SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549

                                    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,   2000
-----------------

                                       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 number 1-7636

                          DYNACORE HOLDINGS CORPORATION
                          (f/k/a DATAPOINT CORPORATION)

             (Exact name of registrant as specified in its charter)

              Delaware                                   74-1605174
(State or other jurisdiction of            (I.R.S. Employer Identification No.)
 incorporation or organization)

               8410 Datapoint Drive, San Antonio, Texas 78229-8500
                (Address of principal executive office and zip code)

                                 (210) 593-7000
              (Registrant's telephone number, including area code)


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

        Title of each class       Name of each exchange on which registered

Common Stock, $.01 par value     National Daily Quotation System "pink sheets"

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

    Indicate 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 or any amendment to this
Form 10-K. Yes X No .

    Applicable only to registrants involved in bankruptcy proceedings during the
preceding  five years:  Indicate by check mark whether the  registrant has filed
all  documents  and reports  required to be filed by Section 12, 13 or 15 (d) of
the Securities Exchange Act of 1934 subsequent to the distribution of securities
under a plan confirmed by a court. Yes X No .

    As of March 31 2001,  10,000,000  shares of  Dynacore  Holdings  Corporation
Common Stock were  outstanding  and the  aggregate  market value (based upon the
last reported sale price of the Common Stock) of the shares of Common Stock held
by non-affiliates was approximately  $2.2 million.  (For purposes of calculating
the  preceding  amount  only,  all  directors  and  executive  officers  of  the
registrant are assumed to be affiliates.)
<PAGE>


ITEM 8.  Financial Statements and Supplementary Data.


              INDEX TO FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA


                                                                        Page

Report of Marks Paneth & Shron LLP
     Independent Auditors                                               18

Report of Ernst & Young LLP                                             19
     Independent Auditors

Consolidated Financial Statements

    Consolidated Statements of Operations for the period
          December 19 - 31, 2000; January 1 - December 18, 2000;
          Five months ended December 31, 1999;
          and fiscal years 1999 and 1998                                20

    Consolidated Balance Sheets as of December 31, 2000
          and July 31, 1999                                             22

    Consolidated Statements of Cash Flows for the period
          December 19 - 31, 2000; January 1 - December 18, 2000;
          Five months ended December 31, 1999;
          and fiscal years 1999 and 1998                                23

    Consolidated  Statements of  Stockholders' Equity  (Deficit)
          for the period December 19 - 31, 2000;
          January 1 - December 18, 2000;
          Five months ended December 31, 1999;
          and fiscal years 1999 and 1998                                24

    Notes to Consolidated Financial Statements                          25





<PAGE>


REPORT OF MARKS PANETH & SHRON LLP
INDEPENDENT AUDITORS


The Board of Directors
Dynacore Holdings Corporation


We have audited the accompanying consolidated balance sheet of Dynacore Holdings
Corporation  (formerly known as Datapoint  Corporation)  and  subsidiaries as of
December  31,  2000,  and the related  consolidated  statements  of  operations,
stockholders'  equity  (deficit),  and cash flows for the period  December 19 to
December 31,  2000,  the period  January 1 to December  18,  2000,  and the five
months ended December 31, 1999. Our audits also included the financial statement
schedule  listed in the index at Item 14(a) as of December  31, 2000 and for the
period  December 19 to December 31, 2000,  the period  January 1 to December 18,
2000, and five months ended December 31, 1999.  These  financial  statements and
schedule are the responsibility of the Company's management.  Our responsibility
is to express an opinion on these consolidated financial statements based on our
audit.

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

In our opinion, the consolidated  financial statements referred to above present
fairly,  in all  material  respects,  the  consolidated  financial  position  of
Dynacore  Holdings  Corporation and subsidiaries as of December 31, 2000 and the
consolidated  results  of its  operations  and its  cash  flows  for the  period
December 19 to December 31, 2000, the period January 1 to December 18, 2000, and
five months ended  December 31, 1999 in conformity  with  accounting  principles
generally accepted in the United States of America.

As discussed in the notes to the consolidated  financial  statements,  effective
December 18, 2000, the Company  emerged from  bankruptcy and applied fresh start
accounting. As a result, the consolidated balance sheet as of December 31, 2000,
and the related  statements of  consolidated  operations  and cash flows for the
period December 19 to December 31, 2000, are presented on a different basis than
that for the periods before fresh start, and therefore, are not comparable.





                                                     Marks Paneth & Shron LLP

New York, New York
March 23, 2001



<PAGE>


REPORT OF ERNST & YOUNG LLP
INDEPENDENT AUDITORS

The Board of Directors
Dynacore Holdings Corporation

We have audited the accompanying consolidated balance sheet of Dynacore Holdings
Corporation  (formerly Datapoint  Corporation) and subsidiaries (the Company) as
of July  31,  1999  and  the  related  consolidated  statements  of  operations,
stockholders'  equity  (deficit) and cash flows for each of the two fiscal years
in the period  ended July 31,  1999.  Our audits  also  included  the  financial
statement schedule listed in the index at Item 14(a). These financial statements
and  schedule  are  the   responsibility  of  the  Company's   management.   Our
responsibility  is to  express  an opinion  on these  financial  statements  and
schedule based on our audits.

We conducted our audits in accordance with 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 audits  provide a  reasonable  basis for our
opinion.

In our opinion, the consolidated  financial statements referred to above present
fairly, in all material  respects,  the consolidated  financial  position of the
Company at July 31, 1999 and the consolidated  results of its operations and its
cash flows for each of the two fiscal years in the period ended July 31, 1999 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,  presents fairly
in all material respects the information set forth therein.

The  accompanying  consolidated  financial  statements  and  schedule  have been
prepared  assuming  that the Company will continue as a going  concern.  As more
fully  described in the Note 3 to the  consolidated  financial  statements,  the
Company incurred  recurring net losses and had a working capital and net capital
deficiency at July 31, 1999. These conditions raised substantial doubt about the
Company's  ability to continue as a going concern.  The financial  statements do
not  include  any  adjustments  to reflect the  possible  future  effects on the
recoverability and classification of assets or the amounts and classification of
liabilities that may result from the outcome of this uncertainty.





                                                         Ernst & Young LLP



Dallas, Texas
November 1, 1999

<PAGE>

CONSOLIDATED STATEMENTS OF OPERATIONS
Dynacore Holdings  Corporation and Subsidiaries For the period December 19 - 31,
2000;  January 1 - December 18, 2000;  Five Months Ended  December 31, 1999; and
Fiscal Years 1999 and 1998 (In thousands, except share and per share data)
<TABLE>
<CAPTION>

                                          Successor                                     Predecessor
                                          --------------- -----------------------------------------------------------------
                                             2000             2000          Five Months Ended
                                        12/19 - 12/31     01/01 - 12/18         12/31/99            07/31/99       08/01/98
---------------------------------------------------------------------------------------------------------------------------
<S>                                     <C>               <C>               <C>                    <C>             <C>
Revenue:
Sales                                              $--          $37,819          $27,932             $78,687        $88,924
Service and other                                  --            25,137           23,928              59,598         62,521
---------------------------------------------------------------------------------------------------------------------------
Total revenue                                      --            62,956           51,860             138,285        151,445

Operating costs and expenses:
Cost of sales                                      --            28,884           21,831              60,740         70,029
Cost of service and other                          --            19,502           17,143              41,958         40,480
Research and development                           --               491              490               1,965          2,466
Selling, general and administrative               173            17,083           13,544              35,695         33,300
Restructuring costs                                22                --              624                 813             96
---------------------------------------------------------------------------------------------------------------------------
Total operating costs and expenses                195            65,960           53,632             141,171        146,371
---------------------------------------------------------------------------------------------------------------------------

Operating  income (loss)                         (195)           (3,004)          (1,772)             (2,886)         5,074

Non-operating income (expense):
Interest expense                                   --            (1,993)          (2,378)             (5,731)        (6,148)
Other, net                                       (116)            1,924              (35)                196          1,195
Reorganization items:
Gain on sale of European Operations                --            52,473               --                  --             --
---------------------------------------------------------------------------------------------------------------------------
Income (loss)  before  income taxes
 and extraordinary credit                        (311)           49,400           (4,185)             (8,421)           121
Income taxes (benefit)                             --            (1,420)             328                 835          1,345
---------------------------------------------------------------------------------------------------------------------------
Income (loss) before
 extraordinary credit                            (311)           50,820           (4,513)             (9,256)        (1,224)
Extraordinary credits:
  Fresh start adjustments                          --             3,771               --               1,707            555
  Debt extinguishment                              --            26,488               --                  --             --
---------------------------------------------------------------------------------------------------------------------------
Net income (loss)                               $(311)          $81,079          $(4,513)            $(7,549)         $(669)
============================================================================================================================

Net income (loss), adjusted for preferred
stock dividends paid or accumulated plus
gain on exchange and retirement of
preferred stock -
Net Income (loss) applicable to common          $(311)          $95,513          $(4,678)            $(7,927)       $(1,391)
============================================================================================================================

Basic income (loss) per common share:
Income (loss) before extraordinary credit      $(.03)            $12.10          $(1.13)            $ (2.42)         $(.48)
Gain on the exchange and retirement of
   preferred stock                                 --                                 --                 .07             --
Extraordinary credit-fresh start adjustments                        .91               --                  --             --
Extraordinary credit-debt extinguishment           --             10.03               --                 .42            .14
---------------------------------------------------------------------------------------------------------------------------
Net income (loss) per common share             $(.03)            $23.04          $(1.13)             $(1.93)         $(.34)
===========================================================================================================================

Diluted income (loss) per common share:
Income (loss) before extraordinary credit      $(.03)            $10.25          $(1.13)            $ (2.42)         $(.48)
Gain on the exchange and retirement of
   preferred stock                                 --                                 --                 .07             --
Extraordinary credit-fresh start adjustments                        .74               --                  --             --
Extraordinary credit-debt extinguishment           --              5.17               --                 .42            .14
---------------------------------------------------------------------------------------------------------------------------
Net income (loss) per common share             $(.03)            $16.16          $(1.13)             $(1.93)         $(.34)
===========================================================================================================================

=========================================================================================
Average common shares outstanding:
        Basic                              10,000,000         4,145,770        4,131,074           4,104,029      4,045,963
        Diluted                            10,000,000         5,118,172        4,131,074           4,104,029      4,045,963


See accompanying Notes to Consolidated Financial Statements.
</TABLE>

<PAGE>

CONSOLIDATED BALANCE SHEETS
Dynacore  Holdings  Corporation and Subsidiaries  December 31, 2000 and July 31,
1999 (In thousands, except share data)
<TABLE>
<CAPTION>

                                                                                Successor          Predecessor
                                                                                   2000               1999
----------------------------------------------------------------------------------------------------------
Assets

<S>                                                                             <C>                 <C>
Current assets:
    Cash and cash equivalents                                                     $7,304            $3,568
    Restricted cash and cash equivalents                                             317               328
    Accounts receivable, net of allowance for doubtful
      accounts of $0 and $1,305, respectively                                        359            32,130
    Inventories                                                                       --             2,632
    Prepaid expenses and other current assets                                        309             2,272
    ------------------------------------------------------------------------------------------------------
        Total current assets                                                       8,289            40,930

Fixed assets, net                                                                    102             5,928
Other assets, net                                                                    535             2,475
Reorganization value in excess of amounts allocable to identifiable assets         3,768                --
----------------------------------------------------------------------------------------------------------
                                                                                 $12,694           $49,333
==========================================================================================================

