions. The total purchase price
was $22.1 million, comprised of cash and our common stock. The transaction was
accounted for using the purchase method of accounting.

     On November 24, 2000, Switchboard acquired Envenue, Inc., a wireless
provider of advanced product searching technologies designed to drive leads to
traditional retailers. The transaction was accounted for as a purchase. The
total purchase price included consideration of $2.0 million in cash to be paid
on or before May 24, 2002. There is also an 18-month earn-out of up to $2.0
million contingent on performance to be paid by Switchboard on or before July 8,
2002.

     In 2000, Switchboard raised approximately $86 million, net of expenses,
through an initial public offering of its common stock.


     In 2000, we sold shares of Software.com common stock resulting in a net
realized gain of approximately $44.6 million. On November 17, 2000, Software.com
and Phone.com merged and began doing business as Openwave Systems, Inc.
("Openwave"). In 2001, we sold shares of Openwave common stock resulting in a
net realized gain of approximately $33.4 million.


     On December 18, 2000, the Board of Directors of ePresence authorized the
repurchase of up to $10.0 million of its common stock on the open market.
Repurchases of stock are at management's discretion, depending upon acceptable
prices and availability. Funds used in the repurchase of shares come from
ePresence's existing cash and investment balances along with cash generated from
operations. As of December 31, 2001, the Company has expended $6.3 million
toward stock repurchase.


     During 2001, as part of the Company's plan to implement cost-cutting
measures in its services business, the Company recorded in total net pre-tax
charges of $4.0 million related to workforce reductions, office closures and
asset write-offs and we anticipate expending approximately $2.9 million in cash
over time on such actions. At December 31, 2001, the Company had utilized
approximately $2.4 million in total of the liability of which approximately $1.4
million was severance related costs, and the remainder related to office
closures and asset write-offs.



                                       16

<PAGE>


     During 2001, Switchboard recorded net pre-tax special charges of $17.3
million related to impairment of certain assets, facility closures and workforce
reduction. Switchboard expects to spend approximately $1.3 million in 2002
related to the restructuring.


     In March 2001, Switchboard entered into a computer equipment sale-leaseback
agreement with Fleet Capital Corporation. Under the agreement, Switchboard will
lease $1.1 million of computer equipment over a three-year period ending on June
28, 2004. Upon the expiration of the lease, Switchboard has the option to
purchase the leased assets for one dollar. The agreement has an estimated
effective annual percentage rate of approximately 7.90%. Under the terms of the
agreement, Switchboard is required to maintain on deposit with Fleet National
Bank a compensating balance, restricted as to use. The compensating balance is
adjusted on a quarterly basis to an amount equal to the principal outstanding
under the lease. As of December 31, 2001, Switchboard has recorded $0.9 million
as restricted cash. Switchboard anticipates total payments under the lease in
2002 will be approximately $0.4 million.

     For a discussion of the Company's lease commitments, see Note 13,
Commitments and Contingencies, in the Company's Notes to Consolidated Financial
Statements for the year ended December 31, 2001 which are incorporated from Item
8 herein.

     The Company has received a commitment letter from Silicon Valley Bank
regarding a $10.0 million working capital line of credit and providing for
borrowings at Silicon Valley Bank's prime rate. The Company is working with
Silicon Valley Bank toward the finalization of terms and conditions and the
execution of definitive loan documents. The Company had no borrowings under any
credit facilities outstanding at either December 31, 2001 or December 31, 2000.

     We believe that existing cash and marketable securities, combined with cash
expected to be generated from operations, will be sufficient to fund the
Company's operations through at least the next 12 months.


CRITICAL ACCOUNTING POLICIES AND ESTIMATES

     The Company considers certain accounting policies related to revenue
recognition, accounts receivable, consolidation of Switchboard results with its
financial results, impairment of long-lived assets and valuation of deferred tax
assets to be critical policies due to the estimation processes involved in each.

Revenue Recognition

     The Company recognizes services revenues pursuant to time and material
contracts generally as services are provided. Services revenues pursuant to
fixed-fee contracts are generally recognized as services are rendered on the
percentage-of-completion method of accounting (based on the ratio of costs
incurred to total estimated costs) with revisions to estimates reflected in the
period which changes become known. Service revenues include customer
reimbursements for out-of-pocket expenses.

     The Company's services business derives a significant portion of its
revenue from fixed-price, fixed-time contracts, which require the accurate
estimation of the cost, scope and duration of each engagement. If the Company
does not accurately estimate the resources required or the scope of time to
satisfy its obligations under the contracts, then future consulting margins may
be significantly and negatively affected or losses on existing contracts may
need to be recognized. Any such resulting reductions in margins or contract
losses could be material to the Company's results of operations.

     Switchboard generates its revenue primarily from its merchant network and
banner and site sponsorship advertising. Generally, revenue is recognized as
services are provided, so long as no significant obligations remain and
collection of the resulting receivable is probable.

     Revenues earned under the merchant network consist of advertising and
platform services. Through their merchant network, Switchboard offers certain
merchant alliance partners the ability to sell Switchboard.com distribution to
their merchant advertisers. These efforts are reflected in their merchant
network advertising revenues. For these advertising services, the merchant
network alliance partners pay Switchboard a monthly fee based on the number of
advertisements placed into Switchboard.com. This monthly fee is recognized as
revenue by Switchboard as it is earned. Platform services relate to the
Switchboard's offerings to its merchant network alliance partners, under which
those alliance partners can enter into a development and licensing arrangement
with Switchboard whereby they create and/or modify a private labeled web-hosted
directory platform. Once the web-hosted directory platform is operational, they
also earn additional fees based on the number of merchants promoted within the
platform. Revenue received by Switchboard for such development and licensing
arrangements is deferred until such time the platform is accepted by the
customer. After acceptance by the customer, revenue from such development and
licensing agreements are recognized ratably over the life of the agreement. Any
additional engineering or other services fees earned through the merchant
promotions are recognized as earned due to their variable nature.

     Revenues earned under Switchboard's banner and site sponsorships consist
principally of advertising revenue earned through the Switchboard.com web site.
Specifically, Switchboard offers both site-wide banner and category specific
banner programs on the Switchboard.com Web site.

     Deferred revenue is principally comprised of billings in excess of
recognized revenue relating to consulting engagements, advertising agreements
and licensing fees received in advance of revenue recognition.


                                       17

<PAGE>

Accounts Receivable

     We perform ongoing credit evaluations of our customers and adjust credit
limits based upon payment history and the customer's current credit worthiness,
as determined by our review of their current credit information. We continuously
monitor collections and payments from our customers and maintain a provision for
estimated credit losses based upon our historical experience and any specific
customer collection issues that we have identified. While such credit losses
have historically been within our expectations and the provisions established,
we cannot guarantee that we will continue to experience the same credit loss
rates that we have in the past. Since our accounts receivable at December 31,
2001 are concentrated in a relatively few number of customers (two customers
account for 42% of accounts receivable at December 31, 2001), a significant
change in the liquidity or financial position of any one of these customers
could have a material adverse impact on the collectibility of our accounts
receivables and our future operating results.

Consolidation of Switchboard results with the financial results of the Company

     Historically, Switchboard's results have been consolidated with the
Company's financial results, due to either the Company's majority ownership of
Switchboard or its control of the Switchboard Board of Directors as a result of
a Voting Rights Agreement by and among the Company, Switchboard and Viacom.
However, in January 2001, as a result of the termination of this Voting Rights
Agreement and the Company's ownership then being 38%, the Company ceased to
consolidate Switchboard's results with its financial results, for the first
three quarters of 2001. In connection with the Viacom transaction discussed in
Note 25 in the Company's Notes to Consolidated Financial Statements, the Company
became owner of approximately 54% of Switchboard's outstanding stock in October
2001. This change in ownership percentage resulted in the Company consolidating
Switchboard's revenues, expenses and other income and expense in the Company's
consolidated statement of operations while the minority interest in Switchboard
is eliminated through consolidated other income and expense. The Company has
retroactively consolidated Switchboard's results from operations beginning on
January 1, 2001 in order for the consolidated results of operations to be
presented consistently with the results of operations of 2000 and 1999. In
addition, Switchboard's assets and liabilities are consolidated in the Company's
consolidated balance sheet as of December 31, 2001. At December 31, 2001, the
Company owned 9,802,421 shares of Switchboard or an approximate 54% interest.

Impairment of Long-lived Assets

     If facts and circumstances were to indicate that our long-lived assets
might be impaired, the estimated future undiscounted cash flows associated with
the long-lived assets would be compared to its carrying amount to determine if a
write-down to fair value is necessary.

     The Company's long-lived assets include goodwill and acquired intangible
assets pursuant to its acquisition of ePresence, Inc. (currently named ePresence
Web Consulting, Inc.) in January 2000 and its acquisition of Strategic Network
Designs, Inc. (currently named ePresence CRM, Inc.) in May 2000. At December 31,
2001, the Company had $14.8 million of goodwill and other intangible assets,
accounting for approximately 9.1% of the Company's total assets. The Company
evaluates the net realizable value of its goodwill and intangibles on an ongoing
basis, relying on a number of factors including operating results, business
plans, budgets, economic projections and undiscounted cash flows. In addition,
the Company's evaluation considers non-financial data such as market trends,
project development cycles and changes in management's market emphasis. During
2001, based on economic conditions and each business unit's actual and
forecasted operating results, it became apparent that the carrying value of the
acquired intangible assets and goodwill had been impaired. In September 2001, a
charge of $12.4 million was recorded related to the impairment of goodwill
measured as the amount by which the carrying amount exceeded the present value
of the estimated discounted future cash flows for goodwill.

     In 2002, Statement of Financial Accounting Standards ("SFAS") No. 142,
"Goodwill and Other Intangible Assets" became effective and as a result, we will
cease to amortize approximately $14.8 million of goodwill. We had recorded
approximately $2.7 million of amortization during 2001 and would have recorded
approximately $1.8 million of amortization during 2002. In lieu of amortization,
we are required to perform an initial impairment review of our goodwill in 2002
and an annual impairment review thereafter. The Company adopted SFAS 142 during
the first quarter of 2002 and ceased amortizing goodwill with a net book value
of $14,780,000 as of the beginning of fiscal 2002. The Company completed an
assessment of fair value of goodwill in the second quarter of 2002 and believes
the book value of goodwill has not been impaired.




Valuation of Deferred Tax Assets

     As part of the process of preparing our Consolidated Financial Statements,
we are required to estimate our income taxes in each of the jurisdictions in
which we operate. The process involves us estimating our actual current tax
exposure together with assessing temporary differences resulting from differing
treatment of items, such as deferred revenue, for tax and accounting purposes.
These differences result in deferred tax assets and liabilities, which are
included within our consolidated balance sheet. We must then assess the
likelihood that our deferred tax assets will be recovered from future taxable
income and to the extent we believe that recovery is not likely, we must
establish a valuation allowance. To the extent we establish a valuation
allowance or increase this allowance in a period, we must include an expense
within the tax provision in the statement of operations.



                                       18

<PAGE>

     Significant management judgment is required in determining our provision
for income taxes, our deferred tax assets and liabilities and any valuation
allowance recorded against our net deferred tax assets. We have recorded a
valuation allowance of $51.4 million as of December 31, 2001, due to
uncertainties related to our ability to utilize some of our deferred tax assets,
primarily consisting of certain net operating losses carryforwards and tax
credits, before they expire. The valuation allowance is based on our estimates
of taxable income by jurisdiction in which we operate and the period over which
our deferred tax assets will be recoverable. In the event that actual results
differ from these estimates or we adjust these estimates in future periods we
may need to establish an additional valuation allowance which could materially
impact our financial position and results of operations.

     The net deferred tax asset as of December 31, 2001 was zero, net of a
valuation allowance of $51.4 million.

RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS

     In June 2001, the Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standards ("SFAS") No. 141, "Business
Combinations". SFAS No. 141 requires all business combinations initiated after
June 30, 2001 to be accounted for using the purchase method.


     In June 2001, the FASB issued SFAS No. 142, "Goodwill and Other Intangible
Assets". With the adoption of SFAS No. 142, goodwill is no longer subject to
amortization over its estimated useful life, but instead goodwill is subject to
at least an annual assessment for impairment by applying a fair-value-based
test. We adopted SFAS 142 in the first quarter of 2002 and ceased amortizing
goodwill with a net book value of $14.8 million. We completed an assessment of
fair value of goodwill in the second quarter of 2002 and we believe the book
value of goodwill has not been impaired.

     In June 2001, the FASB issued SFAS No. 143, "Accounting for Asset
Retirement Obligations". This statement addresses financial accounting and
reporting for obligations associated with the retirement of tangible long-lived
assets and the associated asset retirement costs. It applies to legal
obligations associated with the retirement of long-lived assets that result from
the acquisition, construction, development and/or the normal operation of a
long-lived asset, except for certain obligations of lessees. This statement
amends FASB Statement No. 19 and is effective for financial statements issued
for fiscal years beginning after June 15, 2002. We do not anticipate that the
adoption of this statement will have a material impact on our operations or
financial position.


     In August 2001, the FASB issued SFAS No. 144, "Accounting for the
Impairment or Disposal of Long-Lived Assets". This statement supersedes FASB
Statement No. 121, "Accounting for the Impairment of Long-Lived Assets and for
Long-Lived Assets to Be Disposed of", and the accounting and reporting
provisions of APB Opinion No. 30, "Reporting the Results of
Operations--Reporting the Effects of Disposal of a Segment of a Business, and
Extraordinary, Unusual and Infrequently Occurring Events and Transactions". This
statement requires that one accounting model be used for long-lived assets to be
disposed of by sale, whether previously held and used or newly acquired, and it
broadens the presentation of discontinued operations to include more disposal
transactions. The provisions of this statement are effective for financial
statements issued for fiscal years beginning after December 15, 2001, and
interim periods within those fiscal years, with early adoption permitted. We do
not anticipate that the adoption of this statement will have a material impact
on our operations or financial position.



     In November 2001, the Emerging Issues Task Force concluded its discussions
on EITF Issue 01-9 "Accounting for Consideration Given by a Vendor to a Customer
(Including a Reseller of the Vendor's Products)". This guidance requires that an
entity account for consideration given to a customer as a reduction of revenue
unless it can demonstrate an identifiable benefit that can be sufficiently
separable from the sale of the products or services to the customer, and can
reasonably estimate the fair value of the benefit identified. Switchboard is
required to adopt EITF Issue 01-9 effective January 1, 2002. In accordance with
EITF 01-9, Switchboard will offset the amortization of consideration given to
AOL against revenue. Had Switchboard adopted EITF 01-9 in 2001, Switchboard
revenues would have been reduced by approximately $4.1 million.


FACTORS AFFECTING FUTURE OPERATING RESULTS


     Certain of the information contained in this Amendment No. 1 to Annual
Report on Form 10-K/A, including, without limitation, information with respect
to our plans and strategy for our business, statements relating to the
sufficiency of cash and cash equivalent balances, anticipated expenditures, the
anticipated effects of our cost reduction measures including the discontinuation
of our operations in Europe and Australia, and our sales and marketing and
product development efforts, consists of forward-looking statements. Any
statements contained herein that are not statements of historical fact may be
deemed to be forward-looking statements. Without limiting the foregoing, the
words "believes," "expects," "anticipates," "plans," and similar expressions are
intended to identify forward-looking statements. Important factors that could
cause actual results to differ materially from the forward-looking statements
include the following factors:


     The recent stock market decline and broad economic slowdown has affected
the demand for services, lengthened the sales cycles and caused decreased
technology spending for many of our customers and potential customers. If
companies continue to

                                       19

<PAGE>

cancel or delay their business and technology consulting initiatives because of
the current economic climate, or for other reasons, our business, financial
condition and results of operations could be materially adversely affected.

     During the first quarter of 2002 and in 2001, we restructured our
operations through workforce reductions and office closures. Such restructurings
could have an adverse effect on our business, including on our ability to
attract and retain customers and employees, and there can be no assurance that
we will achieve the anticipated financial benefits of these restructurings. In
addition, there can be no assurance that our workforce reductions will not have
a material adverse effect on our business and operating results in the future.

     Our future success will depend in part upon our ability to continue to grow
our services business, enter into new strategic alliances, acquire additional
services customers and adapt to changing technologies and customer requirements.
Any failure to do so could have a material adverse effect on us. We have a
limited operating history as a services company. In addition, the market for our
consulting services and the technologies used in our solutions have been
changing rapidly and we expect this level of change to continue. If we cannot
keep pace with these changes in our marketplace, our business, financial
condition and results of operations will suffer. There can be no assurance we
will be successful in our strategic focus on services, including e-services.

     We sell our services principally through a direct sales force to customers
in a broad range of industries. We do not require collateral or other security
to support customer receivables. Conditions affecting any of our clients could
cause them to become unable or unwilling to pay us in a timely manner, or at
all, for services we have already performed. Our financial results and condition
could be adversely affected by credit losses.

     We entered into a number of partnerships and alliances with software
vendors under which we provide services around such vendors' products. Any
failure of these alliances to generate the anticipated level of sales, the loss
of one or more of these alliances, or the failure to enter into additional
strategic alliances, could have a material adverse effect on us.

     We are dependent upon the continued services of our key management and
technical personnel. In addition, as a services company, our business is
particularly dependent on our employees. Competition for qualified personnel is
strong, and there can be no assurance we will be able to attract and retain
qualified management and other employees.

     In 2001, we determined that the goodwill recorded in connection with two
prior acquisitions was impaired and recorded a charge. There can be no assurance
that we will not experience similar impairment losses in the future. Any such
loss could adversely and materially impact our results of operations and
financial condition.

     In 2001 we terminated operations in Australia and The Netherlands and
during the first quarter of 2002 elected to close our operations in the United
Kingdom and Germany. There can be no assurance that the termination of our
international operations will positively affect our operating results.