Liabilities and Stockholders' Equity (Deficit)

Current liabilities:
    Payables to banks                                                                 $--           $6,676
    Current maturities of long-term debt                                              --             4,960
    Accounts payable                                                                 297            14,451
    Accrued expenses                                                               1,616            22,890
    Deferred revenue                                                                  --             9,311
    Income taxes payable                                                              --             2,175
----------------------------------------------------------------------------------------------------------
        Total current liabilities                                                  1,913            60,463

Long-term debt, exclusive of current maturities                                       --            50,000
Accrued pension  and post employment liabilities                                   3,192                --
Deferred federal income tax                                                          400               687
Other liabilities                                                                     --            10,311

Commitments and contingencies

Stockholders' equity (deficit):
    Predecessor Preferred stock of $1.00 par value.  Shares authorized 10,000,000;
       shares issued and outstanding  661,967 in 1999 (aggregate liquidation
       preference, including dividends in arrears, $16,549 in 1999).                  --               662
    Predecesssor Common stock of $0.25 par value.  Shares authorized 9,007,080;
       shares issued 4,726,739, including treasury shares of 598,066 in 1999.         --             5,248
    Successor Common stock of $0.01 par value.  Shares authorized 30,000,000;
       shares issued 10,000,000                                                      100                --
    Paid in capital                                                                7,400           212,733
    Accumulated other comprehensive income                                            --              (354)
    Retained equity (deficit)                                                       (311)         (288,292)
    Treasury stock, at cost                                                           --            (2,125)
-----------------------------------------------------------------------------------------------------------
        Total stockholders' equity (deficit)                                       7,189           (72,128)
-----------------------------------------------------------------------------------------------------------
                                                                                 $12,694           $49,333
==========================================================================================================

See accompanying Notes to Consolidated Financial Statements.
</TABLE>


<PAGE>


CONSOLIDATED STATEMENTS OF CASH FLOWS
Dynacore Holdings  Corporation and Subsidiaries For the period December 19 - 31,
2000;  January 1 - December 18, 2000;  Five Months Ended  December 31, 1999; and
Fiscal Years 1999 and 1998 (In thousands)
<TABLE>
<CAPTION>
                                                         Successor                      Predecessor
                                                         ----------     -------------------------------------------------------
                                                             2000          2000
                                                          12/19-12/31    01/01-12/18    12/31/99           1999            1998
-------------------------------------------------------------------------------------------------------------------------------
<S>                                                       <C>            <C>            <C>             <C>              <C>
Cash flows from operating activities:
Net income (loss)                                           $(311)       $81,079         $(4,513)       $(7,549)          $(669)
Adjustments to reconcile net income (loss) to net cash
provided from (used in) operating activities:
Depreciation                                                    5            801           1,470          3,179           3,785
Amortization of reorganized value in excess of amounts
     allocable to identifiable assets                           8             --              --             --              --
Officer stock compensation                                    750             --              --             --              --
Provision for losses (recoveries) on accounts receivable       --             35            (203)          (299)             33
Realized gain on sale of European Operations                   --        (52,473)             --           (273)         (1,205)
Gain on debt extinguishment                                    --        (26,488)             --         (1,707)           (555)
Non-cash pension expense                                       --             --              --          2,761           2,047
Deferred income taxes                                          --            188              60           (616)            836
Fresh start accounting adjustments                             --         (3,771)             --             --              --
Changes in assets and liabilities:
(Increase) Decrease in receivables                            (12)        (4,303)            714           (406)         (7,515)
(Increase) decrease in inventory                               --            (53)          1,008            354           1,139
Increase (Decrease) in accounts payable and accrued expenses(1,637)       12,568           1,044         (1,960)          2,359
Increase (Decrease) in other liabilities and deferred credits  --         (3,487)         (1,254)        (1,948)           (470)
Other, net                                                    (24)        (1,293)            (94)         1,302          (2,058)
--------------------------------------------------------------------------------------------------------------------------------
Net cash provided from (used in) operating activities      (1,221)         2,803          (1,768)        (7,162)         (2,273)

Cash flows from investing activities:
Payments for fixed assets                                      --         (1,513)         (1,729)        (3,312)         (2,354)
Proceeds from disposition of European Operations               --         43,306              --          2,111           3,200
  (net of cash retained by European subsidiaries of $1,819)
Other, net                                                     --            432             153            411             108
-------------------------------------------------------------------------------------------------------------------------------
Net cash provided from (used in) investing activities          --         42,225          (1,576)          (790)            954

Cash flows from financing activities:
Payments on borrowings                                         --        (50,467)        (49,811)       (90,289)        (84,939)
Proceeds from borrowings                                       --         46,902          51,692         89,636          82,637
Debt extinguishment                                            --        (34,868)             --             --              --
Restricted cash for letters of credit                          --            (19)             30             24            (198)
--------------------------------------------------------------------------------------------------------------------------------
Net cash provided from (used in) financing activities          --        (38,452)          1,911           (629)         (2,500)


Effect of foreign currency translation on cash                 --           (140)            (46)            48             430
-------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in cash and cash equivalents       (1,221)         6,436          (1,479)        (8,533)         (3,389)
Cash and cash equivalents at beginning of period            8,525          2,089           3,568         12,101          15,490
-------------------------------------------------------------------------------------------------------------------------------
Cash and cash equivalents at end of period                 $7,304         $8,525          $2,089         $3,568         $12,101
===============================================================================================================================

Cash payments for:
Interest                                                       --           $341            $467         $5,778          $6,188
Income taxes                                                   --           $267            $324            778             807

See accompanying Notes to Consolidated Financial Statements.
</TABLE>

<PAGE>

CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIT)
Dynacore Holdings Corporation and Subsidiaries for the period December 19 - 31,
 2000, January 1 - December 18, 2000;
 five months ended December 31, 1999, and Fiscal Years 1999 and 1998
(In thousands)
<TABLE>
<CAPTION>                                                                                                 Accumulated
                                                         $1.00                                                Other
(Predecessor)                               Common     Preferred     Paid In      Retained    Treasury    Comprehensive
                                             Stock       Stock       Capital      Deficit       Stock     Income (Loss)      Total
<S>                                          <C>            <C>       <C>         <C>           <C>                <C>     <C>
                                          -----------------------------------------------------------------------------------------
-----------------------------------------------------------------------------------------------------------------------------------
Balance at August 2, 1997                     $ 5,248        $ 722    $ 212,655   $ (276,202)   $ (6,632)          $ 125   $(64,084)
-----------------------------------------------------------------------------------------------------------------------------------
Net loss                                            -            -            -         (669)          -               -       (669)
Foreign currency translation adjustment             -            -            -            -           -           1,629      1,629
Pension liability adjustment                        -            -            -            -           -          (1,596)    (1,596)
                                                                                                                         ----------
   Comprehensive loss                                                                                                         (636)
Preferred Stock conversion                          -            -            -       (1,078)      1,312               -       234
Stock options exercised                             -            -            -          (59)         84               -        25
Common issued to 401(k) plan                        -            -            -         (658)        658               -         -
Other                                               -            -            -           11          13               -        24
-----------------------------------------------------------------------------------------------------------------------------------
Balance at August 1, 1998                     $ 5,248        $ 722    $ 212,655   $ (278,655)   $ (4,565)          $ 158   $(64,437)
-----------------------------------------------------------------------------------------------------------------------------------
Net loss                                            -            -            -       (7,549)          -               -     (7,549)
Foreign currency translation adjustment             -            -            -            -           -              60         60
Pension liability adjustment                        -            -            -            -           -            (572)      (572)
                                                                                                                         -----------
   Comprehensive loss                                                                                                        (8,061)
Preferred Stock conversion                          -          (60)           -         (929)        989               -          -
Stock options exercised                             -            -            -         (162)        184               -         22
Common issued to 401(k) plan                        -            -            -       (1,167)      1,267               -        100
Other                                               -            -           78          170           -               -        248
------------------------------------------------------------------------------------------------------------------------------------
Balance at July 31, 1999                      $ 5,248        $ 662    $ 212,733   $ (288,292)   $ (2,125)         $ (354)  $(72,128)
------------------------------------------------------------------------------------------------------------------------------------
Net loss                                            -            -            -       (4,513)          -               -     (4,513)
Foreign currency translation adjustment             -            -            -            -           -            (110)      (110)
Pension liability adjustment                        -            -            -            -           -              28         28
                                                                                                                         -----------
   Comprehensive loss                                                                                                        (4,595)
Common issued to 401(k) plan                        -            -            -         (169)        179               -         10
Other                                               -            -            -          157           -               -        157
------------------------------------------------------------------------------------------------------------------------------------
Balance at December 31, 1999                  $ 5,248        $ 662    $ 212,733   $ (292,817)   $ (1,946)         $ (436)  $(76,556)
-----------------------------------------------------------------------------------------------------------------------------------
Net income before extraordinary items               -            -            -       50,820           -               -     50,820
Debt extinguishment                                                                   26,488                                 26,488
Fresh start adjustments - gains                                                        3,771                                  3,771
                                                                                                                         -----------
   Net income after extraordinary items                                                                                       81,079
Foreign currency translation adjustment             -            -            -            -           -          (6,192)    (6,192)
Pension liability adjustment                        -            -            -            -           -           6,628      6,628
                                                                                                                         -----------
   Comprehensive income                                                                                                       81,515
Preferred Stock conversion                          -          (20)           -         (319)        339               -          -
Common issued to 401(k) plan                        -            -            -         (243)        261               -         18
Debt extinguishment                                 -            -        2,624            -           -               -      2,624
Fresh start adjustments - reclassifications    (5,148)        (642)    (207,957)     212,401       1,346               -          -
Other                                               -            -            -         (101)          -               -       (101)
------------------------------------------------------------------------------------------------------------------------------------
Balance at December 18, 2000                    $ 100          $ -      $ 7,400          $ -         $ -             $ -    $ 7,500
------------------------------------------------------------------------------------------------------------------------------------
(Successor)
Net loss                                            -            -            -         (311)          -               -       (311)
------------------------------------------------------------------------------------------------------------------------------------
Balance at December 31, 2000                    $ 100          $ -      $ 7,400       $ (311)        $ -             $ -    $ 7,189
------------------------------------------------------------------------------------------------------------------------------------
See accompanying Notes to Consolidated Financial Statements.
</TABLE>

<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Dynacore Holdings  Corporation and Subsidiaries For the period December 19 - 31,
2000;  January 1 - December 18, 2000;  Five Months Ended December 31, 1999; July
31, 1999, and August 1, 1998 (Dollars in thousands, except share data)


1.        Summary of Significant Accounting Policies

Liquidity

The Company  believes its available  cash will be sufficient to satisfy its cash
requirements for 2001.

Fiscal Year

On June 30, 2000 the Company  changed its fiscal year to a calendar year end and
also changed its name to Dynacore  Holdings  Corporation in conjunction with the
sale of its European Operations. The transition period is the period from August
1, 1999 to December 31, 1999.  Prior to August 1, 1999,  the Company  utilized a
52-53 week fiscal year and  references to 1999 and 1998 are for the fiscal years
ended July 31, 1999 and August 1, 1998, respectively. December 18, 2000 (January
1, 2000 to  December  18,  2000) is the  period in 2000,  which was prior to the
Effective Date of the Company's  reorganization plan  ("Predecessor").  December
31, 2000 (December 19, 2000 - December 31, 2000) is the period,  in 2000,  which
was  subsequent  to the  Effective  Date of the  Company's  reorganization  plan
("Successor").