     We were not profitable during 2001, and there can be no assurance we will
return to profitability in 2002 or in any future period. Continued losses could
have a material adverse effect on our liquidity and capital resources.

     Our operating expenses are largely based on anticipated revenue trends, and
a high percentage of our expenses, such as personnel and rent, are and will
continue to be fixed in the short-term. We may not be able to quickly reduce
spending if our revenues are lower than we had projected. As a result, an
unanticipated decrease in the number, or an unanticipated slowdown in the
scheduling, of our projects may cause significant variations in operating
results in any particular quarter and could have a material adverse effect on
operations for that quarter. If we do not achieve our expected revenues, our
operating results will be below our expectations and the expectations of
investors and market analysts, which could cause the price of our common stock
to decline. Our quarterly operating results have varied significantly in the
past and will likely vary significantly in the future, making it difficult to
predict future performance. These variations result from a number of factors,
many of which are outside of our control. Because of this difficulty in
predicting future performance, our operating results will likely fall below the
expectations of securities analysts or investors in some future quarter or
quarters. Our failure to meet these expectations would likely adversely affect
the market price of our common stock.

     The market for our products is highly fragmented and characterized by
continuing technological developments, evolving and competing industry
standards, and changing customer requirements. We expect competition to persist
and intensify in the future. Some of our competitors have longer operating
histories and significantly greater financial, technical, marketing and other
resources than we do. Many of these companies can also leverage extensive
customer bases, have broad customer relationships and have broad industry
alliances, including relationships with certain of our current and potential
customers. In addition, certain competitors may adopt aggressive pricing
policies or may introduce new services. Competitive pressures may make it
difficult for us to acquire and retain customers and could require us to reduce
the price of our services. We cannot be certain that we will be


                                       20

<PAGE>

able to compete successfully with existing or new competitors. Our failure to
maintain and enhance our competitive position would limit our ability to retain
and increase our market share, resulting in serious harm to our business and
operating results.

     Our future success depends on the increased acceptance and use of advanced
technologies as a means for conducting commerce and operations. If use of these
advanced technologies does not continue to grow, or grows more slowly than
expected, our revenue growth could slow or decline and our business, financial
condition and results of operations could be materially adversely affected.
Businesses may delay adoption of advanced technologies for a number of reasons,
including:

     o    inability to implement and sustain profitable business models using
          advanced technologies;

     o    inadequate network infrastructure or bandwidth;

     o    delays in the development or adoption of new technical standards and
          protocols required to handle increased levels of usage;

     o    delays in the development of security and authentication technology
          necessary to effect secure transmission of confidential information;
          and

     o    failure of companies to meet their customers' expectations in
          delivering goods and services using advanced technologies.

     Our services rely upon third-party technologies. Our business could be
harmed if providers of such software and technology utilized in connection with
our services ceased to deliver and support reliable products, enhance their
current products in a timely fashion or respond to emerging industry standards.
In addition, if we or our customers cannot maintain licenses to key third-party
software, provision of our services could be delayed until equivalent software
could be licensed and integrated into our services, or we might be forced to
limit our service offerings. Either alternative could materially adversely
affect our business, operating results and financial condition.

     Some of our contracts can be canceled by the customer with limited advance
notice and without significant penalty. Termination by any customer of a
contract for our services could result in a loss of expected revenues and
additional expenses for staff which were allocated to that customer's project.
We could be required to maintain underutilized employees who were assigned to
the terminated contract. The unexpected cancellation or significant reduction in
the scope of any of our large projects could have a material adverse effect on
our business, financial condition and results of operations.

     A significant portion of our projects are based on fixed-price,
fixed-timeframe contracts, rather than contracts in which payment to us is
determined on a time and materials basis. Our failure to accurately estimate the
resources required for a project, or our failure to complete our contractual
obligations in a manner consistent with the project plan upon which our
fixed-price, fixed-timeframe contract was based, could adversely affect our
overall profitability and could have a material adverse effect on our business,
financial condition and results of operations. We have been required to commit
unanticipated additional resources to complete projects in the past, which has
resulted in losses on those contracts. We will likely experience similar
situations in the future and the consequences could be more severe than in the
past, due to the increased size and complexity of our engagements. In addition,
we may fix the price for some projects at an early stage of the process, which
could result in a fixed price that turns out to be too low and, therefore, would
adversely affect our business, financial condition and results of operations.

     Because our proposed credit facility with Silicon Valley Bank is subject to
final documentation, there can be no assurance such facility will be made
available to us.

     We own 9,802,421 shares of Switchboard's common stock, which is traded on
the Nasdaq National Market. The trading price of Switchboard's common stock is
likely to be volatile and may be influenced by many factors, including, without
limitation, variations in financial results, changes in earnings estimates by
industry research analysts, the failure or success of branding and strategic
initiatives and investors' perceptions. Volatility in the trading price of
Switchboard's common stock could have a material adverse effect on our financial
condition. In addition, due to our level of ownership of Switchboard, the
trading price of our common stock is likely to be influenced by the trading
price of Switchboard's common stock. If Switchboard's trading price declines,
the trading price of our common stock will likely decline as well.

     Switchboard's results of operations are consolidated as part of our results
of operations. Switchboard, which has a history of incurring net losses, expects
its net losses to continue partially through 2002 and may never achieve
profitability. In addition, Switchboard's quarterly results of operations have
fluctuated significantly in the past and are likely to fluctuate significantly
from quarter to quarter in the future. Factors that may cause Switchboard's
results of operations to fluctuate include:

     o    the success of Switchboard's relationship with AOL;

     o    the addition or loss of relationships with third parties that are
          Switchboard's source of new merchants for its local merchant network
          or that license Switchboard's services for use on their own web sites;

     o    Switchboard's ability to attract and retain consumers, local merchants
          and national advertisers to its web site;


                                       21

<PAGE>

     o    the amount and timing of expenditures for expansion of Switchboard's
          operations, including the hiring of new employees, capital
          expenditures and related costs;

     o    technical difficulties or failures affecting Switchboard's systems or
          the Internet in general;

     o    the cost of acquiring, and the availability of, content, including
          directory information and maps;

     o    Switchboard's expenses, which are largely fixed, particularly in the
          short-term, are partially based on expectations regarding future
          revenue; and

     o    Switchboard's ability to attract and retain highly skilled managerial
          and technical personnel.

     In addition, Switchboard has only a limited operating history and until
March 2000 had no operating history as a stand-alone company and no experience
in addressing various business challenges without the support of a corporate
parent. It may not be successful as a stand-alone company.

     William P. Ferry, our Chairman of the Board, President and Chief Executive
Officer, is Switchboard's Chairman of the Board, and Richard M. Spaulding, our
Senior Vice President and Chief Financial Officer, and Robert M. Wadsworth, one
of our directors, are directors of Switchboard. Serving as a director of
Switchboard and as either a director or an officer of ePresence could create, or
appear to create, potential conflicts of interest when those directors and
officers are faced with decisions that could have different implications for us
than for Switchboard. Such conflicts, or potential conflicts, of interest could
hinder or delay our management's ability to make timely decisions regarding
significant matters relating to our business.

     Because of the foregoing factors and the other factors we have disclosed
from time to time, we believe that period-to-period comparisons of our financial
results are not necessarily meaningful and you should not rely upon these
comparisons as indicators of our future performance. We expect that our results
of operations may fluctuate from period-to-period in the future.

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Marketable Securites

     Marketable Securities and Interest Rates

     We are exposed to financial market risks, including changes in interest
rates. Our marketable securities as of December 31, 2001, are invested in US
agencies, bonds and notes and repurchase agreements. The majority of our
investments have maturities between one and five years. A significant portion of
our cash is invested in short-term interest-bearing securities. While we have in
the past used hedging contracts to manage exposure to changes in the value of
marketable securities, we are not currently a party to any such contract. We may
use hedging contracts in the future. The fair value of our investment portfolio
or related income would not be significantly impacted by either a 100 basis
point increase or decrease in interest rates due mainly to the short-term nature
of our investment portfolio.

     All the potential changes noted above are based on sensitivity analysis
performed on our balances as of December 31, 2001.

Foreign Currency

     Most of the Company's international revenues are denominated in foreign
currencies. The Company's exposure is mitigated, in part, by the fact that it
incurs certain operating costs in the same foreign currencies in which revenues
are denominated. The Company does not currently use foreign currency hedging
contracts to manage exposure to foreign currency fluctuations. To date, foreign
currency exchange rate fluctuations have not had a material effect on the
Company's operating results or financial condition.


                                       22

<PAGE>

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

                   Index to Consolidated Financial Statements


Report of Independent Public Auditors for 2001                     24

Report of Independent Accountants for 2000 and 1999                25

Consolidated Balance Sheets as of December 31, 2001 and 2000       26

Consolidated Statements of Operations for the Years Ended
    December 31, 2001, 2000 and 1999                               27

Consolidated Statements of Shareholders' Equity for the Years
    Ended December 31, 2001, 2000 and 1999                         28

Consolidated Statements of Cash Flows for the Years Ended
    December 31, 2001, 2000 and 1999                               29

Notes to Consolidated Financial Statements                         30



                                       23

<PAGE>

                         REPORT OF INDEPENDENT AUDITORS


The Board of Directors and
Shareholders of ePresence, Inc.

We have audited the accompanying consolidated balance sheet of ePresence, Inc.
as of December 31, 2001 and the related consolidated statements of operations,
shareholders' equity, and cash flows for the year then ended. Our audit also
included the financial statement schedule listed in the Index at Item 14. These
financial statements and schedule are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements and schedule based on our audit.

We conducted our audit in accordance with auditing standards generally accepted
in the United States. 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 audit provides a reasonable basis for our
opinion.

In our opinion, the financial statements referred to above present fairly, in
all material respects, the consolidated financial position of ePresence, Inc. at
December 31, 2001 and the consolidated results of its operations and its cash
flows for the year then ended, in conformity with accounting principles
generally accepted in the United States. Also, in our opinion, the related
financial statement schedule, when considered in relation to the basic financial
statements taken as a whole, present fairly in all material respects the
information set forth therein.

As discussed in Note 2 of the Consolidated Financial Statements, in 2001 the
Company adopted SFAS No. 133 "Accounting for Derivative Instruments and Hedging
Activities."

/s/ Ernst & Young LLP

Boston, Massachusetts
August 30, 2002


                                       24

<PAGE>

                        REPORT OF INDEPENDENT ACCOUNTANTS


To the Board of Directors and Shareholders of ePresence, Inc.:


    In our opinion, the consolidated balance sheet as of December 31, 2000 and
the related consolidated statements of operations, shareholders' equity and cash
flows for each of the two years in the period ended December 31, 2000 (appearing
on pages 26 through 29 of this Form 10-K/A) present fairly, in all material
respects, the financial position, results of operations and cash flows of
ePresence, Inc. and its subsidiaries at December 31, 2000 and for each of the
two years in the period ended December 31, 2000, in conformity with accounting
principles generally accepted in the United States of America. These financial
statements are the responsibility of the Company's management; our
responsibility is to express an opinion on these financial statements based on
our audits. We conducted our audits of these statements in accordance with
auditing standards generally accepted in the United States of America, which
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, assessing the accounting principles
used and significant estimates made by management, and evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.


/s/ PricewaterhouseCoopers LLP

PricewaterhouseCoopers LLP
Boston, Massachusetts
February 1, 2001



                                       25

<PAGE>
                                 EPRESENCE, INC.
                           CONSOLIDATED BALANCE SHEETS
                           December 31, 2001 AND 2000
                  (in thousands, except share and par amounts)


<TABLE>
<CAPTION>
                                                      December 31,  December 31,
                                                         2001          2000
                                                       -----------  ------------
                                                      (Restated)
<S>                                                   <C>           <C>
 ASSETS
 Current assets:
     Cash and cash equivalents                          $ 33,022       $ 39,726
     Marketable securities                                47,817         79,953
     Accounts receivable, less allowances of
       $1,973 and $1,278, respectively                    11,216         18,439
       Prepaid Asset - Directory Agreement,
         current portion                                       -          6,500
     Other current assets                                  6,658          9,089
                                                        --------       --------
            Total current assets                          98,713        153,707

 Marketable securities                                    40,362         32,504
 Property and equipment, net                               6,139          5,636
 Goodwill, net of accumulated amortization of
   $4,885 and $2,263, respectively                        14,780         29,330
 Prepaid Asset - Directory Agreement                           -          6,133
 Other assets, net of accumulated amortization
   of $3,183 and $876, respectively                        2,957          3,855
                                                        --------       --------
 TOTAL ASSETS                                           $162,951       $231,165
                                                        ========       ========
 LIABILITIES
 Current liabilities:
     Accounts payable                                   $  7,304       $  4,561
     Accrued expenses                                     11,609         12,509
     Other current liabilities                               757            737
     Deferred revenue                                      4,983          4,723
     Current portion of long-term debt                     2,357            204
                                                        --------       --------
            Total current liabilities                     27,010         22,734

 Long-term debt, net of current portion                      518          2,000
 Deferred tax liability                                        -            682
 Minority interests in consolidated subsidiaries          26,237         56,070
 Commitments and contingencies (Note 13)

 SHAREHOLDERS' EQUITY
 Convertible preferred stock, $.01 par value;
   authorized - 1,000,000 shares; none issued                  -              -
 Common stock, $.01 par value; authorized -
   100,000,000 shares; issued 26,316,039 and
   26,063,646 shares, respectively                           263            261
 Additional paid-in capital                              173,140        144,725
 Unearned compensation                                    (1,654)        (2,743)
 Accumulated (deficit)/earnings                          (28,712)        11,619
 Accumulated other comprehensive income                    1,019         24,547
 Treasury stock at cost; 3,393,300 and 1,893,000
   shares, respectively                                  (34,870)       (28,730)
                                                        --------       --------
         Total shareholders' equity                      109,186        149,679
                                                        --------       --------
 TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY             $162,951       $231,165
                                                        ========       ========
</TABLE>


The accompanying notes are an integral part of the consolidated financial
statements.

                                       26

<PAGE>

                                 EPRESENCE, INC.
                      CONSOLIDATED STATEMENTS OF OPERATIONS
              For The Years Ended December 31, 2001, 2000 And 1999
               (In Thousands, Except Share And Per Share Amounts)


<TABLE>
<CAPTION>
                                                                                Year Ended December 31,
                                                                         2001            2000          1999
                                                                        ------          ------         -----
                                                                      (Restated)
<S>                                                                    <C>             <C>            <C>
Revenues:
    Services                                                           $ 51,711        $ 61,300       $ 37,494
    Switchboard                                                          13,326          20,310          8,304
                                                                       --------        --------       --------
       Total revenues                                                    65,037          81,610         45,798
                                                                       --------        --------       --------
Cost of Revenues:
    Services                                                             35,777          33,857         22,714
    Switchboard                                                           3,518           3,491          1,601
                                                                       --------        --------       --------
       Total cost of revenues                                            39,295          37,348         24,315
                                                                       --------        --------       --------
Gross profit                                                             25,742          44,262         21,483
                                                                       --------        --------       --------
Operating Expenses:
     Sales and marketing                                                 42,312          49,409         21,784
     Product development                                                  6,702           3,473          1,923
     General and administrative                                          19,192          17,851         13,650
     Amortization of goodwill, intangibles and other assets               7,435           3,785            866
     Impairment of goodwill                                              12,364               -              -
     Restructuring and special charges                                   21,277               -              -
     Loss on Viacom transaction                                          22,203               -              -
                                                                       --------        --------       --------
        Total operating expenses                                        131,485          74,518         38,223
                                                                       --------        --------       --------
Loss from continuing operations                                        (105,743)        (30,256)       (16,740)

Other Income/(Expense):
    Interest income                                                       6,513           7,624          1,345
    Minority interest in losses of Switchboard                           35,048           9,861          3,513
    Interest expense                                                        (90)            (61)          (100)
    Gain on sale of Openwave, net                                        33,378          44,556         16,586
    Other expenses, net                                                  (1,857)         (2,055)          (672)
                                                                       --------        --------       --------
       Total other income                                                72,992          59,925         20,672

Net (loss)/income from continuing operations before
    income taxes and cumulative effect of accounting change             (32,751)         29,669          3,932
Provision for/(benefit from) income taxes                                11,025          14,614        (22,292)
                                                                       --------        --------       --------
Net (loss)/income from continuing operations before cumulative
    effect of accounting change                                         (43,776)         15,055         26,224
Discontinued operations:
    Income from discontinued operations (net of taxes of $3,283)              -               -          4,925
    Loss from disposal of discontinued operations
       (net of tax benefit of $2,000)                                         -               -         (3,000)
                                                                       --------        --------       --------
Net (loss)/income before cumulative effect of accounting change         (43,776)         15,055         28,149
                                                                       --------        --------       --------
    Cumulative effect of accounting change, net of tax of $1,855          3,445               -              -
                                                                       --------        --------       --------
Net (loss)/income                                                      $(40,331)       $ 15,055       $ 28,149
                                                                       ========        ========       ========
Net (loss)/income per share:
    Basic
       Continuing operations                                           $  (1.76)       $   0.64       $   1.24
                                                                       ========        ========       ========
       Net (loss)/income                                               $  (1.76)       $   0.64       $   1.33
                                                                       ========        ========       ========
    Diluted
       Continuing operations                                           $  (1.76)       $   0.56       $   1.03
                                                                       ========        ========       ========
       Net (loss)/income                                               $  (1.76)       $   0.56       $   1.11
                                                                       ========        ========       ========
Weighted average number of common shares:
    Basic                                                                22,976          23,695         21,155
                                                                       ========        ========       ========
    Diluted                                                              22,976          26,727         25,449
                                                                       ========        ========       ========
</TABLE>


The accompanying notes are an integral part of the consolidated financial
statements.


                                       27

<PAGE>


                                 EPRESENCE, INC.
                 CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
              For The Years Ended December 31, 2001, 2000 And 1999
                      (In Thousands, Except Share Amounts)

<TABLE>
<CAPTION>
                                Conver-                        Addi-                 Accumu-                                 Total
                                tible             Common    tional    Unearned      lated          Other       Treasury      Share-
                              Preferred            Stock    Paid-in    Compen-    Earnings/    Comprehensive    Stock       holders'
                      Shares    Stock    Shares     Par     Capital    sation     (Deficit)  Income    Shares    Cost       Equity
                      ------    -----    -------    ---     -------   --------    --------   ------    ------    ----       -------
<S>                   <C>      <C>       <C>       <C>     <C>         <C>         <C>        <C>      <C>       <C>        <C>

Balance,
   December 31,
   1998               263,158     $3   20,728,281  $ 208   $ 79,485   $(1,326)    $(31,585)  $  178 (1,848,000) $(28,564)   $18,399

Net income                                                                          28,149                                    28,149
Foreign currency
   translation
   adjustment                                                                                   (61)                            (61)
Change in net
   unrealized gain
   on investments,
   net of tax                                                                                53,957                          53,957
                                                                                             ------                         -------
Comprehensive income                                                                28,149   53,896                          82,045
                                                                                  --------   ------                         -------
Common stock issued
   under stock and
   option plans                         1,333,108     13      3,736                                                           3,749
Exercise of warrants
   for shares of
   common stock                            90,701      1         (1)
Conversion of
   preferred stock
   to shares of
   common stock      (263,158)    (3)   2,631,580     26        (23)                                                              -
Unearned
   compensation                                                 277      (277)                                                    -
Amortization of
   unearned
   compensation                                                         1,000                                                 1,000
Issuance of warrants                                          4,503                                                           4,503
Issuance of
   subsidiary common
   stock and
   warrants, net of
   minority interests                                         3,474                                                           3,474
Non-cash advertising
   and promotion
   expenses, net of
   minority interests                                         2,197                                                           2,197
                                                            -------                                                         -------
Balance,
   December 31,
   1999                     -      -   24,783,670    248     93,648      (603)      (3,436)  54,074 (1,848,000)  (28,564)   115,367

Net income                                                                          15,055                                   15,055
Foreign currency
   translation
   adjustment                                                                                  (240)                           (240)
Change in net
   unrealized loss
   on investments                                                                           (29,287)                        (29,287)
                                                                                             ------                         -------
Comprehensive loss                                                                  15,055  (29,527)                        (14,472)
                                                                                  --------   ------                         -------
Common stock issued
   under stock and
   option plans                         1,279,976     13      8,891                                                           8,904
Repurchase of shares                                                                                   (45,000)     (166)      (166)
Unearned
   compensation                                               2,927    (3,015)                                                  (88)
Amortization of
   unearned
   compensation                                                 (5)       875                                                   870
Net change in
   subsidiary
   capital net of
   minority interest                                         39,264                                                          39,264
                                                            -------                                                         -------
Balance,
   December 31,
   2000                    -        -  26,063,646    261    144,725    (2,743)      11,619   24,547 (1,893,000)  (28,730)   149,679

Net loss                                                                           (40,331)                                 (40,331)
Foreign currency
   translation
   adjustment                                                                                  (151)                           (151)
Change in net
   unrealized loss
   on investments                                                                           (23,377)                        (23,377)
                                                                                             ------                      -  -------
Comprehensive loss                                                                (40,331)  (23,528)                        (63,859)
                                                                                 ---------   ------                         -------
Common stock issued
   under stock and
   option plans                           156,223      2        557                                                             559
Issuance of common
   stock in
   connection with
   acquisition                             96,170               576                                                             576
Repurchase of shares                                                                                (1,500,300)   (6,140)    (6,140)
Unearned
   compensation                                                  25       (25)                                                    -
Amortization of
   unearned
   compensation                                                         1,448                                                 1,448
Net change in
   subsidiary
   capital, net of
   minority interest                                         27,257      (334)                                               26,923
                                                            -------    ------                                               -------
Balance,
   December 31,
   2001 (Restated)         -      $ -  26,316,039  $ 263   $173,140   $(1,654)   $(28,712)   $1,019 (3,393,300) $(34,870)  $109,186
                      ======      ===  ==========  =====   ========   =======    ========    ======  =========  ========   ========
</TABLE>

The accompanying notes are an integral part of the consolidated financial
statements.


                                       28

<PAGE>
                                 EPRESENCE, INC.
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
              For The Years Ended December 31, 2001, 2000 And 1999
                                 (In Thousands)


<TABLE>
<CAPTION>
                                                                                             Year Ended December 31,
                                                                                      ---------------------------------------
                                                                                      2001             2000              1999
                                                                                      ----             ----              ----
                                                                                   (Restated)
<S>                                                                                <C>               <C>              <C>
 Cash Flows from Operating Activities:
 Net (loss)/income                                                                 $(40,331)         $ 15,055         $ 28,149
 Adjustments to reconcile net income to net cash (used in)/provided by
   operating activities:
          Gain on sale of investments                                               (33,378)          (44,556)         (16,586)
          Cumulative effect of accounting change                                     (5,300)                -                -
          Other-than-temporary unrealized loss on available for sale investments         55               714                -
          Depreciation and amortization                                               7,410             5,418            2,343
          Minority interest                                                         (35,048)           (9,861)          (3,684)
          Loss on disposal of assets                                                  1,407               325                -
          Loss on sale of subsidiary                                                    784                 -                -
          Discontinued operations, non-cash portion                                       -                 -              600
          Restructuring and special charges, non-cash portion                        19,388                 -                -
          Impairment of goodwill                                                     12,364                 -                -
          Amortization of unearned compensation                                       1,550               870            1,000
          Non-cash advertising and promotion                                          9,680            11,610            4,069
          Loss on Viacom transaction                                                 22,203                 -                -
          Deferred income taxes                                                        (682)           (4,005)           8,695
          Changes in operating assets and liabilities:
                   Accounts receivable                                                6,689            (2,570)            (804)
                   Income tax receivable                                             (1,228)                -                -
                   Net discontinued liabilities                                        (599)           (3,634)           2,071
                   Other current assets                                              (2,199)           (4,909)             212
                   Other non-current assets                                           4,109            (5,498)             481
                   Prepaid royalties                                                      -            (6,500)               -
                   Accounts payable and accrued compensation and expenses            (2,225)           (2,695)             846
                   Accrued costs for restructuring charges                            1,410                 -                -
                   Other current liabilities                                              -              (250)            (437)
                   Deferred revenue                                                     314              (850)          (1,429)
                                                                                   --------          --------         --------
 Net cash (used in)/provided by operating activities                                (33,627)          (51,336)          25,526

 Cash Flows from Investing Activities:
          Capital expenditures                                                       (4,810)           (4,303)          (2,218)
          Proceeds from sales of investment                                          39,266            45,278           17,286
          Acquisition of goodwill                                                    (2,144)          (27,142)               -
          Restricted cash                                                              (874)                -                -
          Proceeds from/(purchases of) marketable securities, net                       257           (42,328)         (38,265)
                                                                                   --------          --------         --------
 Net cash provided by/(used in) investing activities                                 31,695           (28,495)         (23,197)

 Cash Flows from Financing Activities:
          Sale of equity in subsidiary, net                                             150            86,842            4,298
          Net proceeds from sales lease-back                                            875                 -                -
          Purchase of treasury stock                                                 (6,140)             (166)               -
          Proceeds from stock plan purchases, stock options and warrants                557             2,894            8,326
                                                                                   --------          --------         --------
 Net cash (used in)/provided by financing activities                                 (4,558)           89,570           12,624

 Effect of exchange rate changes on cash and cash equivalents                          (214)               67             (193)
                                                                                   --------          --------         --------
 Net (decrease)/increase in cash and cash equivalents                                (6,704)            9,806           14,760
 Cash and cash equivalents at beginning of the year                                  39,726            29,920           15,160
                                                                                   --------          --------         --------
 Cash and cash equivalents at end of the year                                      $ 33,022          $ 39,726         $ 29,920
                                                                                   ========          ========         ========
 Supplemental Disclosures of Cash Flow Information:
          Cash paid during the year for:
                   Interest                                                        $     90          $     61         $    147
                   Income taxes                                                    $  2,059          $  1,870         $    301
           Non-cash financing activity:
                   Corporate insurance financing                                   $      -          $      -         $  1,029
                   Issuance of common stock related to Redbank acquisition         $    576          $      -         $      -
</TABLE>


 The accompanying notes are an integral part of the consolidated financial
statements.

                                       29

<PAGE>

                                 EPRESENCE, INC.

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1. NATURE OF BUSINESS

     ePresence, Inc., ("the Company"), has two reportable segments: services and
Switchboard. The Company's reportable segments are managed separately as they
are separately traded public companies, and market and distribute distinct
products and services. The Company's services segment delivers professional
services including enterprise directory and security services, information
technology platform services, electronic provisioning services, next generation
portal services and operations management services. The Company's Switchboard
segment is organized as a subsidiary, Switchboard Incorporated ("Switchboard").
Switchboard is a provider of web-hosted directory technologies and customized
yellow pages platforms to yellow pages publishers, newspaper publishers and
Internet portals that offer online local directory advertising solutions to
national retailers and brick and mortar merchants across a full range of
Internet and wireless platforms. Switchboard offers a broad range of functions,
content and services, including yellow and white pages, product searching,
location-based searching and interactive maps and driving directions.
Historically, Switchboard's results have been consolidated with the Company's
financial results, due to either the Company's majority ownership of Switchboard
or its control of the Switchboard Board of Directors as a result of a Voting
Rights Agreement by and among the Company, Switchboard and Viacom. However, in
January 2001, as a result of the termination of this Voting Rights Agreement and
the Company's ownership then being 38%, the Company ceased to consolidate
Switchboard's results with its financial results, for the first three quarters
of 2001. In connection with the Viacom transaction discussed in Note 25 in the
Company's Notes to Consolidated Financial Statements, the Company became owner
of approximately 54% of Switchboard's outstanding stock in October 2001. This
change in ownership percentage resulted in the Company consolidating
Switchboard's revenues, expenses and other income and expense in the Company's
consolidated statement of operations while the minority interest in Switchboard
is eliminated through consolidated other income and expense. The Company has
retroactively consolidated Switchboard's results from operations beginning on
January 1, 2001 in order for the consolidated results of operations to be
presented consistently with the results of operations of 2000 and 1999. In
addition, Switchboard's assets and liabilities are consolidated in the Company's
consolidated balance sheet as of December 31, 2001. At December 31, 2001, the
Company owned 9,802,421 shares of Switchboard or an approximate 54% interest.

     In 1999, the Company announced the discontinuation of its software
business.

NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of Presentation

     The consolidated financial statements comprise those of the Company and its
subsidiaries. Intercompany accounts and transactions have been eliminated.
Certain previously reported amounts have been reclassified to conform to the
current method of presentation.

Use of Estimates

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

Cash Equivalents and Marketable Securities

     The Company considers all highly liquid investments with original
maturities of three months or less to be cash equivalents. Those instruments
with original maturities between three and twelve months are considered to be
short-term marketable securities, and investments with maturities of greater
than one year are classified as long-term marketable securities. Cash
equivalents and marketable securities are carried at market, and consist
primarily of U.S. government securities, corporate and municipal issues, and
interest bearing deposits with major banks.

     In accordance with Statement of Financial Accounting Standards ("SFAS")
No. 115, the Company classifies all of its marketable debt and equity securities
as available for sale securities. These securities are valued at their fair
value. Unrealized holding gains and losses are reported as a net amount in
accumulated other comprehensive income, a separate component of shareholders'
equity.

Property and Equipment

    Property and equipment are stated at cost. Depreciation is computed using
the straight-line method over the following estimated asset lives:

Computers and peripherals                          3 years
Equipment                                          3-5 years
Furniture and fixtures                             5 years

                                       30

<PAGE>

     Maintenance and repairs are charged to expense when incurred, while
betterments are capitalized. Leasehold improvements are amortized over the
lesser of the lease term or the life of the asset. When property is retired or
otherwise disposed of, the related cost and accumulated depreciation are removed
from the respective amounts and any gain or loss is reflected in operations.

Revenue Recognition

     The Company recognizes services revenues pursuant to time and material
contracts generally as services are provided. Services revenues pursuant to
fixed-fee contracts are generally recognized as services are rendered on the
percentage-of-completion method of accounting (based on the ratio of costs
incurred to total estimated costs) with revisions to estimates reflected in the
period which changes become known. Service revenues include customer
reimbursements for out-of-pocket expenses.

     Switchboard generates its revenue primarily from merchant network and
banner and site sponsorship advertising. Generally, revenue is recognized as
services are provided, so long as no significant obligations remain and
collection of the resulting receivable is probable. Switchboard believes that
they are able to make reliable judgments regarding the creditworthiness of their
customers based upon historical and current information available to them. There
can be no assurances that Switchboard's payment experience with its customers
will be consistent with past experience or that the financial condition of these
customers will not decline in future periods, the result of which could be
Switchboard's failure to collect on invoiced amounts. Some of these amounts
could be material, resulting in an increase in Switchboard's provision for bad
debts.

     Switchboard revenues earned under the merchant network consist of
advertising and platform services. Through Switchboard's merchant network,
Switchboard offers certain merchant alliance partners the ability to sell
Switchboard.com distribution to their merchant advertisers. These efforts are
reflected in Switchboard's merchant network advertising revenues. For these
advertising services, the merchant network alliance partners pay Switchboard a
monthly fee based on the number of advertisements placed into Switchboard.com.
This monthly fee is recognized as revenue by Switchboard as it is earned.
Platform services relate to the Switchboard's offerings to their merchant
network alliance partners, under which those alliance partners can enter into a
development and licensing arrangement with Switchboard whereby they create
and/or modify a private labeled web-hosted directory platform. Once the
web-hosted directory platform is operational, Switchboard also earns additional
fees based on the number of merchants promoted within the platform. Revenue
received by Switchboard for such development and licensing arrangements is
deferred until such time the platform is accepted by the customer. After
acceptance by the customer, revenue from such development and licensing
agreements are recognized ratably over the life of the agreement. Any additional
engineering or other services fees earned through the merchant promotions are
recognized as earned due to their variable nature.

     Revenues earned under Switchboard's banner and site sponsorships consist
principally of advertising revenue earned though the Switchboard.com web site.
Specifically, Switchboard offers both site-wide banner and category specific
banner programs on the Switchboard.com Web site.

     Deferred revenue is principally comprised of billings in excess of
recognized revenue relating to consulting engagements, advertising agreements
and licensing fees received in advance of revenue recognition.

Foreign Currency Translation

     The Company's subsidiaries generally use the local currency as the
functional currency; assets and liabilities are translated into U.S. dollars at
the period ended exchange rate, and income and expense amounts are translated
using the average rate prevailing for the period. Adjustments resulting from
translation are included in accumulated other comprehensive income.

Minority Interest

     Minority interest in consolidated subsidiary represents minority
shareholders' proportionate share of the equity in the Company's subsidiary,
Switchboard. At December 31, 2001, the Company owned approximately 54% of
Switchboard's outstanding common stock.

Concentration of Credit Risk and Significant Customers

     SFAS No. 105, "Disclosure of Information About Financial Instruments with
Off Balance Sheet Risk and Financial Instruments with Concentrations of Credit
Risk," requires disclosure of any significant off balance sheet and credit risk
concentrations. Financial instruments that subject the Company to the potential
for credit risk consist primarily of trade accounts receivable. The Company
performs ongoing credit evaluations of its customers' financial condition but
does not require collateral.

                                       31

<PAGE>


Historically, the Company has not experienced significant losses related to its
accounts receivable. One customer accounted for 12% of revenue in 2001. No one
customer accounted for more than ten percent of consolidated revenues in 2000
and 1999. In 2001, the majority of the Company's European revenue was
concentrated in Germany and the United Kingdom. In 2000 and 1999, the majority
of the Company's European revenue was concentrated in Germany, the United
Kingdom and The Netherlands. The majority of the revenue in the other category
is concentrated in Australia for all years presented. At December 31, 2001, two
customers accounted for 42% of consolidated net accounts receivable. At December
31, 2000, no customers accounted for more than 10% of consolidated net accounts
receivable. At December 31, 2001 and 2000, approximately 4% and 13% of
consolidated net accounts receivable represent accounts denominated in foreign
currencies that are translated at year-end exchange rates. For the years ended
December 31, 2001, 2000 and 1999, foreign sales accounted for 10%, 13% and 26%
of total revenues, respectively.


     The Company invests its cash and cash equivalents primarily in deposits and
money market funds with two commercial banks. The Company has not experienced
any losses to date on its invested cash.

     The Company sells its services principally through a direct sales force to
customers in a broad range of industries. The Company performs ongoing credit
evaluations of its customers but does not require collateral or other security
to support customer receivables. The Company maintains reserves for credit
losses, and to date, such losses have been within management's expectations.

Income Taxes

     The Company accounts for income taxes under the liability method. Under
this method, deferred tax assets and liabilities are recognized for the
estimated future tax consequences attributable to differences between the
financial statement carrying amounts of existing assets and liabilities and
their respective tax bases. Deferred tax assets and liabilities are measured
using enacted rates in effect for the year in which those temporary differences
are expected to be recovered or settled. A deferred tax asset is established for
the expected future benefit of net operating loss and credit carryforwards. A
valuation reserve against net deferred tax assets is required if, based upon
available evidence, it is more likely than not that some or all of the deferred
tax assets will not be realized.

Derivative Instruments and Hedging

     In June 1998, the Financial Accounting Standards Board ("FASB") issued SFAS
No. 133, "Accounting for Derivative Instruments and Hedging Activities."
Effective January 1, 2001, the Company adopted SFAS No. 133, as amended. SFAS
No. 133 establishes the accounting and reporting standards for derivative
instruments embedded in other contracts and for hedging activities. All
derivatives are required to be measured at fair value and recognized as either
assets or liabilities in the financial statements. If derivatives do not meet
the criteria for hedge accounting, any gain or loss resulting from changes in
value must be recognized in earnings immediately.