Principles of Consolidation

The consolidated  financial  statements  include the accounts of the Company and
its majority-owned subsidiaries,  all of which are wholly-owned except Corebyte,
Inc.,  which is 80% owned.  Intercompany  accounts  and  transactions  have been
eliminated upon consolidation.

Cash and Cash Equivalents

Cash equivalents include short-term,  highly-liquid  investments with maturities
of three months or less from date of acquisition and, as a result,  the carrying
value   approximates   fair  value  because  of  the  short  maturity  of  those
instruments.

Inventories

Inventories  are stated at the lower of standard  cost  (approximates  first-in,
first-out) or market  (replacement  cost as to raw materials and net  realizable
value as to work in process and finished products).

Fixed Assets

Fixed assets are carried at cost and  depreciated  for financial  purposes using
straight-line  and  accelerated  methods at rates based on the economic lives of
the assets or the related lease terms for leasehold improvements:

        Leasehold improvements                              3-5  years
        Machinery, equipment, furniture and fixtures        3-10 years
        Equipment leased to customers                          4 years
        Field support spares                                   3 years

Major improvements that add to the productive  capacity or extend the life of an
asset are  capitalized  while repairs and  maintenance are charged to expense as
incurred.
<PAGE>

Risk Concentration

Financial  instruments that potentially subject the Company to concentrations of
credit risk consist of cash and cash equivalents, and prior to June 30, 2000, of
accounts  receivable.   Concentrations  of  credit  risk  with  respect  to  the
receivables  were limited due to the large number of customers in the  Company's
customer base and their dispersion across industries. The Company primarily sold
to customers  in Europe  within,  but not limited to, the  banking,  automotive,
government, libraries, and telecommunications industries. The Company maintained
an  allowance  for losses  based upon the  expected  collectibility  of accounts
receivable.  At December  31,  2000,  the  Company had $966 on deposit  with one
prominent  Texas bank. At the same date $5,013 and $2,370,  respectively of cash
equivalents  were  invested  in very  short  term  notes  issued by the  Federal
National Mortgage  Association and the Federal Home Loan Bank, both of which are
federal government sponsored corporations with extensive, although not unlimited
United States Treasury backing. These amounts exceed the amount of cash and cash
equivalents included on the balance sheet because of outstanding checks.

Debt

The carrying  amount and the fair value of the  Company's  debt at July 31, 1999
was:

                                                                      Estimated
                                                  Carrying Amount    Fair Value
    8-7/8% convertible subordinated debentures           $54,960      $22,259

The fair value of the Company's 8-7/8% convertible  subordinated  debentures was
based on a quoted market price at July 31, 1999.

Translation of Foreign Currencies

Management  had  determined  that  all of  the  Company's  foreign  subsidiaries
operated   primarily  in  local  currencies  which  represented  the  functional
currencies  of  the   subsidiaries.   All  assets  and  liabilities  of  foreign
subsidiaries   were  translated  into  U.S.  dollars  using  the  exchange  rate
prevailing  at the balance  sheet date,  while income and expense  accounts were
translated at average exchange rates during the year.

Reclassifications

Certain  reclassifications to the financial statements for prior years have been
made to conform to the 2000 presentation. Unless stated otherwise, this includes
all data related to the  Company's  old common stock which has been  restated to
reflect the equivalent  number of new common stock at the rate of .225177 shares
of new common stock for each share of old common stock.

Revenue Recognition

The Company's Corebyte  subsidiary derives its revenue from the sale of internet
based application  software.  For all other operations,  the Company derived its
revenue from hardware and software  products and services.  Services provided by
the Company included hardware and software maintenance,  installation, and basic
consulting  services.  Revenue  was  recognized  in  accordance  with  following
criteria:

Hardware  Products.  Sales  revenue  was  generally  recognized  at the  time of
shipment,  provided no future  vendor  obligations  existed and  collection  was
probable.  If such  obligations  were present in the  contract,  revenue was not
recognized until such time as the contractual obligations were met.

Software  Products.  The  Company  generated  software  license  revenue  as  an
authorized  reseller of  third-party  software  products.  Revenue from software
license fees were generally  recognized upon delivery,  provided payment was due
within one year and was probable of  collection.  If  acceptance  was  required,
software license revenue was recognized upon customer acceptance.

In fiscal 1999 the Company  adopted,  American  Institute  of  Certified  Public
Accountants Statement of Position 97-2, Software Revenue Recognition,  which set
forth new guidelines for recognizing  revenue on software  sales.  The statement
did not have a material  effect on the Company's  1999  financial  statements as
compared to prior years presented. In December 1998, Statement of Position 98-9,
Modification of SOP 97-2, Software Revenue Recognition,  with Respect to Certain
Transactions"  ("SOP 98-9") was released.  SOP 98-9 amends certain provisions of
SOP 97-2 relating to revenue recognition for multiple element arrangements.  SOP
98-9 was  effective  for  transactions  that were  entered  into in fiscal years
beginning after March 15, 1999. The  requirements of SOP 98-9 did not materially
change the Company's financial reporting.
<PAGE>

Services.  Revenue from installation and consulting  services were recognized as
services  were  performed  or ratably  over the  contract  period.  Hardware and
software  maintenance  revenue was deferred at the time of product  shipment and
was recognized ratably over the term of the support period.

Income Taxes

The Company  accounts for income taxes under the liability  method in accordance
with  FASB   Statement  No.  109.  No  tax  provision  has  been  made  for  the
undistributed  earnings of foreign  subsidiaries as the undistributed  earnings,
indefinitely   reinvested  in  the  international  business,  of  the  Company's
remaining foreign subsidiaries at December 31, 2000 was zero.

Net Income (Loss) per Common Share

The  following  tables  depict the  computation  of basic and diluted net income
(loss) per common share.

As a result of the new common stock which was issued on the Effective  Date, all
share data has been  adjusted  to reflect  its  issuance  at the rate of .225177
shares of new common Stock for each share of old common stock.

SUCCESSOR COMPANY
                                 12/19/00 - 12/31/00
                               Income            Per
                               (Loss)   Shares   Share
------------------------------------------------------
Income (loss)  before extraordinary
  credit                       $(311)
Extraordinary credit              --
-------------------------------------------------------
Basic and Diluted              $(311) 10,000     $(0.03)
--------------------------------------------------------

The per share  computations  for the period ended 12/31/00 exclude the following
shares for stock options and convertible  debentures  because their effect would
have been antidilutive:

                                    12/31/00
    Stock options                       750
    Convertible preferred stock          --
    Convertible debentures               --

<TABLE>
<CAPTION>

PREDECESSOR COMPANY
                               01/01/00 - 12/18/00      08/01/99 - 12/31/99                1999                        1998
                               -------------------      -------------------                ----                        ----
                               Income            Per      Income           Per       Income           Per      Income           Per
                               (Loss)   Shares   Share    (Loss)  Shares   Share    (Loss)    Shares Share    (Loss)   Shares  Share
------------------------------------------------------------------------------------------------------------------------------------
<S>                          <C>        <C>      <C>     <C>      <C>      <C>    <C>         <C>    <C>      <C>     <C>       <C>
Income (loss)  before extraordinary
  credit                     $50,820                     $(4,513)                 $(9,256)                    $(1,224)
Preferred stock dividends
  accumulated                   (641)                       (165)                    (684)                       (722)
Gain on the exchange and
  retirement of preferred stock  --                           --                      306                          --
Extraordinary credits:
   Debt extinguishment        41,563                                                1,707                         555
   Fresh start adjustments     3,771
                                                              --                                                   __
------------------------------------------------------------------------------------------------------------------------------------
Basic                        $95,513   4,146  $23.04     $(4,678)   4,131$(1.13)  $(7,927)   4,104   $(1.93)  $(1,391)4,046$(.34)
----------------------------------------------------------------------------------------------------------------------------------

                               01/01/00 - 12/18/00      08/01/99 - 12/31/99                1999                        1998
--------------------------------------------------      -------------------                ----                        ----
                               Income            Per      Income           Per       Income           Per      Income         Per
                               (Loss)   Shares   Share    (Loss)  Shares   Share    (Loss)    Shares Share    (Loss)   Shares Share
-----------------------------------------------------------------------------------------------------------------------------------
Income (loss)  before extraordinary
  credit                     $50,820                     $(4,513)                 $(9,256)                    $(1,224)
Preferred stock dividends
  accumulated                   (641)                       (165)                    (684)                       (722)
Gain on the exchange and
  retirement of preferred stock  --                           --                      306                          --
Extraordinary credits:
   Debt extinguishment        26,488                                                1,707                         555
   Fresh start adjustments     3,771                          --

Dilutives:
8 7/8% subordinated debentures 1,644     683
Convertible preferred stock      641     289
-----------------------------------------------------------------------------------------------------------------------------------
Diluted                      $82,723   5,118  $16.16     $(4,678)   4,131$(1.13)  $(7,927)   4,104   $(1.93)  $(1,391)4,046$(.34)
----------------------------------------------------------------------------------------------------------------------------------
</TABLE>

For the period  January 1, 2000 - December 31, 2000,  the  extraordinary  credit
-debt  extinguishment  was  reduced  by the  "forgiveness"  of  the  liquidation
preference including dividends in arrears, of approximately $16.8 million offset
by the  approximately  $1.8 million  received by preferred  stock holders of New
common stock.

The per share  computations  for periods ended  12/18/00 and 12/31/99 and fiscal
years  1999  and 1998  exclude  the  following  shares  for  stock  options  and
convertible debentures because their effect would have been antidilutive:

                                    12/18/00      12/31/99     1999     1998
                                    --------      --------     ----     ----
    Stock options                       796            796      796      836
    Convertible preferred stock          --            298      298      325
    Convertible debentures               --            683      683      723

Comprehensive Income

In June 1997, the Financial Accounting Standards Board ("FASB") issued Statement
No. 130, Reporting Comprehensive Income. Statement No. 130 established new rules
for the  reporting  and  display of  comprehensive  income  and its  components.
Comprehensive  income is net income,  plus certain other items that are recorded
directly to stockholders'  equity.  The only such items which were applicable to
the Company during the periods shown are foreign currency translation adjustment
and minimum pension liability adjustments. The Company adopted this Statement in
the first quarter of fiscal 1999.


Use of Estimates

The preparation of financial  statements in conformity  with generally  accepted
accounting principles requires management to make estimates and assumptions that
affect the amounts reported in the financial  statements and accompanying notes.
Actual results could differ from those estimates.

2.       Sale of European Operations

On May 17,  1999,  the  Company  entered  into a letter  of  intent  to sell its
European  Operations to Reboot for $49.5 million plus the  assumption of certain
liabilities.  Reboot was a newly  formed  corporation  controlled  by Mr.  Blake
Thomas,  the Company's then  president.  Following the letter of intent,  a sale
agreement  was  executed  with  Reboot  dated as of July 31,  1999 (the  "Reboot
Agreement").  The Reboot Agreement  contained  several  contingencies,  the most
significant  being Reboot's ability to secure  financing  necessary to close the
transaction. By November 1, 1999, Reboot still had not secured its financing and
Dynacore  agreed to an amendment (the  "Amendment")  to the Reboot  Agreement in
return  for  which  Reboot   posted  a  deposit  of  $750,000   which  would  be
non-refundable  in the event that  Reboot  failed to close  because it could not
secure financing.  The Amendment  obligated Reboot to loan Dynacore $2.5 million
on or prior to December 1, 1999.  Although the termination  date pursuant to the
Amendment  was  extended to March 1, 2000,  this  extension  was  contingent  on
Reboot's loaning the Company the $2.5 million on or before December 1, 1999, and
in the event the loan was not made,  the  agreement  terminated  on  December 1,
1999. Since the loan was not made, the agreement was then terminated.