     As discussed in Note 19 on January 1, 2001 the Company was party to two
separate hedging contracts related to its investment in Openwave. Since the
Company did not designate these hedges, the fair market value of these hedges,
$5,300,000 at January 1, 2001, was recorded as an asset and, accordingly, the
Company recorded a cumulative effect in accounting change, net of taxes, of
$3,445,000 (an earnings per share impact of $.15). Upon liquidation of the
Openwave investment these hedges were terminated and were offset against the
gain from the sale of Openwave. These changes had no effect on the consolidated
net income of the Company for the period ending December 31, 2001. Aside from
these hedges, at January 1, 2001 and through December 31, 2001, the Company was
not party to any other derivative instruments.

     Upon liquidation of the Company's Openwave position in January 2001, these
hedges were terminated. The gain on sale of Openwave reported by the Company in
its statement of operations includes the effect of writing off the previously
recorded asset related to these hedges.

Comprehensive Income

     The Company applies the provisions of SFAS No. 130, "Reporting
Comprehensive Income", which establishes standards for reporting and displaying
comprehensive income and its components in the consolidated financial
statements. Comprehensive income is defined as the change in equity of a
business enterprise during a period from transactions and other events and
circumstances from non-owner sources. The Company has disclosed comprehensive
income/(loss) for all periods presented in the accompanying statements of
shareholders' equity.

Advertising Expense

     Advertising costs are expensed as incurred and totaled $15,429,640,
$16,719,299 and $6,114,543 in the years ended December 31, 2001, 2000 and 1999,
respectively. In 2001, 2000 and 1999, the advertising costs included $9,680,382,
$11,824,194 and $4,069,246, respectively, of non-cash advertising received from
Viacom Inc. ("Viacom", formerly CBS, see Note 25).

                                       32

<PAGE>

NOTE 3. RESTATEMENT AND RECLASSIFICATION OF FINANCIAL STATEMENTS

     The Company's previously issued consolidated financial statements for the
year ended December 31, 2001, and the consolidated financial statements for the
quarters ended March 31, 2001, June 30, 2001, September 30, 2001 and December
31, 2001 have been restated. The restatements are described in detail below.

     In the first quarter of 2001, Switchboard sold banner advertising to a
single customer that resulted in $2,700,000 of revenue recognized in 2001. While
seeking to collect payment, additional information about the customer and its
relationship with one of Switchboard's vendors was evaluated by Switchboard.
This information led Switchboard to conclude that it would have been more
appropriate to record the 2001 banner advertising revenue as a reduction of
expense. Accordingly, as part of this Switchboard restatement, Switchboard
reduced 2001 annual revenue by $2,700,000, reduced 2001 annual sales and
marketing expenses by $1,500,000 and reduced the 2001 special charges by
$1,200,000. There was no effect on Switchboard's or the Company's net loss for
the year ended December 31, 2001 related to this issue.

     Contemporaneous with Switchboard's decision to restate its 2001 financial
statements for the banner advertising arrangement, Arthur Andersen LLP, the
Company's and Switchboard's independent auditors for fiscal 2001, advised the
Company and Switchboard that its Boston office had ceased operations and would
be unable to render a report on its and Switchboard's restated 2001 financial
statements. Therefore, Ernst and Young commenced a re-audit of the Company's
2001 consolidated financial statements in August 2002.

     As a result of the re-audit, it was determined that the previously reported
2001 consolidated financial statements should also be restated for the following
Switchboard items: a reduction in operating expenses of $1,100,000; an
impairment charge relating to Switchboard's directory and local advertising
platform agreement entered into with America Online, Inc. ("AOL") in December
2000 ("Directory Agreement") of $11,700,000; a reduction in the 2001 annual
amortization expense related to the Directory Agreement of $3,300,000 and a
reduction in the number of shares of common stock used for computing earnings
per share by 746,260 shares. In addition, Switchboard reclassified $27,900,000
and $10,400,000 in marketable securities at December 31, 2001 and 2000,
respectively, from long-term to short-term, to reflect all marketable securities
with less than one year to maturity as short-term.

     The reduction in Switchboard's operating expenses of $1,100,000 related to
the elimination of excess accrued liabilities that were reflected in the
previously issued December 31, 2001 consolidated financial statements.

     The $11,700,000 impairment charge related to the Directory Agreement was
determined pursuant to SFAS No. 121 "Accounting for the Impairment of Long-Lived
Assets and for Long-Lived Assets to be Disposed of." As a result of lower than
initially anticipated revenues earned by Switchboard under the Directory
Agreement during the first year of this arrangement, an impairment review was
performed on the net book value of the assets related to the Directory
Agreement, which totaled $11,700,000 at December 31, 2001. Revised revenue
projections under the Directory Agreement were developed, and Switchboard
calculated estimated cash flows to be received over the term of the Directory
Agreement. Switchboard determined that the estimated future undiscounted cash
flows were below the carrying value of the assets related to the Directory
Agreement at December 31, 2001. The fair value of the assets related to the
Directory Agreement was then determined by discounting the cash flows at a rate
of 20% which represented a rate commensurate with the risk involved.

     The $3,300,000 reduction in Switchboard amortization expense resulted from
a change in the amortization rate used to amortize the prepaid asset related to
the Directory Agreement as presented on the Company's balance sheet.

     As a result of the re-audit, it was also determined that the previously
reported 2001 consolidated financial statements for the Company should be
restated for a reduction in operating expenses of $632,000 for our services
business related to the elimination of excess accrued liabilities and a
reduction of amortization related to unearned compensation.

     On January 1, 2001, the Company adopted SFAS No. 133, as amended which,
among other things, required derivatives to be measured at fair value and
recognized as either assets or liabilities in the financial statements, as
discussed in Note 2 to the Consolidated Financial Statements. As a result, the
Company recorded a cumulative effect in accounting change, net of taxes, of
$3,400,000. Upon liquidation of the Openwave investment, these hedges were
terminated and were offset against the gain on the sale of Openwave. The
adoption of SFAS 133 had no effect on the consolidated net income of the Company
for the period ending December 31, 2001.

     Because the above-described restatements reflect the timing of certain
revenues and expenses and non-cash transactions, the Company's consolidated
balance sheet was correspondingly adjusted in various categories, including the
asset related to the Directory Agreement, other assets and accrued expenses.
In addition, the accumulated deficit at December 31, 2001 was increased by
$3,490,000 to reflect the cumulative effect of these adjustments. The Company's
capital resources were not impacted by any of these restatements and
reclassifications.

     Following is a summary of changes to selected consolidated financial data
as a result of these restatements for the year ended December 31, 2001:


                                       33

<PAGE>


                                 EPRESENCE, INC.
           SUMMARY OF CHANGES TO SELECTED CONSOLIDATED FINANCIAL DATA
                AS A RESULT OF RESTATEMENTS AND RECLASSIFICATIONS
                    (In Thousands, Except Per Share Amounts)


STATEMENT OF OPERATIONS DATA:


<TABLE>
<CAPTION>
                                                                                               Year Ended December 31, 2001
                                                                                         ---------------------------------------
                                                                                         As Reported     Adjustments    Restated
                                                                                         -----------     -----------    --------
<S>                                                                                      <C>             <C>            <C>
 Revenues:
    Services                                                                              $  51,711       $       -     $  51,711
    Switchboard                                                                              16,026          (2,700)       13,326
                                                                                          ---------       ---------     ---------
                     Total revenues                                                          67,737          (2,700)       65,037
                                                                                          ---------       ---------     ---------

 Cost of Revenues                                                                            39,087             208        39,295
                                                                                          ---------       ---------     ---------

 Gross profit                                                                                28,650          (2,908)       25,742
                                                                                          ---------       ---------     ---------

 Operating Expenses:
    Sales and marketing                                                                      45,048          (2,737)       42,312
    Product development                                                                       6,701               -         6,702
    General and administrative                                                               19,777            (585)       19,192
    Amortization of goodwill, intangibles and other assets                                   10,685          (3,250)        7,435
    Impairment of goodwill                                                                   12,364               -        12,364
    Restructuring and special charges                                                        10,904          10,373        21,277
    Loss on Viacom transaction                                                               22,203               -        22,203
                                                                                          ---------       ---------     ---------
                     Total operating expenses                                               127,682           3,801       131,485
                                                                                          ---------       ---------     ---------

 Loss from operations                                                                       (99,032)         (6,709)     (105,743)

 Other Income/(Expense)                                                                      75,071          (2,081)       72,992


 Net loss from continuing operations before income taxes and cumulative effect
    of accounting change                                                                    (23,961)         (8,790)      (32,751)
 Provision for/(benefit from) income taxes                                                   12,880          (1,855)       11,025
                                                                                          ---------       ---------     ---------
 Net loss before cumulative effect of accounting change                                     (36,841)         (6,935)      (43,776)
    Cumulative effect of accounting change, net of tax of $1,855                                  -           3,445         3,445
                                                                                          ---------       ---------     ---------
 Net loss                                                                                   (36,841)         (3,490)      (40,331)


 Net loss per share: Basic and Diluted                                                    $   (1.60)      $   (0.16)    $   (1.76)
                                                                                          =========       =========     =========

<CAPTION>
BALANCE SHEET DATA:
                                                                                                  As of December 31, 2001
                                                                                         ---------------------------------------
                                                                                         As Reported     Adjustments    Restated
                                                                                         -----------     -----------    --------
<S>                                                                                      <C>             <C>            <C>
 Current Assets                                                                              78,351          20,362        98,713
 Non-Current Assets                                                                          93,140         (28,902)       64,238
 Total Assets                                                                               171,491          (8,540)      162,951
 Accrued Expenses and other current liabilities                                              13,915          (1,549)       12,366
 Minority interests in consolidated subsidiaries                                             29,636          (3,399)       26,237
 Stockholders equity                                                                        112,778          (3,592)      109,186
<CAPTION>
                                                                                                  As of December 31, 2000
                                                                                         ----------------------------------------
                                                                                         As Reported   Adjustments   Reclassified
                                                                                         -----------   -----------   ------------
<S>                                                                                      <C>             <C>            <C>
 Current Assets                                                                             143,327         10,380        153,707
 Non-Current Assets                                                                          87,838        (10,380)        77,458
 Total Assets                                                                               231,165              -        231,165
</TABLE>


                                       34

<PAGE>

NOTE 4. MARKETABLE SECURITIES

     Marketable securities consisted of the following at December 31, 2001 and
2000 (in thousands):


<TABLE>
<CAPTION>
                                                              2001
                                                           (restated)                            2000
                                                   ---------------------------       ---------------------------
                                                   Aggregate         Amortized       Aggregate         Amortized
Security Type                                      Fair Value          Cost          Fair Value          Cost
-------------                                      ----------        ---------       ----------        ---------
<S>                                                 <C>              <C>              <C>              <C>
Maturing within one year:

Common Stock                                        $      -         $      -         $  38,387        $    588
U.S. Treasury Notes                                   19,211           18,801             1,247           1,225
Commercial Paper/Agencies                              6,152            6,003            12,575          12,506
U.S. Corporate Debt Securities                        14,876           14,738            21,991          21,945
Marketable CDs                                         2,001            2,001             4,183           4,186
Warrants                                                   6                6                61              61
Municipal Obligations                                  5,571            5,511             1,509           1,502
                                                    --------         --------         ---------        --------
                                                    $ 47,817         $ 47,060         $  79,953        $ 42,013
                                                    --------         --------         ---------        --------

Maturing after one year through five years:

Commercial Paper/Agencies                           $ 18,931         $ 18,198         $  12,416        $ 12,126
U.S. Treasury Notes                                    5,191            4,996             1,017           1,010
U.S. Corporate Debt Securities                        16,240           15,856            13,537          13,328
Municipal Obligations                                      -                -             5,534           5,514
                                                    --------         --------         ---------        --------
                                                    $ 40,362         $ 39,050         $  32,504        $ 31,978
                                                    --------         --------         ---------        --------
Totals                                              $ 88,179         $ 86,110         $ 112,457        $ 73,991
                                                    ========         ========         =========        ========
</TABLE>


     Unrealized gains/(losses) are included in shareholders' equity and
accumulated other comprehensive income, net of tax.


                                       35

<PAGE>

NOTE 5. PROPERTY AND EQUIPMENT

     Property and equipment consists of the following at:
<TABLE>
<CAPTION>
                                                                      December 31,
                                                         ----------------------------------
                                                             2001                   2000
                                                         -----------            -----------
                                                                     (in thousands)
<S>                                                      <C>                    <C>
Computer and peripherals                                 $     7,726            $    19,277
Equipment                                                      5,090                  9,524
Furniture and fixture                                          1,663                  2,263
Leasehold improvements                                         1,770                  3,411
                                                         -----------            -----------
Total cost                                                    16,249                 34,475
Accumulated depreciation and amortization                    (10,110)               (28,839)
                                                         -----------            -----------
                                                         $     6,139            $     5,636
                                                         ===========            ===========
</TABLE>

     Depreciation expense during 2001, 2000 and 1999 was $3,120,000, $2,194,000
and $1,931,000, respectively. At December 31, 2001, 2000 and 1999, 4%, 5% and
8%, respectively, of the Company's fixed assets were deployed or resided
internationally. The principal international locations were the United Kingdom,
Germany, The Netherlands and Australia.

NOTE 6. DEBT

     Subsequent to year-end, the Company received a commitment letter from
Silicon Valley Bank regarding a $10.0 million working capital line of credit
providing for borrowings at Silicon Valley Bank's prime rate. The Company is
working with Silicon Valley Bank toward the finalization of terms and conditions
and the execution of definitive loan documents. The Company had no borrowings
under any credit facilities outstanding at either December 31, 2001 or December
31, 2000.


     On November 24, 2000, Switchboard acquired Envenue Inc., a wireless
provider of advanced product searching technologies designed to drive leads to
traditional retailers. The transaction was accounted for as a purchase. The
total purchase price included consideration of $2,000,000 in cash to be paid on
or before May 24, 2002, and $37,573 in recorded value of stock options to
purchase 10,200 shares of Switchboard's common stock issued to non-employees.
Switchboard used a 0% dividend yield, 100% expected volatility, 6.297% risk free
interest rate, 5.0 year life and fair value of $4.750 per share as inputs to the
Black-Scholes option pricing model to determine the value attributable to these
options. There is also an 18-month earn-out of up to $2,000,000 contingent on
performance to be paid by Switchboard on or before July 8, 2002. Switchboard
recorded $2,285,482 of goodwill from the acquisition in 2000. Goodwill
represents the excess of the purchase price of an investment in an acquired
business over the fair value of the underlying net identifiable assets.
Switchboard was amortizing this goodwill on a straight-line basis using an
estimated useful life of 5 years. In December 2001, Switchboard exercised its
rights under the acquisition agreement to substantially reduce the funding of
its Envenue acquisition. Additionally, Switchboard evaluated the carrying value
of its goodwill in Envenue, and determined it would not be fully recovered
through estimated undiscounted future operating cash flows. As a result,
Switchboard recorded during the three months ending December 31, 2001 as a
component of special charges $1,858,858 for the impairment of goodwill.

     In March 2001, Switchboard entered into a computer equipment sale-leaseback
agreement with Fleet Capital Corporation under which Switchboard was able to
lease up to $3,000,000 of equipment. Under the agreement, Switchboard will lease
computer equipment over a three-year period ending on June 28, 2004. As of
December 31, 2001, Switchboard has utilized $1,101,000 of this lease facility.
Switchboard did not record a gain on these transactions. The period in which
Switchboard was able to draw down additional amounts against the lease has
expired, and thus the remaining lease facility is no longer available to
Switchboard. Upon the expiration of the lease, Switchboard has the option to
purchase the leased assets for one dollar. The agreement has an estimated
effective annual percentage rate of approximately 7.90%. Under the terms of the
agreement, Switchboard is required to maintain on deposit with Fleet National
Bank a compensating balance, restricted as to use. The compensating balance is
adjusted on a quarterly basis to an amount equal to the principal outstanding
under the lease. As of December 31, 2001, Switchboard recorded $874,000 as
restricted cash. Switchboard has accounted for the transaction as a capital
lease. Switchboard anticipates total payments under the lease in 2002 will be
approximately $413,000.


                                       36

<PAGE>

NOTE 7. ACQUISITIONS

     In January 2000, the Company acquired ePresence, Inc. (currently named
ePresence Web Consulting, Inc. and hereinafter defined as "EPI"), a privately
held business services company based in Red Bank, New Jersey that specialized in
web design, development and integration. Consideration for the acquisition was
$10,614,000 and was comprised of cash and common stock. Through December 31,
2001, approximately $10,037,000 of cash was paid and 96,170 shares of common
stock valued at $577,000 were issued based upon the achievement of certain
performance measures. The common stock was issued to the former stockholders and
was related to the original purchase and was not based on employee retention or
other consideration for services. The acquisition has been accounted for using
the purchase method of accounting. The Company recorded gross intangibles of
approximately $10,082,000 which would have been amortized over a ten-year period
but for the adoption of SFAS No. 142 in the first quarter of 2002.