Subsequent to the termination of the Reboot  Agreement,  as a result of the lack
of performance  by Reboot,  the Company  entered into a Letter of Intent,  dated
January 26, 2000, with the European based  CallCentric Ltd.  ("CallCentric")  to
sell the European  Operations.  Pursuant to an  agreement  dated as of April 19,
2000 (the "Sale  Agreement"),  on June 30, 2000,  after receipt of approval from
the Bankruptcy  Court, the Company sold (the "Sale") its European  Operations to
DNL, a United Kingdom corporation affiliated with CallCentric, for $49.5 million
in cash, less certain adjustments in the event that the aggregate  shareholder's
deficit of the European  Operations exceeded $10 million (the "Purchase Price").
The Sale Agreement contemplated, among other things, that the Company would file
for reorganization  pursuant to Chapter 11 of the United States Bankruptcy Code,
which was filed on May 3, 2000 and that the sale of the European  Operations  to
DNL would be subject to higher and better  offers,  if any,  and the approval of
the  Court.  The  Court  approved  the  sale on June  15,  2000 and the sale was
consummated on June 30, 2000 (the "Closing"). Pursuant to the Sale Agreement, at
Closing DNL deposited $6 million from the Purchase  Price in escrow,  $4 million
pending  resolution  of various  issues  relating to the UK Pension  Plan and $2
million pending  preparation of the closing balance sheet. Upon final resolution
of these issues the full $4 million  escrow  relating to the UK Pension Plan was
released to DNL and $1.625  million of the $2 million escrow was released to the
Company and $375 thousand was released to DNL.  Accordingly,  the final Purchase
Price after such adjustments was $45.125 million.

As a result of the Sale,  the  Company  recorded a gain of  approximately  $52.5
million during the period ended  December 17, 2000.  Included in this amount are
transaction costs and professional fees relating to both the Sale and Bankruptcy
of  approximately  $1.4  million  as  well  as  $1.2  million  representing  the
settlement of the Officers Administrative Claims.
<PAGE>

3.  Reorganization Plan

Reorganization Under Chapter 11

On May 3, 2000,  the Company filed a petition for relief under Chapter 11 of the
United States  Bankruptcy  Code with the United  States  Bankruptcy  Court.  The
Chapter  11  filing  was the  result  of a default  related  to the  semi-annual
interest  payment on the Company's 8 7/8%  Convertible  Subordinated  Debentures
(the  "Debentures"),  recurring  operating  losses and cash flow  problems.  The
filing of a Chapter 11 petition operates as a stay of, among other actions,  the
commencement  or continuation  of a judicial  administrative  or other action or
proceeding  against a debtor  that was or could have been  initiated  before the
commencement  of a Chapter  11 case or the  enforcement  against  the  debtor or
against  the  property  of  the  estate  or  a  judgment   obtained  before  the
commencement  of the case.  Under  Chapter  11,  substantially  all  prepetition
liabilities of debtors are subject to settlement under a plan of reorganization.
The consummation of a plan of  reorganization is dependent upon the satisfaction
of numerous conditions, including, among other things, the acceptance by several
classes of interests and confirmation by the Bankruptcy Court.

On December 5, 2000, the Company's Amended Plan of  Reorganization  (the "Plan")
was approved by the Bankruptcy Court and became effective December 18, 2000 (the
"Effective Date"). The accompanying  consolidated financial statements have been
prepared in  conformity  with  principles  of  accounting  applicable to a going
concern. Further, the accompanying consolidated financial statements reflect all
adjustments  relating to settlement of the claims of any class of creditors that
are provided for in the Company's Plan of Reorganization.

On the Effective Date, as defined in the Plan, all of the then existing debt and
equity in Dynacore was cancelled and 10 million  shares of new common stock,  as
well as 10 million beneficial interests,  representing interests in the Dynacore
Patent  Litigation Trust (as defined below),  formed to pursue Dynacore's patent
litigations, were issued.

The confirmed Plan provided for the  distribution  of $34.8 million in cash from
the proceeds of the sale of the  European  Operations  to Debenture  holders and
other  unsecured  creditors  of Dynacore on the  Effective  Date.  In  addition,
pursuant to the  confirmed  Plan:  (i)  Debenture  holders  and other  unsecured
creditors received 25% of the equity of the reorganized corporation, the ability
to  designate 3 out of 7 members on the Board of  Directors,  and 40% of a trust
(the "Patent  Litigation  Trust"),  formed to pursue the patent  litigations  of
Dynacore, (ii) holders of Dynacore's preferred stock, par value $1.00 per share,
received  23.5% of the equity of the  reorganized  corporation,  and 3.5% of the
Patent Litigation  Trust,  (iii) holders of the common stock, par value $.25 per
share, received 41.5% of the equity of the reorganized corporation, (iv) current
officer management received 10% of the equity of the reorganized  corporation as
part of a settlement  of certain  officer  administrative  claims that  included
employment contract cancellation and other contractual  entitlements and (v) the
remaining  56.5%  interest in the Patent  Litigation  Trust was  retained by the
reorganized Dynacore.

The Plan  contemplated  that the beneficial  interests in the Patent  Litigation
Trust would be transferable and tradable. In addition,  pursuant to the approved
Plan and as reflected in its Restated Certificate of Incorporation,  Dynacore is
obligated to distribute to its then stockholders,  75% of the first $100 million
of net proceeds,  if any, received on account of its beneficial  interest in the
Patent  Litigation  Trust after  adjustment for corporate tax and payment of all
patent litigation expenses. Also, as part of the Plan, Dynacore has committed to
lend the Patent  Litigation Trust up to $1 million to pursue  Dynacore's  patent
litigations. As of December 31, 2000, the amount of such loan is $0.

Fresh Start Reporting

Under the provision of Statement of Position (SOP) 90-7, "Financial Reporting by
Entities in  Reorganization  under the Bankruptcy Code," issued in November 1990
by the  American  Institute  of Certified  Public  Accountants,  the Company has
prepared  the  accompanying  consolidated  pro  forma  balance  sheet  as of the
Effective Date,  December 18, 2000 on the basis of "fresh start" reporting since
the  reorganization   value,  as  defined,  was  less  than  the  total  of  all
post-petition  liabilities and pre-petition claims, and holders of voting shares
immediately before  confirmation of the Plan received less than fifty percent of
the voting shares of the emerging  entity.  Under this  concept,  all assets and
liabilities were restated to reflect the reorganization value of the reorganized
entity,  which  approximates  its fair value at the date of  reorganization.  In
addition,  the accumulated deficit of the Company was eliminated and its capital
structure was recast in  conformity  with the Plan.  As such,  the  accompanying
consolidated  pro forma balance sheet as of December 18, 2000 represents that of
a successor company which, in effect,  is a new entity with assets,  liabilities
and a capital structure having carrying values not comparable with prior periods
and with no beginning retained earnings or deficit.
<PAGE>

The Company  estimated the fair value of the  reorganized  entity based upon the
issuance of 10 million  shares of new common stock at a value of $0.75 per share
pursuant to the approved  Plan While the estimated  reorganization  value of the
Company has been primarily  allocated to specific asset  categories  pursuant to
Fresh Start Reporting,  the effects of such are subject to further refinement or
adjustment.  Current  assets have been  recorded at their book value,  which the
Company believes approximates fair value. Equipment and other fixed assets, have
been recorded at their fair value as estimated by management  after  considering
replacement  cost or  potential  sales  value.  Intellectual  property  has been
revalued as estimated by management after considering its remaining life.
For Fresh Start reporting  purposes,  Corebyte software has been valued at zero.
After the  revaluation of the reorganized  Company was completed,  an intangible
asset  of  $3.8  million  reflecting  the  reorganization  value  in  excess  of
identifiable assets was established, which is being amortized on a straight-line
basis over 15 years.  At December 31, 2000 the intangible  asset was $3,775 less
accumulated amortization of $7 resulting in a net balance of $3,768.
<TABLE>
<CAPTION>

                                                              Prior to              Debt      Fresh Start       Reorganized
                                                        Reorganization   Extinguishment       Adjustments    Balance Sheet
Assets

Current assets:
<S>                                                             <C>              <C>                  <C>            <C>
    Cash and cash equivalents                                   $43,393          (34,868)               --           $8,525
    Restricted cash and cash equivalents                            317               --                --              317
    Accounts receivable, net                                        347               --                --              347
    Prepaid expenses and other current assets                       129               --                --              129
    -----------------------------------------------------------------------------------------------------------------------
Total current assets                                             44,186          (34,868)               --            9,318

Fixed assets, net                                                   108               --                --              108
Other assets, net                                                   746             (207)               --              539
Reorganization value in excess of identifiable assets                --               --             3,775            3,775
---------------------------------------------------------------------------------------------------------------------------
                                                                $45,040          (35,075)            3,775          $13,740
===========================================================================================================================

Liabilities and Stockholders' Equity (Deficit)

Current liabilities:
    Accounts payable                                               $180               --                --             $180
    Liabilities subject to compromise                            61,348          (61,031)               --              317
    Accrued expenses                                              3,710           (1,426)               --            2,284
    Income taxes payable                                             20               --                --               20
    -----------------------------------------------------------------------------------------------------------------------
        Total current liabilities                                65,258          (62,457)               --            2,801

Other liabilities                                                 5,165           (1,730)                4            3,439

Commitments and contingencies

Stockholders' equity (deficit):
    Predecessor Preferred stock                                     642               --              (642)              --
      Predecesssor Common stock                                   5,248               --            (5,248)              --
    Successor Common stock                                           --               --               100              100
    Paid in capital                                             212,733            2,624          (207,957)           7,400
    Retained equity (deficit)                                  (242,660)          26,488           216,172               --
    Treasury stock, at cost                                      (1,346)              --             1,346               --
---------------------------------------------------------------------------------------------------------------------------
        Total stockholders' equity (deficit)                    (25,383)          29,112             3,771            7,500
---------------------------------------------------------------------------------------------------------------------------
                                                                $45,040          (35,075)            3,775          $13,740
===========================================================================================================================
</TABLE>

The  estimated  $7,500   reorganization   value  of  the  Company  exceeded  the
identifiable  net  assets  primarily  because  of the  pension  and  other  post
employment  obligations  of the  Company's  German  subsidiary,  which  are  not
obligations of the parent Company.

4.  Restructuring Costs

During the periods listed below,  the Company  incurred  restructuring  costs as
follows in connection with employee  termination  programs  implemented in these
years:
                             Successor                  Predecessor
                             ------------  -------------------------------------

                             12/19/00 -   01/01/00 -    08/01/99 -
                             12/31/00     12/18/00      12/31/99    1999    1998
--------------------------------------------------------------------------------
Employee termination costs       $22           $0         $624      $813     $96
===============================================================================

For the period ended  December 31, 2000,  the Company  incurred $22 for employee
termination  costs relating to its  downsizing  efforts after its emergence from
bankruptcy.  For the period  ended  December  31,  1999,  the  Company  incurred
restructuring  charges  of $624 for  employee  termination  costs.  These  costs
related  to the  termination  of 28  employees  at  the  Company's  San  Antonio
headquarters  in connection  with the Company's  discontinuance  of its domestic
video conferencing (MINX) employees.

At December 31, 2000, accrued but unpaid restructuring costs were $51.
<PAGE>

The predecessor Company's 1999 and 1998 restructuring charges primarily had been
driven by  management's  efforts to implement cost cutting  measures in light of
its overall plan to return to profitability. Restructuring costs incurred during
1999  included  $650 for the  termination  of 25 employees at the  Company's San
Antonio  headquarters  and  $163  for  the  termination  of 5  employees  at the
Company's French subsidiary.

Restructuring  charges are not recorded until specific  employees are determined
(and notified of  termination)  by  management  in  accordance  with its overall
restructuring plan.

A rollforward of the restructuring  accrual from August 2, 1997 through December
31, 2000 is as follows:

Predecessor                                                TOTAL
------------                                               -----
Restructuring accrual as of August 2, 1997                    $508
Additions                                                       96
Payments                                                      (422)
Restructuring accrual as of August 1, 1998                    $182
Additions                                                      813
Payments                                                      (862)
Restructuring accrual as of July 31, 1999                     $133
Additions                                                      624
Payments                                                      (375)
----------------------------------------------------------------
Restructuring accrual as of December 31, 1999                 $382
Additions                                                        0
Payments                                                      (350)
Restructuring accrual as of December 18, 2000                  $32
                                                               ===

Successor Company
Restructuring accrual as of December 18, 2000                  $32
Additions                                                       22
Payments                                                        (3)
Restructuring accrual as of December 31, 2000                  $51
                                                               ===

5.  Non-operating Income (Expense)
<TABLE>
<CAPTION>

                                    Successor               Predecessor
                                    -----------  ------------------------------------------
                                   12/19/00 -    01/01/00 -    08/01/99 -
                                    12/31/00      12/18/00      12/31/99   1999        1998
-------------------------------------------------------------------------------------------
<S>                                  <C>            <C>           <C>       <C>         <C>
Interest earned                      $19            $1,510        $6        $313        $518
Foreign currency gains (losses)     (135)              317       218         (89)       (104)
Gain on the sale of  buildings        --                --        --         273       1,205
Other                                 --                97      (259)       (301)       (424)
---------------------------------------------------------------------------------------------
                                   $(116)           $1,924      $(35)       $196      $1,195
============================================================================================
</TABLE>

During  fiscal  year 1998,  management  reassessed  the  characteristics  of its
intercompany notes with international  subsidiaries (payable by the U.S. parent)
and  determined  that a  substantial  portion  was  long-term  in nature and not
payable in the  foreseeable  future.  As a result,  during  fiscal year 1999 and
1998,  transaction  gains of $1.6  million  and of $57  thousand,  respectively,
relating  to these  loans are  included  as a  foreign  currency  adjustment  to
accumulated other comprehensive income included in Stockholders'  Deficit, which
in prior years, would have been included in non-operating income and expense.

6.  Income Taxes

The provision for taxes consisted of the following:
<TABLE>
<CAPTION>

                                                     Successor                   Predecessor
                                                     -----------   ------------------------------------------------
                                                    12/19/00 -     01/01/00 -   08/01/99 -
                                                      12/31/00     12/18/00     12/31/99         1999          1998
-------------------------------------------------------------------------------------------------------------------
Income (loss) before income taxes and extraordinary
   credit:
<S>                                                      <C>        <C>          <C>          <C>           <C>
    U.S.                                                 $(311)     $50,538      $(4,356)     $(8,275)      $(5,655)
    Outside the U.S.                                        --       (1,138)         171         (146)        5,776
-------------------------------------------------------------------------------------------------------------------
                                                         $(311)     $49,400      $(4,185)     $(8,421)         $121
===================================================================================================================

U.S. federal:
    Current                                                 $--          $--          $--          $--           --
Outside the U.S.:
    Current                                                 --         (257)          38        1,451           509
    Deferred                                                --       (1,163)         290         (616)          836
-------------------------------------------------------------------------------------------------------------------
Total provision                                             $--     $(1,420)        $328         $835        $1,345
===================================================================================================================
<PAGE>

     The differences  between the tax provision in the financial  statements and
the tax benefit computed at the U.S. federal statutory rates are:

                                                    12/19/00 -     01/01/00 -   08/01/99 -
                                                      12/31/00     12/18/00     12/31/99         1999          1998
-------------------------------------------------------------------------------------------------------------------
Income taxes  at statutory rate                          $(109)     $17,290      $(1,465)     $(2,947)          $42
Increase in taxes resulting from:
    Benefit of U.S. tax loss not recognized                106       20,279        1,523        2,895         2,057
    Tax basis in excess of book basis on disposal
      of assets                                             --      (38,710)          --           --            --
    Foreign losses and other transactions on which
      a tax benefit could not be recognized                 --          708          686          753            33
    Effect of federal tax rate less than (greater than)
      foreign tax rates                                     --          150         (372)         325           190
    Benefit of operating loss carryforwards                 --       (1,137)         (46)        (192)         (979)
    Other, net                                               3           --            2            1             2
-------------------------------------------------------------------------------------------------------------------
Provision for income taxes                                  $--     $(1,420)        $328         $835        $1,345
===================================================================================================================
</TABLE>

The undistributed  earnings,  indefinitely reinvested in international business,
of the Company's foreign  subsidiaries  aggregated  approximately $0 at December
31, 2000.


The primary  components  of deferred  income tax assets and  liabilities  are as
follows:

                                                      2000             1999
---------------------------------------------------------------------------
Deferred income tax assets:
   Property, plant and equipment                            $--      $1,711
   Loss and credit carryforwards                        61,007       76,206
   Minimum pension liability adjustments                    --           --
   Other                                                    --        1,592
---------------------------------------------------------------------------
                                                        61,007       79,509
Less:  valuation allowance                              61,007       78,035
---------------------------------------------------------------------------
                                                            --        1,474
Deferred income tax liabilities:
   Accrued retirement costs                               (400)        (679)
   Foreign exchange gains                                   --         (943)
   Other                                                    --         (539)
---------------------------------------------------------------------------
                                                          (400)      (2,161)
----------------------------------------------------------------------------
Net deferred income tax asset (liability)                $(400)       $(687)
============================================================================

Despite  the current  estimate,  it is possible  that some of the  deferred  tax
assets  will be  realized  in the  future.  Should  this  happen  the  valuation
allowance  will be  reduced.  After the  reduction  of the  valuation  allowance
relating  to the first  $106 of  December  31,  2000  deferred  tax assets to be
utilized  (i.e.,  those arising after  December 18, 2000),  the reduction of the
valuation  allowance  relating to the next $3,768 will result in a corresponding
reduction  of the  reorganization  value  in  excess  of  amounts  allocable  to
identifiable assets rather than a reduction of income tax expense.

At  December  31,  2000,  the net  deferred  income  tax  liability  of $400 was
presented in the balance sheet, based on tax jurisdiction,  as other liabilities
of $400.  Realization  of the  Company's  deferred  tax assets is  dependent  on
generating  sufficient taxable income in certain taxing  jurisdictions  prior to
the  expiration of loss and credit  carryforwards.  In this regard,  the Company
intends to utilize qualified tax planning strategies,  if necessary,  to utilize
deferred  tax  assets  where  valuation   allowances  have  not  been  provided.
Management  believes that more likely than not,  deferred tax assets will not be
fully realized in the future and has therefore provided a valuation allowance to
reserve for those deferred tax assets not considered realizable.

At  December  31,  2000,  the  Company  had  tax  operating  loss  carryforwards
approximating  $137,000 for U.S. federal tax purposes.  Of this amount,  $41,000
expires in years  2001 and 2002,  $29,000  expires  in years 2004 and 2005,  and
$67,000 expires in various amounts  through year 2021.  U.S.  federal  long-term
capital loss  carryforwards  of $35,000 expire in various  amounts  beginning in
2004.  Utilization of the ordinary and capital tax loss carryforwards is subject
to  limitation  in the  event of a more  than 50%  change  in  ownership  of the
Company.
<PAGE>

The Company had unused investment, research, and alternative minimum tax credits
for income tax purposes at December 31, 2000 of  approximately  $328 expiring at
various dates  beginning 2001 which may be used to offset future tax liabilities
of the Company.  Utilization  of these  credits is subject to  limitation in the
event of a more than 50% change in ownership of the Company.

7.  Accounts Receivable

The Company has a  receivable  from  Vugate,  Inc.  ("Vugate")  the buyer of its
videoconferencing  business  (MINX).  This receivable  consists of a note with a
$375 face value that is payable out of certain  Vugate cash flows.  This note is
carried on the balance sheet at $267 which  represents  the present value of the
estimated  payments at a discount  rate of 12.5% per annum.  The  remaining  $33
receivable  from Vugate  represents  rental and  related  charges to Vugate as a
sub-tenant  of  the  Company's  San  Antonio  facility.  An  additional  $59  is
receivable from other parties.

8.  Inventories

     On June 30, 2000, the Company  included all of its inventory as part of the
Sale. The inventory at July 31, 1999, consisted of :

                                                 1999
-----------------------------------------------------
Finished and purchased products                $2,305
Work in process                                   234
Raw materials                                      93
-----------------------------------------------------
                                               $2,632
=====================================================
9.  Fixed Assets

<TABLE>
<CAPTION>
Successor
                                                                  Accumulated
                                                          Cost    Depreciation       Net
    December 31, 2000
<S>                                                       <C>           <C>        <C>
    Property, plant and equipment:
    Leasehold improvements                                 $24           $1          $23
    Machinery, equipment, furniture and fixtures            84            5           79
    ------------------------------------------------------------------------------------
                                                          $108           $6         $102
                                                          ====           ==         ====
Predecessor
                                                                  Accumulated
                                                         Cost     Depreciation       Net
July 31, 1999
    Property, plant and equipment:
    Building and leasehold improvements                 $5,650       $4,477       $1,173
    Machinery, equipment, furniture and fixtures        16,621       13,288        3,333
    ------------------------------------------------------------------------------------
                                                        22,271       17,765        4,506
Field support spares                                    10,872        9,605        1,267
Equipment leased to customers                              304          149          155
----------------------------------------------------------------------------------------
                                                       $33,447      $27,519       $5,928
========================================================================================
</TABLE>

During the first  quarter of 1999,  the  Company  sold the  building it owned in
Gouda,  Netherlands  to a  private  unaffiliated  group for  approximately  $2.1
million (net of mortgage  obligations  and closing  costs).  The sales  contract
provided for the  leaseback by the Company of  approximately  18,000 square feet
for an initial lease term of five years and approximately 12,000 square feet for
an initial lease term of one year. This lease  obligation was transferred to DNL
as a result of the sale of the European operation on June 30, 2000.

On October  27,  1997,  the  Company  sold the three  buildings  it owned in San
Antonio,  Texas to a private  unaffiliated  group for approximately $3.2 million
(net of mortgage obligations and closing costs). The sales contract provided for
the  leaseback  by the  Company of one of the  buildings  (approximately  38,000
square  feet) for an  initial  lease  term of five  years.  As part of the Court
approved bankruptcy proceedings, the Company renegotiated the termination of the
lease to March 31, 2001.