     A summary of the assets acquired and liabilities assumed in the EPI
acquisition follows (in thousands):

     Estimated fair values
        Assets acquired                                 $  1,553
        Liabilities assumed                               (1,021)
        Goodwill (amortized by the straight-line
          method over 10 years)                            9,505
        Contingent common stock settlement                   577
                                                        --------
     Purchase price                                       10,614
     Less cash acquired and common stock settlement         (597)
     Net cash paid                                      $ 10,017
                                                        ========

     In May 2000, the Company acquired Strategic Network Designs, Inc.
(currently named ePresence CRM, Inc. and hereinafter defined as "SND"), a
privately held business services company based in Clark, New Jersey that
specialized in customer relationship management, e-mobility, wireless and custom
application solutions. The total purchase price of $22,085,000, excluding
transaction expenses, included consideration of $17,585,000 in cash, 221,713
shares of common stock valued at $2,356,000 and a one-year earnout which totaled
$2,144,000 contingent on performance. The common stock was issued to former
stockholders of SND and was related to the original purchase and was not based
on employee retention or other consideration for services. The acquisition has
been accounted for using the purchase method of accounting. The Company recorded
gross intangibles of approximately $21,946,000 which would have been amortized
over a ten-year period but for the adoption of SFAS No. 142 in the first quarter
of 2002.

     A summary of the assets acquired and liabilities assumed in the SND
acquisition follows (in thousands):

     Estimated fair values
        Assets acquired                                $  3,073
        Liabilities assumed                              (2,934)
        Goodwill (amortized by the straight-line
          method over 10 years)                          19,802
        Contingent cash settlement                        2,144
                                                       --------
     Purchase price                                      22,085
     Less cash acquired                                    (556)
     Net cash paid                                     $ 21,529
                                                       ========

     Due to the decline in current business conditions, the Company initiated a
cost savings program and realigned resources to focus on profit contribution and
core opportunities. Based upon impairment analyses which indicated that the
carrying amount of the goodwill and purchased intangible assets would not be
fully recovered through estimated undiscounted future operating cash flows, a
charge of $12,364,000 was recorded during the year ended December 31, 2001. The
impairment of goodwill was measured as the amount by which the carrying amount
exceeded the present value of the estimated discounted future cash flows
attributable to such goodwill.


                                       37

<PAGE>

     The following are the Company's unaudited pro forma results for the year
ended December 31, 1999 as compared to the unaudited pro forma results for the
twelve months ended December 31, 2000, assuming the acquisitions occurred on
January 1, 1999 (in thousands, except for per share data).

                                                 Years ended December 31,
                                                 ------------------------
                                                  2000              1999
                                                 ------            ------
                                                        (pro forma)
     Net revenues                               $ 88,167         $ 62,144
     Net (loss) from continuing operations      $(28,313)        $(14,272)
     Net income/(loss)                          $ 16,299         $  3,336
     Net earnings per common share:
         Basic                                  $   0.69         $   0.16
         Diluted                                $   0.61         $   0.13

     These unaudited pro forma results have been prepared for comparative
purposes only and do not purport to be indicative of the results of operations,
which would have actually resulted, had the combinations been in effect on
January 1, 1999, or of future results of operations.

NOTE 8. EMPLOYEE BENEFIT PLANS

     In 1989, the Company established a savings and profit sharing plan covering
substantially all U.S. employees. The plan is qualified under Section 401(a) of
the Internal Revenue Code of 1986, as amended. Effective January 1, 1994, the
Company elected to match an employee's elective deferrals to the plan based upon
a prescribed formula. The maximum matching contribution was 2% of an employee's
annual compensation. Vesting is over a four-year period and begins on the date
of hire. The Company contributed $276,000, $268,000, and $307,000 in 2001, 2000,
and 1999, respectively.

     In January 2000, the Company acquired EPI and has elected to continue
administering the savings and profit sharing plan that was adopted by EPI on
January 1, 1997. The maximum matching contribution was 4% of an employee's
annual compensation. Vesting is over a four-year period and begins four months
from the date of hire. The Company contributed $125,000 and $82,000 in 2001 and
2000, respectively.

     In May 2000, the Company acquired SND and has elected to continue
administering the savings and profit sharing plan that was adopted by SND on
January 1, 1997. The maximum matching contribution was 3% of an employee's
annual compensation. Vesting is over a four-year period and begins three months
from the date of hire. The Company's contribution was $79,000 and $203,000 in
2001 and 2000, respectively.

NOTE 9. ACCRUED EXPENSES

     Accrued expenses consist of the following at:


                                                December 31,
                                         ------------------------
                                           2001            2000
                                        (restated)
                                         --------        --------
                                              (in thousands)
     Compensation                        $ 3,697          $ 5,136
     Restructuring                         3,089             --
     Microsoft Expense Funding               711            1,271
     Other                                 4,112            6,102
                                         -------          -------
         Total                           $11,609          $12,509
                                         =======          =======


NOTE 10. DISCONTINUED OPERATIONS

     In the fourth quarter of 1999, the Board of Directors of the Company
committed to a plan to exit its software business and to focus the Company on
its services and Switchboard segments as its sole operating units. The Company
provided support to its existing customers through April 30, 2001.

     Included in the 1999 results of operations is an estimated loss from
disposal of discontinued operations of $3,000,000, net of tax. The provision is
comprised primarily of $1,900,000 for the write-off of certain idle assets and
the closure and consolidation of leased facilities, estimated future operating
losses of $700,000 and $400,000 for severance and costs related to the reduction
of

                                       38

<PAGE>

approximately 45 members of the Company's staff. The Company expended $540,000,
$1,797,000 and $484,000 in cash related to the exiting of its software business
in 2001, 2000 and 1999, respectively.

    Excluding the estimated loss from disposal of discontinued operations,
revenues and expenses from discontinued operations for the year ended
December 31, 1999 was $26,636,000 and $18,431,000, respectively.

NOTE 11.  RESTRUCTURING CHARGES

    In 2001, as part of the Company's plan to implement cost-cutting measures
in its services business, the Company recorded a pre-tax charge of $3,953,000
related to a workforce reduction of approximately 100 positions, office closures
and asset write-offs as further described below. The Company expects to use
$2,934,000 of cash related to these activities.

    At December 31, 2001, the Company had utilized approximately $2,405,000 in
total of the liability of which $1,375,000 was severance-related costs, and the
remainder related to office closures and asset write-offs. The remaining
liability at December 31, 2001 was approximately $1,548,000, of which $1,108,000
is expected to be cash related expenditures. The Company anticipates that it
will utilize a substantial portion of the remaining liability by the end of
fiscal year 2002.

    The following is a table summarizing restructuring and other charges of our
services segment:
<TABLE>
<CAPTION>
                                                                  Year Ended December 31, 2001
                                               -------------------------------------------------------------------
                                               Total Charge      Cash Payments       Non-cash Charges      Accrual
                                               ------------      -------------       ----------------      -------
                                                                          (in thousands)
<S>                                              <C>                <C>                   <C>              <C>
Staff reductions                                 $  1,908           $  1,375              $  --            $   533
Office closures and other costs                     1,336                451                 --                885
Asset write-offs                                      709                143                436                130
                                                 --------           --------              -----            -------
    Total                                        $  3,953           $  1,969              $ 436            $ 1,548
                                                 ========           ========              =====            =======
</TABLE>
NOTE 12.  SPECIAL CHARGES

    In the three months ended December 31, 2001, Switchboard recorded net
pre-tax special charges of $17,300,000, comprised primarily of $15,600,000 for
the impairment of certain assets, $1,000,000 for costs related to facility
closures and $700,000 in severance costs related to the reduction of
approximately 21% of Switchboard's workforce. The restructuring resulted in 21
employee separations.

     Included in Switchboard's $15,600,000 impairment charge is an amount
recorded for the impairment of the unamortized portion of the value of the
common stock issued and amounts prepaid to AOL. Based upon impairment analysis
which indicated that the carrying amount of these assets would not be fully
recovered through estimated undiscounted future operating cash flows, a charge
of $11,700,000 was recorded by Switchboard as an additional component of special
charges during 2001. The impairment was measured as the amount by which the
carrying amount of these assets exceeded the present value of the estimated
discounted future cash flows attributable to these assets.

     In December 2001, Switchboard exercised its rights under the Envenue
acquisition agreement to substantially reduce the funding of Envenue.
Switchboard evaluated the carrying value of its goodwill in Envenue, and
determined it would not be fully recovered through estimated undiscounted future
operating cash flows. As a result, during the three months ending December 31,
2001, Switchboard recorded as a component of the $15,600,000 impairment charge
for certain assets an impairment charge of $1,900,000 related to the Envenue
goodwill. The impairment was measured as the amount by which the carrying amount
of these assets exceeded in the present value of the estimated discounted future
cash flows attributable to these assets.

     Also included in Switchboard's $15,600,000 impairment charge are amounts
related to prepaid advertising expenses. As a result of Switchboard's change in
overall strategy from a destination site to a technology provider, Switchboard
no longer considers prepaid advertising to be complementary to its corporate
strategy. Accordingly, Switchboard recorded $1,400,000 for the impairment of
these prepaid advertising assets.

     Of the total $17,300,000 charge, $1,600,000 is cash related, of which
approximately $100,000 was expended in the year ended December 31, 2001.
Switchboard has recorded a remaining liability of $1,500,000 on its balance
sheet of December 31, 2001, of which $1,400,000 is cash related. Of the
remaining $1,400,000 in cash related liabilities, Switchboard expects to spend
approximately $1,200,000 in 2002, with the remainder to be paid through December
of 2005.


                                       39

<PAGE>
 NOTE 13.  COMMITMENTS AND CONTINGENCIES

    The Company leases its facilities and certain equipment under non-cancelable
lease agreements, which expire at various dates through March of 2014. Rental
expense under these leases totaled $1,671,000, $1,582,000 and $1,389,000 in
2001, 2000 and 1999, respectively. Under these agreements, the Company is
obligated to pay for utilities, taxes, insurance and maintenance.

    At December 31, 2001, future minimum lease payments under operating leases
with initial terms exceeding one year are as follows (in thousands):

      2002                                                $ 2,686
      2003                                                  1,463
      2004                                                  1,292
      2005                                                    882
      2006                                                    214
      Thereafter                                            1,435
                                                          -------
          Total future minimum lease payments             $ 7,972
                                                          =======

    The total of future minimum rentals to be received under non-cancelable
subleases related to the above leases are $147,000, $83,000 and $36,000 for the
years ending 2002, 2003 and 2004, respectively.

NOTE 14.  PREFERRED STOCK

     In July 1992, the shareholders of the Company approved the creation of a
new class of undesignated preferred stock and authorized 1,000,000 shares of
$.01 par value, in one or more series, with voting rights and preferences to be
determined by the Board of Directors. In March 1998, 263,158 shares were
designated as Series A Convertible Preferred Stock and were issued to
HarbourVest Partners along with warrants to purchase 65,790 shares of Series B
Convertible Preferred Stock and 65,790 shares of Series C Convertible Preferred
Stock at an exercise price of $45.00 and $50.00 per share, respectively, in
exchange for cash of $9,500,000, net of issuance costs of $500,000. Each share
of preferred stock was initially convertible, at the option of the holder, into
ten shares of common stock, subject to adjustment for certain dilutive
issuances. In June 1999, the 263,158 shares of Series A Convertible Preferred
Stock, held by HarbourVest Partners, automatically converted into 2,631,580
shares of common stock. On March 10, 2000, the warrants to purchase shares of
Series B and Series C Convertible Preferred Stock converted into warrants to
purchase an aggregate of 1,315,800 shares of common stock.

NOTE 15.  STOCK OPTION PLANS

    Under the Company's 1992 Stock Incentive Plan, as amended (the "1992 Stock
Incentive Plan"), the Company may grant incentive stock options and
non-statutory options for the purchase of an aggregate of 5,470,000 shares of
common stock to employees, officers, directors, consultants and advisors. At
December 31, 2001, 2,961,064 options and shares were outstanding under this
plan, of which 420,000 shares were subject to the Company's repurchase right and
certain other restrictions for a period of up to three years. The 1992 Stock
Incentive Plan provides that incentive stock options may not be granted at less
than the fair market value of the Company's common stock at the grant date,
options generally vest ratably over a three-year period and expire ten years
from the date of grant.

    The 1992 Stock Incentive Plan also permits awards of restricted stock at a
price determined by the Compensation Committee or the Board of Directors subject
to the Company's right to repurchase such stock in specified circumstances prior
to the expiration of a restricted period. On October 16, 1998, the Company
issued 396,000 shares of restricted common stock to executive officers and
certain members of senior management at par value. An amount for unearned
compensation of $1,426,000 was recorded within shareholders' equity equal to the
fair market value of the stock on the date it was issued, less the purchase
price. An additional 480,000 shares and 40,000 shares of restricted stock were
issued in 2000 and 1999, respectively. An additional $2,560,200 and $277,000 was
recorded as unearned compensation within shareholders' equity in 2000 and 1999,
respectively, equal to the fair market value of the stock on the date it was
issued, less the purchase price. In 2000, 35,600 shares of restricted stock were
cancelled, and 10,000 shares of restricted stock were cancelled in 1999.
Amortization of $1,196,652, $824,527 and $1,000,000 was recorded in 2001, 2000
and 1999, respectively, as compensation expense related to these issuances. The
remainder of the unearned compensation will be amortized over a period of up to
three years from the date of issuance.

                                        40

<PAGE>

     The Company currently holds notes receivable for a total of approximately
$1,335,000 from executive officers and other members of senior management of the
Company. The notes arose from transactions in 1999, 2000, and 2001 whereby the
Company loaned the officers money to pay federal and state tax obligations with
respect to the vesting and issuance of restricted stock. The notes bear interest
at the applicable Federal rate. The principal plus accrued interest on the
remaining $1,312,000 will be forgiven at a rate of 20% on the anniversary date
of the note, over a five-year period. The notes and accrued interest are
recorded as an other non-current asset.

     Under the Company's 2000 Non-Executive Stock Incentive Plan (the "2000
Non-Executive Stock Plan"), the Company may grant non-statutory options for the
purchase of an aggregate of 1,250,000 shares of common stock to employees,
consultants and advisors. At December 31, 2001, 574,867 options were outstanding
under this plan. These options vest ratably over a three-year period and expire
ten years from the date of grant.

     The 2000 Non-Executive Stock Plan also permits awards of restricted stock
at a price determined by the Compensation Committee or the Board of Directors
subject to the Company's right to repurchase such stock in specified
circumstances prior to the expiration of a restricted period. On October 19,
2000, the Company issued 80,000 shares of restricted stock to certain members of
senior management at par value of which 46,000 shares were outstanding at
December 31, 2001. These shares are subject to the Company's repurchase right
and certain other restrictions for a period of up to two years. An amount for
unearned compensation of $454,200 was recorded within shareholders' equity equal
to the fair market value of the stock on the date it was issued, less the
purchase price. An additional 6,000 shares of restricted stock were issued in
2001. An additional $25,000 was recorded as unearned compensation within
shareholders' equity in 2001 equal to the fair market value of the stock on the
date it was issued, less the purchase price. Amortization of $252,000 was
recorded in 2001 and $45,175 was recorded in 2000, as compensation expense
related to these transactions. The remainder of the unearned compensation will
be amortized over a period of up to two years from the date of issuance.

     Under the Company's 2001 Stock Incentive Plan (the "2001 Plan"), the
Company may grant stock options and other stock based awards for the purchase of
an aggregate of 1,200,000 shares of common stock to employees, officers,
directors, consultants and advisors. At December 31, 2001, 963,300 options were
outstanding under this plan. The 2001 Plan provides that incentive stock options
may not be granted at less than the fair market value of the Company's common
stock at the grant date, and options generally vest ratably over a three-year
period and expire ten years from the date of grant.

     Under the Company's 1992 Director Stock Option Plan, as amended (the "1992
Director Plan"), the Company may grant non-statutory stock options for the
purchase of up to an aggregate of 325,000 shares of common stock to directors of
the Company who are not officers or employees of the Company or any subsidiary
of the Company. Under the terms of the 1992 Director Plan, initial options are
automatically granted to each eligible director upon his or her initial election
as a director that cover 32,000 shares of common stock, and annual options are
automatically granted on the date of each Annual Meeting of Shareholders of the
Company that cover 8,000 shares of common stock. In addition, after four years
of service on the Board, each director will automatically receive an option that
covers 16,000 shares. The 1992 Director Plan provides that options shall be
granted at the fair market value of the Company's common stock at the grant
date. Annual options generally vest twelve months after the grant date and
initial options and service options vest ratably over a four-year period. At
December 31, 2001, 245,000 options were outstanding under the 1992 Director
Plan.

     Under the Company's 1995 Employee Stock Purchase Plan, as amended 1,050,000
shares of common stock are available to all full-time employees through
semi-annual offerings. At December 31, 2001, 1,010,378 shares of common stock
have been purchased under this plan. In 2001, the Board of Directors suspended
this plan until further notice.

     In May 2000, the Company acquired SND and assumed the 2000 SND Stock
Incentive Plan. At December 31, 2001, 46,800 options were outstanding under this
plan. The 2000 SND Stock Incentive Plan provides that incentive stock options
may not be granted at less than the fair market value of the Company's common
stock at the grant date, and options generally vest ratably over a three-year
period and expire ten years from the date of grant.

     During 1997, in addition to the options described above, options to
purchase an aggregate of 1,300,000 shares were issued to four executive officers
of the Company. The underlying shares were registered with the SEC and generally
vest over a four-year period. At December 31, 2001, 760,000 of such options were
outstanding.

     The Company applies Accounting Principles Board ("APB") Opinion No. 25 and
related interpretations in accounting for its plans. In fiscal year 1996, the
Company adopted the disclosure only provisions of SFAS No. 123, "Accounting for
Stock-Based Compensation." Accordingly, no compensation cost has been recognized

                                       41

<PAGE>

for its stock-based compensation plans under APB Opinion No. 25. Had
compensation cost for the Company's stock-based compensation plans been recorded
based on the fair value of awards at the grant dates as calculated in accordance
with SFAS No. 123, the Company's net income and earnings per share for the years
ended December 31, 2001, 2000 and 1999 would have been reduced to the pro forma
amounts indicated below:


<TABLE>
<CAPTION>
                                      2001
                                   (restated)                       2000                        1999
                            -----------------------      -----------------------      -----------------------
                            As Reported   Pro Forma      As Reported   Pro Forma      As Reported   Pro Forma
                            -----------   ---------      -----------   ---------      -----------   ---------
                                               (in thousands except per share amounts)
<S>                        <C>           <C>            <C>              <C>            <C>           <C>
Net (loss)/income            $(40,331)    $(49,544)        $15,055      $6,508          $28,149      $24,016
Basic (loss)/income
  per share                  $  (1.76)    $  (2.16)        $  0.64      $ 0.27          $  1.33      $  1.14
Diluted (loss)/income
  per share                  $  (1.76)    $  (2.16)        $  0.56      $ 0.24          $  1.11      $  0.94
</TABLE>


     The fair value of each option grant is estimated on the date of grant using
the Black-Scholes option-pricing model with the following weighted-average
assumptions used for grants in 2001, 2000 and 1999, respectively; dividend yield
of 0%, 0% and 0%; expected volatility of 80%, 105% and 90%; risk-free interest
rates of 5.0%, 6.4% and 5.8%; and expected lives of 5.0, 5.0, and 5.0 years. The
effects of applying SFAS No. 123 in this pro forma disclosure are not likely to
be representative of the effects on reported net income for future years.
Additional awards in future years are anticipated. SFAS No. 123 does not apply
to awards granted prior to 1995. The 2001 pro forma amounts include $9,213,000
of pro forma income related to stock option forfeiture experience.

     A summary of the status of the Company's stock plans as of December 31,
2001, 2000 and 1999 and changes during the years ending on those dates is
presented below.
<TABLE>
<CAPTION>
                                                 2001                          2000                          1999
                                     --------------------------     --------------------------    --------------------------
                                              Weighted  Average              Weighted  Average             Weighted  Average
                                     Shares    Exercise Price       Shares    Exercise Price      Shares    Exercise Price
                                     ------   -----------------     ------   -----------------    ------   -----------------
                                                                   (share amounts in thousands)
<S>                                  <C>            <C>             <C>           <C>             <C>           <C>
    Outstanding at
      beginning of year              4,447          $8.81           3,222         $ 7.11           3,076         $ 3.55
    Granted                          1,981          $3.89           2,492         $10.50           1,590         $10.94
    Exercised                          (91)         $2.79            (424)        $ 3.98          (1,119)        $ 2.83
    Cancelled                       (1,252)         $6.80            (843)        $ 9.71            (325)        $ 6.95
                                     -----          -----           -----         ------           -----         ------
    Outstanding at end of  year      5,085          $6.68           4,447         $ 8.81           3,222         $ 7.11
                                     =====          =====           =====         ======           =====         ======
    Options exercisable at
      end of year                    2,362          $6.87           1,450         $ 5.20           1,095         $ 3.93
                                     =====          =====           =====         ======           =====         ======
    Weighted-average fair value
      of options granted during
      the year                                      $2.69                         $10.46                         $ 7.97
</TABLE>
The following table summarizes information about the Company's stock options at
December 31, 2001:
(share amounts in thousands)

<TABLE>
<CAPTION>
                                                 Options Outstanding           Options Exercisable
                                              -------------------------     ------------------------
                                               Weighted
                                                Average        Weighted                     Weighted
                                               Remaining        Average                      Average
                                Number        Contractual      Exercise        Number       Exercise
Range of Exercise Prices      Outstanding         Life          Price       Exercisable      Price
------------------------      -----------     -----------      --------     -----------     --------
   <S>                       <C>              <C>              <C>              <C>         <C>
    $1.15-$2.25                  704          5.2 years        $ 2.23           704         $ 2.23
    $2.26-$3.99                1,351          9.2 years        $ 3.25           156         $ 3.57
    $4.00-$6.50                1,019          8.6 years        $ 5.30           435         $ 5.78
    $6.51-$10.00                 861          7.7 years        $ 8.55           547         $ 8.64
    $10.01-$20.00              1,150          8.0 years        $13.25           520         $13.19
                               -----                                          -----
                               5,085                                          2,362
                               =====                                          =====
</TABLE>

                                       42

<PAGE>

NOTE 16. SALE OF EQUITY BY SWITCHBOARD

     During 2000, Switchboard sold, in its initial public offering, 6,325,000
shares of its common stock for $15.00 per share. The aggregate gross proceeds
raised in the offering were $94,900,000. Total expenses in connection with the
offering were approximately $8,600,000, of which $6,600,000 was for underwriting
discounts and commissions and $2,000,000 was for professional services and other
expenses.

NOTE 17. STOCK REPURCHASE

     In December 2000, the Board of Directors of the Company authorized the
repurchase of up to $10,000,000 of its common stock on the open market.
Repurchases of stock are at management's discretion, depending upon acceptable
prices and availability. Funds used in the repurchase of shares come from the
Company's existing cash and investment balances along with cash generated from
operations. As of December 31, 2001, the Company had expended $6,306,000 toward
stock repurchases of which $6,140,000 and $166,000 was during the years ended
December 31, 2001 and 2000, respectively.

NOTE 18. RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS

     In June 2001, the FASB issued SFAS No. 141, "Business Combinations". SFAS
No. 141 requires all business combinations initiated after June 30, 2001 to be
accounted for using the purchase method.

     In June 2001, the FASB issued SFAS No. 142, "Goodwill and Other Intangible
Assets". With the adoption of SFAS No. 142, goodwill is no longer subject to
amortization over its estimated useful life, but instead goodwill is subject to
at least an annual assessment for impairment by applying a fair-value-based
test. The Company adopted SFAS 142 in the first quarter of 2002 and ceased
amortizing goodwill with a net book value of $14,800,000. The Company completed
an assesment of fair value of goodwill in the second quarter of 2002 and the
Company believes the book value of goodwill has not been impaired.

     In June 2001, the FASB issued SFAS No. 143, "Accounting for Asset
Retirement Obligations". This statement addresses financial accounting and
reporting for obligations associated with the retirement of tangible long-lived
assets and the associated asset retirement costs. It applies to legal
obligations associated with the retirement of long-lived assets that result from
the acquisition, construction, development and/or the normal operation of a
long-lived asset, except for certain obligations of lessees. This statement
amends FASB Statement No. 19 and is effective for financial statements issued
for fiscal years beginning after June 15, 2002. The Company does not anticipate
that the adoption of this statement will have a material impact on its
operations or financial position.

     In August 2001, the FASB issued SFAS No. 144, "Accounting for the
Impairment or Disposal of Long-Lived Assets". This statement supersedes FASB
Statement No. 121, "Accounting for the Impairment of Long-Lived Assets and for
Long-Lived Assets to Be Disposed of", and the accounting and reporting
provisions of APB Opinion No. 30, "Reporting the Results of
Operations--Reporting the Effects of Disposal of a Segment of a Business, and
Extraordinary, Unusual and Infrequently Occurring Events and Transactions". This
statement requires that one accounting model be used for long-lived assets to be
disposed of by sale, whether previously held and used or newly acquired, and it
broadens the presentation of discontinued operations to include more disposal
transactions. The provisions of this statement are effective for financial
statements issued for fiscal years beginning after December 15, 2001, and
interim periods within those fiscal years, with early adoption permitted. The
Company does not anticipate that the adoption of this statement will have a
material impact on its operations or financial position.

     In November 2001, the Emerging Task Force concluded its discussions on EITF
Issue 01-9 "Accounting for Consideration Given by a Vendor to a Customer
(Including a Reseller of the Vendor's Products)". This guidance requires that an
entity account for consideration given to a customer as a reduction of revenue
unless it can demonstrate an identifiable benefit that can be sufficiently
separable from the sale of the products or services to the customer, and can
reasonably estimate the fair value of the benefit identified. Switchboard is
required to adopt EITF Issue 01-9 effective January 1, 2002. In accordance with
EITF 01-9, Switchboard will offset amortization of consideration given to AOL
against revenue. Had Switchboard adopted EITF 01-9 in 2001, its revenues would
have been reduced by approximately $4,100,000.

                                       43

<PAGE>

NOTE 19. SALE OF INVESTMENT

     In 1996, the Company made an equity investment of approximately $2,000,000
in Software.com, Inc. ("Software.com"), a company which supplies Internet
messaging solutions to services providers. During the year ended December 31,
2000, the Company sold 491,202 shares of common stock of Software.com, resulting
in net proceeds of $45,276,000 and a realized gain of approximately $44,556,000.
At December 31, 2000, the Company held 400,000 shares of common stock of
Software.com of which 300,000 and 100,000 of said shares were valued at $114.50
and $115.90 per share, respectively, with a total value of $45,940,000. The net
unrealized gain of approximately $29,025,000, net of taxes of approximately
$16,308,000, is included in other comprehensive income within shareholders'
equity.

     In January 2000, the Company entered into a hedging contract for 300,000
shares of Software.com common stock. The maturity date for the contract was
February 2, 2001. Upon maturity, the Company received payment for the value of
the Software.com common shares based upon the average closing price of the ten
consecutive trading days prior to, and including, the maturity date. Under the
agreement the settlement price could be no lower than $84.04 and no higher than
$114.50 per common share.

     In February 2000, the Company entered into a hedging contract for 100,000
shares of Software.com common stock. The maturity date for the contract was
February 25, 2001. Upon maturity, the Company received payment for the value of
the Software.com common shares based upon the average closing price of the ten
consecutive trading days prior to, and including, the maturity date. Under the
agreement the settlement price could be no lower than $84.60 and no higher than
$115.90 per common share.

     On November 17, 2000, Software.com and Phone.com merged and began doing
business as Openwave Systems, Inc. ("Openwave"). Each Software.com shareholder
received 1.6105 Phone.com shares. On October 26, 2000, the Company entered into
two hedging contracts for Openwave shares effectively rolling over its hedging
contracts of Software.com common shares. The contracts were adjusted to
equivalent Phone.com shares and pricing and maintained the same terms as the
original contracts with the exception of maturities. The hedging contract for
483,150 Openwave shares matured between January 23, 2001 and January 29, 2001
and the average settlement price was $67.55 per common share. The hedging
contract for 161,050 Openwave shares matured on January 24, 2001 and the
settlement price was $70.60 per common share.

     In January 2001, the Company liquidated its Openwave position for gross
proceeds of approximately $44,006,000 and a realized gain of approximately
$33,378,000. The Company paid a fee of $4,740,000 as a result of the early
liquidation of the hedge contracts. The gain on sale of Openwave reported by the
Company in its statement of operations includes the effect of writing off the
previously recorded asset related to these hedges. As of December 31, 2001, the
Company held no shares of Openwave.


NOTE 20. SALE OF SUBSIDIARY

     On March 22, 2001, the Company sold its Australian subsidiary to an
Australian-based company. The Company exchanged its shares in the Australian
subsidiary for a 10% interest in the acquiring company. The Company recorded a
$1,039,000 loss as a result of the transaction and valued the 10% interest
received at zero.

                                       44

<PAGE>


NOTE 21. INCOME TAXES


     The provision/(benefit) for income taxes consists of the following:


                                              Years ended December 31,
                                       --------------------------------
                                          2001       2000        1999
                                       (restated)
                                       ---------    -------    --------
                                                   (in thousands)
    Current tax expense (benefit):
    Federal income taxes                $   --      $   328    $    170
    Foreign income taxes                    --          (19)        (37)
    State income taxes                      --        1,045         224
                                       ---------    -------    --------
         Total current expense              --        1,354         357
                                       ---------    -------    --------
    Deferred tax expense (benefit):
    Federal income taxes                 (31,474)    12,194       1,254
    Foreign income taxes                    --         --          --
    State and local                       (8,879)     1,066          75
    Valuation allowance                   51,378       --       (23,978)
                                       ---------    -------    --------
         Total deferred expense           11,025     13,260     (22,649)
                                       ---------    -------    --------
         Total                          $ 11,025    $14,614    $(22,292)
                                       =========    =======    ========

     As a result of the Company's adoption of SFAS No. 133, the Company has
recorded a $1,855 provision as part of its cumulative effect of change in
accounting policy.

     The tax effects of the temporary differences that give rise to the deferred
tax asset and liabilities at December 31, 2001 and December 31, 2000 were as
follows:


<TABLE>
<CAPTION>
                                              December 31, 2001    December 31, 2000
                                                  (restated)
                                           ---------------------- --------------------
                                             Assets   Liabilities  Assets  Liabilities
                                           ---------- ----------- -------  -----------
                                                        (in thousands)
<S>                                        <C>         <C>        <C>       <C>
    Current:
    Bad Debts                              $    574     $ --      $    642  $    --
    Employee benefits and compensation          107       --           514       --
    FAS115                                     --        (206)        --     (13,645)
                                           --------     -----      -------  --------
         Total Current                          681      (206)       1,156   (13,645)
                                           --------     -----      -------  --------
    Non-Current:
    Goodwill and other intangibles            4,122       --          --         --
    Net operating loss and credit
      carryforwards                          34,570       --         9,909       --
    Fixed Assets                              1,322       --         1,106       --
    Accrual to Cash                            --        (200)        --        (302)
    Discontinued Operations                                            233
    Other                                     1,228       --           861       --
    Prepaid Advertising & Restructuring       9,861                   --         --
                                           --------     -----      -------  --------
         Total Non-Current                   51,103      (200)      12,109      (302)
                                           --------     -----      -------  --------
    Total Deferred taxes before valuation
      allowance                              51,784      (406)      13,265   (13,947)
    Net Deferreds before valuation
      allowance                              51,378                 13,519
    Valuation allowance                     (51,378)                    --
                                           --------               --------
    Net Deferred Tax Asset/(Liability)     $   --                 $   (682)
                                           ========               ========
</TABLE>

In 2001 the Company evaluated the realizability of all of its deferred tax
assets. Because, the Company believes it is more likely than not that all of the
deferred tax assets will not be realized, a valuation allowance of $51,378,000
for the year ended December 31, 2001 was recorded. Of the $51,378,000 valuation
allowance, $24,373,000 pertains to Switchboard, and $27,005,000 pertains to
services.

                                       45

<PAGE>

     In assessing the realizability of deferred tax assets, the Company
considers whether it is more likely than not that some or all of the deferred
tax asset will not be realized. The Company believes that sufficient uncertainty
exists regarding the realizability of the deferred tax assets such that a
valuation allowance of $51,378,000 for December 31, 2001 has been established
for deferred tax assets.

     The Company has net operating loss carryforwards for federal and state tax
purposes of approximately $72,000,000 and $93,600,000, respectively. The federal
net operating loss carryforwards will begin to expire in 2012 and the state net
operating loss carryforwards will begin to expire in 2002.

     Switchboard is not a member in the Company's consolidated federal income
tax return because they are less than 80% owned by vote and value. Switchboard
has net operating loss carryforwards for federal and state tax purposes of
approximately $70,100,000 and $76,350,000, respectively.

     Services has net operating loss carryforwards for federal and state tax
purposes of approximately $1,900,000 and $17,250,000, respectively.

     Ownership changes resulting in the Company's issuance of capital stock may
limit the amount of net operating loss carryforwards that can be utilized
annually to offset future taxable income. The amount of the annual limitation is
determined based upon the Company's value immediately prior to the ownership
change. Subsequent significant changes in ownership could further affect the
limitation in the future.

     A reconciliation of the Federal statutory tax rate to the Company's
effective income tax rate is as follows:


<TABLE>
<CAPTION>

                                                            2001        2000        1999
                                                         (restated)
                                                         ---------    -------    ---------
    <S>                                                 <C>           <C>          <C>
    Tax at statutory rate                                   (35.0%)     35.0%        35.0%
    State Income Taxes, net of U.S. federal benefit         (17.6)       4.6          7.1
    Effect of Foreign Tax Rates                                --         --          3.1
    Non-Deductible Goodwill Amortization                      6.7        1.1           --
    Minority Interest                                       (37.9)       9.2         71.8
    Foreign Losses not benefited                             (3.8)      (1.1)        14.7
    Other                                                     1.6        0.5          1.0
    Valuation Allowance                                      51.3         --       (751.5)
    Losses not benefited                                     68.4         --           --
                                                         --------     ------    ---------
    Effective Rate                                           33.7%      49.3%      (618.8)%
                                                         ========     ======    =========
</TABLE>


NOTE 22. BASIC AND DILUTED (LOSS)/EARNINGS PER SHARE

     Basic (loss)/earnings per share is based upon the weighted average number
of common shares outstanding during the period. Diluted (loss)/earnings per
share include the dilutive effect of potential common shares outstanding during
the period. Potential common shares result from the assumed exercise of
outstanding stock options and warrants, the proceeds of which are then assumed
to have been used to repurchase outstanding common stock using the treasury
stock method. Potential common shares also include the unvested portion of
restricted stock. For the years ended December 31, 2001, 2000 and 1999, basic
and diluted (loss)/earnings per share were calculated as follows:


<TABLE>
<CAPTION>

                                                              Years ended December 31,
                                                        -----------------------------------
                                                          2001          2000        1999
                                                       (restated)
                                                        --------      -------      -------
                                                                 (in thousands,
                                                            except per share amounts)
    <S>                                                 <C>           <C>          <C>
    Basic (loss)/earnings per share numerator:
         (Loss)/income from continuing operations       $(40,331)     $15,055      $26,224
         Net (loss)/income                               (40,331)      15,055       28,149
    Denominator:
         Weighted average common shares outstanding       22,976       23,695       21,115
    Basic continuing (loss)/earnings per share          $  (1.76)     $   .64      $  1.24
    Basic (loss)/earnings per share                     $  (1.76)     $   .64      $  1.33
    Diluted (loss)/earnings per share per numerator:
         (Loss)/income from continuing operations       $(40,331)     $15,055      $26,224
         Net (loss)/income                               (40,331)      15,055       28,149
    Denominator:
         Weighted average common shares outstanding       22,976       23,695       21,115
         Weighted average common potential shares             --        3,032        4,334
         Total shares                                     22,976       26,727       25,449
    Diluted continuing (loss)/earnings per share        $  (1.76)     $   .56      $  1.03
    Diluted (loss)/earnings per share                   $  (1.76)     $   .56      $  1.11
</TABLE>


                                       46

<PAGE>


     Options to purchase 5,085,000, 855,200 and 531,000 shares of common stock
outstanding during the years ended December 31, 2001, 2000 and 1999,
respectively, were excluded from the calculation of diluted earnings per share,
as their effect would have been antidilutive.