10.  Lease Commitments

The Company  leases  certain  facilities  and equipment  under  various  leases.
Substantially  all of the leases are  classified  as  operating  leases.  Rental
expense for operating leases are as follows:

Successor
12/19/00 to 12/31/00              $6

Predecessor
1/1/00 to 12/18/00            $2,048
8/1/99 to 12/31/99            $1,914
1999                          $4,908
1998                          $4,419
<PAGE>

Most of the leases contain  renewal  options for various periods and require the
Company to maintain the property. Certain leases contain provisions for periodic
rate adjustments to reflect Consumer Price Index changes.

At December 31, 2000, future minimum lease payments for all noncancelable
leases totaled $1,882 and are payable as follows:
2001                         $317
2002                         $229
2003                         $213
2004                         $194
2005 and after               $929

11.  Payables to Bank

At December 31, 2000 no lines of credit or other credit facilities were in place
with any of the Company's banks or financial institutions. The Company's foreign
subsidiaries  had  available  lines of credit  from  foreign  banks,  which were
generally secured by accounts receivable. The outstanding lines of credit to the
foreign  subsidiaries  at July 31,  1999,  totaled  $6.7  million.  The weighted
average  interest rate for these short term borrowings as of the fiscal year end
was 5.7% and 7.2%, for 1999 and 1998, respectively.

12.       Accrued Expenses
                                                        Successor  Predecessor
                                                            2000        1999
----------------------------------------------------------------------------
Salaries, commissions, bonuses and other benefits           $370     $12,204
Taxes other than income taxes                                 --       3,769
Accrued professional fees-bankruptcy & sale of Europe
   Operations                                                680          --
Other                                                        566       6,917
----------------------------------------------------------------------------
                                                          $1,616     $22,890
============================================================================

13.   Long-Term Debt - Predecessor
                                                            1999
8-7/8% convertible subordinated debentures               $54,960
Less: current maturities of long-term debt                 4,960
----------------------------------------------------------------
                                                         $50,000

The Amended Plan of  Reorganization  under Chapter 11 of the Bankruptcy code was
confirmed  by the  United  States  Bankruptcy  Court for the  District  Court of
Delaware and became  effective  December  18, 2000 (the  "Effective  Date").  In
accordance  with the Plan,  the  Indenture as of the  Effective  Date was deemed
cancelled,  terminated,  and deemed  null and void and of no  further  force and
effect,  except as otherwise provided in the Plan. The Company and the Indenture
Trustee were released from any and all  obligations  under the Indenture  except
with respect to the  payments  required to be made by the  Indenture  Trustee in
respect of its Claims,  or with  respect to such other  rights of the  Indenture
Trustee that, pursuant to the terms of the Indenture, survive the termination of
the Indenture.  As provided for by the Plan,  Debenture Holders,  upon redeeming
their debentures to the Indenture  Trustee,  received  43.5701965  shares of New
Common  Stock  and  69.712318  units  of  Beneficial  Interests  in  the  Patent
Litigation Trust per $1,000 principal  amount.  Debenture  Holders also received
$606.50 in cash per $1,000 principal amount.

During fiscal 1999, the Company  repurchased  debentures with a total face value
of $3,155, resulting in an extraordinary gain of $1,707.

14.  Stockholders' Equity (Deficit)

On the  Effective  Date,  all of the  existing  debt and equity in Dynacore  was
cancelled.  The Exchangeable  Preferred Shareholders received 3.663683 shares of
New Common Stock (2.35 million  shares) and .545655 units of the Dynacore Patent
Litigation Trust (350,000 Beneficial Interests).

The $1.00 preferred  stock had a liquidation  preference of $20.00 per share and
cumulative  dividends  of $1.00  annually.  On January  16,  1996,  the  Company
announced  that it was in arrears on its $1.00  preferred  stock in an aggregate
amount equal to six full quarterly dividends.  As a result, each holder of $1.00
preferred  stock had the right to  exchange  each such share  (inclusive  of all
accrued  and unpaid  dividends)  into two shares of the  Company's  then  common
stock.  In  addition,  as a result  of the  dividend  arrearages  the  number of
directors  constituting  the Board of Directors of the Company was  increased by
two with the vote of the  holders of the $1.00  preferred  stock (not  including
those who had exchanged  $1.00  preferred  stock for the  Company's  then common
stock).  These rights  continued until such time as the arrearages had been paid
in full. Dividends of $3,310 were accumulated and unpaid at July 31, 1999.


Changes in other comprehensive income are as follows:
(all Predecessor Company related)
<TABLE>
<CAPTION>

                                            Pension           Foreign Currency
                                            Liability           Translation
                                           Adjustment            Adjustment        Total
<S>                                          <C>                     <C>           <C>
Balance at August 2, 1997                     $(4,488)               $4,613         $125
Annual adjustments                             (2,386)                1,629         (757)
Tax effect                                        790                     -          790
----------------------------------------------------------------------------------------
Balance at August 1, 1998                     $(6,084)               $6,242         $158
Annual adjustments                              2,428                    60        2,488
Tax effect                                     (3,000)                    -       (3,000)
-----------------------------------------------------------------------------------------
Balance at July 31, 1999                      $(6,656)               $6,302        $(354)
Annual adjustments                                 28                  (110)         (82)
Tax effect                                         --                    --           --
----------------------------------------------------------------------------------------
Balance at December 31, 1999                  $(6,628)               $6,192        $(436)
Annual adjustments                              6,628                (6,192)         436
Tax effect                                         --                    --           --
----------------------------------------------------------------------------------------
Balance at December 18, 2000                       $--                   $--         $--)
                                                   ===                   ===         ====
</TABLE>

15.  Stock Option Plans

At December 31, 2000, there were 550,000 employee stock options outstanding.  On
December 19, 2000,  options were granted to Messrs.  Edelman (300,000  options),
Agranoff  (  175,000  options)  and  Krumb  (75,000  options)  as part of  their
employment agreements as defined in the Plan. However, these options are subject
to the  approval  of  Dynacore's  initial  stock  option  plan by the  Company's
stockholders.  In  addition,  the initial  plan shall be limited to an aggregate
amount of 1,500,000  shares.  On January 28, 1998, the  stockholders  approved a
1997 Employee Stock Option Plan. The plan was similar to the Company's  previous
employee  stock option plans.  Under the Company's  employee stock option plans,
officers  and other key  employees  may have been  granted  options to  purchase
common stock and related  stock  appreciation  rights.  Under the terms of these
plans,  options may have been  granted at no less than 75% of fair market  value
and  expired no later than ten years from the date of grant.  The Board also had
the discretion to grant options exercisable in full or in installments,  and had
generally  granted  options  at fair  market  value  exercisable  in two to four
installments beginning one year from the date of grant. In the event of a change
of control in the Company, all stock options would have fully vested. As of July
31, 1999, options for 734,505 shares had been granted and no appreciation rights
had been granted. These options were cancelled as of the Effective Date.
<TABLE>
<CAPTION>

                                                            Employee Stock Option Plans
----------------------------------------------------------------------------------------
                                                   Price Range        Number of Shares
                                                                      ------------------
                                                     of Shares        Under      Available
                                                  Under Option       Option     for Option
------------------------------------------------------------------------------------------
Predecessor Company
-------------------
<S>                                                <C>              <C>           <C>
Outstanding at August 2, 1997                      $4.17-35.52      496,733         348,446
-------------------------------------------------------------------------------------------
Authorized                                                  --           --        450,354
Granted                                           $11.36-17.76      386,922       (386,922)
Exercised                                           4.17-11.94      (35,787)            --
Canceled                                            4.17-35.52      (79,751)        79,751
------------------------------------------------------------------------------------------
Outstanding at August 1, 1998                      $4.17-32.19      768,117         491,629
-------------------------------------------------------------------------------------------
Exercised                                            4.17-4.30      (5,014)              --
Canceled                                            6.39-23.31     (28,598)          28,597
-------------------------------------------------------------------------------------------
Outstanding at July 31, 1999                       $4.17-32.19      734,505         520,226
-------------------------------------------------------------------------------------------
Exercised                                                   --           --              --
Canceled                                                    --           --              --
-------------------------------------------------------------------------------------------
Outstanding at December 31, 1999                   $4.17-32.19      734,505         520,226
Exercised                                                   --           --              --
Canceled                                            4.17-32.19     (734,505)       (520,226)
Granted                                                     --           --              --
-------------------------------------------------------------------------------------------
Outstanding at December 18, 2000                            $--          --              --
                                                            ===          ==              ==

-------------------------------------------------------------------------------------------
Successor Company
Outstanding at December 18, 2000                            $--          --              --
Granted                                                    .75      550,000         950,000
Canceled                                                    --           --              --
-------------------------------------------------------------------------------------------
Outstanding at December 31, 2000                          $.75      550,000         950,000
                                                          =================================
</TABLE>

<PAGE>

On December 10, 1996,  the  stockholders  approved a 1996 Director  Stock Option
Plan.  The plan was similar to the  Company's  previous  director  stock  option
plans.  The 1996  Director  Plan  provided for a one-time  grant of an option to
purchase,  at fair  market  value as of the date of the grant,  5,629  shares of
common stock to each  director,  and an additional  11,258 shares to the present
and any newly  elected  Chairman  of the Board.  A maximum of 112,588  shares of
common stock were  reserved  for the issuance of grants under the 1996  Director
Plan, and the options,  which vested immediately upon grant,  expired five years
from the date of grant. Total director options  outstanding at of July 31, 1999,
totaled 61,923 with a weighted average exercise price of $5.46.

As part of the Bankruptcy Plan the new  non-employee  board of director  members
were granted  options of 50,000  each.  The options  vest  immediately,  have an
exercise price of $.75 and a ten year term.
<TABLE>
<CAPTION>

                                                             Director Stock Option Plans
                                                 Price Range               Number of Shares
                                                 of Shares            Under      Available
                                                 Under Option        Option     for Option
------------------------------------------------------------------------------------------
Predecessor Company
-------------------
<S>                                                <C>               <C>           <C>
Outstanding at August 2, 1997                      $5.28-28.02       67,553        118,217
------------------------------------------------------------------------------------------
Authorized                                                  --           --             --
Granted                                                     --           --             --
Expired                                                     --           --             --
------------------------------------------------------------------------------------------
Outstanding at August 1, 1998                      $5.28-28.02       67,553         118,217
-------------------------------------------------------------------------------------------
Authorized                                                  --           --              --
Granted                                                     --           --              --
Expired                                                  28.02      (5,630)              --
-------------------------------------------------------------------------------------------
Outstanding July 31, 1999                           $5.28-7.23       61,923         118,217
-------------------------------------------------------------------------------------------
Authorized                                                  --           --             --
Granted                                                     --           --             --
Expired                                                     --           --             --
------------------------------------------------------------------------------------------
Outstanding at December 31, 1999                    $5.28-7.23       61,923         118,217
-------------------------------------------------------------------------------------------
Authorized                                                  --           --              --
Granted                                                     --           --              --
Expired                                                     --           --              --
Canceled $5.28-7.23                                   (61,923)    (118,217)
---------------------------------------------------------------------------
Outstanding at December 18, 2000                            $--          --              --
-------------------------------------------------------------==----------==----------------

-------------------------------------------------------------------------------------------
Successor Company
-----------------
Outstanding at December 18, 2000                            $--          --              --
Granted                                                    .75      200,000              --
Canceled--                                                  --           --
---------------------------------------------------------------------------
Outstanding at December 31, 2000                          $.75      200,000              --
                                                          ====      =======              ==
</TABLE>

     The  FASB  has  issued  Statement  No.  123,  "Accounting  for  Stock-Based
Compensation",  ("SFAS No. 123") which requires either recognition or disclosure
of a charge for the value of stock  options  granted.  The Company  adopted this
statement  in 1997 and has  elected  to  continue  to apply  the  provisions  of
Accounting  Principles  Board  Opinion No. 25 and make the footnote  disclosures
required by SFAS No. 123.

Accordingly,  no  compensation  cost has been  recognized  for the stock  option
plans.  Had  compensation  cost been  determined  based on the fair value of the
options  at the  grant  date for  awards  in 1998 and 1997  consistent  with the
provisions  of SFAS No. 123, the  Company's  net earnings and earnings per share
would have been the pro forma amounts indicated below. Because options vest over
several  years  and  additional   grants  are  expected,   the  effects  of  the
calculations  below  are not  likely  to be  representative  of  similar  future
calculations:

(In thousands, except per share amounts)
<TABLE>
<CAPTION>

                                            Successor                       Predecessor
                                            ----------------  ---------------------------------------------------------
                                            12/19/00 -                 01/01/00 -   08/01/99
                                              12/31/00              12/18/00    12/31/99           1999              1998
                                             ----------------------------------------------------------------------------
<S>                                            <C>                  <C>         <C>               <C>               <C>
Net income (loss)   --  As reported            $(311)               $81,079     $(4,513)          $(7,549)          $(669)
                    --   Pro forma              (387)                80,612      (4,893)           (8,444)         (1,395)
Basic earnings (loss) per share -- As reported $(.03)                $23.04      $(1.13)          $(1.93)         $(.34)
                                -- Pro forma    (.04)                 19.45       (1.19)            (2.06)         (.35)

</TABLE>
<PAGE>

The fair value of each option grant was estimated on the date of grant using the
Black-Scholes   option-pricing   model  with  the  following   weighted  average
assumptions.  No options  were  granted  during the period  01/01/00 - 12/18/00,
08/01/99 - 12/31/99, nor for fiscal year 1999.
                                                    Successor       Predecessor
                                             12/19/00 - 12/31/00       1998
Risk-free interest rate
     Employee stock option                         5.19%               5.85%

     Board of director stock option                5.19%             --%
Expected dividend yield
     Employee stock option                         0                   0
     Board of director stock option                0                  --
Expected volatility
     Employee stock option                          .996                .653
     Board of director stock option                 .996             --
Expected lives
     Employee stock option                         6                   6
     Board of director stock option                3                  --
Weighted average remaining contractual life
     Employee stock option                        10                  10
     Board of director stock option                5                   5

The weighted average fair value of options granted for the employee and director
stock option plans granted  12/19/00 - 12/31/00 was $.35.  The weighted  average
fair value of options  granted for the employee  stock option plans was $1.84 in
1998.

Summarized  information about stock options outstanding as of December 31, 2000,
is as follows:

Range of Exercise Prices                                             $0.75
--------------------------------------------------------------------------
Number of shares outstanding                                         750,000

Weighted average exercise price of shares outstanding                $0.75

Weighted average remaining contractual life                          10.0 years

Number of shares exercisable                                         200,000

Weighted average exercise price of shares exercisable                $.75

16.   Operating Segments and Geographic Operations
         (all Predecessor Company)

Operating Segment Information

In fiscal 1999, the Company adopted Statement of Financial  Accounting Standards
(SFAS) No.  131,  "Disclosures  about  Segments  of an  Enterprise  and  Related
Information,"  which requires the reporting of certain financial  information by
operating  segment and geographical  area. Prior to the Petition Date,  Dynacore
was principally engaged in the development,  acquisition,  marketing, servicing,
and system  integration of computer and  communication  products - both hardware
and  software.  These  products  and  services  were  for  integrated  computer,
telecommunication  and video  conferencing  network systems.  The Company's then
Chief  Operating  Decision  Maker  (CODM)  assessed  performance  and  allocated
resources based on a geographic  reporting  structure.  Substantially all of the
Company's  operations  consisted  of ten European  subsidiaries  and to a lesser
extent domestic  operations.  Reportable  operating  segments under SFAS No. 131
included the  Company's  subsidiaries  residing in Sweden,  the United  Kingdom,
France,  and  Belgium.  Each of these  subsidiaries  functioned  as  value-added
resellers of networking and telephony products.

Included in "Corporate and Other" are general  corporate  activities and related
expenses and activities from other foreign subsidiaries. The CODM used operating
income to measure  results of operations  from segments.  Assets were those that
are used or generated  exclusively by each operating  segment.  The eliminations
required to determine the consolidated amounts shown below consisted principally
of the  elimination  of  intercompany  receivables  for  loans  provided  by the
operating segments to the parent entity.
<PAGE>

The  following  table  presents  certain  information  regarding  the  Company's
reportable operating segments for fiscal years 1997-1999:  (For the period after
12/18/00, there are no longer reportable separate segments.)
<TABLE>
<CAPTION>


                                                                   Predecessor Company

                                              01/01/00 -        08/01/99 -
Revenue  12/18/00                              12/31/99            1999             1998
----------------------------------------------------------------------------------------
<S>                                           <C>               <C>               <C>              <C>
Sweden                                        $20,204           $17,567           41,868           $49,538
United Kingdom                                 14,075            14,164           35,814            37,602
France                                          7,057             5,211           17,419            15,750
Belgium                                         3,114             3,524           15,749            11,323
Corporate and Other                            18,625            11,784           28,184            38,507
Eliminations                                     (119)             (390)            (749)           (1,275)
-----------------------------------------------------------------------------------------------------------
   Total                                      $62,956           $51,860         $138,285          $151,445
                                              ============================================================

                                              01/01/00 -        08/01/99 -
Segment Profit (Loss)                          12/18/00          12/31/99           1999              1998
----------------------------------------------------------------------------------------------------------
Sweden                                         $2,111            $1,787           $2,834            $4,044
United Kingdom                                    658             1,230            4,547             4,930
France                                           (441)             (252)           1,102             1,981
Belgium                                            55               (78)           1,339             1,709
Corporate and Other                            (5,387)           (4,459)         (12,708)           (7,590)
-----------------------------------------------------------------------------------------------------------
  Operating Income (Loss)                      (3,004)           (1,772)          (2,886)            5,074
Interest Expense                               (1,993)           (2,378)          (5,731)           (6,148)
Other Non-Operating Income, net                54,397               (35)             196             1,195
----------------------------------------------------------------------------------------------------------
   Income Before Income Taxes and
      Extraordinary Credit                    $49,400            (4,185)          (8,421)             $121
                                              ============================================================

                                               01/01/00 -       08/01/99 -
Capital Expenditures:                          12/18/00          12/31/99           1999              1998
----------------------------------------------------------------------------------------------------------
Sweden                                           $110               $20             $238               $93
United Kingdom                                    432               702            1,732             1,619
France                                             36                24              231                87
Belgium                                            95                54              346               200
Corporate and Other                               840               929              765               355
----------------------------------------------------------------------------------------------------------
   Total                                       $1,513            $1,729            3,312            $2,354
                                               ===========================================================

                                               01/01/00 -        08/01/99 -
Depreciation:                                  12/18/00          12/31/99           1999              1998
----------------------------------------------------------------------------------------------------------
Sweden                                           $139               $93             $292              $419
United Kingdom                                    311               306            1,655             1,679
France                                             54                52              123               103
Belgium                                            37                43              291               253
Corporate and Other                               260               976              818             1,331
----------------------------------------------------------------------------------------------------------
   Total                                         $801            $1,470           $3,179            $3,785
                                                 =========================================================
</TABLE>

<TABLE>
<CAPTION>

                                               01/01/00 -       08/01/99 -
Assets:                                        12/18/00          12/31/99           1999              1998
----------------------------------------------------------------------------------------------------------
<S>                                                <C>          <C>              <C>               <C>
Sweden                                             $--          $14,408          $12,786           $12,213
United Kingdom                                     --            22,669           18,838            26,622
France                                             --            10,971           13,870            15,913
Belgium                                            --            13,028           15,677            13,996
Corporate and Other                            13,740            39,723           44,614            51,862
Eliminations                                       --           (56,745)         (56,452)          (53,790)
-----------------------------------------------------------------------------------------------------------
   Total                                      $13,740           $44,054          $49,333           $66,816
                                              ============================================================
</TABLE>
<PAGE>

Geographic Operations

The following geographic area data includes trade revenues and fixed assets:
<TABLE>
<CAPTION>

                                               01/01/00 -     08/01/99 -
                                               12/18/00          12/31/99           1999              1998
                                               -----------------------------------------------------------
<S>                                            <C>            <C>                <C>               <C>
Revenue - unaffiliated customers:
United States - domestic                         $458              $814           $4,131            $4,305
                      -- export sales             496               215              977             3,157
Europe                                         62,002            50,831          133,143           143,471
Other International                                --                --               34               512
----------------------------------------------------------------------------------------------------------
   Total revenue from unaffiliated customers   62,956            51,860          138,285           151,445

Revenue - Intercompany:
United States                                     116               385              719             1,219
Europe                                              3                 5               30                56
Eliminations                                     (119)             (390)            (749)           (1,275)
-----------------------------------------------------------------------------------------------------------
  Total consolidated revenue                  $62,956           $51,860         $138,285          $151,445
                                              ============================================================

                                               01/01/00 -        08/01/99 -
Fixed Assets:                                  12/18/00          12/31/99           1999              1998
----------------------------------------------------------------------------------------------------------
United States                                    $108              $189             $133              $402
Europe                                             --             5,683            5,795             9,066
----------------------------------------------------------------------------------------------------------
  Total fixed assets                             $108            $5,872           $5,928            $9,468
                                                 =========================================================
</TABLE>


17.  Retirement Income Plans

Retirement expenses incurred by the Company were as follows:
<TABLE>
<CAPTION>

                            Successor                       Predecessor
                            ---------                       -----------
                            12/19/00 -        01/01/00 -    08/01/99 -
                             12/31/00          12/18/00      12/31/99    1999       1998
----------------------------------------------------------------------------------------
<S>                          <C>              <C>           <C>         <C>        <C>    <C>
U.S.:
  Matching contributions        $--                 $23           $12     $81        $51
Outside the U.S.:
  Defined benefit plans       14                  1,461         1,223   2,761      2,047
  Other plans                           --          331           275     543        712
----------------------------------------------------------------------------------------
                              14                  1,792         1,498   3,304      2,759
----------------------------------------------------------------------------------------
                              $14                $1,815        $1,510  $3,385     $2,810
========================================================================================
</TABLE>

U.S. Plans

The Company has adopted a 401(k)  retirement  and savings  plan which covers all
full-time employees who have been employed for at least 12 months. The Company's
retirement and savings plan  contribution  has been a 25% matching  contribution
for employee  contributions  up to 5% of each  employee's  compensation.  At the
Board's  discretion,  the Company may also contribute a profit sharing amount to
the plan that is contingent upon the performance level of the Company.