NOTE 23. SEGMENT INFORMATION

     As described in Note 1. "Nature of Business," the Company has two
reportable segments: Services and Switchboard. Significant financial information
relative to the Company's reportable segments is as follows:


<TABLE>
<CAPTION>

                                                                                         Years Ended December 31,
                                                                                 -------------------------------------
                                                                                   2001           2000          1999
                                                                                 --------       --------      --------
                                                                                (Restated)
                                                                                             (in thousands)
<S>                                                                              <C>            <C>           <C>
Services:
         Revenues                                                                $ 51,711       $ 61,300      $ 37,494

         Cost of Revenues                                                          35,777         33,857        22,714
                                                                                 --------       --------      --------
         Gross Profit                                                              15,934         27,443        14,780

         Operating Expenses:
                  Sales and marketing                                              17,706         20,225        10,926
                  General and administrative                                       15,011         14,548        11,938
                  Amortization of goodwill and intangibles                          2,668          2,217             -
                  Impairment of goodwill                                           12,364              -             -
                  Restructuring charges                                             3,953              -             -
                                                                                 --------       --------      --------
         Operating Expenses                                                        51,702         36,990        22,864
                                                                                 --------       --------      --------
                  Operating loss                                                 $(35,768)      $ (9,547)     $ (8,084)
                                                                                 ========       ========      ========
                  Total assets                                                   $ 97,116       $132,608      $162,255



                                                                                         Years Ended December 31,
                                                                                 -------------------------------------
                                                                                   2001           2000          1999
                                                                                 --------       --------      --------
                                                                                (Restated)
                                                                                             (in thousands)
Switchboard:
         Revenues                                                                $ 13,326       $ 20,310      $  8,304
         Cost of Revenues                                                           3,518          3,491         1,601
                                                                                 --------       --------      --------
         Gross Profit                                                               9,808         16,819         6,703
           Operating Expenses:
                  Sales and marketing                                              24,606         29,184        10,858
                  Product development                                               6,702          3,473         1,923
                  General and administrative                                        4,181          3,303         1,712
                  Amortization of goodwill, intangibles and other assets            4,767          1,568           866
                  Special charges                                                  17,324              -             -
                  Loss on Viacom transaction                                       22,203              -             -
                                                                                 --------       --------       -------
         Operating Expenses                                                        79,783         37,528        15,359
                                                                                 --------       --------       -------
                  Operating loss                                                 $(69,975)      $(20,709)     $ (8,656)
                                                                                 ========       ========      ========
                  Total assets                                                   $ 65,835       $ 98,557        12,195
</TABLE>


                                       47

<PAGE>


     For the years ended December 31, 2001, 2000 and 1999, the Company delivered
its services worldwide and it is now focused on the delivery of its services in
the United States, and Switchboard delivers its revenues within North America.
Revenue can be grouped into geographic areas as follows:


                                            Years Ended December 31,
                                     --------------------------------------
                                        2001
                                     (restated)       2000           1999
                                     ---------      --------      ---------
                                                 (in thousands)
    Revenues from unaffiliated
      customers:
         North America               $  60,202      $ 72,052      $  34,252
         Europe                          3,252         4,185          7,275
         Other                           1,583         5,373          4,271
                                     ---------      --------      ---------
            Total revenues           $  65,037      $ 81,610      $  45,798
                                     =========      ========      =========


NOTE 24. MICROSOFT CORPORATION ALLIANCE

     On January 11, 1999, the Company announced a strategic alliance with
Microsoft Corporation ("Microsoft") to deliver integrated messaging, networking
and Internet solutions and the collaboration on the design and implementation of
packaged services, solutions and support offerings based on Microsoft's
enterprise platform. Under the agreement, Microsoft has contributed $8,400,000
to fund these initiatives and for certain marketing and product development
efforts and the purchase of 1,750,000 common stock warrants. The common stock
warrants are subject to a three-year lock-up provision, based on continuation of
the alliance, and have an exercise price of $10.00 per share. If exercised,
Microsoft's warrants represent approximately 7.1% ownership of the outstanding
common stock of the Company at December 31, 2001. The first of these payments
was received in January 1999 in the amount of $5,900,000. The second payment of
$2,500,000 was received in December 1999. The Company has recorded $4,032,000 of
the 1999 payments received as additional paid in capital for the warrants issued
to Microsoft. The remaining $4,368,000, associated with training, marketing and
product development efforts, was recorded as an offset to expenses incurred
related to this effort.

NOTE 25. VIACOM ALLIANCE

     In August 2001, Switchboard entered into a restructuring agreement with
Viacom, under which, among other things, Switchboard agreed to terminate its
right to the placement of advertising on Viacom's CBS properties with an
expected net present value of approximately $44,500,000 in exchange for,
primarily, the reconveyance by Viacom to Switchboard of approximately 7,500,000
shares of Switchboard's common stock, the cancellation of warrants held by
Viacom to purchase 533,469 shares of Switchboard's common stock and the
reconveyance to Switchboard of the one outstanding share of Switchboard's series
E special voting preferred stock. In addition, as part of the restructuring of
Switchboard's relationship with Viacom, its license to use specified CBS
trademarks terminated on January 26, 2002.


                                       48

<PAGE>

    On October 26, 2001, Switchboard obtained approval for the restructuring
agreement by its stockholders and closed the transactions contemplated by the
restructuring agreement. At the closing, the two individuals who had been
elected directors by Viacom pursuant to Viacom's rights as the holder of
Switchboard's special voting preferred stock resigned as directors of
Switchboard. Due to the reduction in the number of outstanding shares of
Switchboard's stock associated with the closing, the Company became
Switchboard's majority stockholder, owning approximately 54% of Switchboard's
outstanding stock.

    In connection with the termination of its advertising and promotion
agreement with Viacom, Switchboard incurred a loss equal to approximately
$22,200,000 in 2001, which is recorded as a loss on Viacom transaction in the
accompanying statement of operations. The non-cash accounting loss results from
the difference between the net present value of Switchboard's remaining
advertising rights with Viacom, which were terminated, and the value of the
shares of Switchboard's common and preferred stock reconveyed and the warrants
cancelled.

    Subsequently, on February 27, 2002, Viacom exercised its warrant pursuant to
a cashless exercise provision in the warrant, resulting in the net issuance of
386,302 shares of common stock of Switchboard. Additionally, on March 12, 2002,
Switchboard repurchased such 386,302 shares of common stock from Viacom at a
price of $3.25 per share. Switchboard will account for these shares as treasury
stock.

NOTE 26.  AOL ALLIANCE


    In December 2000, Switchboard entered into a Directory Agreement, with
America Online, Inc. ("AOL") to develop a new directory and local advertising
platform and product set to be featured across specified AOL properties (the
"Directory Agreement").

     Switchboard and AOL share specified directory advertisement revenues during
the term of the Directory Agreement. In general (i) Switchboard will receive a
majority of the first $35,000,000 of such directory advertisement revenues and
(ii) Switchboard will receive a lesser share of any additional such directory
advertisement revenues. Switchboard paid AOL $13,000,000 at the signing of the
Directory Agreement. The Directory Agreement calls for a second payment of
$13,000,000 on or before March 11, 2002 subject to the incorporation of the
Directory Platform on the AOL.com, AOL Proper and Digital City properties (the
"AOL Roll-In"), which occurred on January 2, 2002.

    AOL has committed to pay at least $2,000,000 to Switchboard in consulting
or service fees, of which Switchboard had delivered $1,900,000 in services to
AOL through December 31, 2001.

    The Directory Agreement has an initial term of four years, which term is
subject to earlier termination upon the occurrence of specified events,
including, without limitation (a) after 24 months and again after 36 months if
specified revenue targets have not been achieved and neither party has made
additional payments to the other to prevent such termination, (b) if Switchboard
is acquired by one of certain third parties or (c) if AOL acquires one of
certain third parties and AOL pays to Switchboard a termination fee of
$25,000,000.

    In connection with entering into the Directory Agreement, Switchboard issued
to AOL 746,260 shares of its common stock ("AOL Stock Issuance"), which were
restricted from transfer until the AOL Roll-In, and agreed to issue to AOL
746,260 shares of common stock if the Directory Agreement continues after two
years and an additional 746,260 shares of common stock if the Directory
Agreement continues after three years. If Switchboard and AOL renew the
Directory Agreement for at least an additional four years after the initial
term, Switchboard agreed to issue to AOL a warrant to purchase up to 721,385
shares of common stock at a per share purchase price of $4.32. Switchboard
granted AOL "piggy-back" registration rights and up to two Form S-3 demand
registration rights with respect to the foregoing shares of common stock.

      As a result of lower than initially anticipated revenues earned by
Switchboard from the Directory Agreement during the first year of this
arrangement, an impairment review was performed on the net book value of the AOL
Stock Issuance and the restated net prepaid asset related to the Directory
Agreement, which totaled $11,723,000 at December 31, 2001. Revised revenue
projections for the Directory Agreement were developed, and Switchboard
calculated estimated cash flows to be received over the term of the AOL
Agreement. Switchboard determined that the estimated future undiscounted cash
flows were below the carrying value of the AOL Stock Issuance and prepaid asset
related to the Directory Agreement at December 31, 2001. The fair value of the
AOL Stock Issuance and prepaid asset related to the Directory Agreement was then
determined by discounting the cash flows at a rate of 20% which represented a
rate commensurate with the risk involved. As a result, Switchboard recorded an
impairment charge in December 2001 of $11,723,000.

     During the years ended December 31, 2001 and 2000, Switchboard recorded
amortization expense of $4,047,566, as restated, and $411,959, respectively,
related to the prepaid asset related to the Directory Agreement and the AOL
Stock Issuance, as a component of amortization of goodwill, intangibles and
other assets.

     Subsequently, in April 2002 and again in August 2002, the Company amended
its relationship with AOL. The net impact of these two amendments resulted in,
among other things, the elimination of the additional shares to be issued upon
the completion of years two and three; the elimination of the 24 and 36 month
revenue targets and additional potential continuation payments; the replacement
of the second $13,000,000 payment to have been made by March 11, 2002 with a
payment of $2,000,000 which was made in April 2002 and the amendment of the
percentage schedule by which the Company shares in directory advertising revenue
with AOL.

                                       49

<PAGE>

     Revenue recognized from AOL was $4,074,129, or 30.6% of Switchboard
revenue, for 2001. Switchboard anticipates that revenue from AOL will represent
an even greater percentage of its revenue in 2002 and will be a material
component of its overall business. Amounts due from AOL included in accounts
receivable at December 31, 2001 and 2000 were $573,863 and $200,000,
respectively, and unbilled receivables as of December 31, 2001 were $618,357.

NOTE 27.  RELATED PARTIES

    In November 1996 and as amended in March 2000, the Company and Switchboard
entered into a corporate services agreement regarding certain administrative
services, including financial, accounting and payroll advice, treasury, tax and
insurance services for which Switchboard paid the Company a monthly fee based on
Switchboard's headcount and the level of services provided by the Company. In
March 2002, the Company and Switchboard further amended the corporate services
agreement to provide only for telephone services for an amount that is
approximately equal to Switchboard's pro rata share of telephone related costs.
The fee is reviewed and adjusted periodically by mutual agreement of the
parties. For additional items such as development of data processing systems and
programs, legal support, support in financing and acquisition transactions,
general executive and management services, and support for contract bidding,
Switchboard is charged based on ePresence's labor costs for the employee
performing the services.

    Switchboard leases the space it occupies under an agreement with the
Company. Switchboard pays ePresence rent in an amount that is approximately
equal to its pro rata share of the Company's occupancy costs.

    The Chairman of the Board of Directors of Switchboard is also Chairman of
the Board of Directors, President and Chief Executive Officer of the Company.
One director of Switchboard is Senior Vice President and Chief Financial Officer
of the Company.

    The Company currently holds notes receivable for a total of approximately
$1,335,000 from officers and senior executives of the Company. The notes arose
from transactions in 1999, 2000, and 2001 whereby the Company loaned the
officers money to pay federal and state tax obligations with respect to the
vesting and issuance of restricted stock. The notes bear interest at the
applicable Federal rate. The principal plus accrued interest on the remaining
$1,312,000 will be forgiven at a rate of 20% on the anniversary date of the
note, over a five-year period subject to continued employment. The note and
accrued interest are recorded as an other non-current asset.

NOTE 28.  SUBSEQUENT EVENTS (UNAUDITED)

    As a part of the Company's plan to improve results, the Company announced
the closure its operations in the United Kingdom and Germany in the first
quarter of 2002. As a result of this action, the Company anticipates
non-recurring charges of $2,000,000 to $3,000,000 in the first quarter of 2002.

                                       50

<PAGE>

                                     PART IV

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

     (a) The following documents are filed as part of or are included in this
Amendment No. 1 to Annual Report on Form 10-K/A:

     1. Consolidated Financial Statements:

     o Report of Independent Public Accountants for the year ended December 31,
2001.

     o Report of Independent Accountants for the years ended December 31, 2000
and 1999.

     o Consolidated Balance Sheets as of December 31, 2001 and 2000.

     o Consolidated Statements of Operations for the years ended December 31,
2001, 2000 and 1999.

     o Consolidated Statements of Shareholders' Equity for the years ended
December 31, 2001, 2000 and 1999.

     o Consolidated Statements of Cash Flows for the years ended December 31,
2001, 2000 and 1999.

     o Notes to Consolidated Financial Statements.

     2. Consolidated Financial Statement Schedules:

     o Schedule II--Valuation and Qualifying Accounts.

     o Report of Independent Public Accountants for the year ended December 31,
2001.

     o Report of Independent Accountants for the years ended December 31, 2000
and 1999.

     o Schedules other than the one listed above have been omitted since they
are either not required, not applicable or the information is otherwise
included.

     3. Listing of Exhibits:

     o The Exhibits filed as part of this Amendment No. 1 to Annual Report on
Form 10-K/A are listed in the Exhibit Index immediately preceding such Exhibits,
which Exhibit Index is incorporated herein by reference. Documents listed on
such Exhibit Index, except for documents identified by footnotes, are being
filed as exhibits herewith. Documents identified by footnotes are being
incorporated by reference herein and, pursuant to Rule 12b-32 under the
Securities Exchange Act of 1934, reference is made to such documents as
previously filed with the Securities and Exchange Commission.

     (b) The Company filed a Change in Certifying Accountant under Item 4 on
Form 8-K on November 30, 2001. No other reports on Form 8-K were filed by the
Company during the last quarter of the fiscal year ended December 31, 2001.

                                       51

<PAGE>

                                   SCHEDULE II

                                 ePRESENCE, INC.

                        VALUATION AND QUALIFYING ACCOUNTS

              For the Years Ended December 31, 2001, 2000 and 1999
                             (dollars in thousands)

<TABLE>
<CAPTION>
                                                                              Additions
                                                             Balance at      Charged to
                                                            Beginning of      Costs and                     Balance at
                      Description                              Period         Expenses      Deductions     end of Period
                      -----------                           ------------     ----------     ----------     -------------
<S>                                                           <C>             <C>            <C>            <C>
Year ended December 31, 2001 (Restated)
   Reserve for price, sales and doubtful account allowance     $1,278          $2,482         $1,787         $1,973
Year ended December 31, 2000
   Reserve for price, sales and doubtful account allowance     $  869          $  654         $  245         $1,278
Year ended December 31, 1999
   Reserve for price, sales and doubtful account allowance     $2,917          $  834         $2,882         $  869

</TABLE>
                                     52

<PAGE>

                        REPORT OF INDEPENDENT ACCOUNTANTS

To the Board of Directors and Shareholders of ePresence, Inc.:

    Our audits of the consolidated financial statements referred to in our
report dated February 1, 2001 appearing on page 25 of the 2001 Annual Report to
Shareholders of ePresence, Inc. (which report and consolidated financial
statements are incorporated by reference in this Annual Report on Form 10-K/A)
also included an audit of the financial statement schedule for the two years
ended December 31, 2000 noted in Item 14(a)(2) of this Form 10-K/A. In our
opinion, this financial statement schedule for the two years ended December 31,
2000 presents fairly, in all material respects, the information set forth
therein when read in conjunction with the related consolidated financial
statements.


/s/ PricewaterhouseCoopers, LLP


PricewaterhouseCoopers LLP
Boston, Massachusetts
February 1, 2001

                                       53

<PAGE>

                                   SIGNATURES


    Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.