The  Company  maintains a  Supplemental  Executive  Retirement  Plan for certain
executive  employees  selected by the Board of Directors.  The plan provides for
employee contributions of up to 10% of applicable compensation.  In addition, at
the Board's  discretion,  the Company may also make  contributions on an annual,
individual  basis,  allocated on a pro-rata  basis  according  to  participant's
applicable  compensation  up to a  maximum  contribution  of 15%  of  applicable
compensation per employee.  The last stock  contribution the Company made to the
plan was for the fiscal year ended August 2, 1997, for credit to the accounts of
various executive officers.  Under the terms of the plan, benefits accrue to the
various  executive  officers upon  satisfaction of the plan's vesting  criteria,
which is based upon length of employment with the Company.


Plans Outside the U.S.

Most of the Company's foreign subsidiaries provide retirement income plans which
conform to the practice of the country in which they do business,  some of which
are government sponsored plans. The types of company-sponsored  plans in use are
defined benefit and defined contribution.

Five of the  Company's  subsidiaries,  including  the United  Kingdom,  utilized
defined benefit plans with employee  benefits  generally being based on years of
service and wages near retirement.  The plans cover all full-time  employees who
have been employed for at least 12 months. Obligations under the Company's plans
are  funded  primarily  through  (a) fixed  rate of return  investments,  mostly
insurance  policies,  (b) equity  funds for the portion of the United  Kingdom's
plan assets  which are  invested in the Edelman  Value Fund,  Ltd.,  and (c) for
Germany, where reserves are established for the obligations. The Trustees of the
Company's former United Kingdom operating  subsidiary's  defined benefit pension
plan have  implemented  an investment  strategy  which includes an investment of
approximately $6.5 million, $6.4 million and $7.2 million,  respectively, in the
Edelman Value Fund,  Ltd., a related  party,  as of June 30, 2000,  December 31,
1999 and July 31, 1999. The United Kingdom's defined benefit plan was capped and
was converted to a defined  contribution  plan in fiscal year 1993. During 1997,
the Belgian  defined  benefit  pension  plan was closed to new  employees  and a
defined contribution plan initiated. During 1999, the Swiss defined benefit plan
was  terminated.  On June  30,  2000,  as a  result  of the  sale  to  DNL,  the
Netherland's and United Kingdom's plans were assumed by DNL.
<PAGE>

As part of the  Sale  to  DNL,  the  Company's  German  subsidiary  assumed  the
liability for the pension benefits for all German employees who did not transfer
to DNL.  Presently,  the German  subsidiary has no revenue or cash inflow stream
and is not expected to derive any significant amounts of revenue or cash inflows
in the foreseeable future.  While the pension liability of $2.8 million has been
reflected in the Company's  consolidated  financial statements,  this obligation
remains  with the German  subsidiary.  The Parent has  however  entered  into an
exclusive  distribution  agreement  with the  subsidiary  affording  the  German
subsidiary contractual distribution rights for future products of or services by
the Company, if any, in four major Western European countries.

The  Company's  former  United  Kingdom  operating   subsidiary  had  a  defined
contribution  plan.  The plan covers all full-time  salaried  employees who have
been  employed  for at  least 12  months  and  contributions  are  based  upon a
percentage of  compensation.  Obligations  under this plan are funded  primarily
through deposits in pooled investments.


Expenses of the defined benefit plans were as follows:
<TABLE>
<CAPTION>

                                        Successor                        Predecessor
                                        --------------   --------------------------------------------
                                        12/19/00 -        01/01/00 -       08/01/99 -
                                         12/31/00         12/18/00          12/31/99     1999    1998
-----------------------------------------------------------------------------------------------------
<S>                                            <C>            <C>               <C>      <C>     <C>
Service Cost                                   $--            $484              $423     $217    $  275
Interest Cost                                  14            1,219               995    2,291     2,325
Expected return on plan assets                 --             (895)             (770)  (1,690)   (1,964)
Amortization of transition obligation          --               14                14       33        36
Amortization of net actuarial  loss            --              639               561    1,910     1,375
------------------------------------------------------------------------------------------------------
Total                                         $14           $1,461            $1,223   $2,761    $2,047
                                              =========================================================
</TABLE>

Obligation and asset data for the defined benefit plans at December 31, 2000 and
July 31, 1999 were as follows:

                                                      2000               1999
--------------------------------------------------------------------------------
Change in benefit obligations
Benefit obligation at beginning of period                 $2,694      $35,671
     Service cost                                             --          217
     Interest cost                                            14        2,291
     Benefits paid                                            --       (1,112)
     Foreign exchange (gain) loss                            139           --
     Actuarial (gain) loss                                    (5)       2,001
-----------------------------------------------------------------------------
Benefit obligation at end of period                       $2,842      $39,068
-----------------------------------------------------------------------------

Change in plan assets
Fair value of plan assets at beginning of period              $--     $25,154
    Actual return on plan assets                              --        4,318
    Benefits paid from plan assets                            --         (662)
------------------------------------------------------------------------------
Fair value of plan assets at end of period                    $--     $28,810
-----------------------------------------------------------------------------

Funded Status                                            $(2,837)    $(10,258)
    Unrecognized net actuarial (gain) loss                    (5)       6,611
    Unrecognized prior service cost                           --          300
    Unrecognized transition obligation                        --          491
-----------------------------------------------------------------------------
Net amount recognized                                    $(2,842)     $(2,856)
                                                         =====================

Amounts recognized in the balance sheet consist of:
     Accrued retirement, non-current                     $(2,842)    $(10,035)
     Prepaid benefit cost                                   --            523
     Deferred tax asset                                     --             --
     Accumulated other comprehensive loss                   --           6,656
-----------------------------------------------------------------------------
Total                                                 $(2,842)        $(2,856)
                                                      ========================

The range of assumptions used for the non-U.S. defined benefit plans reflect the
different  economic  environments  within the  various  countries.  The  defined
benefit  obligations  were  determined as of December 31, 2000 and July 31, 1999
using assumed  discount  rates of 6% for 2000,  and a range of 5.75% to 6.25% in
1999, an assumed average  long-term pay  progression  rate of 3%, and an assumed
weighted  average  expected  rate of  return  on plan  assets of 6 1/2% in 1999.
Benefit  obligations  exceed plan assets for each of the Company's  plans at the
end of December  31,  2000 and July 31,  1999.  Accrued  pension  costs  include
accumulated benefit obligations of $2,842 and $34,807, respectively, versus plan
assets of $0 and $28,810,  for the plans whose accumulated  benefit  obligations
exceeded their assets.
<PAGE>

18.  Certain Relationships and Related Transactions

Director Agranoff is the Company's Chief Operating Officer, Acting President and
Vice  Chairman of the Board of  Directors,  and of counsel at the law firm Pryor
Cashman Sherman & Flynn LLP. During the period ended December 31, 2000, December
18, 2000,  December 31,1999 and fiscal years 1999 and 1998,  Dynacore paid legal
fees of $0, $420,  $250,  $265, and $0,  respectively,  to the law firm of Pryor
Cashman Sherman & Flynn LLP, for legal services provided by attorneys other than
Mr. Agranoff.  In addition, at December 31, 2000, the Company owed Pryor Cashman
Sherman & Flynn LLP approximately $70 for services rendered.

During the period ended December 31, 2000, December 18, 2000, December 31, 1999,
and fiscal  years 1999 and 1998,  the Company paid  secretarial  expenses of $0,
$45,  $0,  $64,  and $69,  respectively,  to Canal  Capital  Corporation.  Chief
Executive  Officer Edelman and Director  Agranoff are Canal Capital  Corporation
board members,  with Chief Executive  Officer Edelman serving as Chairman of the
Board.

The Company,  along with  co-tenants  Canal  Capital  Corporation,  of which Mr.
Edelman and Mr. Agranoff are directors and Plaza Securities Company LP, of which
Mr. Edelman is the  controlling  general  partner and Mr.  Agranoff is a general
partner,  entered  into an  amendment  of its New York office lease in February,
1999.  While the Company is currently  paying 50% of the monthly  lease  payment
based upon its pro-rata  occupancy of the premises,  each co-tenant of the lease
is jointly  liable for the full lease  obligation.  The lease expires in October
2009 and the annual lease  obligation for the entire  premises is  approximately
$400.

The Trustees of the  Company's  former  United  Kingdom  operating  subsidiary's
defined  benefit  pension plan have  implemented  an investment  strategy  which
includes an investment  of  approximately  $6.5  million,  $6.4 million and $7.2
million,  respectively,  in the Edelman Value Fund, Ltd., a related party, as of
June 30, 2000, December 31, 1999 and July 31, 1999.

Director  Angel is the senior  managing  shareholder  of Angel &  Frankel,  P.C.
During the period ended December 31, 2000,  December 18, 2000,  December 31,1999
and fiscal years 1999 and 1998,  Dynacore  paid legal fees of $0, $484,  $0, $0,
and $0,  respectively,  to the law firm of  Angel &  Frankel,  P. C.  for  legal
services.

On June 29, 1998, the Company had signed a letter of intent,  which subsequently
expired on August 20, 1998, to acquire Dimensional Media Associates ("DMA"). Mr.
Robert D. Summer is the  president of DMA and a former board member of Dynacore.
In addition to the letter,  Dynacore advanced DMA $200. This advance was secured
by a promissory  note,  payment of which had been  guaranteed  by a principal of
DMA. The principal payment of $200 was repaid on July 20, 1999.


19.  Contingencies

From time to time, the Company is a defendant in lawsuits  generally  incidental
to its business.  The Company is not currently aware of any such suit,  which if
decided  adversely  to the  Company,  would  result in a material  liability  in
relation to the financial position and results of operations.

20.  Acquisition

Consistent with the  determination  of its Board of Directors to shift the focus
of the  Company  towards  acquiring,  developing  and  marketing  products  with
internet and e-commerce applications, on July 27, 1999, the Company, through its
newly formed subsidiary,  Corebyte Inc.,  conditionally  acquired (the "Corebyte
Acquisition") the Corebyte  communication and networking software product family
(the "Corebyte Products"). The acquisition was accomplished pursuant to an Asset
Purchase Agreement,  by and among the Company, SF Digital, LLC and John Engstrom
("Engstrom"),  dated  July 27,  1999.  Given the lack of a  significant  revenue
stream  resulting  from  longer  than  anticipated  software  developmental  and
marketing efforts and the present availability of similar Internet  applications
in the marketplace, in January, 2001, the Company began a thorough evaluation of
the Corebyte operations,  prospects,  and strategic options. Pending the outcome
of this  evaluation,  which will include the exploration  and  discussions  with
various  parties for  alternative  uses and markets for the  Corebyte  developed
source code and underlying  technologies,  if any, the Company has significantly
restructured  and curtailed  Corebyte's  day-to-day  operations,  to include the
elimination of its Web hosting services to third parties.
<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.



                                           DYNACORE HOLDINGS CORPORATION
                                                   (Registrant)

                                       BY: /s/ Phillip K. Krumb
                                       Asher B. Edelman
                                       Chief Executive Officer and
                                       Chairman of The Board
                                       By Phillip P. Krumb, Attorney In Fact


DATED:  April 18, 2001


    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.

         Signature               Title                        Date


/s/ Phillip P. Krumb        Chief Financial Officer       April 18, 2001
    Phillip P. Krumb     (Principal Accounting Officer)



Phillip P. Krumb, pursuant to powers of attorney which are being filed with this
report, has signed below as attorney-in- fact for the following directors of the
Registrant:

                    Gerald N. Agranoff          Roger B. Smith
                    Nicholas W. Walsh           Joshua J. Angel
                    Neil S. Subin




/s/  Phillip P. Krumb                                          April 18, 2001
---------------------
     Phillip P. Krumb


                           .