                                       EPRESENCE, INC.
September 19, 2002
                                   By: /s/ Richard M. Spaulding
                                       --------------------------------
                                       Richard M. Spaulding
                                       Senior Vice President and Chief
                                       Financial Officer, Treasurer and
                                       Clerk (Principal Financial and
                                       Principal Accounting Officer)


    Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated.
<TABLE>
<CAPTION>

            Name                              Title                         Date
            ----                              -----                         ----

<S>                                  <C>                              <C>
/s/ William P. Ferry                 Chairman of the Board,           September 18, 2002
-------------------------------      President and Chief
    William P. Ferry                 Executive Officer
                                     (Principal Executive
                                     Officer)

/s/ Richard M. Spaulding             Senior Vice President, Chief     September 18, 2002
-------------------------------      Financial Officer and
    Richard M. Spaulding             Treasurer (Principal
                                     Financial and Principal
                                     Accounting Officer)

/s/ John F. Burton                   Director                         September 18, 2002
-------------------------------
    John F. Burton

/s/ Albert A. Notini                 Director                         September 18, 2002
-------------------------------
    Albert A. Notini

/s/ John J. Rando                    Director                         September 18, 2002
-------------------------------
    John J. Rando

/s/ Fontaine K. Richardson           Director                         September 18, 2002
-------------------------------
    Fontaine K. Richardson

/s/ Robert M. Wadsworth              Director                         September 18, 2002
-------------------------------
    Robert M. Wadsworth
</TABLE>

                                       54

<PAGE>

CERTIFICATIONS

I, William P. Ferry, certify that:

1.  I have reviewed this Amendment No. 1 to Annual Report on Form 10-K/A of
    ePresence, Inc.;

2.  Based on my knowledge, this Amendment No. 1 to Annual Report does not
    contain any untrue statement of a material fact or omit to state a material
    fact necessary to make the statements made, in light of the circumstances
    under which such statements were made, not misleading with respect to the
    period covered by this Amendment No. 1 to Annual Report; and

3.  Based on my knowledge, the financial statements, and other financial
    information included in this Amendment No. 1 to Annual Report, fairly
    present in all material respects the financial condition, results of
    operations and cash flows of the registrant as of, and for, the periods
    presented in this Amendment No. 1 to Annual Report.


Date: September 19, 2002               /s/ William P. Ferry
                                       -------------------------
                                       William P. Ferry

                                       President and Chief Executive Officer
                                       (principal executive officer)


I, Richard M. Spaulding, certify that:

1.  I have reviewed this Amendment No. 1 to Annual Report on Form 10-K/A of
    ePresence, Inc.;

2.  Based on my knowledge, this Amendment No. 1 to Annual Report does not
    contain any untrue statement of a material fact or omit to state a material
    fact necessary to make the statements made, in light of the circumstances
    under which such statements were made, not misleading with respect to the
    period covered by this Amendment No. 1 to Annual Report; and

3.  Based on my knowledge, the financial statements, and other financial
    information included in this Amendment No. 1 to Annual Report, fairly
    present in all material respects the financial condition, results of
    operations and cash flows of the registrant as of, and for, the periods
    presented in this Amendment No. 1 to Annual Report.


Date: September 19, 2002                /s/ Richard M. Spaulding
                                        -------------------------
                                        Richard M. Spaulding
                                        Chief Financial Officer
                                        (principal financial officer)


                                       55

<PAGE>

                                  EXHIBIT INDEX

Number            Title of Document

2(3)              Stock Purchase Agreement by and among the Registrant,
                  Strategic Network Designs, Inc. and the Stockholders of
                  Strategic Network Designs, Inc., dated May 11, 2000.

2A(18)            Amendment to Stock Purchase Agreement among the Company,
                  David R. Rovner and Ranjan Sinja, individually and as the
                  Stockholders' Representative of the stockholders of ePresence
                  CRM, Inc. (formerly Strategic Network Designs, Inc.).

3.1(2)            Second Amended and Restated Articles of Organization of the
                  Registrant.

3.2(16)           Articles of Amendment to Second Amended and Restated Articles
                  of Organization, as filed with the Secretary of the
                  Commonwealth of Massachusetts on May 9, 2000.

3.3(1)            Amended and Restated By-Laws of the Registrant.

3.3A(14)          Amendment No. 1 to Amended and Restated By-Laws of the
                  Registrant.

10.1              (reserved)

10.2              (reserved)

10.3+(15)         1992 Stock Incentive Plan, as amended.

10.3A+(10)        Form of Incentive Stock Option for grant under the 1992
                  Stock Incentive Plan, as amended.

10.3B+(10)        Form of Non-Qualified Stock Option for grant under the 1992
                  Stock Incentive Plan, as amended.

10.3C+(18)        Revised form of Incentive Stock Option for grant under the
                  1992 Stock Incentive Plan, as amended.

10.3D+(18)        Revised form of Non-Qualified Stock Option for grant under
                  the 1992 Stock Incentive Plan, as amended.

10.4+(15)         1992 Director Stock Option Plan, as amended.

10.5+(17)         Deferred Compensation Plan of the Registrant.

10.6+(4)          Employment Agreement dated February 4, 1997 between the
                  Registrant and William P. Ferry.

10.6A+(5)         Amendment No. 1 dated as of June 17, 1997 to Employment
                  Agreement between the Registrant and William P. Ferry.

10.6B+(9)         Amendment No. 2 dated as of October 16, 1998 to Employment
                  Agreement between the Registrant and William P. Ferry.

10.6C+(14)        Amendment No. 3 dated as of December 8, 1999 to Employment
                  Agreement between the Registrant and William P. Ferry.

10.6D+(18)        Amendment No. 4 dated as of November 16, 2000 to Employment
                  Agreement between the Registrant and William P. Ferry.

10.6E+#           Amendment No. 5 to Employment Agreement between the Company
                  and William P. Ferry dated October 15, 2001.

10.7(1)           Lease Agreement dated April 21, 1989, as amended to  date,
                  between the Registrant and CB Westboro C Limited Partnership,
                  a Texas Limited Partnership.

<PAGE>

10.7A(9)         Amendment to Lease Agreement dated April 21, 1993 between the
                 Registrant and CB Westboro C Limited Partnership, a Texas
                 Limited Partnership.

10.7B(18)        Amendment to Lease Agreement dated July 22, 1994 between the
                 Registrant and CB Westboro C Limited Partnership, a Texas
                 Limited Partnership.

10.7C(18)        Amendment to Lease Agreement dated September 19, 1995 between
                 the Registrant and Commonwealth Westboro Limited Partnership, a
                 Massachusetts Limited Partnership (as successor in interest to
                 CB Westboro C Limited Partnership, a Texas Limited
                 Partnership).

10.8(6)          Securities Issuance Agreement dated as of September 4, 1997 by
                 and between Foothill Capital Corporation and the Registrant.

10.8A(18)        Amendment Number One to Securities Issuance Agreement, by and
                 between Foothill Capital Corporation and the Registrant.

10.9(6)          Form of Warrant issued by the Registrant to Foothill Capital
                 Corporation.

10.10(7)         Preferred Stock and Warrant Purchase Agreement dated as of
                 March 5, 1998 between the Registrant and HarbourVest Partners
                 V-Direct Fund L.P.

10.11(16)        Common Stock Purchase Warrant issued to HarbourVest Venture
                 Partners V-Direct Fund L.P. on June 30, 2000, replacing the
                 Series B Convertible Preferred Stock Purchase Warrant, dated as
                 of March 5, 1998.

10.12(16)        Common Stock Purchase Warrant issued to HarbourVest Venture
                 Partners V-Direct Fund L.P. on June 30, 2000, replacing the
                 Series C Convertible Preferred Stock Purchase Warrant, dated as
                 of March 5, 1998.

10.13+(9)        Executive Retention Agreement dated as of October 16, 1998
                 between the Registrant and Richard M. Spaulding.

10.13A+(21)      Amendment No. 1 to Executive Retention Agreement between the
                 Company and Richard M. Spaulding dated July 26, 2001.

10.14+(9)        Executive Retention Agreement dated as of October 16, 1998
                 between the Registrant and Anthony J. Bellantuoni.

10.14A+(21)      Amendment No. 1 to Executive Retention Agreement between the
                 Company and Anthony J. Bellantuoni dated July 26, 2001.

10.15+(9)        Executive Officer Restricted Stock Agreement dated October 16,
                 1998 between the Registrant and William P. Ferry.

10.16+(9)        Executive Officer Restricted Stock Agreement dated October 16,
                 1998 between the Registrant and Richard M. Spaulding.

10.17+(9)        Executive Officer Restricted Stock Agreement dated October 16,
                 1998 between the Registrant and Anthony J. Bellantuoni.

10.18*(11)       Alliance Agreement dated January 8, 1999 between the Registrant
                 and Microsoft Corporation.

10.19(11)        Warrant Purchase Agreement January 8, 1999 between the
                 Registrant and Microsoft.

10.20(11)        Common Stock Purchase Warrant issued by the Registrant to
                 Microsoft on January 8, 1999.

10.21+(11)       Employment Letter dated as of January 15, 1999 between the
                 Registrant and Scott G. Silk.

10.21A+(21)      Amendment No. 1 to Employment Letter between the Company and
                 Scott G. Silk dated July 26, 2001.

10.22+(11)       Non-Qualified Stock Option Agreement dated February 4, 1997
                 granted by the Registrant to William P. Ferry.

<PAGE>

10.23+(11)        Non-Qualified Stock Option Agreement dated June 11, 1997
                  granted by the Registrant to Anthony J. Bellantuoni.

10.24(12)         Common Stock and Warrant Purchase Agreement dated as of
                  June 1, 1999 by and among Switchboard Incorporated, the
                  Registrant and CBS Corporation, as amended.

10.24A(13)        Amendment No. 2 to Common Stock and Warrant Purchase Agreement
                  by and among Switchboard Incorporated, the Registrant and CBS
                  Corporation, effective as of July 1, 1999.

10.25*(12)         Common Stock Purchase Warrant issued by Switchboard
                  Incorporated to CBS Corporation on June 30, 1999.

10.26*(12)        Advertising and Promotion Agreement dated as of June 30, 1999
                  by and among CBS Corporation, the Registrant and Switchboard
                  Incorporated.

10.27(12)         License Agreement dated as of June 30, 1999 by and between CBS
                  Corporation and Switchboard Incorporated.

10.28(12)         Warrant Purchase Agreement dated as of June 1, 1999 by and
                  between the Registrant and CBS Corporation.

10.29(12)         Common Stock Purchase Warrant issued by the Registrant to CBS
                  Corporation on June 30, 1999.

10.30+(14)        Non-Qualified Stock Option Agreement dated October 21, 1999
                  granted by the Registrant to William P. Ferry.

10.31+(14)        Non-Qualified Stock Option Agreement dated December 8, 1999
                  granted by the Registrant to William P. Ferry.

10.32+(14)        Executive Officer Restricted Stock Agreement dated
                  October 8, 1999 between the Registrant and Scott G. Silk.

10.33(16)         Pledge Agreement between the Company and Richard M. Spaulding,
                  dated May 5, 2000.

10.34(16)         Pledge Agreement between the Company and Anthony J.
                  Bellantuoni, dated May 5, 2000.

10.35(18)         Credit Agreement between the Company and Fleet National Bank,
                  dated October 6, 2000, as amended.

10.36(18)         Security Agreement by the Company in favor of Fleet National
                  Bank, dated October 6, 2000.

10.37(18)         Pledge Agreement between the Company and Fleet National Bank,
                  dated October 6, 2000.

10.38+(18)        Corporate Officer Restricted Stock Agreement between the
                  Company and William P. Ferry, dated December 21, 2000.

10.39+(18)        Corporate Officer Restricted Stock Agreement between the
                  Company and William P. Ferry, dated December 21, 2000.

10.40+(18)        Corporate Officer Restricted Stock Agreement between the
                  Company and Richard M. Spaulding, dated December 1, 2000.

10.41+(18)        Corporate Officer Restricted Stock Agreement between the
                  Company and Anthony J. Bellantuoni, dated December 1, 2000.

10.42+(18)        Corporate Officer Restricted Stock Agreement between the
                  Company and Scott G. Silk, dated December 1, 2000.

10.43(18)         Pledge Agreement between the Company and Scott Silk, dated
                  October 8, 2000.

10.43A(21)        Amendment No. 1 to Pledge Agreement between the Company and
                  Scott G. Silk dated July 26, 2001.

<PAGE>

10.44(18)         Pledge Agreement between the Company and Richard Spaulding,
                  dated October 16, 2000.

10.44A(21)        Amendment No. 1 to Pledge Agreement between the Company and
                  Richard M. Spaulding dated July 26, 2001.

10.45(18)         Pledge Agreement between the Company and Anthony Bellantuoni,
                  dated October 16, 2000.

10.45A(21)        Amendment No. 1 to Pledge Agreement between the Company and
                  Anthony J. Bellantuoni dated July 26, 2001.

10.46(18)         Termination of Stockholders' Voting Agreement by and among
                  the Company, Switchboard Incorporated and Viacom Inc.
                  (formerly CBS Corporation), dated January 1, 2001.

10.47+(18)        Non-Qualified Stock Option Agreement between the Company and
                  William P. Ferry, dated January 25, 2001.

10.48+(19)        2001 Incentive Stock Plan.

10.49+(20)        2001 Stock Incentive Plan, as amended.

10.50+(20)        Form of Incentive Stock Option Agreement under the 2001 Stock
                  Incentive Plan, as amended.

10.51+(20)        Form of Non-Statutory Stock Option Agreement under the 2001
                  Stock Incentive Plan, as amended.

10.52(21)         Secured Promissory Note issued to the Company by Richard M.
                  Spaulding, dated July 26, 2001.

10.53(21)         Secured Promissory Note issued to the Company by Anthony J.
                  Bellantuoni, dated July 26, 2001.

10.54(21)         Secured Promissory Note issued to the Company by Scott G.
                  Silk, dated July 26, 2001.

10.55+#           Letter of Employment dated as of August 11, 1999 between the
                  Company and Rodney P. Jackson.

10.56+#           Restricted Stock Agreement between the Company and Rodney P.
                  Jackson dated October 19, 2000.

10.57+#           Non-Statutory Stock Option Agreement dated January 25, 2001
                  granted by the Registrant to Rodney P. Jackson.

10.58+#           Non-Statutory Stock Option Agreement dated July 26, 2001
                  granted by the Registrant to Scott G. Silk.

10.59#            Promissory Note issued to the Company by William P. Ferry
                  dated July 26, 2001.

10.60#            Secured Promissory Note issued to the Company by Scott G.
                  Silk dated October 8, 2001.

10.61#            Pledge Agreement between the Company and Scott G. Silk dated
                  October 8, 2001.

10.62+#           Non-Qualified Stock Option Agreement dated October 15, 2001
                  granted by the Registrant to William P. Ferry.

21#               Subsidiaries of the Registrant.

23.1**            Consent of PricewaterhouseCoopers LLP.

23.2#             Consent of Arthur Andersen LLP.

23.3***           Consent of Ernst & Young LLP.

99.1#             Confirmation Letter to the Securities and Exchange Commission
                  from the Company in accordance with Temporary Note 3T to
                  Article 3 of Regulation S-X.

99.2              Certification pursuant to 18 U.S.C. Section 1350, as adopted
                  pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

<PAGE>

99.3              Certification pursuant to 18 U.S.C. Section 1350, as adopted
                  pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

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

+Management contract or compensation plan or arrangement required to be filed as
an exhibit pursuant to Item 14(c) of Form 10-K.

*Confidential treatment has been requested as to certain portions, which
portions have been omitted and filed separately with the Securities and Exchange
Commission.

**Amended and Restated Exhibit.

***Superseding Exhibit to Exhibit 23.2 Consent of Arthur Andersen LLP.

#Previously Filed.

(1) Incorporated herein by reference to the exhibits to the Registrant's
Registration statement on Form S-1 (File No. 33-49194).

(2) Incorporated herein by reference to the exhibits to the Registrant's
Registration statement on Form S-8 (File No. 33-54140).

(3) Incorporated herein by reference to the exhibits to the Registrant's Current
Report on Form 8-K, filed May 25, 2000.

(4) Incorporated herein by reference to the exhibits to the Registrant's Annual
Report on Form 10-K for the fiscal year ended December 31, 1996.

(5) Incorporated herein by reference to the exhibits to the Registrant's
Quarterly Report on Form 10-Q for the fiscal quarter ended June 30, 1997.

(6) Incorporated herein by reference to the exhibits to the Registrant's
Quarterly Report on Form 10-Q for the fiscal quarter ended September 30, 1997.

(7) Incorporated herein by reference to the exhibits to the Registrant's Current
Report on Form 8-K dated March 5, 1998.

(8) Incorporated herein by reference to the exhibits to the Registrant's Annual
Report on Form 10-K for the fiscal year ended December 31, 1997.

(9) Incorporated herein by reference to the exhibits to the Registrant's Annual
Report on Form 10-K for the fiscal year ended December 31, 1998.

(10) Incorporated herein by reference to the exhibits to the Registrant's
Registration Statement on Form S-8 (File No. 333-70553).

(11) Incorporated herein by reference to the exhibits to the Registrant's
Quarterly Report on Form 10-Q for the fiscal quarter ended March 31, 1999.

(12) Incorporated herein by reference to the exhibits to the Registrant's
Quarterly Report on Form 10-Q for the fiscal quarter ended June 30, 1999.

(13) Incorporated herein by reference to Exhibit 10.4A to Switchboard
Incorporated's Registration Statement on Form S-1 (File No. 333-90013), filed on
October 29, 1999, as amended.

(14) Incorporated herein by reference to the exhibits to the Registrant's Annual
Report on Form 10-K for the fiscal year ended December 31, 1999, filed March 30,
2000.

(15) Incorporated herein by reference to the exhibits to the Registrant's
Quarterly Report on Form 10-Q for the fiscal quarter ended March 31, 2000.

(16) Incorporated herein by reference to the exhibits to the Registrant's
Quarterly Report on Form 10-Q for the fiscal quarter ended June 30, 2000.

(17) Incorporated herein by reference to the exhibits to the Registrant's
Registration Statement on Form S-8, filed June 22, 2000 (File No. 333- 39860).

<PAGE>

(18) Incorporated herein by reference to the exhibits to the Registrant's Annual
Report on Form 10-K for the fiscal year ended December 31, 2000, filed April 2,
2001.

(19) Incorporated herein by reference to the exhibits to the Registrant's
Registration Statement on Form S-8, filed May 11, 2001 (File No. 333- 60764).

(20) Incorporated herein by reference to the exhibits to the Registrant's
Quarterly Report on Form 10-Q for the fiscal quarter ended June 30, 2001

(21) Incorporated herein by reference to the exhibits to the Registrant's
Quarterly Report on Form 10-Q for the fiscal quarter ended September 30, 2001.